CREDIT AGREEMENT

 CREDIT AGREEMENT

                           Dated as of January 2, 1997

                                      among

                       ACTION PERFORMANCE COMPANIES, INC.
                                  as Borrower,

                      Certain Subsidiaries and Affiliates,
                                 as Guarantors,

                                       AND

                   FIRST UNION NATIONAL BANK OF NORTH CAROLINA

                                TABLE OF CONTENTS

SECTION 1 DEFINITIONS..........................................................1
         1.1 Definitions.......................................................1
         1.2 Computation of Time Periods......................................21
         1.3 Accounting Terms.................................................21

SECTION 2 CREDIT FACILITIES...................................................21
         2.1 Revolving Loans..................................................21
         (a) Commitment.......................................................21
         (b) Notices..........................................................22
         (c) Interest Rate....................................................22
         (d) Repayment........................................................22
         (e) Revolving Note...................................................22
         2.2 Letter of Credit Facility........................................22
         2.3 Bankers' Acceptances.............................................25

SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES......................26
         3.1 Default Rate.....................................................26
         3.2 Extension and Conversion.........................................26
         3.3 Prepayments......................................................27
         3.4 Termination and Reduction of Commitments.........................27
         3.5 Fees.............................................................28
         3.6 Capital Adequacy.................................................28
         3.7 Inability To Determine Interest Rate.............................29
         3.8 Illegality.......................................................29
         3.9 Requirements of Law..............................................29
         3.10 Taxes...........................................................30
         3.11 Indemnity.......................................................31
         3.12 Payments, Computations, Etc.....................................32

SECTION 4 GUARANTY............................................................32
         4.1 The Guarantee....................................................32
         4.2 Obligations Unconditional........................................33
         4.3 Reinstatement....................................................34
         4.4 Certain Additional Waivers.......................................34
         4.5 Remedies.........................................................34
         4.6 Rights of Contribution...........................................35
         4.7 Continuing Guarantee.............................................35

SECTION 5 CONDITIONS..........................................................35
         5.1 Conditions to Closing............................................35
         5.2 Conditions to All Extensions of Credit...........................37

SECTION 6 REPRESENTATIONS AND WARRANTIES......................................38
         6.1 Financial Condition..............................................38
         6.2 No Changes or Restricted Payments................................38
                                       i

         6.3 Organization; Existence; Compliance with Law.....................38
         6.4 Power; Authorization; Enforceable Obligations....................39
         6.5 No Legal Bar.....................................................39
         6.6 No Material Litigation...........................................39
         6.7 No Default.......................................................40
         6.8 Ownership of Property; Liens.....................................40
         6.9 Intellectual Property............................................40
         6.10 No Burdensome Restrictions......................................40
         6.11 Taxes...........................................................40
         6.12 ERISA...........................................................40
         6.13 Governmental Regulations, Etc...................................42
         6.14 Subsidiaries....................................................43
         6.15 Purpose of Extensions of Credit.................................43
         6.16 Environmental Matters...........................................43

SECTION 7 AFFIRMATIVE COVENANTS...............................................44
         7.1 Financial Statements.............................................44
         7.2 Certificates; Other Information..................................45
         7.3 Notices..........................................................46
         7.4 Payment of Obligations...........................................47
         7.5 Conduct of Business and Maintenance of Existence.................47
         7.6 Maintenance of Property; Insurance...............................47
         7.7 Inspection of Property; Books and Records; Discussions...........48
         7.8 Environmental Laws...............................................48
         7.9 Financial Covenants..............................................49
         7.10 Additional Guaranties...........................................49
         7.11 Use of Proceeds.................................................49

SECTION 8 NEGATIVE COVENANTS..................................................49
         8.1 Indebtedness.....................................................50
         8.2 Liens............................................................51
         8.3 Nature of Business...............................................51
         8.4 Consolidation,   Merger,  Sale   or  Purchase  of  Assets,  Capital
             Expenditures, etc................................................51
         8.5 Advances, Investments and Loans..................................52
         8.6 Transactions with Affiliates.....................................52
         8.7 Ownership of Equity Interests....................................52
         8.8 Fiscal Year......................................................53
         8.9 Prepayments of Indebtedness, etc.................................53
         8.10 Restricted Payments.............................................53
         8.11 Sale Leasebacks.................................................53
         8.12 No Further Negative Pledges.....................................53

SECTION 9 EVENTS OF DEFAULT...................................................54
         9.1 Events of Default................................................54
         9.2 Acceleration; Remedies...........................................56

SECTION 10 MISCELLANEOUS......................................................57
         10.1 Notices.........................................................57
                                       ii

         10.2 Right of Set-Off................................................58
         10.3 Benefit of Agreement............................................58
         10.4 No Waiver; Remedies Cumulative..................................58
         10.5 Payment of Expenses, etc........................................59
         10.6 Amendments, Waivers and Consents................................59
         10.7 Counterparts....................................................59
         10.8 Headings........................................................60
         10.9 Survival........................................................60
         10.10 Governing Law; Submission to Jurisdiction; Venue...............60
         10.11 Severability...................................................60
         10.12 Entirety.......................................................61
         10.13 Binding Effect; Termination....................................61
         10.14 Conflict.......................................................61
                                      iii

                                    SCHEDULES

Schedule 2.1(b)          Form of Notice of Borrowing
Schedule 2.1(e)          Form of Revolving Note
Schedule 2.2(b)          Form of Notice of Request for Letter of Credit
Schedule 2.3(b)          Form of Notice of Request for Banker's Acceptance
Schedule 3.2             Form of Notice of Extension/Conversion
Schedule 5.1(f)          Secretary's Certificate
Schedule 6.6             Description of Legal Proceedings
Schedule 6.8             Liens
Schedule 6.14            Subsidiaries
Schedule 7.2(b)          Form of Officer's Compliance Certificate
Schedule 7.11-1          Form of Joinder Agreement
Schedule 8.1             Indebtedness
Schedule 8.5             Existing Investments
                                       iv

                                CREDIT AGREEMENT

         THIS  CREDIT  AGREEMENT  dated  as of  January  2,  1997  (the  "Credit
Agreement"),  is by and among ACTION  PERFORMANCE  COMPANIES,  INC.,  an Arizona
corporation (the "Borrower"),  the subsidiaries and affiliates identified on the
signature  pages hereto and such other  subsidiaries  and affiliates as may from
time to time become  Guarantors  hereunder  in  accordance  with the  provisions
hereof (the  "Guarantors")  and FIRST UNION NATIONAL BANK OF NORTH CAROLINA (the
"Bank").

                               W I T N E S S E T H

         WHEREAS, the Borrower has requested that the Bank provide a $16 million
credit facility for the purposes hereinafter set forth;

         WHEREAS,  the Bank has  agreed to make the  requested  credit  facility
available to the Borrower on the terms and conditions hereinafter set forth;

         NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged, the parties hereto agree as follows:

                                    SECTION 1
                                   DEFINITIONS
                                   -----------

         1.1      Definitions.

                  As used in this Credit  Agreement,  the following  terms shall
have the meanings specified below unless the context otherwise requires:

                  "Additional  Credit  Party"  means each Person that  becomes a
         Guarantor after the Closing Date by execution of a Joinder Agreement.

                  "Affiliate"  means,  with  respect  to any  Person,  any other
         Person (i) directly or indirectly controlling or controlled by or under
         direct or indirect  common control with such Person or (ii) directly or
         indirectly  owning or holding ten  percent  (10%) or more of the equity
         interest in such  Person.  For purposes of this  definition,  "control"
         when used with  respect  to any  Person  means the power to direct  the
         management and policies of such Person, directly or indirectly, whether
         through the ownership of voting  securities,  by contract or otherwise;
         and the terms "controlling" and "controlled" have meanings  correlative
         to the foregoing.

                  "Alternate  Base  Rate"  means  for any day,  a rate per annum
         equal to the  greatest  of (a) the Prime Rate in effect on such day and
         (b) the Federal Funds  Effective Rate in effect on such day plus 1/2 of
         1%. For purposes hereof: "Prime Rate" shall mean, at any time, the rate
         of interest per annum publicly  announced from time to time by the Bank
         at its principal office in Charlotte, North Carolina as its prime rate.
         Each change in the Prime

         Rate shall be  effective  as of the opening of business on the day such
         change in the Prime Rate occurs.  The parties hereto  acknowledge  that
         the rate  announced  publicly by the Bank as its Prime Rate is an index
         or base  rate and  shall  not  necessarily  be its  lowest or best rate
         charged to its customers or other banks;  and "Federal Funds  Effective
         Rate" shall mean,  for any day,  the  weighted  average of the rates on
         overnight  federal  funds  transactions  with  members  of the  Federal
         Reserve System  arranged by federal funds brokers,  as published on the
         next  succeeding  Business Day by the Federal Reserve Bank of New York,
         or, if such rate is not so  published on the next  succeeding  Business
         Day,  the average of the  quotations  for the day of such  transactions
         received by the Bank from three  federal  funds  brokers of  recognized
         standing  selected  by it.  If for  any  reason  the  Bank  shall  have
         determined (which  determination  shall be conclusive in the absence of
         manifest  error)  that it is  unable to  ascertain  the  Federal  Funds
         Effective  Rate, for any reason,  including the inability or failure of
         the Bank to obtain  sufficient  quotations in accordance with the terms
         thereof,  the Alternate Base Rate shall be determined without regard to
         clause (b) of the first sentence of this  definition,  as  appropriate,
         until the circumstances  giving rise to such inability no longer exist.
         Any change in the Alternate Base Rate due to a change in the Prime Rate
         or the Federal Funds  Effective  Rate shall be effective on the opening
         of business on the date of such change.

                  "Alternate Base Rate Loan" means any Loan bearing  interest at
         a rate determined by reference to the Alternate Base Rate.

                  "Attributed  Principal Amount" means, on any day, with respect
         to any  Securitization  Transaction  entered  into by any member of the
         Consolidated  Group,  the  aggregate  amount (with  respect to any such
         transaction,  the  "Invested  Amount")  paid to, or  borrowed  by, such
         Person as of such date under such Securitization Transaction, minus the
         aggregate amount received by the applicable  Receivables  Financier and
         applied  to  the   reduction   of  the   Invested   Amount  under  such
         Securitization Transaction.

                  "BA Commitment" means the commitment of the Bank to create and
         discount  Bankers'  Acceptances,   and  to  honor  payment  obligations
         relating thereto.

                  "BA Discount  Reference  Rate" shall mean, with respect to any
         Bankers'  Acceptance,  the current  quoted  discount  rate for bankers'
         acceptances  of the  Bank on the  date  of  creation  of such  Bankers'
         Acceptance for bankers' acceptances in an amount substantially equal to
         the  face  amount  of such  Bankers'  Acceptance  and  having  the same
         maturity as such Bankers' Acceptance.

                  "BA  Documents"  shall  mean,  with  respect  to  any  Bankers
         Acceptance  such  documents and  agreements as the Bank  reasonably may
         require in connection with the creation of such Bankers' Acceptance.

                  "BA Obligations" means, at any time, without duplication,  the
         sum of (i) the  maximum  aggregate  amount  which  is,  or at any  time
         thereafter  may  become,   payable  by  the  Bank  under  all  Bankers'
         Acceptances then outstanding,  plus (ii) the aggregate BA Reimbursement
         Obligations at such time.

                  "BA Reimbursement Obligation" means, at any time, with respect
         to any Bankers' Acceptance, the obligation of the Borrower to reimburse
         the Bank for the face amount of a matured Bankers' Acceptance.

                  "Bankers'  Acceptance" means a draft drawn by the Borrower, on
         and  accepted  and  discounted  by,  the  Bank in  accordance  with the
         provisions of Section 2.3.

                  "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
         United  States Code, as amended,  modified,  succeeded or replaced from
         time to time.

                  "Bankruptcy  Event"  means,  with  respect to any Person,  the
         occurrence of any of the following  with respect to such Person:  (i) a
         court or governmental  agency having jurisdiction in the premises shall
         enter a decree or order  for  relief in  respect  of such  Person in an
         involuntary case under any applicable  bankruptcy,  insolvency or other
         similar  law now or  hereafter  in effect,  or  appointing  a receiver,
         liquidator,  assignee,  custodian,  trustee,  sequestrator  (or similar
         official) of such Person or for any substantial part of its Property or
         ordering the winding up or  liquidation  of its affairs;  or (ii) there
         shall be commenced  against such Person an  involuntary  case under any
         applicable bankruptcy, insolvency or other similar law now or hereafter
         in effect, or any case,  proceeding or other action for the appointment
         of a receiver,  liquidator,  assignee, custodian, trustee, sequestrator
         (or similar official) of such Person or for any substantial part of its
         Property or for the winding up or liquidation of its affairs,  and such
         involuntary case or other case, proceeding or other action shall remain
         undismissed,  undischarged  or  unbonded  for a period  of  sixty  (60)
         consecutive  days; or (iii) such Person shall commence a voluntary case
         under any applicable bankruptcy, insolvency or other similar law now or
         hereafter in effect,  or consent to the entry of an order for relief in
         an involuntary  case under any such law, or consent to the  appointment
         or taking possession by a receiver,  liquidator,  assignee,  custodian,
         trustee,  sequestrator (or similar  official) of such Person or for any
         substantial part of its Property or make any general assignment for the
         benefit of creditors;  or (iv) such Person shall be unable to, or shall
         admit in writing  its  inability  to, pay its debts  generally  as they
         become due.

                  "Borrower" means the Person  identified as such in the heading
         hereof, together with any permitted successors and assigns.

                  "Business  Day" means a day other than a  Saturday,  Sunday or
         other day on which  commercial  banks in Charlotte,  North  Carolina or
         Phoenix, Arizona are authorized or required
         by law to close, except that, when used in connection with a LIBOR Rate
         Loan, such day shall also be a day on which dealings  between banks are
         carried on in U.S. dollar deposits in London, England, Charlotte, North
         Carolina and New York, New York.

                  "Capital Lease" means, as applied to any Person,  any lease of
         any Property (whether real, personal or mixed) by that Person as lessee
         which,  in  accordance  with GAAP,  is or should be accounted  for as a
         capital lease on the balance sheet of that Person.

                  "Capital Lease Obligation" means the capital lease obligations
         relating to a Capital Lease determined in accordance with GAAP.

                  "Cash Equivalents" means (a) securities issued or directly and
         fully  guaranteed  or insured  by the  United  States of America or any
         agency or  instrumentality  thereof  (provided  that the full faith and
         credit of the United  States of America is pledged in support  thereof)
         having  maturities  of not more  than  twelve  months  from the date of
         acquisition, (b) U.S. dollar denominated time deposits and certificates
         of deposit of (i) the Bank,  or (ii) any  domestic  commercial  bank of
         recognized  standing  (y)  having  capital  and  surplus  in  excess of
         $500,000,000 and (z) whose short-term  commercial paper rating from S&P
         is at least A-1 or the  equivalent  thereof or from Moody's is at least
         P-1 or the equivalent  thereof (any the Bank being an "Approved Bank"),
         in each case with maturities of not more than 270 days from the date of
         acquisition,  (c)  commercial  paper and  variable  or fixed rate notes
         issued by any Approved Bank (or by the parent corporation  thereof) and
         maturing within six months of the date of  acquisition,  (d) repurchase
         agreements  entered  into by a Person  with  the Bank or trust  company
         (including  any of the Banks) or  recognized  securities  dealer having
         capital and surplus in excess of  $500,000,000  for direct  obligations
         issued by or fully  guaranteed by the United States of America in which
         such Person shall have a perfected  first  priority  security  interest
         (subject  to no  other  Liens)  and  having,  on the  date of  purchase
         thereof,  a fair  market  value of at least  100% of the  amount of the
         repurchase  obligations,  (e)  obligations  of any State of the  United
         States or any political  subdivision thereof, the interest with respect
         to which is exempt from federal  income  taxation  under Section 103 of
         the Code,  having a long term  rating of at least AA- or Aa-3 by S&P or
         Moody's, respectively, and maturing within three years from the date of
         acquisition  thereof,  (f) Investments in municipal  auction  preferred
         stock (i) rated AAA (or the equivalent thereof) or better by S&P or Aaa
         (or the  equivalent  thereof)  or  better  by  Moody's  and  (ii)  with
         dividends that reset at least once every 365 days and (g)  Investments,
         classified in accordance with GAAP as current  assets,  in money market
         investment  programs  registered  under the Investment  Borrower Act of
         1940,  as  amended,  which  are  administered  by  reputable  financial
         institutions having capital of at least $100,000,000 and the portfolios
         of which are limited to Investments  of the character  described in the
         foregoing subdivisions (a), (b), (c), (e) and (f).

                  "Change of  Control"  shall be deemed to have  occurred in the
                  event that:

                           (i) the  Principal  Shareholder  shall  cease to own,
                  directly or indirectly,  at least  1,700,000  shares of Voting
                  Stock of the Borrower, free and clear of Liens;

                           (ii)  the  Principal  Shareholder  shall  cease to be
                  entitled, directly or indirectly,  through ownership of Voting
                  Stock of the Borrower, by contract or otherwise,  to direct or
                  cause the  direction  of the  management  and  policies of the
                  Borrower  (including  the  power  to  name a  majority  of the
                  members of the Board of Directors of the Borrower);

                           (iii) the Principal Shareholder shall cease to be the
                  chief  executive  officer of the  Borrower  (a) for any reason
                  other  than his death or legal  disability,  or (b) due to his
                  death or legal disability, and a successor satisfactory to the
                  Bank

                  does not  assume  his  responsibilities  and  position  within
                  thirty (30) days of such cessation.

                  "Closing Date" means the date hereof.

                  "Code"  means the Internal  Revenue Code of 1986,  as amended,
         and any successor  statute  thereto,  as  interpreted  by the rules and
         regulations issued  thereunder,  in each case as in effect from time to
         time.  References  to sections of the Code shall be  construed  also to
         refer to any successor sections.

                  "Commitment"   means  the   Revolving   Commitment,   the  LOC
         Commitment and the BA Commitment.

                  "Commitment  Fee"  shall have the  meaning  given such term in
         Section 3.5(a).

                  "Commitment  Period"  means the period from and  including the
         Closing Date to but not  including  the earlier of (i) the  Termination
         Date, or (ii) the date on which the Revolving Commitment  terminates in
         accordance with the provisions of this Credit Agreement.

                  "Consolidated"  means,  when  used  with  reference  to  Fixed
         Charges or Funded Debt,  the aggregate of Fixed Charges or Funded Debt,
         as the  case  may  be,  of the  Borrower  and its  Subsidiaries,  after
         eliminating  all offsetting  debts and credits between the Borrower and
         its  Subsidiaries  and all other  terms  required to be  eliminated  in
         accordance with GAAP. Calculations of Consolidated EBITDA, Consolidated
         Revenues,  Consolidated Fixed Charges and Consolidated Income Available
         for Fixed Charges shall be made on a consolidating  pro forma basis, as
         if (i) any  consolidation  or  merger  with or into any  Person  by the
         Borrower or any Subsidiary, any Transfer of all or substantially all of
         the  assets of the  Borrower  or any  Subsidiary  to any  Person or any
         Transfer of all or substantially all of the assets of any Person to the
         Borrower or any Subsidiary  that has occurred during the preceding four
         Fiscal  Quarters  had occurred at the  commencement  of such period and
         (ii) any  Indebtedness  incurred  or  assumed by the  Borrower  and its
         Subsidiaries  during the preceding four Fiscal Quarters (other than any
         refinancing of Indebtedness to the extent that the principal  amount of
         such  Indebtedness  did  not  increase)  had  been  in  effect  at  the
         commencement of such period.

                  "Consolidated  EBITDA"  means,  with  respect  to any  date of
         determination,  the sum of (a)  Consolidated  Net  Income  for the most
         recently ended four Fiscal  Quarters and (b) the amount of all Interest
         Charges, depreciation,  amortization,  income taxes, deferred items and
         other non-cash expenses of the Borrower and its Subsidiaries,  but only
         to the extent deducted in the  determination of Consolidated Net Income
         for the most recently ended four Fiscal Quarters;

                  "Consolidated  Group" means the Borrower and its  consolidated
         subsidiaries, as determined in accordance with GAAP.

                  "Consolidated  Income Available for Fixed Charges" means, with
         respect to any period, Consolidated Net Income for such period plus all
         amounts  deducted  in the  computation  thereof on account of (a) Fixed
         Charges  and (b)  taxes  imposed  on or  measured  by  income or excess
         profits.

                  "Consolidated Net Income" means, with reference to any period,
         the net income (or loss) of the Borrower and its  Subsidiaries for such
         period (taken as a cumulative  whole), as determined in accordance with
         GAAP, after  eliminating all offsetting  debits and credits between the
         Borrower  and its  Subsidiaries  and all  other  terms  required  to be
         eliminated in the course of the preparation of  consolidated  financial
         statements  of the Borrower and its  Subsidiaries  in  accordance  with
         GAAP; provided that there shall be excluded:

                           (a)  subject  to  clause  (i)  of the  definition  of
                  "Consolidated"  herein,  the  income  (or loss) of any  Person
                  accrued prior to the date it becomes a Subsidiary or is merged
                  into or  consolidated  with the Borrower or a Subsidiary,  and
                  the income (or loss) of any Person,  substantially  all of the
                  assets of which have been acquired in any manner,  realized by
                  such other Person prior to the date of acquisition;

                           (b) the income (or loss) of any Person  (other than a
                  Subsidiary)  in which the  Borrower or any  Subsidiary  has an
                  ownership interest,  except to the extent that any such income
                  has been actually  received by the Borrower or such Subsidiary
                  in the form of cash dividends or similar cash distributions;

                           (c) the  undistributed  earnings of any Subsidiary to
                  the extent that the  declaration  or payment of  dividends  or
                  similar  distributions  by such  Subsidiary is not at the time
                  permitted  by the  terms  of  its  charter  or any  agreement,
                  instrument,   judgment,   decree,   order,  statute,  rule  or
                  governmental regulation applicable to such Subsidiary;

                           (d) any  restoration  to  income  of any  contingency
                  reserve,  except to the extent that provision for such reserve
                  was made out of income accrued during such period;

                           (e) any aggregate net gain (but not any aggregate net
                  loss) during such period  arising  from the sale,  conversion,
                  exchange or other  disposition of capital assets (such term to
                  include,  without limitation,  (i) all non-current assets and,
                  without  duplication,  (ii)  the  following,  whether  or  not
                  current: all fixed assets, whether tangible or intangible, all
                  inventory  sold in conjunction  with the  disposition of fixed
                  assets, and all Securities);

                           (f) any  gains  resulting  from any  write-up  of any
                  assets (but not any loss  resulting  from any writedown of any
                  assets);

                           (g) any net gain from the  collection of the proceeds
                  of life insurance policies;

                           (h) any  gain  arising  from the  acquisition  of any
                  Security,   or  the   extinguishment,   under  GAAP,   of  any
                  Indebtedness, of the Borrower or any Subsidiary;

                           (i) any net  income  or gain  (but not any net  loss)
                  during  such   period  from  (i)  any  change  in   accounting
                  principles  in  accordance  with GAAP,  (ii) any prior  period
                  adjustments resulting from any change in accounting principles
                  in accordance  with GAAP,  (iii) any  extraordinary  items, or
                  (iv) any discontinued operations or the disposition thereof;

                           (j) any deferred  credit  representing  the excess of
                  equity in any Subsidiary at the date of  acquisition  over the
                  cost of the investment in such Subsidiary; and

                           (k) any  portion  of such net income  that  cannot be
                  freely converted into United States Dollars.

                  "Consolidated  Net Worth" means, at any time, (a) Consolidated
         Total  Assets minus (b) the total  liabilities  of the Borrower and its
         Subsidiaries  which  would be shown as  liabilities  on a  consolidated
         balance  sheet of the  Borrower  and its  Subsidiaries  as of such time
         prepared in accordance with GAAP.

                  "Consolidated  Revenues" means the revenue of the Borrower and
         its Subsidiaries for the applicable period, as determined in accordance
         with GAAP, after  eliminating all offsetting debits and credits between
         the Borrower and its  Subsidiaries  and all other terms  required to be
         eliminated in the course of the preparation of  consolidated  financial
         statements  of the Borrower and its  Subsidiaries  in  accordance  with
         GAAP.

