10-Q

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    Form 10-Q
                Quarterly Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934


For Quarter Ended    September 30, 1998

Commission File Number    0-10436

                              L. B. Foster Company
             (Exact name of Registrant as specified in its charter)

                            Pennsylvania 25-13247733
          (State of Incorporation) (I.R.S. Employer Identification No.)

                415 Holiday Drive, Pittsburgh, Pennsylvania 15220
               (Address of principal executive offices) (Zip Code)

                                 (412) 928-3417
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for shorter  period that the registrant was required
to file such reports),  and (2) has been subject to such filing requirements for
the past 90 days.

                       Yes  X              No

Indicate  the  number of shares of each of the  registrant's  classes  of common
stock as of the latest practicable date.

    Class                                 Outstanding at October 27, 1998
    -----                                 -------------------------------

Class A Common Stock, Par Value $.01             9,981,343 Shares






                      L.B. FOSTER COMPANY AND SUBSIDIARIES


                                      INDEX
                                      -----


PART I.  Financial Information                                    Page
- -------  ---------------------                                    ----

    Item 1.    Financial Statements:

               Condensed Consolidated Balance Sheets                2

               Condensed Consolidated Statements of Income          3

               Condensed Consolidated Statements of Cash Flows      4

               Notes to Condensed Consolidated
               Financial Statements                                 5

    Item 2.    Management's Discussion and Analysis of
               Financial Condition and Results of Operations        9


PART II.  Other Information

    Item 1.    Legal Proceedings                                   15

    Item 6.    Exhibits and Reports on Form 8-K                    15

Signature                                                          18




                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                      L. B. FOSTER COMPANY AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In Thousands)

                                                  September 30,     December 31,
                                                       1998             1997
                                                   ----------------------------
ASSETS                                             (Unaudited)
Current Assets:
  Cash and cash equivalents ....................      $   3,493       $   1,156
                                                      ---------       ---------
  Accounts and notes receivable:
    Trade ......................................         35,262          45,022
    Other ......................................          3,288           2,564
                                                      ---------       ---------
                                                         38,550          47,586
                                                      ---------       ---------
  Inventories ..................................         40,889          43,365
                                                      ---------       ---------
  Current deferred tax assets ..................            567             123
                                                      ---------       ---------
  Other current assets .........................            696             557
                                                      ---------       ---------
  Property held for resale .....................                          3,461
                                                      ---------       ---------
    Total Current Assets .......................         84,195          96,248
                                                      ---------       ---------

Property, Plant & Equipment-At Cost ............         43,775          42,134
Less Accumulated Depreciation ..................        (22,845)        (21,359)
                                                      ---------       ---------
                                                         20,930          20,775
                                                      ---------       ---------
Property Held for Resale .......................            615             615
                                                      ---------       ---------
Other Assets:
  Goodwill and Intangibles .....................          5,960           4,484
  Investments ..................................          1,707           1,693
  Other Assets .................................          3,398           3,154
                                                      ---------       ---------
     Total Other Assets ........................         11,065           9,331
                                                      ---------       ---------

TOTAL ASSETS ...................................      $ 116,805       $ 126,969
                                                      =========       =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
  Current maturities of long-term debt .........      $   1,174       $   1,309
  Short-term borrowings ........................                         18,111
  Accounts payable .............................         18,765          12,524
  Accrued payroll and employee benefits ........          3,748           3,008
  Other accrued liabilities ....................          1,183           1,219
                                                      ---------       ---------
    Total Current Liabilities ..................         24,870          36,171
                                                      ---------       ---------

Long-Term Borrowings ...........................         11,000          15,000
                                                      ---------       ---------
Other Long-Term Debt ...........................          4,074           2,530
                                                      ---------       ---------
Deferred Tax Liabilities .......................          1,518             554
                                                      ---------       ---------
Other Long-Term Liabilities ....................          1,991           2,206
                                                      ---------       ---------

Stockholders' Equity:
  Class A Common stock .........................            102             102
  Paid-in capital ..............................         35,426          35,434
  Retained earnings ............................         38,985          35,625
  Treasury stock ...............................         (1,161)           (653)
                                                      ---------       ---------
    Total Stockholders' Equity .................         73,352          70,508
                                                      ---------       ---------

TOTAL LIABILITIES AND
 STOCKHOLDERS' EQUITY ..........................      $ 116,805       $ 126,969
                                                      =========       =========

See Notes to Condensed Consolidated Financial Statements.