                  "Consolidated   Total  Assets"  means,   as  of  any  date  of
         determination,  the total assets of the  Borrower and its  Subsidiaries
         which would be shown as assets on a  consolidated  balance sheet of the
         Borrower and its  Subsidiaries  as of such time  prepared in accordance
         with GAAP,  after  eliminating  all amounts  properly  attributable  to
         minority interests, if any, in the stock and surplus of Subsidiaries.

                  "Consolidated  Total Tangible Assets" means Consolidated Total
         Assets  less and except  goodwill  and other  intangible  assets of the
         Borrower and its  Subsidiaries  on a consolidated  basis  determined in
         accordance with GAAP.

                  "Contractual   Obligation"   means,  as  to  any  Person,  any
         provision  of any  security  issued by such  Person or of any  material
         agreement, instrument or undertaking to which such Person is a party or
         by which it or any of its Property is bound.

                  "Credit Documents" means a collective reference to this Credit
         Agreement,  the Revolving  Note, the LOC  Documents,  the BA Documents,
         each Joinder  Agreement and all other related  agreements and documents
         issued or  delivered  hereunder  or  thereunder  or pursuant  hereto or
         thereto.

                  "Credit Party" means any of the Borrower and the Guarantors.

                  "Current  Maturities  of Funded Debt"  means,  at any time and
         with  respect to any item of Funded  Debt,  the  portion of such Funded
         Debt outstanding at such time which by the terms of such Funded Debt or
         the terms of any  instrument  or agreement  relating  thereto is due on
         demand or within  one year from such time  (whether  by  sinking  fund,
         other  required  prepayment  or final  payment at maturity)  and is not
         directly or  indirectly  renewable,  extendible  or  refundable  at the
         option of the obligor  under an agreement or firm  commitment in effect
         at such time to a date one year or more from such time.

                  "Default" means any event,  act or condition which with notice
         or lapse of time, or both, would constitute an Event of Default.

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

                  "Domestic  Credit  Party"  means  any  Credit  Party  which is
         incorporated  or  organized  under the laws of any State of the  United
         States or the District of Columbia.

                  "Domestic   Subsidiary"   means   any   Subsidiary   which  is
         incorporated  or  organized  under the laws of any State of the  United
         States or the District of Columbia.

                  "Eligible  Bankers'  Acceptance"  means a Bankers'  Acceptance
         which meets the requirements of 12 U.S.C. ss.372(a).

                  "Environmental  Laws" means any and all lawful and  applicable
         Federal,   state,  local  and  foreign  statutes,   laws,  regulations,
         ordinances,  rules, judgments,  orders, decrees, permits,  concessions,
         grants,   franchises,   licenses,   agreements  or  other  governmental
         restrictions  relating to the environment or to emissions,  discharges,
         releases or threatened releases of pollutants, contaminants, chemicals,
         or  industrial,  toxic  or  hazardous  substances  or  wastes  into the
         environment including, without limitation,  ambient air, surface water,
         ground  water,  or land,  or  otherwise  relating  to the  manufacture,
         processing, distribution, use, treatment, storage, disposal, transport,
         or handling of  pollutants,  contaminants,  chemicals,  or  industrial,
         toxic or hazardous substances or wastes.

                  "ERISA" means the Employee  Retirement  Income Security Act of
         1974, as amended,  and any successor statute thereto, as interpreted by
         the rules and regulations thereunder,  all as the same may be in effect
         from time to time.  References  to sections of ERISA shall be construed
         also to refer to any successor sections.

                  "ERISA  Affiliate"  means an  entity  which  is  under  common
         control with any Credit Party within the meaning of Section 4001(a)(14)
         of ERISA,  or is a member of a group which  includes  the  Borrower and
         which is treated as a single  employer under Sections  414(b) or (c) of
         the Code.

                  "ERISA  Event"  means  (i)  with  respect  to  any  Plan,  the
         occurrence  of a  Reportable  Event  or the  substantial  cessation  of
         operations  (within the meaning of Section 4062(e) of ERISA);  (ii) the
         withdrawal by the Borrower, any Subsidiary of the Borrower or any ERISA
         Affiliate from a Multiple  Employer Plan during a plan year in which it
         was a  substantial  employer  (as  such  term  is  defined  in  Section
         4001(a)(2) of ERISA),  or the termination of a Multiple  Employer Plan;
         (iii) the distribution of a notice of intent to terminate or the actual
         termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA;
         (iv)  the  institution  of  proceedings  to  terminate  or  the  actual
         termination of a Plan by the PBGC under Section 4042 of ERISA;  (v) any
         event or condition  which could  reasonably  be expected to  constitute
         grounds  under  Section  4042 of ERISA for the  termination  of, or the
         appointment of a trustee to administer,  any Plan; (vi) the complete or
         partial  withdrawal of the Borrower,  any Subsidiary of the Borrower or
         any ERISA Affiliate from a Multiemployer Plan; (vii) the conditions for
         imposition of a lien under  Section  302(f) of ERISA exist with respect
         to any  Plan;  or  (vii)  the  adoption  of an  amendment  to any  Plan
         requiring  the  provision of security to such Plan  pursuant to Section
         307 of ERISA.

                  "Eurodollar  Reserve  Percentage"  for any day, the percentage
         (expressed as a decimal and rounded upwards, if necessary,  to the next
         higher 1/100th of 1%), which is in effect for such day as prescribed by
         the  Federal  Reserve  Board (or any  successor)  for  determining  the
         maximum reserve  requirement  (including  without limitation any basic,
         supplemental   or  emergency   reserves)  in  respect  of  Eurocurrency
         liabilities, as defined in Regulation D of such Board as in effect from
         time to time, or any similar  category of liabilities for a member bank
         of the Federal Reserve System in New York City.

                  "Event of Default" means such term as defined in Section 9.1.

                  "Extension of Credit" means, as to the Bank, the making of, or
         participation  in, a Loan by the Bank,  the  issuance or extension of a
         Letter of Credit or the creation and discount of a Bankers' Acceptance.

                  "Fees" means all fees payable pursuant to Section 3.5.

                  "First  Union"  means  First  Union  National  Bank  of  North
         Carolina and its successors.

                  "Fiscal Quarter" means a fiscal quarter of the Borrower or any
         of its Subsidiaries which shall be any quarterly period ending on March
         31, June 30, September 30 or December 31 of any year.

                  "Fiscal Year" means, with respect to any Person, a fiscal year
         of such Person..  The term "Fiscal Year, " when used without  reference
         to any  Person,  shall  mean a Fiscal  Year of the  Borrower  ending on
         September 30, of any year.

                  "Fixed   Charges"   means,   with   respect  to  any  date  of
         determination,  the sum of (a) Interest  Charges for the most  recently
         ended four Fiscal  Quarters and (b) Lease Rentals for the most recently
         ended four Fiscal Quarters.

                  "Fixed  Charges  Coverage  Ratio"  means,  as of any  date  of
         determination  thereof,  the ratio of (a) Consolidated Income Available
         for Fixed Charges for the most recently  ended four Fiscal  Quarters to
         (b) Consolidated Fixed Charges for such period.

                  "Foreign  Credit  Party"  means a Credit  Party which is not a
         Domestic Credit Party.

                  "Foreign  Subsidiary"  means  a  Subsidiary  which  is  not  a
         Domestic Subsidiary.

                  "Funded  Debt"  means,   with  respect  to  any  Person,   all
         Indebtedness  of such Person  which by its terms or by the terms of any
         instrument or agreement relating thereto matures, or which is otherwise
         payable or unpaid,  one year or more from, or is directly or indirectly
         renewable or extendible at the option of the obligor in respect thereof
         to a date one year or more (including, without limitation, an option of
         such obligor under a revolving credit or similar  agreement  obligating
         the  lender or lenders  to extend  credit  over a period of one year or
         more) from, the date of the creation thereof; provided that Funded Debt
         shall include,  as at any date of determination,  Current Maturities of
         Funded Debt.

                  "GAAP" means generally accepted  accounting  principles in the
         United States applied on a consistent basis and subject to the terms of
         Section 1.3 hereof.

                  "Gordon   Transactions"  means  (i)  the  acquisition  by  the
         Borrower  of all of the  outstanding  stock of Creative  Marketing  and
         Promotions,  Inc., a North Carolina  corporation  ("CMP"), and (ii) the
         acquisition by MTL Acquisition, Inc., an Arizona corporation ("MTL") of
         the  assets  and  assumption  of  certain  liabilities  of  Motorsports
         Traditions Limited Partnership, a North Carolina limited partnership.

                  "Governmental  Authority" means any Federal,  state,  local or
         foreign court or governmental  agency,  authority,  instrumentality  or
         regulatory body.

                  "Guarantor" means each of those other Persons  identified as a
         "Guarantor" on the signature pages hereto,  and each Additional  Credit
         Party which may hereafter  execute a Joinder  Agreement,  together with
         their successors and permitted assigns.

                  "Guaranteed Obligations" means, as to each Guarantor,  without
         duplication,  (i) all obligations of the Borrower to the Bank, whenever
         arising,  under this Credit Agreement , the Revolving Note or the other
         Credit Documents  relating to the Obligations  hereunder,  and (ii) all
         liabilities and obligations,  whenever arising, owing from the Borrower
         to the Bank,  or any  Affiliate of the Bank,  arising under any Hedging
         Agreement relating to Obligations hereunder.

                  "Guaranty  Obligations"  means,  with  respect to any  Person,
         without  duplication,  any  obligations  of  such  Person  (other  than
         endorsements   in  the  ordinary   course  of  business  of  negotiable
         instruments  for  deposit or  collection)  guaranteeing  or intended to
         guarantee any  Indebtedness of any other Person in any manner,  whether
         direct or indirect,  and

         including without limitation any obligation, whether or not contingent,
         (i) to purchase  any such  Indebtedness  or any  Property  constituting
         security  therefor,  (ii) to advance or provide  funds or other support
         for the  payment or purchase  of any such  Indebtedness  or to maintain
         working  capital,  solvency or other  balance  sheet  condition of such
         other  Person  (including  without  limitation  keep  well  agreements,
         maintenance  agreements,  comfort  letters  or  similar  agreements  or
         arrangements)  for the  benefit of any holder of  Indebtedness  of such
         other  Person,  (iii) to  lease or  purchase  Property,  securities  or
         services  primarily  for the  purpose  of  assuring  the holder of such
         Indebtedness,  or (iv) to otherwise  assure or hold harmless the holder
         of such Indebtedness against loss in respect thereof. The amount of any
         Guaranty  Obligation  hereunder  shall (subject to any  limitations set
         forth  therein)  be  deemed to be an  amount  equal to the  outstanding
         principal  amount  (or  maximum  principal  amount,  if  larger) of the
         Indebtedness in respect of which such Guaranty Obligation is made.

                  "Hedging   Agreements"  means  any  interest  rate  protection
         agreement or foreign currency  exchange  agreement between the Borrower
         and the Bank, or any Affiliate of the Bank.

                  "Indebtedness" of any Person means (i) all obligations of such
         Person  for  borrowed  money,  (ii)  all  obligations  of  such  Person
         evidenced by bonds, debentures,  notes or similar instruments,  or upon
         which interest  payments are customarily made, (iii) all obligations of
         such Person under conditional sale or other title retention  agreements
         relating to Property  purchased  by such Person  (other than  customary
         reservations  or retentions of title under  agreements  with  suppliers
         entered into in the ordinary course of business),  (iv) all obligations
         of such  Person  issued or assumed as the  deferred  purchase  price of
         Property or services  purchased  by such Person  (other than trade debt
         incurred in the  ordinary  course of business and due within six months
         of the  incurrence  thereof)  which would  appear as  liabilities  on a
         balance sheet of such Person,  (v) all obligations of such Person under
         take-or-pay or similar  arrangements or under  commodities  agreements,
         (vi) all  Indebtedness of others secured by (or for which the holder of
         such Indebtedness has an existing right, contingent or otherwise, to be
         secured by) any Lien on, or payable out of the  proceeds of  production
         from,  Property  owned or acquired by such  Person,  whether or not the
         obligations  secured  thereby  have  been  assumed,  provided  that for
         purposes hereof the amount of such Indebtedness shall be limited to the
         greater of (A) the  amount of such  Indebtedness  as to which  there is
         recourse to such Person and (B) the fair market  value of the  property
         which is subject to the Lien,  (vii) all Guaranty  Obligations  of such
         Person,  (viii) the principal portion of all obligations of such Person
         under Capital Leases, (ix) all obligations of such Person in respect of
         interest  rate  protection   agreements,   foreign  currency   exchange
         agreements,  commodity  purchase or option agreements or other interest
         or exchange rate or commodity price hedging agreements (including,  but
         not limited to, the Hedging Agreements),  (x) the maximum amount of all
         standby  letters of credit  issued or bankers'  acceptances  facilities
         created for the account of such Person and,  without  duplication,  all
         drafts  drawn  thereunder  (to  the  extent  unreimbursed),   (xi)  all
         preferred stock issued by such Person and required by the terms thereof
         to be redeemed,  or for which mandatory  sinking fund payments are due,
         by a fixed date,  (xii) the  outstanding  Attributed  Principal  Amount
         under any  Securitization  Financing and (xiii) the  principal  balance
         outstanding  under any synthetic lease, tax retention  operating lease,
         off- balance sheet loan

         or similar  off-balance sheet financing product to which such Person is
         a  party,   where  such   transaction  is  considered   borrowed  money
         indebtedness  for tax purposes but is classified as an operating  lease
         in accordance  with GAAP. The  Indebtedness of any Person shall include
         the  Indebtedness  of any  partnership  or joint  venture in which such
         Person is a general partner or a joint venturer, but only to the extent
         to  which  there  is  recourse  to  such  Person  for  payment  of such
         Indebtedness.

                  "Interest  Charges" means,  with reference to any period,  the
         sum (without  duplication) of the following (in each case,  eliminating
         all  offsetting  debits  and  credits  between  the  Borrower  and  its
         Subsidiaries  and all other  items  required  to be  eliminated  in the
         course of the preparation of consolidated  financial  statements of the
         Borrower  and  its  Subsidiaries  in  accordance  with  GAAP):  (a) all
         interest  in  respect  of   Indebtedness   of  the   Borrower  and  its
         Subsidiaries  (including imputed interest on Capital Lease Obligations)
         deducted  in  determining  Consolidated  Net  Income  for such  period,
         together with all interest  capitalized or deferred  during such period
         and not  deducted  in  determining  Consolidated  Net  Income  for such
         period,  and (b) all debt discount and expense amortized or required to
         be amortized in the  determination  of Consolidated Net Income for such
         period.

                  "Interest  Payment  Date"  (a) as to any  Alternate  Base Rate
         Loan, the last day of each March, June, September and December to occur
         while such Loan is outstanding, (b) as to any LIBOR Rate Loan having an
         Interest  Period of three months or less, the last day of such Interest
         Period,  and (c) as to any LIBOR Rate Loan  having an  Interest  Period
         longer  than three  months,  each day which is three  months  after the
         first day of such  Interest  Period  and the last day of such  Interest
         Period.

                  "Interest Period" with respect to any LIBOR Rate Loan,

                         (i) initially,  the period  commencing on the borrowing
                  date or  conversion  date, as the case may be, with respect to
                  such LIBOR Rate Loan and ending one, two,  three or six months
                  thereafter,  as  selected  by the  Borrower  in the  notice of
                  borrowing or notice of conversion  given with respect thereto;
                  and

                        (ii) thereafter,  each period commencing on the last day
                  of the immediately  preceding  Interest  Period  applicable to
                  such LIBOR Rate Loan and ending one, two,  three or six months
                  thereafter,  as selected by the Borrower by irrevocable notice
                  to the Bank not less than  three  Business  Days  prior to the
                  last day of the then  current  Interest  Period  with  respect
                  thereto;

         provided that the foregoing provisions are subject to the following:

                           (A) if any Interest Period pertaining to a LIBOR Rate
                  Loan would  otherwise end on a day that is not a Business Day,
                  such Interest  Period shall be extended to the next succeeding
                  Business Day unless the result of such  extension  would be to
                  carry such  Interest  Period into  another  calendar  month in
                  which event such Interest  Period shall end on the immediately
                  preceding Business Day;

                           (B) any Interest  Period  pertaining  to a LIBOR Rate
                  Loan that begins on the last Business Day of a calendar  month
                  (or on a day for which there is no  numerically  corresponding
                  day in the calendar month at the end of such Interest  Period)
                  shall end on the last  Business Day of the  relevant  calendar
                  month;

                           (C) if the  Borrower  shall  fail to give  notice  as
                  provided above,  the Borrower shall be deemed to have selected
                  an Alternate Base Rate Loan to replace the affected LIBOR Rate
                  Loan;

                           (D) any  Interest  Period in respect of any Loan that
                  would otherwise  extend beyond the Termination  Date shall end
                  on the Termination Date; and

                           (E) no more than 4 LIBOR  Rate Loans may be in effect
                  at any time.  For  purposes  hereof,  LIBOR  Rate  Loans  with
                  different  Interest  Periods  shall be  considered as separate
                  LIBOR Rate  Loans,  even if they shall  begin on the same date
                  and have the same duration,  although  borrowings,  extensions
                  and conversions may, in accordance with the provisions hereof,
                  be  combined  at  the  end of  existing  Interest  Periods  to
                  constitute  a new  LIBOR  Rate  Loan  with a  single  Interest
                  Period.

                  "Invested  Amount"  shall have the meaning  given such term in
         the definition of Attributed Principal Amount.

                  "Investment", in any Person, means any loan or advance to such
         Person,  any  purchase  or  other  acquisition  of any  capital  stock,
         warrants,  rights,  options,  obligations  or other  securities  of, or
         equity  interest  in, such  Person,  any capital  contribution  to such
         Person or any  other  investment  in such  Person,  including,  without
         limitation,  any Guaranty  Obligation  incurred for the benefit of such
         Person.

                  "Joinder Agreement" means a Joinder Agreement substantially in
         the  form  of  Schedule  7.10  hereto,  executed  and  delivered  by an
         Additional  Credit Party in accordance  with the  provisions of Section
         7.10.

                  "Lease Rentals" means,  with reference to any period,  the sum
         of rental and other obligations  required to be paid during such period
         by the Borrower or any Subsidiary as lessee under all leases of real or
         personal  property  (other than Capital  Leases),  excluding any amount
         required to be paid by the lessee (whether or not therein designated as
         rental or  additional  rental) on account of  maintenance  and repairs,
         insurance,  taxes,  assessments,   water  rates  and  similar  charges;
         provided  that,  if at the date of  determination,  any such  rental or
         other  obligations (or portion thereof) are contingent or not otherwise
         definitely  determinable by the terms of the related lease,  the amount
         of such  obligations (or such portion  thereof) (i) shall be assumed to
         be  equal  to the  amount  of such  obligations  for the  period  of 12
         consecutive   calendar  months   immediately   preceding  the  date  of
         determination  or (ii) if the  related  lease was not in effect  during
         such preceding  12-month  period,  shall be the amount estimated by the
         chief  financial  officer or controller of the Borrower on a reasonable
         basis and in good faith.

                  "Letter  of Credit"  means any letter of credit  issued by the
         Bank for the account of the  Borrower in  accordance  with the terms of
         Section 2.2.

                  "Letter of Credit Fee" shall have the meaning  given such term
         in Section 3.5(b).

                  "LIBOR"  means the  arithmetic  mean  (rounded  to the nearest
         1/100th of 1%) of the offered rates for deposits in U.S.  Dollars for a
         period  equal to the  Interest  Period  selected  which  appears on the
         Telerate Page 3750 at  approximately  11:00 A.M.  London time,  two (2)
         Business  Days prior to the  commencement  of the  applicable  Interest
         Period.  If, for any reason,  such rate is not available,  then "LIBOR"
         shall mean the rate per annum at which, as determined by the Bank, U.S.
         Dollars in the amount of $5,000,000  are being offered to leading banks
         at approximately 11:00 A.M. London time, two (2) Business Days prior to
         the  commencement  of the applicable  Interest Period for settlement in
         immediately  available  funds by leading banks in the London  interbank
         market for a period equal to the Interest Period selected.

                  "LIBOR  Rate"  means a rate per  annum  (rounded  upwards,  if
         necessary,  to the next higher  1/100th of 1%)  determined  by the Bank
         pursuant to the following formula:

                  LIBOR Rate  =                   LIBOR
                                -------------------------------------------
                                   1.00 minus Eurodollar Reserve Percentage

                  "LIBOR Rate Loan" means Loans the rate of interest  applicable
         to which is based on the LIBOR Rate.

                  "Lien" means any mortgage, pledge, hypothecation,  assignment,
         deposit arrangement, security interest, encumbrance, lien (statutory or
         otherwise),  preference,  priority or charge of any kind (including any
         agreement to give any of the foregoing,  any conditional  sale or other
         title retention agreement, any financing or similar statement or notice
         filed under the Uniform Commercial Code as adopted and in effect in the
         relevant jurisdiction or other similar recording or notice statute, and
         any lease in the nature thereof).

                  "Loan" or "Loans" means the Revolving Loans.

                  "LOC/BA  Committed  Amount"  means  such  term as  defined  in
         Section 2.2.

                  "LOC  Commitment"  means the  commitment of the Bank to issue,
         and to honor payment obligations under, Letters of Credit hereunder.

                  "LOC Documents"  means,  with respect to any Letter of Credit,
         such Letter of Credit, any amendments thereto,  any documents delivered
         in connection therewith,  any application therefor, and any agreements,
         instruments,   guarantees  or  other  documents   (whether  general  in
         application or applicable  only to such Letter of Credit)  governing or
         providing for (i) the rights and  obligations of the parties  concerned
         or at risk or (ii) any collateral security for such obligations.

                  "LOC  Obligations"  means,  at any  time,  the  sum of (i) the
         maximum  amount  which  is,  or at  any  time  thereafter  may  become,
         available  to be  drawn  under  Letters  of  Credit  then  outstanding,
         assuming  compliance with all requirements for drawings  referred to in
         such Letters of Credit plus (ii) the  aggregate  amount of all drawings
         under  Letters  of  Credit  honored  by the  Bank  but not  theretofore
         reimbursed.

                  "Material  Adverse Effect" means a material  adverse effect on
         (i) the  condition  (financial  or  otherwise),  operations,  business,
         assets,  liabilities or prospects of the Consolidated  Group taken as a
         whole,  (ii) the  ability  of the  Credit  Parties  taken as a whole to
         perform any material  obligation under the Credit Documents to which it
         is a party or (iii)  the  rights  and  remedies  of the Bank  under the
         Credit Documents.

                  "Materials  of  Environmental  Concern"  means any gasoline or
         petroleum  (including  crude oil or any fraction  thereof) or petroleum
         products or any  hazardous  or toxic  substances,  materials or wastes,
         defined  or  regulated  as such in or  under  any  Environmental  Laws,
         including, without limitation, asbestos,  polychlorinated biphenyls and
         urea-formaldehyde insulation.

                  "Moody's"  means  Moody's  Investors  Service,  Inc.,  or  any
         successor or assignee of the business of such  Borrower in the business
         of rating securities.

                  "Multiemployer  Plan"  means a Plan  which is a  multiemployer
         plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.

                  "Multiple Employer Plan" means a Plan which the Borrower,  any
         Subsidiary  of the  Borrower  or any ERISA  Affiliate  and at least one
         employer other than the Borrower, any Subsidiary of the Borrower or any
         ERISA Affiliate are contributing sponsors.

                  "Non-Excluded  Taxes" means such term as is defined in Section
         3.10.

                  "Notice of Borrowing"  means a written  notice of borrowing in
         substantially  the form of  Schedule  2.1(b),  as  required  by Section
         2.1(b).

                  "Notice of  Extension/Conversion"  means the written notice of
         extension or conversion in  substantially  the form of Schedule 3.2, as
         required by Section 3.2.

                  "Obligations"  means,  collectively,  the Revolving Loans, the
         LOC Obligations and the BA Obligations.

                  "Operating  Lease" means, as applied to any Person,  any lease
         (including,  without limitation,  leases which may be terminated by the
         lessee at any time) of any Property  (whether real,  personal or mixed)
         which is not a Capital  Lease  other  than any such lease in which that
         Person is the lessor.

                  "Organizational  Documents"  means,  as  to  any  Person,  the
         certificate of  incorporation  and by-laws or other  organizational  or
         governing documents of such Person.

                  "PBGC"  means  the  Pension   Benefit   Guaranty   Corporation
         established  pursuant  to  Subtitle  A of  Title  IV of  ERISA  and any
         successor thereof.

                  "Permitted Investments" means Investments which are either (i)
         cash and Cash Equivalents;  (ii) accounts receivable created,  acquired
         or made in the ordinary course of business and payable or dischargeable
         in accordance with customary trade terms; (iii) Investments  consisting
         of  stock,  obligations,  securities  or  other  property  received  in
         settlement of accounts  receivable  (created in the ordinary  course of
         business) from bankrupt obligors;  (iv) Investments  existing as of the
         Closing Date and set forth in Schedule  8.5,  (v) Guaranty  Obligations
         permitted  by  Section  8.1;  (vi)  acquisitions  permitted  by Section
         8.4(d);  (vii)  transactions  permitted by Section 8.6, (viii) loans to
         employees,  directors  or  officers  in  connection  with the  award of
         convertible  bonds or stock under a stock incentive plan,  stock option
         plan or other  equity-based  compensation  plan or  arrangement  in the
         aggregate not to exceed $500,000  (calculated on the exercise price for
         any such shares) in the aggregate at any time  outstanding;  (ix) other
         advances or loans to  employees,  directors,  officers or agents not to
         exceed $250,000 in the aggregate at any time outstanding;  (x) advances
         or loans to customers or suppliers  that do not exceed  $250,000 in the
         aggregate at any one time  outstanding,  (xi) Investments by members of
         the Consolidated Group and their  Subsidiaries and Affiliates  existing
         on the Closing Date,  (xii)  Investments  by a Credit Party in and to a
         Domestic Credit Party and (xiii) other loans,  advances and investments
         of a nature not contemplated in the foregoing  subsections in an amount
         not to exceed in the aggregate at any time  outstanding an amount equal
         to the sum of $250,000 plus an amount equal to the "unused"  portion of
         Restricted  Payments which are  permitted,  but not made, in any fiscal
         year.

                  "Permitted Liens" means:

                                    (i) Liens in favor of the Bank;

                                    (ii)  Liens  (other  than  Liens  created or
                  imposed under ERISA) for taxes,  assessments  or  governmental
                  charges  or  levies  not  yet due or  Liens  for  taxes  being
                  contested in good faith by appropriate  proceedings  for which
                  adequate reserves determined in accordance with GAAP have been
                  established  (and as to which the Property subject to any such
                  Lien  is not  yet  subject  to  foreclosure,  sale  or loss on
                  account thereof);

                                    (iii) statutory Liens of landlords and Liens
                  of  carriers,   warehousemen,   mechanics,   materialmen   and
                  suppliers  and  other  Liens  imposed  by law or  pursuant  to
                  customary  reservations  or retentions of title arising in the
                  ordinary  course of business,  provided that such Liens secure
                  only  amounts not yet due and payable or, if due and  payable,
                  are unfiled and no other  action has been taken to enforce the
                  same or are  being  contested  in good  faith  by  appropriate
                  proceedings   for  which  adequate   reserves   determined  in
                  accordance  with GAAP have been  established  (and as to which
                  the  Property  subject to any such Lien is not yet  subject to
                  foreclosure, sale or loss on account thereof);

                                    (iv)  Liens  (other  than  Liens  created or
                  imposed under ERISA) incurred or deposits made by the Borrower
                  and its  Subsidiaries  in the  ordinary  course of business in
                  connection with workers' compensation,  unemployment insurance
                  and  other  types  of  social  security,   or  to  secure  the
                  performance of tenders,  statutory obligations,  bids, leases,
                  government  contracts,  performance and return-of-money  bonds
                  and other similar  obligations  (exclusive of obligations  for
                  the payment of borrowed money);

                                    (v) Liens in connection with  attachments or
                  judgments  (including  judgment or appeal bonds) provided that
                  the judgments  secured  shall,  within 30 days after the entry
                  thereof,  have been  discharged  or execution  thereof  stayed
                  pending appeal,  or shall have been discharged  within 30 days
                  after the expiration of any such stay;

                                    (vi) easements, rights-of-way,  restrictions
                  (including    zoning    restrictions),    minor   defects   or
                  irregularities   in  title  and  other   similar   charges  or
                  encumbrances not, in any material  respect,  impairing the use
                  of the encumbered Property for its intended purposes;

                                    (vii)  Liens  securing  purchase  money  and
                  sale/leaseback  Indebtedness (including Capital Leases) to the
                  extent permitted under Section 8.1(d),  provided that any such
                  Lien attaches only to the Property financed or leased and such
                  Lien  attaches  thereto  concurrently  with or  within 90 days
                  after the acquisition  thereof in connection with the purchase
                  money transactions and within 30 days after the closing of any
                  sale/leaseback transaction;

                                    (viii) leases or subleases granted to others
                  not  interfering in any material  respect with the business of
                  any member of the Consolidated Group;

                                    (ix)  any  interest  of  title  of a  lessor
                  under,  and Liens  arising from UCC financing  statements  (or
                  equivalent  filings,  registrations  or  agreements in foreign
                  jurisdictions)  relating to,  leases  permitted by this Credit
                  Agreement;

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

                                    (xi)  Liens  deemed  to exist in  connection
                  with  Investments  in repurchase  agreements  permitted  under
                  Section 8.5;

                                    (xii) normal and customary  rights of setoff
                  upon  deposits  of cash in favor of banks or other  depository
                  institutions; and

                                    (xiii) Liens existing as of the Closing Date
                  and set  forth on  Schedule  6.8;  provided  that no such Lien
                  shall at any time be extended to or cover any  Property  other
                  than the Property subject thereto on the Closing Date.

                  "Person"  means any  individual,  partnership,  joint venture,
         firm,  corporation,  limited liability company,  association,  trust or
         other  enterprise  (whether or not  incorporated)  or any  Governmental
         Authority.

                  "Plan" means any employee  benefit plan (as defined in Section
         3(3) of ERISA)  which is covered by ERISA and with respect to which the
         Borrower, any Subsidiary of the Borrower or any ERISA Affiliate is (or,
         if such plan were terminated at such time,  would under Section 4069 of
         ERISA be deemed to be) an "employer" within the meaning of Section 3(5)
         of ERISA.

                  "Principal Shareholder" means Fred W. Wagenhals, the president
         and chief executive officer of the Borrower.

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

                  "Receivables   Financier"   means,   in   connection   with  a
         Securitization  Transaction,  the Person which  provides  financing for
         such transaction  whether by purchase,  loan or otherwise in respect of
         Receivables.

                  "Regulation  G,  T, U, or X"  means  Regulation  G, T, U or X,
         respectively,  of the Board of Governors of the Federal  Reserve System
         as from time to time in effect  and any  successor  to all or a portion
         thereof.

                  "Release"  means  any  spilling,  leaking,  pumping,  pouring,
         emitting, emptying, discharging, injecting, escaping, leaching, dumping
         or  disposing  into  the  environment  (including  the  abandonment  or
         discarding  of  barrels,   containers  and  other  closed   receptacles
         containing any Materials of Environmental Concern).

                  "Reportable  Event"  means  any of the  events  set  forth  in
         Section  4043(c)  of ERISA,  other  than  those  events as to which the
         notice requirement has been waived by regulation.

                  "Requirement of Law" means, as to any Person, any law, treaty,
         rule or  regulation  or  determination  of an  arbitrator or a court or
         other  Governmental  Authority,  in each case  applicable to or binding
         upon such Person or any of its material property is subject.

                  "Responsible  Officer" means the Chief  Financial  Officer and
         the Controller.

                  "Restricted   Payment"   means  (i)  any   dividend  or  other
         distribution, direct or indirect, on account of any shares of any class
         of stock now or hereafter  outstanding,  except (A) a dividend  payable
         solely in shares of that  class to the  holders  of that  class and (B)
         dividends and other  distributions  payable to a Credit Party, (ii) any
         redemption,  retirement,  sinking fund or similar payment,  purchase or
         other acquisition for value,  direct or indirect,  of any shares of any
         class of stock now or hereafter outstanding, and (iii) any payment made
         to retire,  or to obtain the  surrender of, any  outstanding  warrants,
         options or other rights to acquire  shares of any class of stock now or
         hereafter outstanding.

                  "Revolving  Commitment"  means the  commitment  of the Bank to
         make Revolving Loans hereunder.

                  "Revolving Commitment Increase Date" means the date upon which
         all of the following shall have occurred:

                           (a) the definitive acquisition agreements relating to
                  the  Gordon  Transactions  shall have been  delivered  to, and
                  reviewed and approved by, the Bank;

                           (b) the Bank shall have  completed such due diligence
                  relating   to  the   Gordon   Transactions   as  it  may  deem
                  appropriate;

                           (c)  the   Gordon   Transactions   shall   have  been
                  consummated prior to or contemporaneously with the increase in
                  the Revolving  Commitment on the Revolving Commitment Increase
                  Date;

                           (d) CMP shall be joined as a Guarantor  hereunder  in
                  accordance with the provisions of Section 7.10 (accompanied by
                  supporting  resolutions,  incumbency  certificates,  corporate
                  formation  and  organizational  documentation  and opinions of
                  counsel as the Bank may reasonably request);

                           (e) the  conditions of Section 5.2 shall be met as if
                  an Extension of Credit were made on such date.

                  "Revolving  Committed  Amount"  means  such term as defined in
         Section 2.1(a).

                  "Revolving Loans" shall have the meaning assigned to such term
         in Section 2.1(a).

                  "Revolving  Note" means the promissory note of the Borrower in
         favor of the Bank evidencing the Revolving Loans in  substantially  the
         form  attached  as  Schedule  2.1(e),  as such  promissory  note may be
         amended,  modified,  supplemented,  extended,  renewed or replaced from
         time to time.

                  "S&P" means  Standard & Poor's  Ratings  Group,  a division of
         McGraw Hill, Inc., or any successor or assignee of the business of such
         division in the business of rating securities.

                  "Securitization  Transaction" means any financing  transaction
         or series of  financing  transactions  that have been or may be entered
         into by a member  of the  Consolidated  Group  pursuant  to which  such
         member of the Consolidated Group may sell, convey or otherwise transfer
         to (i) a Subsidiary  or  affiliate,  or (ii) any other  Person,  or may
         grant a security  interest in, any  Receivables  or  interests  therein
         secured by  merchandise  or services  financed  thereby  (whether  such
         Receivables  are then existing or arising in the future) of such member
         of the Consolidated  Group,  and any assets related thereto,  including
         without  limitation,  all security interests in merchandise or services
         financed thereby,  the proceeds of such  Receivables,  and other assets
         which are

         customarily  sold  or  in  respect  of  which  security  interests  are
         customarily  granted in  connection  with  securitization  transactions
         involving such assets.

                  "Security" shall have the meaning set forth in Section 2(1) of
         the Securities Act of 1933, as amended from time to time.

                  "Senior  Note  Agreement"  means the Note  Purchase  Agreement
         dated as of January 2, 1997 issued by the Borrower in  connection  with
         the Senior Notes, as modified, supplemented,  renewed and replaced from
         time to time.

                  "Senior Notes" means those $20,000,000,  8.05% Senior Notes of
         the Borrower due January 2, 1999, as amended,  modified,  supplemented,
         renewed and replaced from time to time.

                  "Single  Employer  Plan"  means any Plan  which is  covered by
         Title IV of ERISA, but which is not a Multiemployer  Plan or a Multiple
         Employer Plan.

                  "Subsidiary" means, as to any Person, (a) any corporation more
         than 50% of whose  stock of any  class or  classes  having by the terms
         thereof  ordinary  voting power to elect a majority of the directors of
         such corporation (irrespective of whether or not at the time, any class
         or classes of such corporation shall have or might have voting power by
         reason of the  happening  of any  contingency)  is at the time owned by
         such Person directly or indirectly  through  Subsidiaries,  and (b) any
         partnership,  association,  joint venture or other entity in which such
         Person directly or indirectly through Subsidiaries has more than 50% of
         the  voting  interests  at  any  time.  Unless  otherwise   identified,
         "Subsidiary" or "Subsidiaries" shall mean Subsidiaries of the Borrower.

                  "Termination  Date" means March 31, 1998,  or if extended with
         the  written  consent  of the  Bank,  such  later  date as to which the
         Termination Date may be extended.

                  "Transfer"  means  the  sale,  lease,  transfer,   conveyance,
         abandonment or other disposition,  directly or indirectly,  in a single
         transaction  or a  series  of  transactions  of all or  any  part  of a
         Person's assets.

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

                  "Wells  Fargo Letter of Credit"  means that standby  Letter of
         Credit  issued  hereunder  on the Closing  Date in favor of Wells Fargo
         HSBC Trade Bank, N.A. in support of certain existing commercial letters
         of credit issued for the account of the Borrower and its Subsidiaries.

                  "Wholly Owned  Subsidiary"  of any Person means any Subsidiary
         100% of whose  Voting  Stock or other  equity  interests is at the time
         owned by such Person directly or indirectly  through other Wholly Owned
         Subsidiaries.

         1.2      Computation of Time Periods.

                  For purposes of computation of periods of time hereunder,  the
word "from" means "from and  including" and the words "to" and "until" each mean
"to but excluding."

         1.3      Accounting Terms.

                  Except as otherwise  expressly provided herein, all accounting
terms  used  herein  shall be  interpreted,  and all  financial  statements  and
certificates and reports as to financial matters required to be delivered to the
Bank  hereunder  shall  be  prepared,  in  accordance  with  GAAP  applied  on a
consistent  basis.  All  calculations  made  for  the  purposes  of  determining
compliance  with this Credit  Agreement  shall  (except as  otherwise  expressly
provided  herein) be made by application  of GAAP applied on a basis  consistent
with the most recent annual or quarterly financial statements delivered pursuant
to  Section  7.1  hereof  (or,  prior to the  delivery  of the  first  financial
statements  pursuant to Section 7.1 hereof,  consistent  with the annual audited
financial statements  referenced in Section 6.1(i));  provided,  however, if (a)
the Borrower  shall object to determining  such  compliance on such basis at the
time of delivery of such  financial  statements due to any change in GAAP or the
rules  promulgated  with  respect  thereto  or (b) the Bank  shall so  object in
writing within 30 days after delivery of such  financial  statements,  then such
calculations  shall be made on a basis consistent with the most recent financial
statements  delivered by the Borrower to the Bank as to which no such  objection
shall have been made.

                                    SECTION 2
                                CREDIT FACILITIES
                                -----------------

         2.1      Revolving Loans.

                  (a)      Commitment.

         During  the  Commitment  Period,  subject  to the terms and  conditions
hereof,  the Bank agrees to make revolving loans to the Borrower upon request up
to an  aggregate  principal  amount  at any  time  outstanding  (the  "Revolving
Committed Amount") of:

                  (i) from the  Closing  Date until the sooner of the  Revolving
         Commitment  Increase  Date or September 30, 1997,  SIX MILLION  DOLLARS
         ($6,000,000);

                  (ii)  from  the  Revolving   Commitment  Increase  Date  until
         September 30, 1997, TEN MILLION DOLLARS ($10,000,000); and

                  (iii) from September 30, 1997 until the Termination  Date, SIX
         MILLION DOLLARS ($6,000,000).

The Loans  hereunder  may  consist  of  Alternate  Base Rate Loans or LIBOR Rate
Loans, or a combination  thereof;  provided that no more than 4 LIBOR Rate Loans
may be  outstanding  at any  time.  The  obligation  of the  Bank to make  Loans
hereunder and to extend,  or convert Loans

into, LIBOR Rate Loans is subject to the condition that the  Representations and
Warranties  set forth  herein  are true and  correct  in all  material  respects
(except as to items stated as of a particular time).

                  (b)      Notices.

         Requests by the Borrower for Loans  hereunder,  and for  extensions  or
conversions  of Loans  hereunder,  shall be made by written notice (or telephone
notice promptly  confirmed in writing) by 12:00 Noon  Charlotte,  North Carolina
time on (i) the  Business  Day prior to the  requested  borrowing,  extension or
conversion in the case of Alternate  Base Rate Loans and (ii) the third Business
Day prior to the  requested  borrowing,  extension or  conversion in the case of
LIBOR  Rate  Loans.  Each  request  shall be in a  minimum  principal  amount of
$1,000,000 in the case of LIBOR Rate Loans and $100,000 in the case of Alternate
Base Rate Loans and,  in each case,  integral  multiples  of  $100,000 in excess
thereof,  and shall  specify the date of the requested  borrowing,  extension or
conversion, the aggregate amount to be borrowed, extended or converted and if an
extension of  conversion,  the Loan which is being  extended or  converted,  and
whether the  borrowing,  extension  or  conversion  shall  consist of LIBOR Rate
Loans,  Alternate Base Rate Loans or combination  thereof. If the Borrower shall
fail to specify  (A) the type of Loan  requested  for a  borrowing,  the request
shall be deemed a request for a Alternate  Base Rate Loan,  (B) the  duration of
the  applicable  Interest  Period in the case of LIBOR Rate  Loans,  the request
shall be deemed to be a request  for an  Interest  Period of one  month.  Unless
extended in accordance  with the  provisions  hereof,  LIBOR Rate Loans shall be
converted to  Alternate  Base Rate Loans at the end of the  applicable  Interest
Period. A form of Notice of Borrowing is attached as Schedule 2.1(b).

                  (c)      Interest Rate.

         Subject to the provisions of Section 3.1, the Revolving Loans hereunder
shall bear  interest  at a per annum rate equal to (i) in the case of LIBOR Rate
Loans,  the LIBOR Rate plus 1.90%,  and (ii) in the case of Alternate  Base Rate
Loans,  the  Alternate  Base Rate.  Interest  will be payable in arrears on each
Interest Payment Date.

                  (d)      Repayment.

         The Revolving Loans shall be due and payable on the  Termination  Date,
together with accrued interest and fees.

                  (e)      Revolving Note.

         The Revolving Loans shall be evidenced by the Revolving Note.

         2.2      Letter of Credit Facility.

         (a) Issuance.  During the Commitment  Period,  subject to the terms and
conditions  hereof and of the LOC  Documents,  if any,  and such other terms and
conditions  which the Bank may  reasonably  require,  the Bank shall  issue such
Letters of Credit as the  Borrower  may  request  for its own account or for the
account of another Credit Party as provided herein,  in a form

acceptable to the Bank, for the purposes  hereinafter  set forth;  provided that
the sum of LOC  Obligations  plus BA  Obligations  shall not exceed SIX  MILLION
DOLLARS ($6,000,000) at any time (the "LOC/BA Committed Amount).  Other than the
Wells Fargo Letter of Credit,  Letters of Credit issued hereunder shall be trade
or  commercial  letters of credit (as opposed to standby  letters of credit) and
shall not have an  original  expiry  date more than six months  from the date of
issuance or extension,  nor an expiry date,  whether as originally  issued or by
extension,  extending  beyond the Termination  Date. Each Letter of Credit shall
comply with the related LOC Documents The issuance date of each Letter of Credit
shall be a Business Day.

         (b) Notice and  Reports.  The request  for the  issuance of a Letter of
Credit  shall be  submitted  by the  Borrower  to the Bank at  least  three  (3)
Business Days prior to the requested date of issuance (or such shorter period as
may be agreed by the Bank).  A form of Notice of Request for Letter of Credit is
attached as Schedule 2.2(b).

         (c)  Reimbursement.  In the event of any  drawing  under any  Letter of
Credit,  the Bank will promptly  notify the Borrower.  The Borrower  promises to
reimburse the Bank on the day of drawing under any Letter of Credit (either with
the proceeds of a Revolving  Loan  obtained  hereunder or otherwise) in same day
funds. If the Borrower shall fail to reimburse the Bank as provided hereinabove,
the unreimbursed  amount of such drawing shall bear interest at a per annum rate
equal  to the  Alternate  Base  Rate  plus  two  percent  (2%).  The  Borrower's
reimbursement  obligations  hereunder shall be absolute and unconditional  under
all circumstances irrespective of any rights of setoff,  counterclaim or defense
to payment the Borrower may claim or have against the Bank,  the  beneficiary of
the  Letter  of  Credit  drawn  upon  or any  other  Person,  including  without
limitation  any defense based on any failure of the Borrower or any other Credit
Party  to  receive  consideration  or  the  legality,  validity,  regularity  or
unenforceability of the Letter of Credit.

         (d)   Designation   of  other  Credit   Parties  as  Account   Parties.
Notwithstanding  anything to the  contrary  set forth in this Credit  Agreement,
including  without  limitation  Section 2.2(a) hereof, a Letter of Credit issued
hereunder  may contain a  statement  to the effect that such Letter of Credit is
issued for the account of a Credit  Party,  provided that  notwithstanding  such
statement,  the Borrower  shall be the actual  account party for all purposes of
this Credit  Agreement  for such Letter of Credit and such  statement  shall not
affect the Borrower's  reimbursement  obligations hereunder with respect to such
Letter of Credit.

         (e)  Renewal,  Extension.  The  renewal or  extension  of any Letter of
Credit shall,  for purposes  hereof,  be treated in all respects the same as the
issuance of a new Letter of Credit hereunder.

         (f)  Uniform  Customs and  Practices.  The Bank may have the Letters of
Credit be subject to The Uniform Customs and Practice for  Documentary  Credits,
as  published as of the date of issue by the  International  Chamber of Commerce
(the "UCP"), in which case the UCP may be incorporated therein and deemed in all
respects to be a part thereof.

         (g)      Indemnification; Nature of Bank's Duties.

                  (i) In addition to its other  obligations  under this  Section
         2.2, the Borrower hereby agrees to protect, indemnify, pay and save the
         Bank   harmless   from  and  against  any  and  all

         claims,  demands,  liabilities,  damages,  losses,  costs,  charges and
         expenses (including reasonable attorneys' fees) that the Bank may incur
         or be  subject  to as a  consequence,  direct or  indirect,  of (A) the
         issuance  of any  Letter of Credit  or (B) the  failure  of the Bank to
         honor a  drawing  under a Letter  of  Credit  as a result of any act or
         omission,  whether  rightful or  wrongful,  of any present or future de
         jure or de facto government or governmental authority (all such acts or
         omissions, herein called "Government Acts").

                  (ii) As between the Borrower and the Bank,  the Borrower shall
         assume  all risks of the  acts,  omissions  or misuse of any  Letter of
         Credit by the beneficiary  thereof.  The Bank shall not be responsible:
         (A) for the form, validity, sufficiency, accuracy, genuineness or legal
         effect of any document  submitted by any party in  connection  with the
         application for and issuance of any Letter of Credit, even if it should
         in  fact  prove  to be in any or all  respects  invalid,  insufficient,
         inaccurate,  fraudulent or forged;  (B) for the validity or sufficiency
         of any instrument  transferring  or assigning or purporting to transfer
         or assign any Letter of Credit or the rights or benefits  thereunder or
         proceeds thereof,  in whole or in part, that may prove to be invalid or
         ineffective for any reason; (C) for errors, omissions, interruptions or
         delays in  transmission  or delivery of any messages,  by mail,  cable,
         telegraph,  telex or otherwise,  whether or not they be in cipher;  (D)
         for any loss or delay in the  transmission or otherwise of any document
         required in order to make a drawing  under a Letter of Credit or of the
         proceeds  thereof;  and (E) for any  consequences  arising  from causes
         beyond the  control of the Bank,  including,  without  limitation,  any
         Government Acts. None of the above shall affect, impair, or prevent the
         vesting of the Bank's rights or powers hereunder.

                  (iii) In  furtherance  and  extension and not in limitation of
         the  specific  provisions  hereinabove  set forth,  any action taken or
         omitted by the Bank,  under or in connection  with any Letter of Credit
         or the related  certificates,  if taken or omitted in good faith, shall
         not put the Bank under any  resulting  liability to the Borrower or any
         other Credit Party. It is the intention of the parties that this Credit
         Agreement  shall be construed  and applied to protect and indemnify the
         Bank against any and all risks  involved in the issuance of the Letters
         of Credit,  all of which risks are hereby  assumed by the  Borrower (on
         behalf of  itself  and each of the other  Credit  Parties),  including,
         without limitation, any and all Government Acts. The Bank shall not, in
         any way,  be liable for any  failure by the Bank or anyone  else to pay
         any  drawing  under any Letter of Credit as a result of any  Government
         Acts or any other cause beyond the control of the Bank.

                  (iv) Nothing in this  subsection  (g) is intended to limit the
         reimbursement  obligations of the Borrower  contained in subsection (c)
         above.  The obligations of the Borrower under this subsection (g) shall
         survive the termination of this Credit  Agreement.  No act or omissions
         of any current or prior  beneficiary of a Letter of Credit shall in any
         way affect or impair the rights of the Bank to enforce any right, power
         or benefit under this Credit Agreement.