                      L. B. FOSTER COMPANY AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                    (In Thousands, Except Per Share Amounts)


                                   Three Months              Nine Months
                                       Ended                    Ended
                                    September 30,           September 30,
                       --------------------------------------------------------
                                  1998         1997         1998         1997
                       --------------------------------------------------------
                                                        (Unaudited)

Net Sales ................   $  50,368    $  56,935    $ 158,585    $ 165,145
Cost of Goods Sold .......      43,155       48,836      135,355      143,152
                             ---------    ---------    ---------    ---------
Gross Profit .............       7,213        8,099       23,230       21,993

   Selling and Admin-
    istrative Expenses ...       5,849        5,624       17,783       16,484
   Interest Expense ......         308          665        1,377        1,845
   Other (Income) Expense         (130)        (209)      (1,533)        (316)
                             ---------    ---------    ---------    ---------
                                 6,027        6,080       17,627       18,013
                             ---------    ---------    ---------    ---------
Income Before Income Taxes       1,186        2,019        5,603        3,980

Income Tax Expense .......         473          807        2,243        1,490
                             ---------    ---------    ---------    ---------


Net Income ...............   $     713    $   1,212    $   3,360    $   2,490
                             =========    =========    =========    =========


Basic Earnings Per
 Common Share ............       $0.07        $0.12        $0.33        $0.24
                                 =====        =====        =====        =====

Diluted Earnings
 Per Common Share                $0.07        $0.12        $0.33        $0.24
                                 =====        =====        =====        =====


Cash Dividend per
 Common Share ....               $--          $--          $--          $--
                                 =====        =====        =====        =====


See Notes to Condensed Consolidated Financial Statements.


                      L. B. FOSTER COMPANY AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)

                                                                 Nine Months
                                                             Ended September 30,
                                                             -------------------
                                                             1998          1997
                                                             -------------------
                                                                 (Unaudited)
Cash Flows from Operating Activities:
    Net Income ..........................................  $  3,360    $  2,490
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
    Deferred income taxes ...............................       520       1,437
    Depreciation and amortization .......................     2,197       1,943
    Gain on sale of property, plant and equipment .......    (1,271)       (113)
 Change in operating assets and liabilities:
    Accounts receivable .................................    10,499       5,373
    Inventories .........................................    (1,196)     (5,192)
    Property held for resale ............................       200         (32)
    Other current asset .................................      (128)         (9)
    Other non-current assets ............................      (494)       (317)
    Accounts payable ....................................     7,492      (5,911)
    Accrued payroll and employee benefits ...............       830        (857)
    Other current liabilities ...........................       (36)     (1,029)
    Other liabilities ...................................      (215)         64
                                                            --------    --------
  Net Cash Provided (Used) by Operating Activities ......    21,758      (2,153)
                                                            --------    --------

Cash Flows from Investing Activities:
    Proceeds from sale of property, plant and equipment .       687       1,542
    Proceeds from sale of Fosterweld ....................     7,258
    Capital expenditures on property, plant and equipment    (1,953)     (1,505)
    Purchase of DM&E stock ..............................                (1,500)
    Acquisition of business .............................    (3,774)     (2,500)
                                                            --------    --------
  Net Cash Provided (Used) by Investing Activities ......     2,218      (3,963)
                                                            --------    --------

Cash Flows from Financing Activities:
    (Repayments) proceeds from issuance of revolving
      credit agreement borrowings .......................   (22,111)      7,000
    Proceeds from industrial revenue bond ...............     2,045
    Exercise of stock options ...........................       308         540
    Treasury share transactions .........................      (909)       (513)
    Issuance (repayments) of other long-term debt .......      (972)     (1,056)
                                                            --------    --------
  Net Cash (Used) Provided by Financing Activities ......   (21,639)      5,971
                                                            --------    --------