                  (v) Notwithstanding anything to the contrary contained in this
         subsection  (i), the Borrower shall have no obligation to indemnify the
         Bank in

         respect of any  liability  incurred  by the Bank (A) arising out of the
         gross negligence or willful  misconduct of the Bank, as determined by a
         court of competent jurisdiction, or (B) caused by the Bank's failure to
         pay under any Letter of Credit  after  presentation  to it of a request
         strictly  complying  with the terms and  conditions  of such  Letter of
         Credit, as determined by a court of competent jurisdiction, unless such
         payment is prohibited by any law, regulation, court order or decree.

         (h) Conflict with LOC Documents.  In the event of any conflict  between
this  Credit  Agreement  and any LOC  Document  (including  any letter of credit
application), this Credit Agreement shall control.

         2.3      Bankers' Acceptances.
                  ---------------------

         (a)  Bankers'  Acceptance  Commitment.  During the  Commitment  Period,
subject  to the terms and  conditions  hereof and of the BA  Documents,  if any,
executed in connection  with the creation of each Bankers'  Acceptance  and such
other terms and conditions which the Bank may reasonably require, the Bank shall
create and discount such Bankers'  Acceptances  as the Borrower may request from
time to time as provided herein, in a form acceptable to the Bank; provided that
the sum of LOC Obligations plus the BA Obligations  shall not at any time exceed
the LOC/BA Committed Amount, and provided further that the Borrower shall not be
entitled to request any Bankers'  Acceptance which, if created,  would result in
more than ten (10) separate Bankers' Acceptances being outstanding  hereunder at
any time. The maturity of any Bankers'  Acceptances  shall be the date 30, 60 or
90 days after the creation thereof, as the Borrower may elect; provided that, no
such  maturity  shall  extend  beyond the date  falling five (5) days before the
Termination  Date.  Each  Bankers'  Acceptance  shall comply with the related BA
Documents  and shall be executed on behalf of the Borrower and  presented to the
Bank  pursuant to such  procedures  as are  provided for in such BA Documents or
otherwise  provided  or required  by the Bank.  The face amount of any  Bankers'
Acceptance  shall be in a minimum  amount of $500,000 and integral  multiples of
$500,000 in excess  thereof.  The creation and  maturity  date of each  Bankers'
Acceptance  shall be a Business Day.  Notwithstanding  the  foregoing,  the Bank
shall not be obligated to create or discount any Bankers' Acceptance (i) that is
not an Eligible Bankers' Acceptance, or (ii) if creation thereof would cause the
BA Agent to exceed  the  maximum  amount  of  outstanding  bankers'  acceptances
permitted by applicable law.

         (b) Notice and Requests. Any request for the creation and discount of a
Bankers'  Acceptance  shall be  submitted  to the Bank by 9:30 A.M.  (Charlotte,
North  Carolina  time)  on the  requested  date  of  creation  and  discount  by
completion  of a  Bankers'  Acceptance  Request  substantially  in the  form  of
Schedule  2.3(b) (a "BA Request") and shall be  accompanied by such documents as
are specified therein and in the related BA Documents.

         (c) Discount of Bankers' Acceptances.  Upon the creation by the Bank of
a  Bankers'  Acceptance,   the  Bank  shall  discount  such  Committed  Bankers'
Acceptance by deducting from the face amount thereof a discount equal to the sum
of BA Discount  Reference Rate plus 1.90% (the  "Applicable  BA Discount  Rate")
applied against the face amount of the Bankers' Acceptance for the term thereof,
and the Bank shall make the net amount available in immediately  available funds
to the  Borrower.  The Bank may  retain  or  rediscount,  at its  election,  any
Bankers'  Acceptance and

the  amount  received  by the Bank upon  payment  thereof  at  maturity  or upon
rediscounting shall be solely for the account of the Bank.

         (d) Reimbursement. The Bank shall give prompt notice to the Borrower in
each case of its  honor of a mature  Bankers'  Acceptance.  The  Borrower  shall
thereupon  reimburse the Bank on the same day on which the Bank honors a matured
Bankers'  Acceptance  for  the  full  amount  of the  related  BA  Reimbursement
Obligation in Dollars and in immediately  available funds. If the Borrower shall
fail to reimburse the Bank as provided hereinabove, the related BA Reimbursement
Obligation  shall bear interest at a per annum rate equal to the Alternate  Base
Rate plus two percent (2%). The Borrower's  reimbursement  obligations hereunder
shall be absolute and unconditional under all circumstances  irrespective of any
rights of set-off,  counterclaim or defense to payment the Borrower may claim or
have against the Bank or any other Person.

         (e)  Eligibility  Requirement.  The Borrower  agrees that, in the event
that any Bankers' Acceptance created (or to be created) shall not be an Eligible
Bankers'  Acceptance,  the Borrower  shall,  upon demand by the Bank, pay to the
Bank  additional  amounts  sufficient to  compensate  the Bank for any increased
costs resulting therefrom (including without limitation costs resulting from any
reserve  requirement,   premium  liability  to  the  Federal  Deposit  Insurance
Corporation,  or a higher discount rate). A detailed  statement as to the amount
of such increased costs, prepared in good faith and submitted by the Bank to the
Borrower,  shall be  conclusive  and binding for all purposes,  absent  manifest
error in computation.

                                    SECTION 3
                 OTHER PROVISIONS RELATING TO CREDIT FACILITIES
                 ----------------------------------------------

         3.1      Default Rate.

                  Upon the occurrence,  and during the continuance,  of an Event
of Default,  the principal of and, to the extent  permitted by law,  interest on
the  Loans and any  other  amounts  owing  hereunder  or under the other  Credit
Documents shall bear interest, payable on demand, at a per annum rate 2% greater
than the rate which would  otherwise be applicable (or if no rate is applicable,
whether in respect of interest,  fees or other amounts, then 2% greater than the
Alternate Base Rate).

         3.2      Extension and Conversion.

                  Subject to the terms of Section 5.2,  the Borrower  shall have
the option,  on any  Business  Day, to extend  existing  Loans into a subsequent
permissible  Interest Period or to convert Loans into Loans of another  interest
rate type; provided,  however, that (i) except as provided in Section 3.8, LIBOR
Rate Loans may be converted  into Alternate Base Rate Loans only on the last day
of the  Interest  Period  applicable  thereto,  (ii)  LIBOR  Rate  Loans  may be
extended,  and Alternate Base Rate Loans may be converted into LIBOR Rate Loans,
only if no Default or Event of Default is in  existence on the date of extension
or  conversion,  (iii) Loans  extended as, or converted  into,  LIBOR Rate Loans
shall be subject to the terms of the  definition of "Interest  Period" set forth
in  Section  1.1 and shall be in such  minimum  amounts as  provided  in Section
2.1(b),  and (iv) any request for  extension or  conversion of a LIBOR Rate Loan
which shall fail to

specify  an  Interest  Period  shall be deemed to be a request  for an  Interest
Period of one month.  Each such extension or conversion shall be effected by the
Borrower  by  giving a  Notice  of  Extension/Conversion  (or  telephone  notice
promptly confirmed in writing) to the Bank prior to 11:00 A.M. (Charlotte, North
Carolina  time) on the Business Day of, in the case of the conversion of a LIBOR
Rate Loan into a Alternate  Base Rate Loan,  and on the third Business Day prior
to, in the case of the  extension  of a LIBOR Rate Loan as, or  conversion  of a
Alternate  Base Rate Loan  into,  a LIBOR Rate  Loan,  the date of the  proposed
extension  or  conversion,  specifying  the date of the  proposed  extension  or
conversion,  the Loans to be so extended or  converted,  the types of Loans into
which  such  Loans are to be  converted  and,  if  appropriate,  the  applicable
Interest Periods with respect thereto.  Each request for extension or conversion
shall be irrevocable and shall constitute a  representation  and warranty by the
Borrower of the matters specified in subsections (a) through (d) of Section 5.2.
In the event the Borrower fails to request  extension or conversion of any LIBOR
Rate Loan in accordance  with this Section,  or any such conversion or extension
is not permitted or required by this Section, then such LIBOR Rate Loan shall be
automatically  converted  into a  Alternate  Base  Rate  Loan  at the end of the
Interest  Period  applicable  thereto.  The Bank shall  give the Bank  notice as
promptly as practicable of any such proposed  extension or conversion  affecting
any Loan.

         3.3      Prepayments.

                  (a) Voluntary  Prepayments.  Revolving  Loans may be repaid in
whole or in part without premium or penalty;  provided that (i) LIBOR Rate Loans
may be prepaid only upon three (3) Business  Days' prior  written  notice to the
Bank and must be accompanied by payment of any amounts owing under Section 3.11,
and (ii) partial  prepayments  shall be minimum principal amounts of $1,000,000,
in the case of LIBOR Rate Loans,  and  $100,000,  in the case of Alternate  Base
Rate Loans, and in integral multiples of $100,000 in excess thereof.

                  (b) Mandatory  Prepayments.  If at any time, (A) the aggregate
principal amount of Revolving Loans shall exceed the Revolving Committed Amount,
or (B) the sum of LOC  Obligations  plus BA Obligations  shall exceed the LOC/BA
Committed  Amount,  the Borrower shall immediately make payment on the Revolving
Loans  and/or to a cash  collateral  account in  respect of the LOC  Obligations
and/or BA Obligations, in an amount sufficient to eliminate the deficiency.

                  (c) Application.  Unless otherwise  specified by the Borrower,
prepayments  made hereunder shall be applied first to Alternate Base Rate Loans,
then to LIBOR Rate Loans in direct order of Interest Period  maturities and then
to a cash  collateral  account to secure  LOC  Obligations  and BA  Obligations.
Amounts  prepaid  hereunder may be reborrowed in accordance  with the provisions
hereof.

         3.4      Termination and Reduction of Commitments

                  (a) Voluntary  Reductions.  The  Commitments  hereunder may be
terminated  or  permanently  reduced in whole or in part upon three (3) Business
Days' prior written notice to the Bank, provided that (i) after giving effect to
any such voluntary  reduction the aggregate  amount of Revolving Loans shall not
exceed the Revolving  Committed  Amount and the sum of LOC  Obligations  plus BA
Obligations  shall  not  exceed  the LOC  Committed  Amount,  and  (ii)

partial  reductions  shall be minimum  principal  amount of  $1,000,000,  and in
integral multiples of $100,000 in excess thereof.

                  (b)  Mandatory  Reduction.  The  Commitments  hereunder  shall
terminate on the Termination Date.

         3.5      Fees.

                  (a)  Commitment  Fee.  In   consideration   of  the  Revolving
Commitments  hereunder,  the Borrower agrees to pay to the Bank a commitment fee
(the  "Commitment  Fee") equal to three-eighths of one percent (.375%) per annum
on the average  daily unused amount of the  Revolving  Committed  Amount for the
applicable  period.  The Commitment Fee shall be payable quarterly in arrears on
the 5th day following the last day of each calendar  quarter for the immediately
preceding  quarter (or portion  thereof)  beginning  with the first such date to
occur after the Closing Date.

                  (b) Letter of Credit Fees.  The Borrower  agrees to pay to the
Bank (collectively, the "Letter of Credit Fees"):

                           (A)  with   regard  to  standby   Letters  of  Credit
                  (including  the Wells Fargo Letter of Credit),  a fee equal to
                  1.90% per annum on the average daily maximum amount  available
                  to be drawn under  standby  Letters of Credit from the date of
                  issuance  to the  date of  expiration,  payable  quarterly  in
                  arrears at the end of each calendar quarter thereafter;

                           (B) with  regard to trade or  commercial  Letters  of
                  Credit,  such fronting and negotiation fees as may be mutually
                  agreed  upon by the Bank and the  Borrower  from time to time;
                  and

                           (C) customary charges of the Bank with respect to the
                  issuance, amendment,  transfer,  administration,  cancellation
                  and conversion of, and drawings under,  such Letters of Credit
                  as may be mutually  agreed upon by the Bank and the  Borrowers
                  from time to time.

                  (c) Upfront Fee. The Borrower  agrees to pay to the Bank on or
before the Closing Date an upfront fee of $25,000  (against which the $2,500 Due
Diligence deposit shall be credited).

         3.6      Capital Adequacy.

                  If the Bank has  determined,  after the date hereof,  that the
adoption or the  becoming  effective  of, or any change in, or any change by any
Governmental  Authority,  central  bank or  comparable  agency  charged with the
interpretation or administration thereof in the interpretation or administration
of, any  applicable  law,  rule or regulation  regarding  capital  adequacy,  or
compliance by the Bank with any request or directive  regarding capital adequacy
(whether or not having the force of law) of any such authority,  central bank or
comparable  agency,  has or would have the effect of reducing the rate of return
on  the  Bank's  capital  or  assets  as a  consequence  of its

commitments or obligations  hereunder to a level below that which the Bank could
have achieved but for such adoption, effectiveness, change or compliance (taking
into consideration the Bank's policies with respect to capital adequacy),  then,
upon notice from the Bank to the  Borrower,  the Borrower  shall be obligated to
pay to the Bank such additional amount or amounts as the Bank determines in good
faith will compensate the Bank for such  reduction.  Each  determination  by the
Bank of amounts  owing under this  Section  shall,  absent  manifest  error,  be
conclusive and binding on the parties hereto.

         3.7      Inability To Determine Interest Rate.

         If prior to the first day of any Interest  Period,  the Bank shall have
determined  (which  determination  shall  be  conclusive  and  binding  upon the
Borrower)  that,  by reason of  circumstances  affecting  the  relevant  market,
adequate and reasonable  means do not exist for ascertaining the Eurodollar Rate
for such Interest  Period,  the Bank shall give  telecopy or  telephonic  notice
thereof to the  Borrower as soon as  practicable  thereafter.  If such notice is
given (a) any LIBOR  Rate  Loans  requested  to be made on the first day of such
Interest  Period  shall be made as  Alternate  Base Rate Loans and (b) any Loans
that were to have been converted on the first day of such Interest  Period to or
continued  as LIBOR Rate Loans shall be  converted  to or continued as Alternate
Base Rate Loans.  Until such notice has been  withdrawn by the Bank,  no further
LIBOR Rate Loans shall be made or continued as such, nor shall the Borrower have
the right to convert Alternate Base Rate Loans to LIBOR Rate Loans.

         3.8      Illegality.

         Notwithstanding  any other provision  herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
occurring  after the Closing Date shall make it unlawful for the Bank to make or
maintain LIBOR Rate Loans as contemplated by this Credit Agreement, (a) the Bank
shall promptly give written notice of such  circumstances to the Borrower (which
notice shall be withdrawn  whenever such circumstances no longer exist), (b) the
commitment of the Bank  hereunder to make LIBOR Rate Loans,  continue LIBOR Rate
Loans as such and convert a  Alternate  Base Rate Loan to LIBOR Rate Loans shall
forthwith be canceled and, until such time as it shall no longer be unlawful for
the Bank to make or  maintain  LIBOR  Rate  Loans,  the Bank  shall  then have a
commitment  only to make a  Alternate  Base Rate Loan when a LIBOR  Rate Loan is
requested and (c) the Loans then  outstanding as LIBOR Rate Loans, if any, shall
be converted  automatically  to Alternate Base Rate Loans on the respective last
days of the then current  Interest  Periods with respect to such Loans or within
such earlier  period as required by law. If any such  conversion of a LIBOR Rate
Loan  occurs  on a day  which is not the last day of the then  current  Interest
Period with respect thereto, the Borrower shall pay to the Bank such amounts, if
any, as may be required pursuant to Section 3.11.

         3.9      Requirements of Law.

         If,  after  the date  hereof,  the  adoption  of or any  change  in any
Requirement of Law or in the interpretation or application thereof applicable to
the Bank, or  compliance  by the Bank with any request or directive  (whether or
not  having  the  force of law)  from  any  central  bank or other  Governmental
Authority, in each case made subsequent to the Closing Date:

                           (a)  shall  subject  the  Bank to any tax of any kind
         whatsoever  with respect to any Letter of Credit,  any LIBOR Rate Loans
         made by it or its  obligation  to make LIBOR Rate Loans,  or change the
         basis of taxation of  payments to the Bank in respect  thereof  (except
         for  (i)   Non-Excluded   Taxes  covered  by  Section  3.10  (including
         Non-Excluded  Taxes imposed solely by reason of any failure of the Bank
         to comply with its obligations  under Section 3.10) and (ii) changes in
         taxes measured by or imposed upon the overall net income of the Bank or
         its applicable lending office, or any branch or affiliate thereof,  and
         all franchise taxes,  branch taxes, taxes on doing business or taxes on
         the overall capital or net worth of the Bank or its applicable  lending
         office,  or any branch or  affiliate  thereof,  in each case imposed in
         lieu of net income taxes);

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

                  (c) shall  impose on the Bank any other  condition  (excluding
         any tax of any kind whatsoever);

and the result of any of the  foregoing is to increase the cost to the Bank,  by
an amount  which the Bank  deems to be  material,  of making,  converting  into,
continuing  or  maintaining  LIBOR Rate Loans or  issuing  or  participating  in
Letters of Credit or creating and discounting  Bankers' Acceptances or to reduce
any amount receivable hereunder in respect thereof, then, in any such case, upon
notice to the Borrower from the Bank in accordance herewith,  the Borrower shall
be obligated to promptly pay the Bank, upon its demand,  any additional  amounts
necessary  to  compensate  the Bank for such  increased  cost or reduced  amount
receivable,  provided  that, in any such case, the Borrower may elect to convert
the LIBOR Rate Loans made by the Bank  hereunder to Alternate Base Rate Loans by
giving the Bank at least one Business  Day's notice of such  election,  in which
case  the  Borrower  shall  promptly  pay  to the  Bank,  upon  demand,  without
duplication,  such amounts, if any, as may be required pursuant to Section 3.11.
If the Bank becomes  entitled to claim any additional  amounts  pursuant to this
subsection,  it shall provide prompt notice  thereof to the Borrower  certifying
(x) that one of the events described in this Section has occurred and describing
in reasonable  detail the nature of such event,  (y) as to the increased cost or
reduced amount  resulting  from such event and (z) as to the  additional  amount
demanded by the Bank and a reasonably  detailed  explanation of the  calculation
thereof.  Such a certificate as to any additional  amounts  payable  pursuant to
this  Section  submitted  by the Bank to the Borrower  shall be  conclusive  and
binding on the parties  hereto in the absence of manifest  error.  This covenant
shall survive the  termination  of this Credit  Agreement and the payment of the
Loans and all other amounts payable hereunder.

         3.10     Taxes.

         Except as provided  below in this  Section,  all  payments  made by the
Borrower  under this Credit  Agreement and the Revolving Note shall be made free
and clear of, and without  deduction  or  withholding  for or on account of, any
present  or  future  income,  stamp or other  taxes,  levies,  imposts,  duties,
charges,  fees,  deductions or withholdings,  now or hereafter imposed,  levied,

collected,  withheld or assessed by any court, or governmental  body,  agency or
other  official,  excluding  taxes  measured by or imposed  upon the overall net
income of the Bank or its applicable  lending office, or any branch or Affiliate
thereof, and all franchise taxes, branch taxes, taxes on doing business or taxes
on the  overall  capital  or net  worth  of the Bank or its  applicable  lending
office, or any branch or Affiliate thereof,  in each case imposed in lieu of net
income taxes, imposed: (i) by the jurisdiction under the laws of which the Bank,
applicable lending office, branch or Affiliate is organized or is located, or in
which its principal executive office is located, or any nation within which such
jurisdiction is located or any political  subdivision thereof; or (ii) by reason
of any  connection  between  the  jurisdiction  imposing  such tax and the Bank,
applicable  lending office,  branch or Affiliate other than a connection arising
solely from the Bank having executed, delivered or performed its obligations, or
received payment under or enforced, this Credit Agreement or the Revolving Note.
If  any  such  non-excluded  taxes,  levies,  imposts,  duties,  charges,  fees,
deductions or withholdings  ("Non- Excluded  Taxes") are required to be withheld
from any amounts  payable to the Bank hereunder or under the Revolving Note, (A)
the amounts so payable to the Bank shall be increased to the extent necessary to
yield to the Bank (after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts specified in this
Credit  Agreement  and the  Revolving  Note,  and (B) as  promptly  as  possible
thereafter the Borrower shall send to the Bank for its own account,  a certified
copy of an original  official  receipt  received by the Borrower showing payment
thereof.  If the Borrower  fails to pay any  Non-Excluded  Taxes when due to the
appropriate taxing authority or fails to remit to the Bank the required receipts
or other required  documentary  evidence,  the Borrower shall indemnify the Bank
for any incremental taxes,  interest or penalties that may become payable by the
Bank as a result of any such  failure.  The  agreements  in this  Section  shall
survive the  termination  of this Credit  Agreement and the payment of the Loans
and all other amounts payable hereunder.

         3.11     Indemnity.

         The  Borrower  promises  to  indemnify  the  Bank  and to hold the Bank
harmless  from any loss or expense  which the Bank may  sustain or incur  (other
than through the Bank's gross negligence or willful misconduct) as a consequence
of (a)  default by the  Borrower in making a borrowing  of,  conversion  into or
continuation  of  LIBOR  Rate  Loans  after  the  Borrower  has  given a  notice
requesting the same in accordance with the provisions of this Credit  Agreement,
(b) default by the Borrower in making any  prepayment of a LIBOR Rate Loan after
the Borrower has given a notice  thereof in  accordance  with the  provisions of
this Credit Agreement or (c) the making of a prepayment of LIBOR Rate Loans on a
day which is not the last day of an Interest Period with respect  thereto.  With
respect to LIBOR Rate Loans, such indemnification may include an amount equal to
the excess,  if any, of (i) the amount of interest  which would have  accrued on
the amount so prepaid,  or not so  borrowed,  converted  or  continued,  for the
period from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of the applicable Interest Period (or, in the case of a
failure to borrow,  convert or  continue,  the  Interest  Period that would have
commenced on the date of such  failure) in each case at the  applicable  rate of
interest  for such LIBOR Rate Loans  provided for herein over (ii) the amount of
interest (as reasonably  determined by the Bank) which would have accrued to the
Bank on such amount by placing  such amount on deposit for a  comparable  period
with leading  banks in the  interbank  Eurodollar  market.  The covenants of the
Borrower set forth in this Section 3.11 shall survive the 

termination of this Credit  Agreement and the payment of the Loans and all other
amounts payable hereunder.

         3.12     Payments, Computations, Etc.

         Except  as  otherwise   specifically   provided  herein,  all  payments
hereunder shall be made to the Bank in Dollars in immediately  available  funds,
without  offset,  deduction,  counterclaim  or  withholding  of any kind, at the
Bank's  office  specified in Section  10.1 not later than 2:00 P.M.  (Charlotte,
North  Carolina  time) on the date when due.  Payments  received after such time
shall be deemed to have been received on the next  succeeding  Business Day. The
Bank may (but shall not be  obligated  to) debit the amount of any such  payment
which is not made by such time to any ordinary  deposit  account of the Borrower
maintained  with the Bank (with notice to the Borrower).  The Borrower shall, at
the time it makes any payment under this Credit  Agreement,  specify to the Bank
the Loans,  LOC  Obligations,  BA Obligations,  Fees,  interest or other amounts
payable by the Borrower hereunder to which such payment is to be applied (and in
the  event  that it  fails  so to  specify,  or if  such  application  would  be
inconsistent  with the terms  hereof,  the Bank shall apply such payment in such
manner as the Bank may  determine to be  appropriate  in respect of  obligations
owing by the Borrower hereunder). Whenever any payment hereunder shall be stated
to be due on a day which is not a Business  Day, the due date  thereof  shall be
extended to the next succeeding Business Day (subject to accrual of interest and
Fees for the period of such  extension),  except  that in the case of LIBOR Rate
Loans, if the extension would cause the payment to be made in the next following
calendar  month,  then such payment shall instead be made on the next  preceding
Business Day. Except as expressly provided otherwise herein, all computations of
interest  and Fees shall be made on the basis of actual  number of days  elapsed
over a year of 360 days,  except  with  respect to  computation  of  interest on
Alternate Base Rate Loans which (unless the Alternate Base Rate is determined by
reference to the Federal Funds Rate) shall be calculated  based on a year of 365
or 366 days, as appropriate.  Interest shall accrue from and include the date of
borrowing, but exclude the date of payment.