Net (Decrease) Increase in Cash and Cash Equivalents ....     2,337        (145)

Cash and Cash Equivalents at Beginning of  Period .......     1,156       1,201
                                                            --------    --------

Cash and Cash Equivalents at End of Period ..............  $  3,493    $  1,056
                                                            ========    ========

Supplemental Disclosures of Cash Flow Information:

    Interest Paid .......................................  $  1,488    $  1,788
                                                            ========    ========

    Income Taxes Paid ...................................  $  1,578    $    585
                                                            ========    ========


During  1998 and 1997,  the Company  financed  the  purchase of certain  capital
expenditures totaling $336,000 and $33,500,  respectively,  through the issuance
of capital leases.

See Notes to Condensed Consolidated Financial Statements.




                      L. B. FOSTER COMPANY AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1. FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by generally  accepted  accounting  principles  for complete
financial  statements.   In  the  opinion  of  management,   all  estimates  and
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included,  however, actual results could differ from
those  estimates.  The results of operations  for these interim  periods are not
necessarily  indicative  of the results  that may be expected for the year ended
December 31,  1998.  Certain  items  previously  reported in specific  financial
statement  captions were  reclassified  in 1997.  The  reclassifications  had no
effect on income. For further information,  refer to the consolidated  financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1997. The  acquisitions  of business in the
third  quarter of 1998 were not  material  to the  financial  statements  of the
Corporation.


2. ACCOUNTING PRINCIPLES

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" and
SFAS  No.  131,  "Disclosures  About  Segments  of  an  Enterprise  and  Related
Information".  The Company has had no material transactions under the provisions
of SFAS  No.  130  and the  Company  does  not  anticipate  that  the  reporting
requirements   of  SFAS  No.  131  will  have  a  material  impact  on  existing
disclosures.

Financial Accounting Standards Board Statement No. 132, "Employers'  Disclosures
about Pensions and Other Postretirement  Benefits," was issued in February 1998.
This statement revises  employers'  disclosures about pension and postretirement
benefit plans. It does not change the measurement or recognition of those plans.
The Company will adopt this statement in 1998.

Financial   Accounting  Standards  Board  Statement  No.  133,  "Accounting  for
Derivative  Instruments  and Hedging  Activities"  was issued in June 1998. This
statement   establishes   accounting  and  reporting  standards  for  derivative
instruments  and hedging  activities.  It requires that an entity  recognize all
derivatives  as either  assets or  liabilities  in the  statement  of  financial
position  and  measure  those  instruments  at fair  value.  This  statement  is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
The effect of  adopting  this  statement  is not  expected to be material to the
Company.


3. ACCOUNTS RECEIVABLE

Credit is extended on an evaluation of the customer's  financial  condition and,
generally, collateral is not required. Credit terms are consistent with industry
standards and  practices.  Trade  accounts  receivable at September 30, 1998 and
December  31, 1997 have been reduced by an  allowance  for doubtful  accounts of
$1,516,000  and  $1,468,000,  respectively.  Bad debt  expense  was  $34,000 and
$224,000  for the  nine  month  periods  ended  September  30,  1998  and  1997,
respectively.



4. INVENTORIES

Inventories  of the  Company at  September  30, 1998 and  December  31, 1997 are
summarized as follows in thousands:


                                                September 30,   December 31,
                                                     1998           1997
                                                    --------     --------

Finished goods ..................................   $ 32,794     $ 30,380
Work-in-process .................................      3,429        7,826
Raw materials ...................................      4,971        8,369
                                                    --------     --------

Total inventories at current costs ..............     41,194       46,575
(Less):
Current costs over LIFO
  stated values .................................     (2,610)      (2,610)
Reserve for the decline in market
  value of inventories ..........................       (600)        (600)
                                                    --------     --------
                                                    $ 37,984     $ 43,365
                                                    ========     ========




Inventories  of the  Company  are  generally  valued  at the  lower of  last-in,
first-out (LIFO) cost or market.  Other inventories of the Company are valued at
average  cost or market,  whichever is lower.  An actual  valuation of inventory
under the LIFO  method  can be made  only at the end of each  year  based on the
inventory levels and costs at that time. Accordingly,  interim LIFO calculations
must necessarily be based on management's  estimates of expected year-end levels
and costs.