                                    SECTION 4
                                    GUARANTY
                                    --------

         4.1      The Guarantee.

         Each of the Guarantors  hereby jointly and severally  guarantees to the
Bank, to each Affiliate of the Bank that enters into a Hedging  Agreement and to
the  Bank  as  hereinafter   provided  the  prompt  payment  of  the  Guaranteed
Obligations  in full  when due  (whether  at  stated  maturity,  as a  mandatory
prepayment,  by acceleration,  a mandatory cash  collateralization or otherwise)
strictly in accordance  with the terms thereof.  The  Guarantors  hereby further
agree that if any of the  Guaranteed  Obligations  are not paid in full when due
(whether at stated maturity,  as a mandatory  prepayment,  by  acceleration,  as
mandatory cash collateralization or otherwise), the Guarantors will, jointly and
severally,  promptly pay the same, without any demand or notice whatsoever,  and
that in the case of any  extension  of time of  payment or renewal of any of the
Guaranteed Obligations, the same will be promptly paid in full when due (whether
at extended maturity, as a mandatory  prepayment,  by acceleration or otherwise)
in accordance with the terms of such extension or renewal.

         Notwithstanding  any provision to the contrary  contained  herein or in
any other of the  Credit  Documents  or  Hedging  Agreements,  to the extent the
obligations of a Guarantor  shall be adjudicated to be invalid or  unenforceable
for any reason (including,  without limitation,  because of any applicable state
or federal  law  relating  to  fraudulent  conveyances  or  transfers)  then the
obligations of each Guarantor  hereunder  shall be limited to the maximum amount
that  is  permissible  under  applicable  law  (whether  federal  or  state  and
including, without limitation, the Bankruptcy Code).

         4.2      Obligations Unconditional.

         The  obligations of the  Guarantors  under Section 4.1 hereof are joint
and several, absolute and unconditional, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Credit Documents or Hedging
Agreements,  or any other  agreement or instrument  referred to therein,  or any
substitution,  release or exchange of any other guarantee of or security for any
of  the  Guaranteed  Obligations,  and,  to  the  fullest  extent  permitted  by
applicable law,  irrespective of any other  circumstance  whatsoever which might
otherwise  constitute a legal or  equitable  discharge or defense of a surety or
guarantor,  it being the intent of this Section 4.2 that the  obligations of the
Guarantors  hereunder  shall be  absolute  and  unconditional  under any and all
circumstances.  Each Guarantor agrees that such Guarantor shall have no right of
subrogation,  indemnity,  reimbursement or contribution  against the Borrower or
any other  Guarantor of the Guaranteed  Obligations  for amounts paid under this
Guaranty  until such time as the Bank (and any  Affiliates  of the Bank entering
into Hedging Agreements) has been paid in full, all Commitments under the Credit
Agreement have been  terminated and no Person or  Governmental  Authority  shall
have any right to request any return or  reimbursement of funds from the Bank in
connection  with  monies   received  under  the  Credit   Documents  or  Hedging
Agreements. Without limiting the generality of the foregoing, it is agreed that,
to the fullest extent permitted by law, the occurrence of any one or more of the
following  shall not alter or impair the  liability of any  Guarantor  hereunder
which shall remain absolute and unconditional as described above:

                  (i) at any time or from  time to time,  without  notice to any
         Guarantor,  the time for any  performance of or compliance  with any of
         the Guaranteed  Obligations  shall be extended,  or such performance or
         compliance shall be waived;

                  (ii) any of the acts mentioned in any of the provisions of any
         of the Credit  Documents,  any Hedging Agreement or any other agreement
         or instrument referred to in the Credit Documents or Hedging Agreements
         shall be done or omitted;

                  (iii) the maturity of any of the Guaranteed  Obligations shall
         be accelerated, or any of the Guaranteed Obligations shall be modified,
         supplemented  or amended in any respect,  or any right under any of the
         Credit  Documents,  any Hedging  Agreement  or any other  agreement  or
         instrument  referred to in the Credit  Documents or Hedging  Agreements
         shall  be  waived  or any  other  guarantee  of  any of the  Guaranteed
         Obligations or any security  therefor shall be released or exchanged in
         whole or in part or otherwise dealt with;

                  (iv) any Lien granted to, or in favor of, the Bank as security
         for  any of the  Guaranteed  Obligations  shall  fail to  attach  or be
         perfected; or

                  (v) any of the Guaranteed  Obligations  shall be determined to
         be void or voidable (including,  without limitation, for the benefit of
         any creditor of any Guarantor) or shall be  subordinated  to the claims
         of any Person  (including,  without  limitation,  any  creditor  of any
         Guarantor).

With respect to its  obligations  hereunder,  each  Guarantor  hereby  expressly
waives  diligence,  presentment,  demand of  payment,  protest  and all  notices
whatsoever, and any requirement that the Bank exhaust any right, power or remedy
or proceed  against any Person  under any of the Credit  Documents,  any Hedging
Agreement  or any  other  agreement  or  instrument  referred  to in the  Credit
Documents  or Hedging  Agreements,  or against any other  Person under any other
guarantee of, or security for, any of the Guaranteed Obligations.

         4.3      Reinstatement.

         The  obligations  of the  Guarantors  under  this  Section  4 shall  be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Guaranteed Obligations is rescinded
or  must  be  otherwise  restored  by  any  holder  of  any  of  the  Guaranteed
Obligations,   whether  as  a  result  of  any   proceedings  in  bankruptcy  or
reorganization  or otherwise,  and each Guarantor  agrees that it will indemnify
the Bank on demand for all  reasonable  costs and expenses  (including,  without
limitation,  fees and  expenses of counsel)  incurred by the Bank in  connection
with such  rescission  or  restoration,  including  any such costs and  expenses
incurred in defending against any claim alleging that such payment constituted a
preference,  fraudulent  transfer or similar payment under the Bankruptcy  Code,
insolvency or similar law.

         4.4      Certain Additional Waivers.

         Without  limiting the  generality of the  provisions of this Section 4,
each Guarantor hereby specifically waives the benefits of N.C. Gen. Stat. ss.ss.
26-7 through 26-9, inclusive.  Each Guarantor further agrees that such Guarantor
shall have no right of  recourse  to security  for the  Guaranteed  Obligations,
except  through the  exercise of the rights of  subrogation  pursuant to Section
4.2.

         4.5      Remedies.

         The Guarantors  agree that, to the fullest extent  permitted by law, as
between the  Guarantors,  on the one hand,  and the Bank, on the other hand, the
Guaranteed  Obligations  may be  declared  to be  forthwith  due and  payable as
provided in Section 9.2 hereof (and shall be deemed to have become automatically
due and payable in the circumstances  provided in said Section 9.2) for purposes
of Section 4.1 hereof  notwithstanding any stay, injunction or other prohibition
preventing  such  declaration  (or preventing the  Guaranteed  Obligations  from
becoming automatically due and payable) as against any other Person and that, in
the event of such  declaration  (or the Guaranteed  Obligations  being deemed to
have become automatically due and payable),  the Guaranteed Obligations (whether
or not due and  payable  by any other  Person)  shall  forthwith  become due and
payable by the Guarantors for purposes of said Section 4.1.

         4.6      Rights of Contribution.

         The Guarantors hereby agree, as among themselves, that if any Guarantor
shall  become an  Excess  Funding  Guarantor  (as  defined  below),  each  other
Guarantor shall, on demand of such Excess Funding  Guarantor (but subject to the
succeeding provisions of this Section 4.6), pay to such Excess Funding Guarantor
an  amount  equal to such  Guarantor's  Pro Rata  Share  (as  defined  below and
determined,  for this  purpose,  without  reference to the  properties,  assets,
liabilities  and debts of such Excess Funding  Guarantor) of such Excess Payment
(as  defined  below).  The payment  obligation  of any  Guarantor  to any Excess
Funding  Guarantor  under this Section 4.6 shall be  subordinate  and subject in
right  of  payment  to the  prior  payment  in full of the  obligations  of such
Guarantor under the other  provisions of this Section 4, and such Excess Funding
Guarantor  shall not  exercise  any right or remedy with  respect to such excess
until payment and satisfaction in full of all of such obligations.  For purposes
of this Section 4.6, (i) "Excess  Funding  Guarantor"  shall mean, in respect of
any obligations arising under the other provisions of this Section 4 (hereafter,
the "Excess  Funding  Guarantied  Obligations"),  a  Guarantor  that has paid an
amount  in  excess  of its Pro  Rata  Share  of the  Excess  Funding  Guarantied
Obligations;  (ii) "Excess Payment" shall mean, in respect of any Excess Funding
Guarantied Obligations, the amount paid by an Excess Funding Guarantor in excess
of its Pro Rata Share of such Excess Funding Guarantied  Obligations;  and (iii)
"Pro Rata Share",  for the purposes of this  Section  4.6,  shall mean,  for any
Guarantor,  the ratio (expressed as a percentage) of (a) the amount by which the
aggregate  present  fair  saleable  value of all of its  assets  and  properties
exceeds the amount of all debts and  liabilities  of such  Guarantor  (including
contingent, subordinated, unmatured, and unliquidated liabilities, but excluding
the  obligations  of such  Guarantor  hereunder)  to (b) the amount by which the
aggregate  present fair saleable value of all assets and other properties of the
Borrower  and all of the  Guarantors  exceeds the amount of all of the debts and
liabilities (including  contingent,  subordinated,  unmatured,  and unliquidated
liabilities,  but excluding the  obligations  of the Borrower and the Guarantors
hereunder) of the Borrower and all of the Guarantors, all as of the Closing Date
(if any Guarantor  becomes a party hereto  subsequent to the Closing Date,  then
for the purposes of this Section 4.6 such  subsequent  Guarantor shall be deemed
to have been a Guarantor as of the Closing Date and the  information  pertaining
to, and only pertaining to, such Guarantor as of the date such Guarantor  became
a Guarantor shall be deemed true as of the Closing Date).

         4.7      Continuing Guarantee.

         The  guarantee in this Section 4 is a continuing  guarantee,  and shall
apply to all Guaranteed Obligations whenever arising.

                                    SECTION 5
                                   CONDITIONS
                                   ----------

         5.1      Conditions to Closing.

         This  Credit  Agreement  shall  become   effective,   and  the  initial
Extensions  of  Credit  may be made,  upon  the  satisfaction  of the  following
conditions precedent:

                  (a)  Execution  of  Credit  Agreement  and  Credit  Documents.
Receipt of fully  executed  copies of this Credit  Agreement  and the  Revolving
Note.

                  (b) Senior Note Placement.  Evidence  satisfactory to the Bank
of the  issuance  by the  Borrower  of the Senior  Notes and  receipt of the net
proceeds  therefrom,  together with certified copies of the Senior Notes and the
Senior Note Agreement relating thereto.

                  (c) Financial  Information.  Receipt of financial  information
regarding the Borrower and its Subsidiaries, as may be requested by, and in each
case in form and substance satisfactory to the Bank.

                  (d)  Absence  of Legal  Proceedings.  Except as  disclosed  in
Schedule  6.6,  the absence of any action,  suit,  investigation  or  proceeding
pending in any court or before any  arbitrator or  governmental  instrumentality
which if adversely  determined  could  reasonably be expected to have a Material
Adverse Effect on the Consolidated Group taken as a whole.

                  (e) Legal  Opinions.  Receipt of an opinion of counsel for the
Credit  Parties   relating  to  the  Credit   Documents  and  the   transactions
contemplated herein, in form and substance satisfactory to the Bank.

                  (f)  Corporate  Documents.  Receipt of the following (or their
equivalent) for each of the Credit Parties:

                           (i) Articles of Incorporation. Copies of the articles
         of incorporation or charter documents certified to be true and complete
         as of a recent date by the  appropriate  governmental  authority of the
         state of its incorporation.

                           (ii) Resolutions.  Copies of resolutions of the Board
         of Directors  approving and adopting the respective  Credit  Documents,
         the  transactions  contemplated  therein and authorizing  execution and
         delivery thereof, certified by a secretary or assistant secretary as of
         the  Closing  Date to be true and correct and in force and effect as of
         such date.

                           (iii)  Bylaws.  Copies of the bylaws  certified  by a
         secretary or assistant  secretary as of the Closing Date to be true and
         correct and in force and effect as of such date.

                           (iv) Good  Standing.  Copies,  where  applicable,  of
         certificates of good standing, existence or its equivalent certified as
         of a recent date by the  appropriate  governmental  authorities  of the
         state of incorporation  and each other state in which the failure to so
         qualify and be in good standing would have a Material Adverse Effect on
         the business or operations in such state.

                           (v) Officer's  Certificate.  An officer's certificate
         for  each  of  the  Credit   Parties  dated  as  of  the  Closing  Date
         substantially   in  the  form  of  Schedule  5.1(f)  with   appropriate
         insertions and attachments.

                  (g)  Fees.  Receipt of all Fees, if any, owing to the Bank.

                  (h)  Section  5.2  Conditions.  The  conditions  specified  in
Section 5.2 shall be satisfied.

                  (i) Additional Matters.  All other documents and legal matters
in connection with the transactions  contemplated by this Credit Agreement shall
be reasonably satisfactory in form and substance to the Bank.

         5.2      Conditions to All Extensions of Credit.

         The  obligation of the Bank to make any  Extension of Credit  hereunder
(including the initial  Extension of Credit to be made  hereunder) is subject to
the  satisfaction  of the following  conditions  precedent on the date of making
such Extension of Credit:

                  (a)  Representations  and Warranties.  The representations and
warranties made by the Credit Parties herein or in any other Credit Documents or
which  are  contained  in any  certificate  furnished  at any  time  under or in
connection herewith shall be true and correct in all material respects on and as
of the  date of  such  Extension  of  Credit  as if made on and as of such  date
(except for those which expressly relate to an earlier date).

                  (b) No  Default  or Event of  Default.  No Default or Event of
Default  shall have  occurred  and be  continuing  on such date or after  giving
effect to the Extension of Credit to be made on such date unless such Default or
Event of  Default  shall  have  been  waived  in  accordance  with  this  Credit
Agreement.

                  (c) No Material Adverse Effect.  No  circumstances,  events or
conditions  shall  have  occurred  since  the  date  of  the  audited  financial
statements referenced in Section 6.1 which would have a Material Adverse Effect.

                  (d) Additional  Conditions to Revolving  Loans. If a Revolving
Loan is made  pursuant to Section 2.1, all  conditions  set forth  therein shall
have been satisfied.

                  (e)  Additional  Conditions  to  Letters  of  Credit.  If such
Extension of Credit is made  pursuant to Section 2.2, all  conditions  set forth
therein shall have been satisfied.

                  (f)  Additional  Conditions to Bankers'  Acceptances.  If such
Extension of Credit is made  pursuant to Section 2.3, all  conditions  set forth
therein shall have been satisfied.

         Each  request  for  Extension  of  Credit  (including   extensions  and
conversions)  and each  acceptance  by the  Borrower of an  Extension  of Credit
(including   extensions  and  conversions)  shall  be  deemed  to  constitute  a
representation  and warranty by the Borrower as of the date of such Extension of
Credit that the applicable  conditions in  subsections  (a), (b) and (c), and in
(d), (e) or (f) of this Section have been satisfied.

                                    SECTION 6
                         REPRESENTATIONS AND WARRANTIES
                         ------------------------------

         To induce  the Bank to enter  into this  Credit  Agreement  and to make
Extensions  of  Credit  herein   provided  for,  each  of  the  members  of  the
Consolidated  Group parties  hereto hereby  represents  and warrants to the Bank
that:

         6.1      Financial Condition.

         Each of the financial  statements described below (copies of which have
heretofore  been provided to the Bank),  have been  prepared in accordance  with
GAAP consistently  applied throughout the periods covered thereby,  are complete
and correct in all material respects and present fairly the financial  condition
and results  from  operations  of the  entities  and for the periods  specified,
subject in the case of interim  Borrower-prepared  statements to normal year-end
adjustments:

                  (i) an audited  consolidated balance sheet of the Borrower and
         its consolidated  subsidiaries dated as of September 30, 1996, together
         with  related  statements  income  and cash flows  certified  by Arthur
         Andersen LLP, certified public accountants; and

                  (ii) a  Borrower-prepared  consolidated  balance  sheet of the
         Borrower and its consolidated  subsidiaries  dated as of June 30, 1996,
         together with related consolidated statements of income and cash flows.

         6.2      No Changes or Restricted Payments.

         Since  the  date of the  audited  financial  statements  referenced  in
Section  6.1(i),  (a)  there  has  been no  circumstance,  development  or event
relating to or affecting the members of the Consolidated  Group which has had or
would be reasonably  expected to have a Material Adverse Effect,  and (b) except
as permitted herein, no Restricted Payments have been made by any members of the
Consolidated Group, other than those permitted hereunder.

         6.3      Organization; Existence; Compliance with Law.

         Each of the members of the Consolidated Group (a) is a corporation duly
organized,  validly existing in good standing under the laws of the jurisdiction
of its  organization,  (b)  has the  corporate  or  other  necessary  power  and
authority,  and the legal right to own and operate  its  property,  to lease the
property  it  operates  as lessee and to  conduct  the  business  in which it is
currently  engaged,  (c) is  duly  qualified  as a  foreign  entity  and in good
standing  under  the laws of each  jurisdiction  where its  ownership,  lease or
operation   of  property  or  the  conduct  of  its   business   requires   such
qualification,  other  than in such  jurisdictions  where the  failure  to be so
qualified  and in good  standing  would not, in the  aggregate,  have a Material
Adverse Effect, and (d) is in compliance with all  Organizational  Documents and
Requirements of Law,  except to the extent that the failure to comply  therewith
would not, in the aggregate,  be reasonably  expected to have a Material Adverse
Effect.

         6.4      Power; Authorization; Enforceable Obligations.

         Each of the Credit Parties has the corporate or other  necessary  power
and  authority,  and the legal  right,  to make,  deliver and perform the Credit
Documents to which it is a party and has taken all necessary corporate action to
authorize the execution,  delivery and performance by it of the Credit Documents
to which it is a party. No consent or authorization  of, filing with,  notice to
or other act by or in respect of, any Governmental Authority or any other Person
is required in connection  with the borrowings  hereunder or with the execution,
delivery or  performance  of any Credit  Documents by the Credit  Parties (other
than those  which  have been  obtained,  such  filings  as are  required  by the
Securities and Exchange  Commission and to fulfill other reporting  requirements
with  Governmental  Authorities) or with the validity or  enforceability  of any
Credit Document against the Credit parties.  Each Credit Document to which it is
a party constitutes a legal, valid and binding obligation of such Credit Parties
enforceable  against such Credit  Parties in  accordance  with their  respective
terms,  except  as  enforceability  may be  limited  by  applicable  bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors'  rights  generally and by general  equitable  principles  (whether
enforcement is sought by proceedings in equity or at law).

         6.5      No Legal Bar.

         The execution,  delivery and performance of the Credit  Documents,  the
borrowings  hereunder  and the use of the  Extensions of Credit will not violate
any  Requirement  of Law or any  Contractual  Obligation  of any  member  of the
Consolidated  Group  (except  those as to which  waivers or  consents  have been
obtained,  and will not result in, or require, the creation or imposition of any
Lien  on  any  of  their  respective  properties  or  revenues  pursuant  to any
Requirement of Law or Contractual  Obligation other than the Liens arising under
or  contemplated  in  connection  with the  Credit  Documents.  No member of the
Consolidated Group is in default under or with respect to any of its Contractual
Obligations in any respect which would reasonably be expected to have a Material
Adverse Effect.

         6.6      No Material Litigation.

         Except as  disclosed on Schedule 6.6 (as updated from time to time with
the consent of the Bank), no claim,  litigation,  investigation or proceeding of
or before any  arbitrator or  Governmental  Authority is pending or, to the best
knowledge of the Credit  Parties,  threatened by or against,  any members of the
Consolidated  Group or against any of their  respective  properties  or revenues
which (a) relate to the Credit Documents or any of the transactions contemplated
hereby or thereby, (b) if adversely determined,  would reasonably be expected to
have a Material Adverse Effect.  Set forth on Schedule 6.6 (as updated from time
to time  with the  consent  of the Bank) is a summary  of all  material  claims,
litigation,  investigations and proceedings pending or, to the best knowledge of
the Credit  Parties,  threatened  by or against the members of the  Consolidated
Group or against any of their  respective  properties  or revenues,  and none of
such  actions,  individually  or in the  aggregate,  if adversely  determined is
reasonably  expected to have a Material  Adverse Effect,  except as disclosed on
Schedule 6.6 (as updated from time to time with the consent of the Bank).

         6.7      No Default.

         No Default or Event of Default has occurred and is continuing.

         6.8      Ownership of Property; Liens.

         Each  of  members  of  the  Consolidated  Group  has  good  record  and
marketable  title in fee simple to, or a valid  leasehold  interest  in, all its
material real property, and good title to, or a valid leasehold interest in, all
its other material  property,  and none of such property is subject to any Lien,
except for Permitted Liens.

         6.9      Intellectual Property.

         Each of the members of the  Consolidated  Group owns,  or has the legal
right to use, all United States trademarks,  tradenames, copyrights, technology,
know-how  and  processes,  if any,  necessary  for each of them to  conduct  its
business as currently  conducted (the "Intellectual  Property") except for those
the  failure  to own or have such  legal  right to use  would not be  reasonably
expected to have a Material  Adverse  Effect.  No claim has been asserted and is
pending  by  any  Person   challenging  or  questioning  the  use  of  any  such
Intellectual  Property or the validity or effectiveness of any such Intellectual
Property,  nor does any Credit Party know of any such claim, and the use of such
Intellectual Property by the members of the Consolidated Group does not infringe
on the rights of any Person,  except for such claims and  infringements  that in
the  aggregate,  would not be  reasonably  expected  to have a Material  Adverse
Effect.

         6.10     No Burdensome Restrictions.

         No   Requirement  of  Law,   Organizational   Document  or  Contractual
Obligation of the members of the Consolidated Group would be reasonably expected
to have a Material Adverse Effect.

         6.11     Taxes.

         Each of the members of the Consolidated Group has filed or caused to be
filed all United States  federal  income tax returns and all other  material tax
returns which, to the best knowledge of the Credit  Parties,  are required to be
filed and has paid (a) all taxes shown to be due and payable on said  returns or
(b) all taxes  shown to be due and  payable on any  assessments  of which it has
received notice made against it or any of its property and all other taxes, fees
or  other  charges  imposed  on it or any of its  property  by any  Governmental
Authority (other than any (i) taxes, fees or other charges with respect to which
the failure to pay, in the aggregate,  would not have a Material  Adverse Effect
or (ii)  taxes,  fees or other  charges  the  amount  or  validity  of which are
currently  being contested and with respect to which reserves in conformity with
GAAP have been provided on the books of such  Person),  and no tax Lien has been
filed,  and,  to the best  knowledge  of the Credit  Parties,  no claim is being
asserted, with respect to any such tax, fee or other charge.

         6.12     ERISA

         Except as would not  reasonably be expected to have a Material  Adverse
Effect:

         (a)  During  the  five-year  period  prior to the  date on  which  this
representation is made or deemed made: (i) no ERISA Event has occurred,  and, to
the best knowledge of the Credit Parties,  no event or condition has occurred or
exists as a result of which any ERISA  Event  could  reasonably  be  expected to
occur,  with respect to any Plan; (ii) no "accumulated  funding  deficiency," as
such  term is  defined  in  Section  302 of ERISA and  Section  412 of the Code,
whether or not waived,  has occurred  with respect to any Plan;  (iii) each Plan
has been maintained,  operated,  and funded in compliance with its own terms and
in material  compliance  with the  provisions of ERISA,  the Code, and any other
applicable  federal  or state  laws;  and (iv) no lien in favor of the PBGC or a
Plan has arisen or is reasonably likely to arise on account of any Plan.

         (b) The  actuarial  present  value  of all  "benefit  liabilities"  (as
defined in Section  4001(a)(16)  of ERISA),  whether or not  vested,  under each
Single Employer Plan, as of the last annual  valuation date prior to the date on
which this  representation is made or deemed made (determined,  in each case, in
accordance with Financial Accounting Standards Board Statement 87, utilizing the
actuarial  assumptions  used in such  Plan's  most  recent  actuarial  valuation
report),  did not exceed as of such  valuation date the fair market value of the
assets of such Plan.

         (c) No member of the  Consolidated  Group nor any ERISA  Affiliate  has
incurred,  or, to the best knowledge of the Credit Parties,  could be reasonably
expected to incur,  any withdrawal  liability  under ERISA to any  Multiemployer
Plan or Multiple  Employer  Plan.  No member of the  Consolidated  Group nor any
ERISA Affiliate would become subject to any withdrawal  liability under ERISA if
any member of the  Consolidated  Group or any ERISA  Affiliate  were to withdraw
completely from all  Multiemployer  Plans and Multiple  Employer Plans as of the
valuation date most closely  preceding the date on which this  representation is
made or deemed made. No member of the Consolidated Group nor any ERISA Affiliate
has received any notification that any  Multiemployer  Plan is in reorganization
(within the meaning of Section 4241 of ERISA),  is insolvent (within the meaning
of Section 4245 of ERISA),  or has been terminated  (within the meaning of Title
IV of ERISA),  and no Multiemployer Plan is, to the best knowledge of the Credit
Parties, reasonably expected to be in reorganization, insolvent, or terminated.

         (d) No  prohibited  transaction  (within  the meaning of Section 406 of
ERISA or Section  4975 of the Code) or breach of  fiduciary  responsibility  has
occurred with respect to a Plan which has subjected or may subject any member of
the  Consolidated  Group or any ERISA  Affiliate to any liability under Sections
406, 409,  502(i),  or 502(l) of ERISA or Section 4975 of the Code, or under any
agreement or other  instrument  pursuant to which any member of the Consolidated
Group or any ERISA  Affiliate  has agreed or is required to indemnify any person
against any such liability.

         (e) No member of the  Consolidated  Group nor any ERISA  Affiliates has
any  material  liability  with  respect  to  "expected  post-retirement  benefit
obligations"  within the meaning of the  Financial  Accounting  Standards  Board
Statement  106. Each Plan which is a welfare plan (as defined in Section 3(1) of
ERISA) to which  Sections  601-609 of ERISA and Section  4980B of the Code apply
has been administered in compliance in all material respects of such sections.

         6.13     Governmental Regulations, Etc.

                  (a) No  part  of the  proceeds  of the  Loans  will  be  used,
         directly or  indirectly,  for the purpose of purchasing or carrying any
         "margin  stock"  within the meaning of Regulation G or Regulation U, or
         for the purpose of purchasing or carrying or trading in any securities.
         If  requested  by the Bank,  the  Borrower  will  furnish to the Bank a
         statement to the foregoing  effect in conformity with the  requirements
         of FR Form U-1 referred to in said Regulation U. No indebtedness  being
         reduced  or  retired  out of the  proceeds  of the Loans was or will be
         incurred  for the purpose of  purchasing  or carrying  any margin stock
         within the meaning of Regulation U or any "margin  security" within the
         meaning  of  Regulation  T.  "Margin  stock"  within  the  meanings  of
         Regulation  U does not  constitute  more  than 25% of the  value of the
         consolidated  assets of the Borrower and its Subsidiaries.  None of the
         transactions contemplated by this Credit Agreement (including,  without
         limitation,  the direct or indirect  use of the  proceeds of the Loans)
         will violate or result in a violation of the Securities Act of 1933, as
         amended,  or the  Securities  Exchange  Act of  1934,  as  amended,  or
         regulations issued pursuant thereto, or Regulation G, T, U or X.

                  (b) None of the members of the  Consolidated  Group is subject
         to regulation under the Public Utility Holding Company Act of 1935, the
         Federal  Power  Act or the  Investment  Borrower  Act of 1940,  each as
         amended. In addition,  none of the members of the Consolidated Group is
         (i) an  "investment  company"  registered  or required to be registered
         under  the  Investment  Company  Act of 1940,  as  amended,  and is not
         controlled  by  such a  company,  or  (ii) a  "holding  company",  or a
         "subsidiary  company" of a "holding  company",  or an  "affiliate" of a
         "holding company" or of a "subsidiary" of a "holding  company",  within
         the  meaning of the Public  Utility  Holding  Company  Act of 1935,  as
         amended.

                  (c) No director, executive officer or principal shareholder of
         any member of the Consolidated  Group is a director,  executive officer
         or principal shareholder of the Bank. For the purposes hereof the terms
         "director",  "executive officer" and "principal shareholder" (when used
         with  reference  to the Bank)  have the  respective  meanings  assigned
         thereto in Regulation O issued by the Board of Governors of the Federal
         Reserve System.

                  (d) Each of the members of the Consolidated Group has obtained
         all  material  licenses,  permits,  franchises  or  other  governmental
         authorizations  necessary to the ownership of its  respective  Property
         and to the conduct of its business.

                  (e)  None  of the  members  of the  Consolidated  Group  is in
         violation of any  applicable  statute,  regulation  or ordinance of the
         United States of America,  or of any state,  city, town,  municipality,
         county or any other  jurisdiction,  or of any agency thereof (including
         without   limitation,   environmental  laws  and  regulations),   which
         violation  could  reasonably  be  expected  to have a Material  Adverse
         Effect.

                  (f) Each of the members of the  Consolidated  Group is current
         with all material reports and documents,  if any,  required to be filed
         with any state or federal  securities  commission or similar agency and
         is in full  compliance  in all material  respects  with all  applicable
         rules and regulations of such commissions.

         6.14     Subsidiaries.

         Set forth on Schedule 6.14 are all the  Subsidiaries of the Borrower at
the Closing Date,  the  jurisdiction  of their  incorporation  and the direct or
indirect ownership interest of the Borrower therein.

         6.15     Purpose of Extensions of Credit.

         The  Extensions  of Credit will be used to  refinance  existing  Funded
Debt,  finance the Gordon  Transactions and other permitted  acquisitions and to
finance  working  capital and other  corporate  purposes.  The Letters of Credit
shall  be used  only  for or in  connection  with  appeal  bonds,  reimbursement
obligations   arising  in  connection   with  surety  and   reclamation   bonds,
reinsurance,  domestic or international  trade  transactions and obligations not
otherwise aforementioned relating to transactions entered into by the applicable
account party in the ordinary course of business.

         6.16     Environmental Matters.

         Except as  disclosed  on Schedule  6.6 and as would not  reasonably  be
expected to have a Material Adverse Effect:

         (a) Each of the facilities and properties owned,  leased or operated by
the members of the Consolidated  Group (the  "Properties") and all operations at
the Properties are in compliance  with all  applicable  Environmental  Laws, and
there is no violation of any Environmental Law with respect to the Properties or
the  businesses   operated  by  the  members  of  the  Consolidated  Group  (the
"Businesses"),  and  there  are no  conditions  relating  to the  Businesses  or
Properties that could give rise to liability under any applicable  Environmental
Laws.

         (b) None of the Properties contains, or has previously  contained,  any
Materials of Environmental  Concern at, on or under the Properties in amounts or
concentrations that constitute or constituted a violation of, or could give rise
to liability under, Environmental Laws.

         (c) None of the  members of the  Consolidated  Group has  received  any
written  or  verbal  notice  of,  or  inquiry  from any  Governmental  Authority
regarding,  any  violation,  alleged  violation,  non-compliance,  liability  or
potential   liability  regarding   environmental   matters  or  compliance  with
Environmental  Laws with regard to any of the Properties or the Businesses,  nor
does any member of the  Consolidated  Group have  knowledge or reason to believe
that any such notice will be received or is being threatened.

         (d) Materials of  Environmental  Concern have not been  transported  or
disposed of from the Properties,  or generated,  treated,  stored or disposed of
at, on or under any of the Properties or any other location,  in each case by or
on behalf any members of the Consolidated  Group in violation of, or in a manner
that would be reasonably  likely to give rise to liability under, any applicable
Environmental Law.

         (e) No judicial proceeding or governmental or administrative  action is
pending or, to the best  knowledge of any Credit  Party,  threatened,  under any
Environmental  Law to which any

member of the  Consolidated  Group is or will be named as a party, nor are there
any consent decrees or other decrees,  consent orders,  administrative orders or
other orders, or other administrative or judicial requirements outstanding under
any Environmental Law with respect to any member of the Consolidated  Group, the
Properties or the Businesses.

         (f) There has been no release  or,  threat of release of  Materials  of
Environmental  Concern at or from the Properties,  or arising from or related to
the operations  (including,  without limitation,  disposal) of any member of the
Consolidated  Group in connection with the Properties or otherwise in connection
with the  Businesses,  in  violation  of or in amounts or in a manner that could
give rise to liability under Environmental Laws.

                                    SECTION 7
                              AFFIRMATIVE COVENANTS
                              ---------------------

         Each of the Credit  Parties  covenants  and agrees  that on the Closing
Date,  and so  long  as  this  Credit  Agreement  is in  effect  and  until  the
Commitments  have been  terminated,  no Obligations  remain  outstanding and all
amounts owing  hereunder or in connection  herewith have been paid in full, each
of the members of the Consolidated Group party hereto shall:

         7.1      Financial Statements.

         Furnish, or cause to be furnished, to the Bank:

                  (a) Audited Financial Statements. As soon as available, but in
         any event within 90 days after the end of each fiscal year,  an audited
         consolidated  balance sheet of the Borrower and its  subsidiaries as of
         the end of the fiscal year and the related  consolidated  statements of
         income, retained earnings,  shareholders' equity and cash flows for the
         year,  audited by Arthur  Andersen  LLP,  or other firm of  independent
         certified  public   accountants  of  nationally   recognized   standing
         reasonably  acceptable  to the  Bank,  setting  forth  in each  case in
         comparative form the figures for the previous year,  reported without a
         "going concern" or like  qualification  or exception,  or qualification
         indicating  that the scope of the audit was  inadequate  to permit such
         independent  certified  public  accountants  to certify such  financial
         statements without such qualification.

                  (b)  Borrower-Prepared   Financial  Statements.   As  soon  as
         available, but in any event

                           (i) within 45 days after the end of each of the first
                  three  fiscal  quarters,   a  Borrower-prepared   consolidated
                  balance sheet of the Borrower and its  subsidiaries  as of the
                  end of the quarter and related Borrower-prepared  consolidated
                  statements of income, retained earnings,  shareholders' equity
                  and cash  flows for such  quarterly  period and for the fiscal
                  year to date;

                           (ii)  within  60 days  after  the  end of the  fourth
                  fiscal  quarter,  a Borrower-  prepared  consolidated  balance
                  sheet of the  Borrower and its  subsidiaries  as of the end of
                  the  quarter  and   related   Borrower-prepared   consolidated
                  statements of

                  income, retained earnings, shareholders' equity and cash flows
                  for such quarterly period and for the fiscal year to date;

                           (iii)  within 30 days prior to the end of each fiscal
                  year,  an annual  business  plan and budget for the members of
                  the Consolidated  Group,  containing,  among other things, pro
                  forma financial statements for the next fiscal year,

         in each case setting forth in comparative form the consolidated figures
         for the corresponding period or periods of the preceding fiscal year or
         the portion of the fiscal year ending with such period,  as applicable,
         in each case subject to normal recurring year-end audit adjustments.

All such  financial  statements  to be  complete  and  correct  in all  material
respects  (subject,  in the case of  interim  statements,  to  normal  recurring
year-end audit  adjustments) and to be prepared in reasonable detail and ,in the
case of the annual and  quarterly  financial  statements  provided in accordance
with subsections (a) and (b) above, in accordance with GAAP applied consistently
throughout  the  periods  reflected  therein)  and  further   accompanied  by  a
description  of, and an estimation of the effect on the financial  statements on
account of, a change in the application of accounting  principles as provided in
Section 1.3.

         7.2      Certificates; Other Information.

         Furnish, or cause to be furnished, to the Bank:

                  (a) Accountant's  Certificate and Reports.  Concurrently  with
         the  delivery of the  financial  statements  referred to in  subsection
         7.1(a)  above,  a  certificate  of  the  independent  certified  public
         accountants  reporting  on such  financial  statements  stating that in
         making the examination  necessary therefor no knowledge was obtained of
         any  Default  or  Event  of  Default,   except  as  specified  in  such
         certificate.

                  (b) Officer's  Certificate.  Concurrently with the delivery of
         the  financial  statements  referred to in  Sections  7.1(a) and 7.1(b)
         above, a certificate of a Responsible  Officer in such capacity and not
         individually  stating that, to the best of such  Responsible  Officer's
         knowledge and belief,  (i) the financial  statements  fairly present in
         all material respects the financial condition of the parties covered by
         such financial  statements,  (ii) during such period the members of the
         Consolidated  Group have observed or performed in all material respects
         the covenants and other agreements hereunder and under the other Credit
         Documents  relating to them, and satisfied in all material respects the
         conditions,   contained  in  this  Credit  Agreement  to  be  observed,
         performed  or  satisfied by them,  (iii) such  Responsible  Officer has
         obtained  no  knowledge  of any  Default or Event of Default  except as
         specified in such certificate and (iv) such  certificate  shall include
         the  calculations  required to indicate  compliance with Section 7.9. A
         form of Officer's Certificate is attached as Schedule 7.2(b).

                  (c) Accountants' Reports. Promptly upon receipt, a copy of any
         final  (as  distinguished  from  a  preliminary  or  discussion  draft)
         "management  letter" or other

         similar  report  submitted  by  independent  accountants  or  financial
         consultants to the members of the Consolidated Group in connection with
         any annual, interim or special audit.

                  (d) Public Information.  Within thirty days after the same are
         sent,  copies of all  reports  (other  than  those  otherwise  provided
         pursuant to subsection 7.1) and other financial  information  which any
         member of the Consolidated Group sends to its public stockholders,  and
         within  thirty days after the same are filed,  copies of all  financial
         statements  and  non-confidential  reports  which  any  member  of  the
         Consolidated  Group  may make to,  or file  with,  the  Securities  and
         Exchange   Commission  or  any  successor  or  analogous   Governmental
         Authority.

                  (e) Other Information. Promptly, such additional financial and
         other information as the Bank may from time to time reasonably request.

         7.3      Notices.

         Give notice to the Bank of:

                  (a)  Defaults.  Immediately  (and in any event  within two (2)
         Business  Days) after a Responsible  Officer of a Credit Party knows or
         has reason to know thereof,  the  occurrence of any Default or Event of
         Default.

                  (b) Contractual  Obligations.  Promptly, the initiation of any
         default or event of default  under any  Contractual  Obligation  of any
         member of the Consolidated  Group which would reasonably be expected to
         have a Material Adverse Effect.

                  (c)  Legal  Proceedings.  Promptly,  any  litigation,  or  any
         investigation  or  proceeding   (including  without   limitation,   any
         environmental proceeding) known to any member of the Consolidated Group
         (other  than  those   disclosed  in  Schedule  6.6),  or  any  material
         development in respect thereof  (including  those matters  disclosed on
         Schedule 6.6), affecting any member of the Consolidated Group which, if
         adversely  determined,  would reasonably be expected to have a Material
         Adverse Effect.

                  (d)  ERISA.  Promptly,  after any  Responsible  Officer of the
         Borrower  knows or has  reason to know of (i) any  event or  condition,
         including,  but not limited to, any Reportable Event, that constitutes,
         or might  reasonably lead to, an ERISA Event;  (ii) with respect to any
         Multiemployer  Plan,  the receipt of notice as  prescribed  in ERISA or
         otherwise of any  withdrawal  liability  assessed  against any of their
         ERISA Affiliates,  or of a determination that any Multiemployer Plan is
         in  reorganization or insolvent (both within the meaning of Title IV of
         ERISA);  (iii) the  failure  to make full  payment on or before the due
         date (including extensions) thereof of all amounts which the members of
         the  Consolidated   Group  or  any  ERISA  Affiliate  are  required  to
         contribute  to each Plan  pursuant to its terms and as required to meet
         the  minimum  funding  standard  set  forth in ERISA  and the Code with
         respect;  or (iv) any  change  in the  funding  status of any Plan that
         reasonably  could  be  expected  to  have a  Material  Adverse  Effect;
         together with a description of any such event or condition or a copy of
         any such notice and a statement

         by the chief  financial  officer of the Borrower  briefly setting forth
         the details regarding such event, condition, or notice, and the action,
         if any,  which has been or is being taken or is proposed to be taken by
         the Credit  Parties with respect  thereto.  Promptly upon request,  the
         members of the  Consolidated  Group  shall  furnish  the Bank with such
         additional  information  concerning  any  Plan  as  may  be  reasonably
         requested,  including,  but not  limited  to,  copies  of  each  annual
         report/return  (Form  5500  series),  as  well  as  all  schedules  and
         attachments  thereto  required to be filed with the Department of Labor
         and/or the  Internal  Revenue  Service  pursuant to ERISA and the Code,
         respectively, for each "plan year" (within the meaning of Section 3(39)
         of ERISA).

                  (e) Other.  Promptly,  any other  development or event which a
         Responsible  Officer  determines could reasonably be expected to have a
         Material Adverse Effect.

Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible  Officer setting forth details of the occurrence referred to therein
and stating what action the relevant Credit Parties propose to take with respect
thereto.

         7.4      Payment of Obligations.

         Pay,  discharge  or otherwise  satisfy at or before  maturity or before
they become delinquent,  as the case may be, in accordance with prudent business
practice  (subject,  where applicable,  to specified grace periods) all material
obligations of each member of the Consolidated  Group of whatever nature and any
additional  costs  that  are  imposed  as a  result  of any  failure  to so pay,
discharge or otherwise satisfy such  obligations,  except (i) when the amount or
validity of such  obligations  and costs is  currently  being  contested in good
faith by appropriate proceedings and reserves, if applicable, in conformity with
GAAP with respect  thereto have been  provided on the books of the  Consolidated
Group,  as the case may be, and (ii) to the extent  that the  failure to so pay,
discharge  or  otherwise  satisfy  such  obligations  would not have a  Material
Adverse Effect.

         7.5      Conduct of Business and Maintenance of Existence.

         Continue  to  engage  in  business  of the  same  general  type  as now
conducted  by it on the date  hereof  and  similar or  related  businesses  with
respect to  motorsports  products  except to the extent  that  failure to comply
therewith would not, in the aggregate, have a Material Adverse Effect; preserve,
renew and keep in full  force and effect its  corporate  existence  and take all
reasonable  action to maintain all rights,  privileges,  licenses and franchises
necessary or desirable in the normal  conduct of its  business;  and comply with
all Contractual  Obligations and  Requirements of Law applicable to it except to
the  extent  that  failure  to comply  with  such  Contractual  Obligations  and
Requirements of Law would not, in the aggregate, have a Material Adverse Effect.

         7.6      Maintenance of Property; Insurance.

         Keep all  material  Property  useful and  necessary  in its business in
reasonably  good working order and condition  (ordinary wear and tear excepted);
maintain with  financially  sound and reputable  insurance  companies  casualty,
liability and such other insurance  (which may

include plans of self-insurance) with such coverage and deductibles, and in such
amounts as may be  consistent  with prudent  business  practice and in any event
consistent with normal industry practice (except to any greater extent as may be
required by the terms of any of the other Credit Documents);  and furnish to the
Bank, upon written request, full information as to the insurance carried.

         7.7      Inspection of Property; Books and Records; Discussions.

         Keep  proper  books of  records  and  account in which  full,  true and
correct  entries in conformity  with GAAP and all  Requirements  of Law shall be
made  of all  dealings  and  transactions  in  relation  to its  businesses  and
activities;  and  permit,  during  regular  business  hours and upon  reasonable
notice, the Bank to visit and inspect any of its properties and examine and make
abstracts (including  photocopies) from any of its books and records (other than
materials  protected by the  attorney-client  privilege and materials  which the
Credit  Parties  may  not  disclose  without   violation  of  a  confidentiality
obligation  binding  upon  them) at any  reasonable  time,  and to  discuss  the
business,  operations,  properties  and  financial  and other  condition  of the
members of the Consolidated  Group with officers and employees of the members of
the Consolidated Group and with their independent  certified public accountants.
The cost of the  inspection  referred to in the preceding  sentence shall be for
the  account  of the Bank  unless  an  Event  of  Default  has  occurred  and is
continuing,  in which case the cost of such inspection  shall be for the account
of the Credit Parties.

         7.8      Environmental Laws.

         (a) Comply in all material  respects with, and take reasonable  actions
         to ensure  compliance  in all  material  respects  by all  tenants  and
         subtenants,  if any, with, all applicable Environmental Laws and obtain
         and  comply  in all  material  respects  with  and  maintain,  and take
         reasonable actions to ensure that all tenants and subtenants obtain and
         comply  in all  material  respects  with  and  maintain,  any  and  all
         licenses, approvals,  notifications,  registrations or permits required
         by applicable  Environmental  Laws except to the extent that failure to
         do so would not  reasonably  be  expected  to have a  Material  Adverse
         Effect;

         (b) Conduct and  complete  all  investigations,  studies,  sampling and
         testing,  and all remedial,  removal and other actions  required  under
         Environmental  Laws and promptly  comply in all material  respects with
         all  lawful  orders  and  directives  of all  Governmental  Authorities
         regarding  Environmental  Laws  except to the extent  that the same are
         being  contested  in good  faith  by  appropriate  proceedings  and the
         failure to do or the pendency of such proceedings  would not reasonably
         be expected to have a Material Adverse Effect; and

         (c) Defend,  indemnify and hold harmless the Bank,  and its  employees,
         agents,  officers and  directors,  from and against any and all claims,
         demands, penalties, fines, liabilities, settlements, damages, costs and
         expenses of whatever  kind or nature  known or unknown,  contingent  or
         otherwise,  arising out of, or in any way relating to the violation of,
         noncompliance with or liability under, any Environmental Law applicable
         to the  operations  of the  members  of the  Consolidated  Group or the
         Properties, or any orders, 

         requirements or demands of Governmental  Authorities  related  thereto,
         including,  without limitation,  reasonable attorney's and consultant's
         fees,  investigation and laboratory fees,  response costs,  court costs
         and litigation expenses, except to the extent that any of the foregoing
         arise out of the gross  negligence  or willful  misconduct of the party
         seeking  indemnification  therefor.  The  agreements in this  paragraph
         shall  survive  repayment  of the Loans and all other  amounts  payable
         hereunder, and termination of the Commitments.

         7.9      Financial Covenants.

         (a) Maintenance of Consolidated Funded Debt to Consolidated EBITDA. The
Borrower will not permit, at any time, the ratio of Consolidated  Funded Debt to
Consolidated EBITDA to be greater than 2.00 to 1.00.

         (b) Fixed Charges  Coverage  Ratio  Maintenance.  The Borrower will not
permit,  at any time,  the Fixed Charges  Coverage Ratio to be less than 5.00 to
1.00.

         (c)  Maintenance  of  Consolidated  Net Worth.  The  Borrower  will not
permit,  at any  time,  Consolidated  Net  Worth to be less  than the sum of (a)
$26,000,000,  plus (b) an aggregate  amount equal to fifty  percent (50%) of its
Consolidated  Net Income for each completed  Fiscal  Quarter  beginning with the
Fiscal  Quarter that  includes the Closing  Date (but,  in each case,  only if a
positive number).

         7.10     Additional Guaranties.

                  (a) Domestic  Subsidiaries.  At any time any Person  becomes a
         Domestic Subsidiary, the Borrower will promptly notify the Bank thereof
         and cause such Domestic  Subsidiary to become a Guarantor  hereunder by
         (i) execution of a Joinder  Agreement,  and (ii) delivery of supporting
         resolutions,   incumbency   certificates,   corporation  formation  and
         organizational  documentation  and  opinions of counsel as the Bank may
         reasonably request.

                  (b)  Foreign  Subsidiaries.  At any time any Person  becomes a
         Foreign Subsidiary,  the Borrower will promptly notify the Bank thereof
         and cause delivery of supporting resolutions,  incumbency certificates,
         corporation formation and organizational  documentation and opinions of
         counsel as the Bank may reasonably request.

         7.11     Use of Proceeds.

         Extensions  of Credit will be used solely for the purposes  provided in
Section 6.15.