5. REVOLVING CREDIT AGREEMENT

On August 13, 1998 the Company  entered into a senior secured  revolving  credit
facility for  $45,000,000  with its banks.  The amended  agreement  replaces the
November,  1995  revolving  credit  agreement  that had a maturity date of July,
1999.

The interest  rate is, at the  Company's  option,  based on the prime rate,  the
domestic  certificate  of  deposit  rate (CD rate) or the  Euro-bank  rate.  The
interest rates are adjusted  quarterly based on the ratio of total  indebtedness
to Earnings  Before  Income Taxes,  Depreciation  and  Amortization  (EBITDA) as
defined in the agreement. The ranges are prime to prime plus 0.125%, the CD rate
plus 0.35% to the CD rate plus 1.375%,  and the Euro-bank rate plus 0.35% to the
Euro-bank rate plus 1.375%.  Borrowings under the agreement,  which expires July
31, 2002, are secured by accounts receivable and inventory.

The agreement  includes  financial  covenants  requiring a minimum net worth,  a
fixed  charge  coverage  ratio,  and a maximum  ratio of total  indebtedness  to
EBITDA.


6. OTHER (INCOME)/EXPENSE

Other  income  included  a gain of  $1,700,000  for the  sale of the  Fosterweld
facility, a gain of $185,000 for the sale of a Navasota,  Texas facility,  and a
write-down  of $900,000 for a Houston,  Texas  property  currently  under a sale
agreement.  In 1998 and 1997, the Fosterweld Division had revenues of $5,188,000
and $12,225,000 with operating profit of $702,000 and $1,365,000, respectively.


7. EARNINGS PER COMMON SHARE

In 1997, the Company adopted Financial  Accounting Standards Board Statement No.
128,  "Earnings  Per Share"  (SFAS No.  128).  Statement  No. 128  replaced  the
calculation  of  primary  and fully  diluted  earnings  per share with basic and
diluted earnings per share.  Unlike primary  earnings per share,  basic earnings
per share  excludes  any  dilutive  effects of  options,  warrants  and  certain
convertible  securities.  Diluted  earnings  per share uses the  average  market
prices during the period in calculating the dilutive effect of options under the
treasury stock method.

The following  table sets forth the  computation of basic and diluted net income
per common share (in thousands, except per share amounts):


                                     Three Months Ended   Nine Months Ended
                                        September 30,        September 30,
                                     -------------------  ------------------
                                         1998      1997      1998      1997
Numerator:
  Numerator for basic and diluted
    net income per common share -
    net income available to common
    stockholders ..................   $   713   $ 1,212   $ 3,360   $ 2,490
                                      =======   =======   =======   =======

Denominator:
    Weighted average shares .......    10,003    10,129    10,003    10,141

                                      -------   -------   -------   -------
  Denominator for basic net income
    per common share ..............    10,003    10,129    10,003    10,141

Effect of dilutive securities:
    Employee stock options ........       213       231       224       135
                                      -------   -------   -------   -------
  Dilutive potential common shares        213       231       224       135

  Denominator for diluted net
    income per common share -
    adjusted weighted average
    shares and assumed conversions     10,216    10,360    10,227    10,276
                                      =======   =======   =======   =======

Basic net income per common share .   $  0.07   $  0.12   $  0.33   $  0.24
                                      =======   =======   =======   =======

Diluted net income per common share   $  0.07   $  0.12   $  0.33   $  0.24
                                      =======   =======   =======   =======


8. COMMITMENTS AND CONTINGENT LIABILITIES

The Company is subject to laws and regulations relating to the protection of the
environment and the Company's efforts to comply with  environmental  regulations
may have an adverse effect on the Company's future  earnings.  In the opinion of
management,  compliance with the present environmental  protection laws will not
have a material adverse effect on the financial condition, competitive position,
or capital expenditures of the Company.



The  Company is  subject to legal  proceedings  and  claims  which  arise in the
ordinary  course of its business.  In the opinion of management,  the amounts of
ultimate  liability with respect to these actions will not materially effect the
financial  position of the  Company.  At  September  30,  1998,  the Company had
outstanding letters of credit of approximately $2,902,000.



           Management's Discussion and Analysis of Financial Condition
                            and Results of Operations

                                   Three Months Ended         Nine Months Ended
                                     September 30,              September 30,
                                   ===================        =================
                                   1998          1997         1998         1997
                                   ====================       =================
                                               (Dollars in thousands)
Net Sales:
       Rail Products               $26,085      $30,654        83,076    79,803
       Construction Products        13,054       11,981        38,232    45,164
*      Tubular Products             11,229       14,301        37,251    40,179
       Other                                                       26
                                   --------------------        ----------------
          Total Net Sales           50,368       56,936       158,585   165,146
                                   =====================      =================
Gross Profit:
       Rail Products                 4,229        4,038        12,427    10,332
       Construction Produc           1,604        2,569         6,920     7,413
**     Tubular Products              1,615        1,677         4,544     4,525
       Other                          (235)        (185)         (661)     (277)
                                   ---------------------       ----------------
          Total Gross Profit         7,213        8,099        23,230    21,993
                                   ---------------------       ----------------

Expenses:
       Selling and administrative
        expenses                     5,849        5,624        17,783    16,484
       Interest expense                308          665         1,377     1,845
       Other (income) expense         (130)        (209)       (1,533)     (316)
                                  ----------------------       ----------------
           Total Expens              6,027        6,080        17,627    18,013
                                  ----------------------       ----------------

Income Before Income T               1,186        2,019         5,603     3,980
Income Tax Expense                     473          807         2,243     1,490
                                  -----------------------      ----------------

Net Income                            $713       $1,212        $3,360    $2,490
                                  ========================     ================


Gross Profit %:
       Rail Products                 16.2%        13.2%         15.0%     12.9%
       Construction Products         12.3%        21.4%         18.1%     16.4%
       Tubular Products              14.4%        11.7%         12.2%     11.3%
          Total Gross Profit%        14.3%        14.2%         14.6%     13.3%
                                  ========================     ================

*      Net Sales
        Coated and Threaded Pipe   11,198       11,370         32,055    31,246
        Fosterweld                     31        2,931          5,196     8,933
                                  -------------------------    ----------------
       Total Tubular Products      11,229       14,301         37,251    40,179
                                  =========================    ================

**     Gross Profit
        Coated and Threaded Pipe    1,458        1,244          3,667     3,234
        Fosterweld                    157          433            877     1,291
                                  =========================    ================
       Total Tubular Products       1,615        1,677          4,544     4,525
                                  =========================    ================




Third Quarter 1998 Results of Operations
- ----------------------------------------

Net income for the 1998 third quarter was $0.7 million or $0.07 per share on net
sales of $50.4 million. This compares to a 1997 third quarter net income of $1.2
million or $0.12 per share on net sales of $56.9 million.

Rail  products' 1998 third quarter net sales were $26.1 million or a decrease of
15% over the same period last year. This decrease was due primarily to delays in
shipments of transit  products and a decrease in relay rail sales over the prior
year which offset  increased  sales of  Allegheny  Rail  Products.  Construction
products'  net sales  increased 9% from the year earlier  quarter as a result of
sales generated by the Foster Geotechnical  Division acquired in August of 1998,
which offset the declines in piling sales. Tubular products' sales decreased 22%
from  the  same  quarter  of 1997 due to the  June  1998  sale of the  Company's
Fosterweld Division. Changes in net sales are primarily the result of changes in
volume rather than changes in prices.

The gross margin  percentage  for the total Company was 14% in the 1998 and 1997
third quarters.  Rail products' gross margin  percentage in the third quarter of
1998 was 16%  versus 13% in the year  earlier  quarter  primarily  due to record
sales and profits of Allegheny  Rail Products.  The gross margin  percentage for
construction products declined 9% from the year earlier quarter primarily due to
a $0.9 million write-down of certain catenary sign structure contracts.  Tubular
products' gross margin percentage in the third quarter of 1998 increased 2% from
the same period last year.