                                    SECTION 8
                               NEGATIVE COVENANTS
                               ------------------

         Each of the Credit  Parties  covenants  and agrees  that on the Closing
Date,  and so  long  as  this  Credit  Agreement  is in  effect  and  until  the
Commitments  have been  terminated,  no

Obligations  remain outstanding and all amounts owing hereunder or in connection
herewith, have been paid in full, no member of the Consolidated Group shall:

         8.1      Indebtedness.

         Contract,  create,  incur,  assume or permit to exist any Indebtedness,
         except:

                  (a)  Indebtedness   arising  or  existing  under  this  Credit
         Agreement and the other Credit Documents;

                  (b) Indebtedness evidenced by the Senior Notes in an aggregate
         principal amount not to exceed $20,000,000;

                  (c)  Indebtedness  set forth in Schedule  8.1,  and  renewals,
         refinancings  and  extensions  thereof on terms and  conditions no less
         favorable than for such existing Indebtedness;

                  (d) Capital Lease  Obligations and Indebtedness  incurred,  in
         each case,  to provide all or a portion of the purchase  price or costs
         of  construction  of an  asset  or,  in the  case  of a  sale/leaseback
         transaction  as described in Section 8.11, to finance the value of such
         asset owned by a member of the  Consolidated  Group,  provided that (i)
         such  Indebtedness when incurred shall not exceed the purchase price or
         cost of construction of such asset or, in the case of a  sale/leaseback
         transaction,  the  fair  market  value  of  such  asset,  (ii)  no such
         Indebtedness  shall be refinanced  for a principal  amount in excess of
         the  principal  balance   outstanding  thereon  at  the  time  of  such
         refinancing,  and (iii) the total amount of all such Indebtedness shall
         not exceed $2,000,000 at any time outstanding;

                  (e)  Indebtedness  and  obligations  owing under interest rate
         protection  agreements relating to the Obligations  hereunder and under
         interest rate,  commodities and foreign  currency  exchange  protection
         agreements  entered into in the  ordinary  course of business to manage
         existing or anticipated risks and not for speculative purposes;

                  (f) unsecured  intercompany  Indebtedness owing by a member of
         the  Consolidated  Group to another  member of the  Consolidated  Group
         (subject, however, to the limitations of Section 8.5 in the case of the
         member of the  Consolidated  Group  extending  the  intercompany  loan,
         advance or credit);

                  (g)  other  unsecured  Funded  Debt  of  the  Borrower  in the
         aggregate  at any time  outstanding  of up to an  amount  equal to five
         percent (5%) of Consolidated Total Tangible Assets as of the end of the
         immediately preceding Fiscal Quarter; and

                  (h) Guaranty Obligations of Indebtedness  permitted under this
         Section 8.1.

         8.2      Liens.

         Contract,  create,  incur,  assume  or  permit  to exist  any Lien with
respect to any of their respective  property or assets of any kind (whether real
or personal,  tangible or intangible),  whether now owned or hereafter acquired,
except for Permitted Liens.

         8.3      Nature of Business.

         Alter the character of their business in any material respect from that
conducted as of the Closing Date and similar or related  businesses with respect
thereto.

         8.4  Consolidation,   Merger,  Sale  or  Purchase  of  Assets,  Capital
Expenditures, etc.

         (a)  Dissolve,  liquidate  or  wind up  their  affairs,  except  (i) in
connection with a disposition of assets permitted by the terms of subsection (c)
hereof and (ii) for the dissolution and liquidation of a wholly-owned Subsidiary
of a Credit  Party where the parent  Credit  Party  receives  the assets of such
Subsidiary;

         (b) Enter into any  transaction of merger or  consolidation;  provided,
however,  that,  so long as no Default or Event of Default  would be directly or
indirectly caused as a result thereof,

                  (i) a  member  of  the  Consolidated  Group  (other  than  the
         Borrower)  may  merge  or  consolidate   with  another  member  of  the
         Consolidated  Group,  provided  that  (A) if the  Borrower  is a  party
         thereto, it shall be the surviving  corporation,  (B) if a Credit Party
         shall be a party thereto,  it shall be the surviving  corporation,  and
         (C) the surviving corporation shall be a Domestic Credit Party or shall
         become a Domestic  Credit  Party  pursuant to the terms of Section 7.10
         concurrently with consummation of the merger or consolidation;

                  (ii) a  member  of the  Consolidated  Group  (other  than  the
         Borrower)  may  merge  or  consolidate  with any  Person  that is not a
         Subsidiary,  provided that the  applicable  conditions set forth in the
         foregoing  subsection  (i) of this  Section  8.4(b),  in  Section  7.10
         regarding  joinder of certain  Subsidiaries as Credit  Parties,  and in
         Section 8.4(d) regarding acquisitions,  are complied with in connection
         with any such acquisition by merger.

         (c)  Sell,  lease,  transfer  or  otherwise  dispose  of  any  Property
(including without limitation pursuant to any sale/leaseback  transaction) other
than (i) the sale of  inventory  in the  ordinary  course of  business  for fair
consideration, (ii) the sale or disposition of machinery and equipment no longer
used or useful in the conduct of such Person's  business,  and (iii) other sales
of  assets,  provided  that  (A)  after  giving  effect  to such  sale or  other
disposition,  the aggregate  book value of assets sold or otherwise  disposed of
pursuant to this clause (iii),  or the revenues  therefrom,  in any given fiscal
year does not exceed an amount equal to the lesser of 15% of Consolidated  Total
Tangible Assets as of the end of the immediately preceding Fiscal Quarter or 15%
of Consolidated Revenues for the immediately preceding four Fiscal Quarters, and
(B) after giving effect to such sale or other  disposition,  no Default or Event
of Default would exist hereunder.

         (d)      Except

                  (i)      for the Gordon Transactions,

                  (ii)     as otherwise permitted by Section 8.4(b)(i), and

                  (iii) for  Investments  in  entities in which less than 50% is
         (or, as a result of the  transaction,  will be) owned by a Credit Party
         where  such  Investments  are  permitted  by  subclause  (xiii)  of the
         definition of "Permitted Investments",

purchase,  lease or otherwise  acquire (in a single  transaction  or a series of
related  transactions)  all or any substantial part of the Property of any other
Person, at a purchase price or acquisition cost (including Indebtedness assumed)
in any given fiscal year in the aggregate for all such acquisitions in excess of
an amount equal to five percent (5%) of Consolidated Total Tangible Assets as of
the end of the immediately  preceding Fiscal Quarter,  without the prior written
consent of the Bank.

         (e) Take or permit any action,  or fail to take any action,  the effect
of which would be to cause a Domestic  Credit  Party to lose its status as such,
other than as expressly permitted in this Section.

         8.5      Advances, Investments and Loans.

         Lend money or extend credit or make advances to any Person, or purchase
or acquire any stock, obligations or securities of, or any other interest in, or
make any capital contribution to, or otherwise make an Investment in, any Person
except for Permitted Investments.

         8.6      Transactions with Affiliates.

         Enter   into  or  permit  to  exist  any   transaction   or  series  of
transactions,  whether  or not in the  ordinary  course  of  business,  with any
officer,  director,   shareholder  or  Affiliate  other  than  (i)  transactions
permitted by Section 8.1,  Section  8.4(b),  Section 8.5 or Section  8.10,  (ii)
customary fees and expenses paid to directors and (iii) where such  transactions
are on terms and conditions substantially as favorable as would be obtainable in
a  comparable  arm's-length  transaction  with a Person  other than an  officer,
director, shareholder or Affiliate.

         8.7      Ownership of Equity Interests.

         Issue, sell,  transfer,  pledge or otherwise dispose of any partnership
interests,  shares  of  capital  stock or other  equity or  ownership  interests
("Equity  Interests")  in any member of the  Consolidated  Group  other than the
Borrower,  except (i) issuance, sale or transfer of Equity Interests to a Credit
Party  by a  Subsidiary  of  such  Credit  Party,  (ii)  in  connection  with  a
transaction  permitted by Section 8.4, and (iii) as needed to qualify  directors
under applicable law.

         8.8      Fiscal Year.

         Change its Fiscal Year.

         8.9      Prepayments of Indebtedness, etc.

         (a)  After  the  issuance  thereof,  amend or  modify  (or  permit  the
amendment  or  modification  of), the terms of any other Funded Debt in a manner
adverse to the  interests of the Bank  (including  specifically  shortening  any
maturity  or average  life to  maturity or  requiring  any  payment  sooner than
previously  scheduled  or  increasing  the  interest  rate  or  fees  applicable
thereto);

         (b) Make any  prepayment,  redemption,  defeasance or  acquisition  for
value of (including without limitation, by way of depositing money or securities
with the trustee with respect  thereto before due for the purpose of paying when
due),  or  refund,  refinance  or  exchange  of  any  Funded  Debt  (other  than
intercompany  Indebtedness  permitted  hereunder) other than regularly scheduled
payments of principal  and  interest on such Funded  Debt,  except to the extent
permitted by Section 8.10.

         8.10     Restricted Payments.

         Make or permit Restricted Payments in the aggregate for any Fiscal Year
in excess of an amount equal to 35% of Consolidated Net Income (if positive) for
the immediately  preceding Fiscal Year, without the prior written consent of the
Bank.

         8.11     Sale Leasebacks.

         Except as permitted pursuant to Section 8.1(c) and (d) hereof, directly
or indirectly, become or remain liable as lessee or as guarantor or other surety
with respect to any lease, whether an Operating Lease or a Capital Lease, of any
Property  (whether  real or personal or mixed),  whether now owned or  hereafter
acquired,  (i)  which  such  Person  has  sold or  transferred  or is to sell or
transfer to any other Person other than a Credit Party or (ii) which such Person
intends to use for  substantially  the same purpose as any other  Property which
has been sold or is to be sold or transferred by such Person to any other Person
in connection with such lease.

         8.12     No Further Negative Pledges.

         Except with  respect to the Senior Note  Agreement  relating to (i) the
Senior Notes, (ii) Indebtedness  incurred pursuant to Section 8.1(g),  and (iii)
prohibitions  against  other  encumbrances  on specific  Property  encumbered to
secure payment of particular  Indebtedness (which Indebtedness relates solely to
such  specific  Property,  and  improvements  and  accretions  thereto,  and  is
otherwise  permitted  hereby),  no member of the  Consolidated  Group will enter
into,  assume  or become  subject  to any  agreement  prohibiting  or  otherwise
restricting  the  creation  or  assumption  of any Lien upon its  properties  or
assets,  whether now owned or hereafter acquired,  or requiring the grant of any
security for such obligation if security is given for some other obligation.

                                    SECTION 9
                                EVENTS OF DEFAULT
                                -----------------

         9.1      Events of Default.

         An Event of  Default  shall  exist  upon the  occurrence  of any of the
following specified events (each an "Event of Default"):

         (a)      Payment.  Any Credit Party shall

                  (i) default in the payment when due of any principal of any of
         the Loans or of any  reimbursement  obligations  relating to Letters of
         Credit or Bankers' Acceptances, or

                  (ii) default, and such defaults shall continue for five (5) or
         more  Business  Days,  in the payment  when due of any  interest on the
         Loans  or on any  reimbursement  obligations,  or of any  Fees or other
         amounts owing hereunder,  under any of the other Credit Documents or in
         connection herewith or therewith; or

         (b) Representations. Any representation,  warranty or statement made or
deemed  to be made  herein,  in any of the  other  Credit  Documents,  or in any
statement or certificate  delivered or required to be delivered  pursuant hereto
or thereto shall prove untrue in any material respect on the date as of which it
was deemed to have been made; or

         (c)      Covenants.

                  (i) Default in the due  performance or observance of any term,
         covenant or agreement  contained in Section  7.3(a),  7.9,  7.10 or 8.1
         through  8.12  (except in the case of negative  covenants  contained in
         Sections  8.1 through  8.12,  those  Defaults  which may occur or arise
         other than on account of or by affirmative  or  intentional  act of the
         Borrower or event or condition  which the Borrower shall with knowledge
         permit to exist,  all of which  shall be subject to the  provisions  of
         clause (ii) hereof), inclusive, or

                  (ii) Default in the due performance or observance by it of any
         term,   covenant  or  agreement   (other  than  those  referred  to  in
         subsections  (a), (b) or (c)(i) of this Section 9.1)  contained in this
         Credit  Agreement  and such default  shall  continue  unremedied  for a
         period of at least 30 days after the earlier of a  responsible  officer
         of a Credit Party  becoming  aware of such default or notice thereof by
         the Bank or, if such default cannot  reasonably be remedied within such
         30 day period,  an  additional  period not to exceed 30 days,  provided
         that  remedy is  commenced  within  the  original  30 day period and is
         diligently and continuously pursued; or

         (d) Other Credit  Documents.  (i) Any Credit Party shall default in the
due performance or observance of any material term, covenant or agreement in any
of the other Credit Documents  (subject to applicable grace or cure periods,  if
any),  or (ii)  except as to the

Credit  Party  which is  dissolved,  released or merged or  consolidated  out of
existence  as the  result  of or in  connection  with a  dissolution,  merger or
disposition  permitted by Section 8.4(a),  Section 8.4(b) or Section 8.4(c), any
Credit  Document  shall  fail to be in full force and effect or to give the Bank
any material part of the Liens,  rights,  powers and privileges  purported to be
created thereby; or

         (e)  Guaranties.  Except as to the  Credit  Party  which is  dissolved,
released  or merged or  consolidated  out of  existence  as the  result of or in
connection  with a  dissolution,  merger or  disposition  permitted  by  Section
8.4(a),  Section 8.4(b) or Section  8.4(c),  the guaranty given by any Guarantor
hereunder or any material  provision thereof shall cease to be in full force and
effect, or any Guarantor  hereunder or any Person acting by or on behalf of such
Guarantor  shall  deny or  disaffirm  such  Guarantor's  obligations  under such
guaranty, or any Guarantor shall default in payment under such guaranty; or

         (f) Bankruptcy, etc. A Bankruptcy Event shall occur with respect to any
member of the Consolidated Group; or

         (g) Defaults under Other  Agreements.  With respect to any Indebtedness
(other than  Indebtedness  outstanding under this Credit Agreement) in excess of
$1,000,000 in the aggregate for the Consolidated Group taken as a whole, without
duplication,  (A) (1) any member of the Consolidated  Group shall default in any
payment (beyond the applicable grace period with respect  thereto,  if any) with
respect to any such  Indebtedness,  or (2) the occurrence  and  continuance of a
default in the  observance  or  performance  relating  to such  Indebtedness  or
contained  in any  instrument  or  agreement  evidencing,  securing  or relating
thereto,  or any other event or condition  shall occur or condition  exist,  the
effect of which default or other event or condition is to cause, or permit,  the
holder or holders of such  Indebtedness  (or  trustee or agent on behalf of such
holders)  to cause  any such  Indebtedness  to become  due  prior to its  stated
maturity;  or (B) any such  Indebtedness  shall be declared due and payable,  or
required to be prepaid other than by a regularly scheduled required  prepayment,
prior to the stated maturity thereof; or

         (h) Judgments.  Any member of the Consolidated  Group shall fail within
30 days of the date due and  payable to pay,  bond or  otherwise  discharge  any
judgment,  settlement  or  order  for  the  payment  of  money  which  judgment,
settlement or order, when aggregated with all other such judgments,  settlements
or orders  due and  unpaid at such time,  exceeds  $2,000,000,  and which is not
stayed  on  appeal  (or for  which  no  motion  for stay is  pending)  or is not
otherwise being executed; or

         (i) ERISA. Any of the following events or conditions,  if such event or
condition could  reasonably be expected to have a Material  Adverse Effect:  (1)
any "accumulated  funding deficiency," as such term is defined in Section 302 of
ERISA and  Section  412 of the Code,  whether or not  waived,  shall  exist with
respect to any Plan,  or any lien  shall  arise on the assets of a member of the
Consolidated Group or any ERISA Affiliate in favor of the PBGC or a Plan; (2) an
ERISA Event shall occur with respect to a Single Employer Plan, which is, in the
reasonable opinion of the Bank, likely to result in the termination of such Plan
for  purposes of Title IV of ERISA;  (3) an ERISA Event shall occur with respect
to a Multiemployer  Plan or Multiple  Employer Plan, which is, in the reasonable
opinion of the Bank,  likely to result in (i) the  termination  of such Plan for
purposes of Title IV of ERISA, or (ii) a member of the Consolidated

Group or any ERISA  Affiliate  incurring  any  liability  in  connection  with a
withdrawal  from,  reorganization  of (within  the  meaning  of Section  4241 of
ERISA),  or  insolvency  of (within the  meaning of Section  4245 of ERISA) such
Plan; or (4) any  prohibited  transaction  (within the meaning of Section 406 of
ERISA or Section 4975 of the Code) or breach of fiduciary  responsibility  shall
occur  which  may  subject  a member  of the  Consolidated  Group  or any  ERISA
Affiliate to any liability under Sections 406, 409,  502(i),  or 502(l) of ERISA
or Section 4975 of the Code, or under any agreement or other instrument pursuant
to which a member of the Consolidated Group or any ERISA Affiliate has agreed or
is required to indemnify any person against any such liability; or

         (j) Ownership. There shall occur a Change of Control; or

         (k) Senior  Notes.  The  occurrence  of an Event of  Default  under the
         Senior Notes.

         9.2      Acceleration; Remedies.

         Upon the occurrence of an Event of Default, and at any time thereafter,
the Bank may, by written  notice to the Borrower  and the other  Credit  Parties
take any of the following actions:

         (i)  Termination of  Commitments.  Declare the  Commitments  terminated
       whereupon the Commitments shall be immediately terminated.

         (ii)  Acceleration.  Declare  the unpaid  principal  of and any accrued
       interest in respect of all Loans, any reimbursement  obligations relating
       to  Letters  of Credit  and  Bankers'  Acceptances  and any and all other
       indebtedness  or  obligations  of any and every  kind owing by the Credit
       Parties  to the Bank  hereunder  to be due  whereupon  the same  shall be
       immediately due and payable without presentment, demand, protest or other
       notice of any kind,  all of which are hereby waived by each of the Credit
       Parties.

         (iii) Cash  Collateral.  Direct the  Borrower to pay (and the  Borrower
       agrees that upon receipt of such  notice,  or upon the  occurrence  of an
       Event of Default under Section 9.1(f),  it will  immediately  pay) to the
       Bank additional cash, to be held by the Bank in a cash collateral account
       as additional  security for the LOC  Obligations and BA Obligations in an
       amount equal to the maximum aggregate amount which may be drawn under all
       Letters of Credits and Bankers' Acceptances then outstanding.

         (iv)  Enforcement  of Rights.  Enforce any and all rights and interests
       created  and  existing  under  the  Credit  Documents  and all  rights of
       set-off.

Notwithstanding  the  foregoing,  if an Event of  Default  specified  in Section
9.1(f) shall occur, then the Commitments shall  automatically  terminate and all
Loans, all reimbursement  obligations relating to Letters of Credit and Bankers'
Acceptances,  all accrued  interest in respect  thereof,  all accrued and unpaid
Fees  and  other  indebtedness  or  obligations  owing  to  the  Bank  hereunder
automatically  shall  immediately  become due and payable  without  presentment,
demand,  protest 

or the giving of any notice or other action by the Bank, all of which are hereby
waived by the Credit Parties.

                                   SECTION 10
                                  MISCELLANEOUS
                                  -------------

         10.1     Notices.

         Except as otherwise  expressly  provided herein,  all notices and other
communications  shall  have been duly  given  and  shall be  effective  (i) when
delivered, (ii) when transmitted via telecopy (or other facsimile device) to the
number set out below, (iii) the Business Day following the day on which the same
has been  delivered  prepaid  to a  reputable  national  overnight  air  courier
service,  or (iv) the third  Business Day following the day on which the same is
sent by certified  or  registered  mail,  postage  prepaid,  in each case to the
respective parties at the address,  in the case of the Borrower,  Guarantors and
the Bank,  set forth below or at such other address as such party may specify by
written notice to the other parties hereto:

                           if to the Borrower or the Guarantors:

                           ACTION PERFORMANCE COMPANIES, INC.
                           2401 West First Street
                           Tempe, Arizona  85281
                           Attn:  Fred W. Wagenhals
                           Telephone:  (602) 894-0100
                           Telecopy:    (602) 967-1403

                  with a copy to:

                           O'Connor, Cavanagh, Anderson,
                                    Killingsworth & Beshears
                           One East Camelback Road, Suite 1100
                           Phoenix, Arizona  85012-1656
                           Attn:  Robert S. Kant
                           Telephone:  (602) 263-2606
                           Telecopy:    (602) 263-2900

                  if to the Bank:

                           First Union National Bank of North Carolina
                           201 South College Street, Suite 1300
                           Charlotte, North Carolina  28288-0656
                           Attn:  Portfolio Management
                           Telephone:  (704) 383-4369
                           Telecopy:   (704) 374-4820

                  with a copy to:

                           First Union National Bank of North Carolina
                           301 S. Tryon Street, N.C. Corporate Banking
                           Charlotte, North Carolina  28288-0145
                           Attn:  Tracey Gillespie
                                    Vice Preisdent
                           Telephone:  (704) 383-7645
                           Telecopy:    (704) 374-4000
         10.2     Right of Set-Off.

         In addition to any rights now or hereafter granted under applicable law
or  otherwise,  and  not by way of  limitation  of any  such  rights,  upon  the
occurrence  of an Event of Default,  the Bank is authorized at any time and from
time to time, without presentment,  demand,  protest or other notice of any kind
(all  of  which  rights  being  hereby  expressly  waived),  to  set-off  and to
appropriate  and apply any and all  deposits  (general or special) and any other
indebtedness  at any  time  held  or  owing  by  the  Bank  (including,  without
limitation branches,  agencies or Affiliates of the Bank wherever located) to or
for the credit or the  account  of any  Credit  Party  against  obligations  and
liabilities of such Person to the Bank hereunder,  under the Revolving Note, the
other Credit Documents or otherwise, irrespective of whether the Bank shall have
made any demand hereunder and although such obligations,  liabilities or claims,
or any of them,  may be contingent  or unmatured,  and any such set-off shall be
deemed to have been made  immediately upon the occurrence of an Event of Default
even though  such charge is made or entered on the books of the Bank  subsequent
thereto.

         10.3     Benefit of Agreement.

         This Credit Agreement shall be binding upon and inure to the benefit of
and be  enforceable  by the  respective  successors  and  assigns of the parties
hereto;  provided that none of the Credit  Parties may assign or transfer any of
its interests without prior written consent of the Bank.

         10.4     No Waiver; Remedies Cumulative.

         No  failure or delay on the part of the Bank in  exercising  any right,
power or privilege hereunder or under any other Credit Document and no course of
dealing between the Bank and any of the Credit Parties shall operate as a waiver
thereof;  nor shall any  single  or  partial  exercise  of any  right,  power or
privilege  hereunder  or under any other Credit  Document  preclude any other or
further exercise thereof or the exercise of any other right,  power or privilege
hereunder or thereunder.  The rights and remedies provided herein are cumulative
and not exclusive of any rights or remedies which the Bank would otherwise have.
No notice  to or  demand  on any  Credit  Party in any case  shall  entitle  the
Borrower or any other Credit  Party to any other or further  notice or demand in
similar or other  circumstances or constitute a waiver of the rights of the Bank
to any other or further  action in any  circumstances  without notice or demand,
except as expressly provided otherwise herein or in other Credit Documents.

         10.5     Payment of Expenses, etc.

         The Borrower agrees to: (i) pay all reasonable  out-of-pocket costs and
expenses  (A) of the  Bank in  connection  with  the  negotiation,  preparation,
execution and delivery and administration of this Credit Agreement and the other
Credit  Documents  and  the  documents  and  instruments   referred  to  therein
(including,  without limitation, the reasonable fees and expenses of Moore & Van
Allen, PLLC,  special counsel to the Bank) and any amendment,  waiver or consent
relating hereto and thereto including,  but not limited to, any such amendments,
waivers or consents resulting from or related to any work-out,  renegotiation or
restructure  relating to the performance by the Credit Parties under this Credit
Agreement  and (B) of the Bank in  connection  with  enforcement  of the  Credit
Documents  and the  documents and  instruments  referred to therein  (including,
without limitation, in connection with any such enforcement, the reasonable fees
and  disbursements of counsel for the Bank); (ii) pay and hold the Bank harmless
from and against any and all present and future  stamp and other  similar  taxes
with  respect  to the  foregoing  matters  and save the Bank  harmless  from and
against any and all  liabilities  with respect to or resulting from any delay or
omission (other than to the extent  attributable to the Bank) to pay such taxes;
and   (iii)   indemnify   the  Bank,   its   officers,   directors,   employees,
representatives  and agents from and hold each of them harmless  against any and
all losses, liabilities,  claims, damages or expenses incurred by any of them as
a result of, or arising  out of, or in any way  related  to, or by reason of (A)
any investigation, litigation or other proceeding (whether or not the
Bank is a party thereto) related to the entering into and/or  performance of any
Credit Document or the use of proceeds of any Loans  (including other extensions
of credit) hereunder or the consummation of any other transactions  contemplated
in any Credit Document,  including,  without limitation, the reasonable fees and
disbursements  of counsel  incurred in connection  with any such  investigation,
litigation  or other  proceeding or (B) the presence or Release of any Materials
of  Environmental  Concern at,  under or from any  Property  owned,  operated or
leased  by  the  Borrower  or any of its  Subsidiaries,  or the  failure  by the
Borrower or any of its  Subsidiaries to comply with any  Environmental  Law (but
excluding,  in the case of either of clause (A) or (B) above,  any such  losses,
liabilities,  claims,  damages or expenses  to the extent  incurred by reason of
gross  negligence  or  willful  misconduct  on  the  part  of the  Person  to be
indemnified).