The Monitor Group had development  expenses totaling $0.3 million including $0.1
million for  amortization  of intangible  assets.  Revenues for the quarter were
negligible and below management expectations.

Selling and  administrative  expenses  increased 4% in the 1998 third quarter in
comparison to the same period last year  principally due to expenses  associated
with the operation of the Company's recently acquired,  Precise and Geotechnical
Divisions.  Interest expense  decreased 46% over the year earlier quarter due to
reduction in outstanding  borrowings  principally  resulting from the receipt of
Fosterweld sale proceeds.  Other income included a gain of $0.2 million from the
sale of a Navasota,  Texas facility. The provision for income taxes was recorded
at 40% in the third quarters of 1998 and 1997.

First Nine Months of 1998 Results of Operations
- -----------------------------------------------

Net income for the first nine months of 1998 was $3.4 million or $0.33 per share
on sales of $158.6  million.  This  compares to a net income of $2.5  million or
$0.24 per share for the same period last year on net sales of $165.1 million.

Rail  products'  net sales in the first nine  months of 1998 were $83.1  million
compared to $79.8 million in 1997. This 4% increase  resulted from higher volume
sales of new rail and Allegheny Rail products.  Construction products' net sales
declined 15% to $38.2 million compared to $45.2 million in the first nine months
of 1997 as the loss of sheet  piling  sales  more than  offset the  increase  in
bridge and highway  product sales.  Net sales of tubular  products for the first
nine months of 1998  declined  7.0% from the year earlier  period as a result of
the sale of the Company's Fosterweld Division.

The gross margin percentage for the Company during the first nine months of 1998
increased  to 15% from 13% in the same period last year.  Rail  products'  gross
margin percentage  increased to 15% from 13% primarily due to relay rail's lower
cost of sales from certain  projects and the previously  mentioned higher volume



of Allegheny Rail Products' sales. The gross margin  percentage for construction
products  increased  to 18% from 16% as a result  of high  demand  for a limited
supply of piling products and the addition of the Foster Geotechnical  Division.
Tubular  products' gross margin  percentage was 12% in first nine months of 1998
compared to 11% in 1997 primarily due to higher margins on coated pipe products.

The Monitor Group had development  expenses totaling $0.8 million including $0.2
million for  amortization  of  intangible  assets.  Revenues for the period were
negligible and below management expectations.

Selling and administrative expenses for the first nine months of 1998 increased
8% from the  same  period  of  1997.  The  increase  was due to  added  expenses
associated  with the operation of the Company's  recently  acquired  Precise and
Geotechnical  Divisions.  Interest  expense  decreased  25% due to  reduction in
outstanding borrowings principally resulting from the receipt of Fosterweld sale
proceeds. The provision for income taxes is recorded at 40% versus 37% in 1997.


Liquidity and Capital Resources
- -------------------------------

The Company  generates  internal  cash flow from the sale of  inventory  and the
collection  of  accounts  receivable.  During the first nine  months of 1998 the
average  turnover  rate for accounts  receivable  was lower than the same period
last year due to slower  collections of certain transit  contracts.  The average
turnover rate for  inventory  was higher in 1998 than in 1997,  primarily in new
rail and  Allegheny  Rail  products.  Working  capital at September 30, 1998 was
$59.3 million compared to $60.1 million at December 31, 1997.

Year to date,  the Company had total capital  expenditures  of $2.0 million.  In
addition, the Company repurchased $0.9 million of its common stock in accordance
with the Company's  previously  announced program to repurchase  500,000 shares.
Since inception of this program,  the Company repurchased 288,744 shares at $1.5
million.  Capital expenditures in 1998, excluding acquisitions,  are expected to
be  consistent  with 1997 and are  anticipated  to be funded by cash  flows from
operations.

Total  revolving  credit  agreement  borrowings at September 30, 1998 were $11.0
million,  or a decrease  of $22.1  million  from the end of the prior  year.  At
September 30, 1998 the Company had $31.1 million in unused borrowing commitment.
The Company borrowed $2.0 million through an industrial  revenue bond to finance
part of the Precise Fabricating Corporation acquisition.  Outstanding letters of
credit at September 30, 1998 were $2.9 million. Management believes its internal
and external sources of funds are adequate to meet anticipated needs.