         10.6     Amendments, Waivers and Consents.

         Neither this Credit  Agreement nor any other Credit Document nor any of
the terms  hereof or thereof  may be amended,  changed,  waived,  discharged  or
terminated unless such amendment, change, waiver, discharge or termination is in
writing  entered  into by, or  approved  in writing  by, the Bank and the Credit
Parties directly affected thereby.

         10.7     Counterparts.

         This Credit  Agreement  may be executed in any number of  counterparts,
each of which when so executed and  delivered  shall be an original,  but all of
which shall constitute one and the same instrument. It shall not be necessary in
making  proof of this Credit  Agreement  to produce or account for more than one
such counterpart.

         10.8     Headings.

         The headings of the sections  and  subsections  hereof are provided for
convenience  only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.

         10.9     Survival.

         All indemnities set forth herein,  including,  without  limitation,  in
Section  2.2(i),  3.9,  3.11 or 10.5 shall survive the execution and delivery of
this Credit  Agreement,  the making of the Loans, the issuance of the Letters of
Credit,  the repayment of the Loans, LOC Obligations and other obligations under
the Credit Documents and the termination of the Commitments  hereunder,  and all
representations  and warranties  made by the Credit Parties herein shall survive
delivery of the Revolving Note and the making of the Loans hereunder.

         10.10    Governing Law; Submission to Jurisdiction; Venue.

         (a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND
CONSTRUED  AND  INTERPRETED  IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF NORTH
CAROLINA.  Any legal action or proceeding with respect to this Credit  Agreement
or any other Credit  Document may be brought in the courts of the State of North
Carolina in Mecklenburg County, or of the United States for the Western District
of North Carolina, and, by execution and delivery of this Credit Agreement, each
of the Credit  Parties hereby  irrevocably  accepts for itself and in respect of
its property,  generally and unconditionally,  the nonexclusive  jurisdiction of
such courts. Nothing herein shall affect the right of the Bank to commence legal
proceedings  or to  otherwise  proceed  against  any  Credit  Party in any other
jurisdiction.

         (b) Each of the Credit Parties hereby  irrevocably waives any objection
which  it may  now or  hereafter  have  to the  laying  of  venue  of any of the
aforesaid  actions or  proceedings  arising  out of or in  connection  with this
Credit  Agreement or any other Credit Document brought in the courts referred to
in subsection (a) hereof and hereby further irrevocably waives and agrees not to
plead or claim in any such court that any such action or  proceeding  brought in
any such court has been brought in an inconvenient forum.

         (c) TO THE EXTENT  PERMITTED BY LAW, EACH OF THE BANK, THE BORROWER AND
THE CREDIT PARTIES HEREBY  IRREVOCABLY  WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION,  PROCEEDING  OR  COUNTERCLAIM  ARISING OUT OF OR RELATING TO THIS CREDIT
AGREEMENT,  ANY OF THE OTHER CREDIT DOCUMENTS OR THE  TRANSACTIONS  CONTEMPLATED
HEREBY.

         10.11             Severability.

         If any  provision of any of the Credit  Documents is  determined  to be
illegal,  invalid or unenforceable,  such provision shall be fully severable and
the  remaining  provisions  shall  remain in

full  force and  effect  and shall be  construed  without  giving  effect to the
illegal, invalid or unenforceable provisions.

         10.12             Entirety.

         This  Credit  Agreement   together  with  the  other  Credit  Documents
represent the entire agreement of the parties hereto and thereto,  and supersede
all prior agreements and understandings,  oral or written, if any, including any
commitment  letters or  correspondence  relating to the Credit  Documents or the
transactions contemplated herein and therein.

         10.13             Binding Effect; Termination.

         (a) This Credit  Agreement  shall  become  effective at such time on or
after the Closing  Date when it shall have been  executed by the  Borrower,  the
Guarantors and the Bank, and thereafter  this Credit  Agreement shall be binding
upon and inure to the benefit of the Borrower,  the  Guarantors and the Bank and
their respective successors and assigns.

         (b) The term of this Credit  Agreement shall be until no Loans or other
Obligations  or any other  amounts  payable  hereunder or under any of the other
Credit  Documents  shall  remain  outstanding  and until all of the  Commitments
hereunder shall have expired or been terminated.

         10.14             Conflict.

         To the extent  that there is a conflict  or  inconsistency  between any
provision hereof, on the one hand, and any provision of any Credit Document,  on
the other hand, this Credit Agreement shall control.

                           [Signature Page to Follow]

         IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Credit  Agreement to be duly executed and delivered as of the date first
above written.

BORROWER:                           ACTION PERFORMANCE COMPANIES, INC.,
                                    an Arizona corporation

                                    By:/s/Christopher S. Besing
                                       ------------------------
                                    Name:  Christopher S. Besing
                                    Title: Vice President, Treasurer and
                                           Chief Financial Officer

GUARANTORS:                         SPORTS IMAGE, INC.,
                                    an Arizona corporation

                                    By:/s/Christopher S. Besing         
                                       ------------------------         
                                    Name:  Christopher S. Besing         
                                    Title: Vice President, Treasurer and
                                           Chief Financial Officer      

                                    MTL ACQUISITION, INC.,
                                    an Arizona corporation

                                    By:/s/Christopher S. Besing         
                                       ------------------------         
                                    Name:  Christopher S. Besing         
                                    Title: Vice President, Treasurer and
                                           Chief Financial Officer      

BANK:                               FIRST UNION NATIONAL BANK OF NORTH CAROLINA

                                    By:/s/David Silands
                                       ------------------------
                                    Name:  David Siland
                                    Title: Vice President

                                 Schedule 2.1(b)
                                 ---------------

                           FORM OF NOTICE OF BORROWING

First Union National Bank of North Carolina
201 S. College Street, Suite 1300
Charlotte, North Carolina  28288-0656
Attention:  Portfolio Management

         Re:      Credit  Agreement  dated as of January 2, 1997 (as amended and
                  modified,  the "Credit  Agreement")  among ACTION  PERFORMANCE
                  COMPANIES,  INC., the Guarantors  identified therein and First
                  Union  National  Bank of North  Carolina.  Terms  used but not
                  otherwise  defined herein shall have the meanings  provided in
                  the Credit Agreement.

Ladies and Gentlemen:

The undersigned,  ACTION PERFORMANCE  COMPANIES,  INC., an Arizona  corporation,
being the Borrower  under the  above-referenced  Credit  Agreement  hereby gives
notice  pursuant to Section  2.1(b) of the Credit  Agreement  of a request for a
Revolving Loan as follows

(A)      Date of Borrowing
         (which is a Business Day)           _______________________

(B)      Principal Amount of
         Borrowing                           _______________________

(C)      Interest rate basis                 _______________________

(D)      Interest Period and the
         last day thereof                    _______________________

In accordance with the requirements of Section 5.2 of the Credit Agreement,  the
undersigned Borrower hereby certifies that:

                  (a) The representations and warranties contained in the Credit
         Agreement  and the other Credit  Documents  are true and correct in all
         material respects as of the date of this request,  and will be true and
         correct  after  giving  effect  to the  requested  Extension  of Credit
         (except for those which expressly relate to an earlier date).

                  (b) No Default or Event of Default exists, or will exist after
         giving effect to the requested Extension of Credit.

                  (c) No circumstances, events or conditions have occurred since
         the date of the audited financial statements  referenced in Section 6.1
         of the Credit Agreement which would have a Material Adverse Effect.

                  (d) All  conditions  set forth in Section 2.1 as to the making
         of Revolving Loans have been satisfied.

                                       Very truly yours,

                                       ACTION PERFORMANCE COMPANIES, INC.

                                       By:_______________________________
                                       Name:
                                       Title:

                                 Schedule 2.1(e)
                                 ---------------

                             FORM OF REVOLVING NOTE

$10,000,000                                                      January 2, 1997

         FOR VALUE RECEIVED, the undersigned Borrower, hereby promises to pay to
the order of FIRST UNION NATIONAL BANK OF NORTH CAROLINA, and its successors and
assigns,  on or  before  the  Termination  Date  to the  office  of the  Bank in
immediately  available funds as provided in the Credit Agreement,  the principal
amount of the  Bank's  Revolving  Committed  Amount or, if less,  the  aggregate
unpaid  principal  amount  of  all  Revolving  Loans  made  by the  Bank  to the
undersigned  Borrower,  together  with  interest  thereon  at the  rates  and as
provided in the Credit Agreement.

         This Note is the  Revolving  Note  referred to in the Credit  Agreement
dated  as  of  January  2,  1997  (as   amended   and   modified,   the  "Credit
Agreement")among Action Performance Companies, Inc., an Arizona corporation, the
Guarantors  identified  therein and First Union National Bank of North Carolina.
Terms used but not otherwise  defined herein shall have the meanings provided in
the Credit Agreement.

         The holder may  endorse  and  attach a schedule  to reflect  borrowings
evidenced by this Note and all payments and prepayments  thereon;  provided that
any failure to endorse such  information  shall not affect the obligation of the
undersigned Borrower to pay amounts evidenced hereby.

         Upon the  occurrence of an Event of Default,  all amounts  evidenced by
this Note may, or shall,  become  immediately due and payable as provided in the
Credit Agreement without presentment, demand, protest or notice of any kind, all
of which are waived by the undersigned Borrower. In the event payment of amounts
evidenced by this Note is not made at any stated or  accelerated  maturity,  the
undersigned  Borrower agrees to pay, in addition to principal and interest,  all
costs of collection, including reasonable attorneys' fees.

         This Note and the Loans and amounts evidenced hereby may be transferred
only as provided in the Credit Agreement.

         This Note  shall be  governed  by, and  construed  and  interpreted  in
accordance with, the law of the State of North Carolina.

         IN WITNESS WHEREOF, the undersigned Borrower has caused this Note to be
duly executed as of the date first above written.

                                    ACTION PERFORMANCE COMPANIES, INC.,
                                    an Arizona corporation

                                    By_________________________________
                                    Name:
                                    Title:

                                 Schedule 2.2(b)
                                 ---------------

                 Form of Notice of Request for Letter of Credit

                                     [Date]

First Union National Bank of North Carolina
201 S. College Street, Suite 1300
Charlotte, NC  28288-0656
Attention:  Portfolio Management

         Re:      Credit  Agreement  dated as of January 2, 1997 (as amended and
                  modified,  the "Credit  Agreement")  among ACTION  PERFORMANCE
                  COMPANIES,  INC., the Guarantors  identified therein and First
                  Union  National  Bank of North  Carolina.  Terms  used but not
                  otherwise  defined herein shall have the meanings  provided in
                  the Credit Agreement.

Ladies and Gentlemen:

         Pursuant to subsection 2.2(b) of the Credit Agreement,  the undersigned
Borrower, ACTION PERFORMANCE COMPANIES, INC., hereby requests that the following
Letters of Credit be made on [date] as follows (the "Proposed Extension"):

         (1)      Account Party:

         (2)      For use by:

         (3)      Beneficiary:

         (4)      Face Amount of Letter of Credit:

         (5)      Date of Issuance

         Delivery of Letter of Credit should be made as follows:

                  In  accordance  with the  requirements  of Section  5.2 of the
         Credit Agreement, the undersigned Borrower hereby certifies that:

                  (a) The representations and warranties contained in the Credit
         Agreement  and the other Credit  Documents  are true and correct in all
         material respects as of the date of this request,  and will be true and
         correct  after  giving  effect  to the  requested  Extension  of Credit
         (except for those which expressly relate to an earlier date).

                  (b) No Default or Event of Default exists, or will exist after
         giving effect to the requested Extension of Credit.

                  (c) No circumstances, events or conditions have occurred since
         the date of the audited financial statements  referenced in Section 6.1
         of the Credit Agreement which would have a Material Adverse Effect.

                  (d) All conditions set forth in Section 2.2 as to the issuance
         of a Letter of Credit have been satisfied.

                                    Very truly yours,

                                    ACTION PERFORMANCE COMPANIES, INC.

                                    By:_______________________________
                                    Name:
                                    Title:

                                  Schedule 3.2
                                  ------------

                     Form of Notice of Extension/Conversion

First Union National Bank of North Carolina
201 S. College Street, Suite 1300
Charlotte, North Carolina  28288-0656
Attention:  Portfolio Management

         Re:      Credit  Agreement  dated as of January 2, 1997 (as amended and
                  modified,  the "Credit  Agreement")  among ACTION  PERFORMANCE
                  COMPANIES,  INC., the Guarantors  identified therein and First
                  Union  National  Bank of North  Carolina.  Terms  used but not
                  otherwise  defined herein shall have the meanings  provided in
                  the Credit Agreement.

Ladies and Gentlemen:

         The undersigned  Borrower,  ACTION PERFORMANCE  COMPANIES,  INC. hereby
gives notice pursuant to Section 3.2 of the Credit Agreement that it requests an
extension  or  conversion  of a  Revolving  Loan  outstanding  under the  Credit
Agreement,  and in connection therewith sets forth below the terms on which such
extension or conversion is requested to be made:

(A)      Date of Extension or Conversion     
         (which is the last day of the
         the applicable Interest Period)     _______________________

(B)      Principal Amount of
         Extension or Conversion             _______________________

(C)      Interest rate basis                 _______________________

(D)      Interest Period and the
         last day thereof                    _______________________

         In  accordance  with the  requirements  of  Section  5.2 of the  Credit
Agreement, the undersigned Borrower hereby certifies that:

                  (a) The representations and warranties contained in the Credit
         Agreement  and the other Credit  Documents  are true and correct in all
         material respects as of the date of this request,  and will be true and
         correct  after  giving  effect  to the  requested  Extension  of Credit
         (except for those which expressly relate to an earlier date).

                  (b) No Default or Event of Default exists, or will exist after
         giving effect to the requested Extension of Credit.

                  (c) No circumstances, events or conditions have occurred since
         the date of the audited financial statements  referenced in Section 6.1
         of the Credit Agreement which would have a Material Adverse Effect.

                  (d) All  conditions  set forth in Section 2.1 as to the making
         of Revolving Loans have been satisfied

                                       Very truly yours,

                                       ACTION PERFORMANCE COMPANIES, INC.

                                       By:_________________________________
                                       Name:
                                       Title:

                                 Schedule 7.11-1
                                 ---------------

                            Form of Joinder Agreement

         THIS JOINDER  AGREEMENT (the  "Agreement"),  dated as of _____________,
19__,  is by  and  between  _____________________,  a  ___________________  (the
"Applicant Guarantor"),  and FIRST UNION NATIONAL BANK OF NORTH CAROLINA,  under
that  certain  Credit  Agreement  dated as of  January 2, 1997 (as  amended  and
modified,  the "Credit  Agreement") by and among ACTION  PERFORMANCE  COMPANIES,
INC., an Arizona corporation,  the Guarantors identified therein and First Union
National Bank of North Carolina, as Bank. All of the defined terms in the Credit
Agreement are incorporated herein by reference.

         The Applicant  Guarantor has indicated its desire to become a Guarantor
or is required by the terms of Section 7.10 of the Credit Agreement to become, a
Guarantor under the Credit Agreement.

         Accordingly,  the Applicant Guarantor hereby agrees as follows with the
Bank:

         1. The Applicant  Guarantor  hereby  acknowledges,  agrees and confirms
that, by its execution of this Agreement, the Applicant Guarantor will be deemed
to be a party to the Credit  Agreement and a "Guarantor" for all purposes of the
Credit  Agreement  and the other  Credit  Documents,  and shall  have all of the
obligations of a Guarantor thereunder as if it had executed the Credit Agreement
and the other Credit Documents.  The Applicant  Guarantor agrees to be bound by,
all of the terms,  provisions and conditions  contained in the Credit Documents,
including without  limitation (i) all of the affirmative and negative  covenants
set forth in Sections 7 and 8 of the Credit
Agreement and (ii) all of the undertakings and waivers set forth in Section 4 of
the Credit Agreement.  Without limiting the generality of the foregoing terms of
this  paragraph  1, the  Applicant  Guarantor  hereby (A) jointly and  severally
together  with the  other  Guarantors,  guarantees  to the Bank as  provided  in
Section 4 of the Credit  Agreement,  the prompt  payment and  performance of the
Guaranteed  Obligations  in full  when due  (whether  at stated  maturity,  as a
mandatory prepayment, by acceleration,  as a mandatory cash collateralization or
otherwise) strictly in accordance with the terms thereof. and (B) agrees that if
any of the  Guaranteed  Obligations  are not paid or  performed in full when due
(whether at stated maturity,  as a mandatory prepayment,  by acceleration,  as a
mandatory cash  collateralization  or otherwise),  the Applicant Guarantor will,
jointly and  severally  together  with the other  Guarantors,  promptly  pay and
perform the same, without any demand or notice whatsoever,  and that in the case
of any  extension  of  time  of  payment  or  renewal  of any of the  Guaranteed
Obligations,  the  same  will be  promptly  paid in full  when due  (whether  at
extended maturity,  as a mandatory prepayment,  by acceleration,  as a mandatory
cash  collateralization  or  otherwise)  in  accordance  with the  terms of such
extension or renewal.

         2.  The  Applicant  Guarantor  acknowledges  and  confirms  that it has
received a copy of the Credit Agreement and the Schedules and Exhibits  thereto.
The information on the Schedules to the Credit  Agreement are amended to provide
the information, if any, shown on the attached Schedule A.

         3. This Agreement may be executed in two or more counterparts,  each of
which shall  constitute an original but all of which when taken  together  shall
constitute one contract.

         4. This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of North Carolina.

         IN WITNESS  WHEREOF,  the  Applicant  Guarantor has caused this Joinder
Agreement  to be duly  executed  by its  authorized  officers,  and the Bank has
caused the same to be accepted by its authorized officer, as of the day and year
first above written.

                                  APPLICANT GUARANTOR

                                  By:__________________________________
                                  Name:
                                  Title:

                                  Address for Notices:

                                  Attn:  _______________________
                                  Telephone:
                                  Telecopy:

                                  Acknowledged and accepted:

                                  FIRST UNION NATIONAL BANK OF NORTH
                                    CAROLINA

                                  By:______________________________________
                                  Name:
                                  Title: 

Basic Info X:

Name: CREDIT AGREEMENT
Type: Credit Agreement
Date: Jan. 23, 1997
Company: ACTION PERFORMANCE COMPANIES INC
State: Arizona

Other info:

Date:

  • Saturday , Sunday
  • March 31 , June 30 , September 30
  • December 31
  • last day of each March , June
  • last Business Day
  • January 2 , 1999
  • March 31 , 1998
  • September 30 , 1997
  • last day of the
  • September 30 , 1996
  • June 30 , 1996
  • within 60 days after the end of the fourth fiscal quarter
  • January 2 , 1997

Organization:

  • 7.5 Conduct of Business and Maintenance of Existence
  • Notice of Request for Letter of Credit Schedule 2.3 b Form of Notice of Request for Banker 's Acceptance Schedule 3.2 Form of Notice of ExtensionConversion
  • Compliance Certificate Schedule
  • Federal Reserve Bank of New York
  • Federal Funds Effective Rate
  • BA Reimbursement Obligations
  • Consolidated Fixed Charges
  • Consolidated Income Available for Fixed Charges
  • Consolidated Total Assets
  • District of Columbia
  • Federal Reserve Board
  • Creative Marketing and Promotions , Inc.
  • MTL Acquisition , Inc.
  • Motorsports Traditions Limited Partnership
  • Capital Lease Obligations
  • Consolidated Net Income
  • Additional Credit Party
  • Moody 's Investors Service , Inc.
  • Pension Benefit Guaranty Corporation
  • Chief Financial Officer
  • Standard & Poor 's Ratings Group
  • McGraw Hill , Inc.
  • Wells Fargo HSBC Trade Bank
  • Revolving Commitment Increase Date
  • Notice of Borrowing
  • Interest Payment Date
  • Letter of Credit Facility
  • Credit Parties as Account Parties
  • The Uniform Customs and Practice for Documentary Credits
  • International Chamber of Commerce
  • Nature of Bank 's Duties
  • BA Discount Reference Rate
  • BA Reimbursement Obligation in Dollars
  • Federal Deposit Insurance Corporation
  • Reduction of Commitments
  • Revolving Committed Amount
  • LOC Committed Amount
  • b Mandatory Reduction
  • Wells Fargo Letter of Credit
  • Bank in Dollars
  • Alternate Base Rate Loans
  • Credit Documents or Hedging Agreements
  • Certain Additional Waivers
  • Excess Funding Guarantor
  • Execution of Credit Agreement and Credit Documents
  • c Financial Information
  • Board of Directors
  • All Extensions of Credit
  • No Material Adverse Effect
  • e Additional Conditions to Letters of Credit
  • 6.1 Financial Condition
  • Organizational Documents and Requirements of Law
  • Financial Accounting Standards Board Statement 87
  • Multiemployer Plans and Multiple Employer Plans
  • FR Form U-1
  • Board of Governors of the Federal Reserve System
  • Audited Financial Statements
  • Borrower-Prepared Financial Statements
  • Securities and Exchange Commission
  • Department of Labor
  • Internal Revenue Service
  • Contractual Obligations and Requirements of Law
  • Maintenance of Property ; Insurance
  • Bank unless an Event of Default
  • Maintenance of Consolidated Funded Debt to Consolidated EBITDA
  • Fixed Charges Coverage Ratio Maintenance
  • Maintenance of Consolidated Net Worth
  • Guaranty Obligations of Indebtedness
  • Nature of Business
  • Consolidated Total Tangible Assets
  • Domestic Credit Party
  • Ownership of Equity Interests
  • Any Credit Party
  • < PAGE > Credit Party
  • Enforcement of Rights
  • Killingsworth & Beshears One East Camelback Road
  • First Union National Bank of North Carolina 201 South College Street
  • Suite 1300 Charlotte
  • First Union National Bank of North Carolina 301 S. Tryon Street
  • Moore & Van Allen , PLLC
  • Western District of North Carolina
  • Action Performance Companies , Inc.
  • Notice of Request for Letter of Credit [ Date ] First Union National Bank of North Carolina 201 S. College Street
  • Date of Issuance Delivery of Letter of Credit
  • ExtensionConversion First Union National Bank of North Carolina 201 S. College Street
  • the State of North Carolina

Location:

  • United States Code
  • England
  • U.S.
  • United States Dollars
  • New York City
  • A.M. London
  • Bank
  • Noon Charlotte
  • Pro Rata
  • Etc
  • United States of America
  • Tempe
  • Phoenix
  • N.C.
  • Mecklenburg County
  • NC
  • NORTH CAROLINA
  • Arizona

Money:

  • $ 16 million
  • $ 500,000,000
  • $ 100,000,000
  • $ '' means dollars
  • $ 5,000,000
  • $ 250,000
  • $ 6,000,000
  • $ 25,000
  • $ 2,500
  • $ 26,000,000
  • $ 20,000,000
  • $ 1,000,000
  • $ 2,000,000
  • $ 10,000,000

Person:

  • Lien
  • Gordon Transactions
  • Arthur Andersen LLP
  • Fred W. Wagenhals
  • O'Connor
  • Cavanagh
  • Anderson
  • Robert S. Kant
  • Tracey Gillespie
  • Christopher S. Besing
  • David Siland

Time:

  • 9:30 A.M.
  • 2:00 P.M.

Percent:

  • ten percent
  • 10 %
  • 1 %
  • 8.05 %
  • 100 %
  • 2 %
  • one percent .375 %
  • 1.90 %
  • 25 %
  • fifty percent 50 %
  • 15 %
  • five percent 5 %
  • 35 %