On August 13, 1998 the Company amended its $45,000,000  senior secured revolving
credit agreement.  The amended agreement  replaces the November,  1995 revolving
credit agreement that had a maturity date of July, 1999. This amended  agreement
expires July 31, 2002 and can be extended under certain conditions.

The interest  rate is, at the  Company's  option,  based on the prime rate,  the
domestic  certificate  of  deposit  rate (CD rate) or the  Euro-bank  rate.  The
interest rates are adjusted  quarterly based on the ratio of total  indebtedness
to EBITDA as  defined  in the  agreement.  The  ranges  are prime to prime  plus
0.125%,  the CD rate plus 0.35% to the CD rate plus  1.375%,  and the  Euro-bank
rate  plus  0.35% to the  Euro-bank  rate  plus  1.375%.  Borrowings  under  the
agreement  are secured by  accounts  receivable  and  inventory.  The  agreement
includes  financial  covenants  requiring  a minimum net worth,  a fixed  charge
coverage ratio, and a maximum ratio of total indebtedness to EBITDA.



Other Matters
- -------------

The Company owns 13% of the Dakota, Minnesota & Eastern Railroad Corporation
(DM&E), a privately held,  regional  railroad which operates over 1,100 miles of
track in five states.  The Company's  investment in the stock is recorded in the
Company's  accounts at its  historical  cost of $1.7 million,  comprised of $0.2
million of common stock and $1.5 million of the DM&E's Series B Preferred  Stock
and  warrants.   Although  this   investment's   market  value  is  not  readily
determinable,  management  believes that this  investment,  without  taking into
account the DM&E's proposed Powder River Basin project discussed below, would be
worth significantly more than its historical cost.

The DM&E  announced  in June 1997 that it plans to build an  extension  from the
DM&E's  existing  line into the low sulfur coal market of the Powder River Basin
in  Wyoming  and to  rebuild  approximately  600 miles of  existing  track  (the
"Project").  The DM&E has also announced that the estimated cost of this project
is  $1.4   billion.   The   Project  is  subject  to  approval  by  the  Surface
Transportation Board (STB).

In February 1998, the DM&E filed its application with the Surface Transportation
Board  seeking  authority to construct  approximately  280 miles of new railroad
line.  The DM&E has indicated  that this new railroad line could be available to
carry  Power River  Basin coal  within two years  after  regulatory  approval is
obtained. The DM&E anticipates that the STB will reach a preliminary decision in
December 1998. This approval would be subject to completion of the Environmental
Impact Statement (EIS) and acceptable  mitigation of  environmental  issues that
may arise in the EIS.


Morgan  Stanley  & Co.,  Inc.,  has  been  retained  by the  DM&E to  assist  in
identifying strategic partners or potential acquirers of all or a portion of the
equity of the DM&E.  The DM&E has stated that the DM&E could repay  project debt
and cover its  operating  costs if it  captures a 5% market  share in the Powder
River Basin.  If the Project proves to be viable,  management  believes that the
value of the Company's investment in the DM&E could increase dramatically.

In  May  of  1998,   with  the  approval  of  its   shareholders,   the  Company
reincorporated   from  Delaware  to  Pennsylvania.   The  principal  reason  for
reincorporating  the  Company in  Pennsylvania  is to  eliminate  the  Company's
liability of  approximately  $50,000 per year under the Delaware  franchise tax.
Pennsylvania  corporations  that  have a class of  stock  registered  under  the
Securities   Exchange  Act  of  1934  are   automatically   subject  to  certain
antitakeover provisions of the Pennsylvania Business Corporation Law of 1988, as
amended,  unless the articles of  incorporation  provide  that those  provisions
shall  not  apply  to the  corporation.  The  Company  has  opted  out of  those
antitakeover  provisions by having its articles of incorporation expressly state
that they shall not apply to the corporation.

In June of 1998, the Company sold to Northwest Pipe Company of Portland, Oregon,
the plant, equipment, inventory, leasehold and contract rights and miscellaneous
assets related to its  Fosterweld  pipe  manufacturing  facility in Wood County,
West Virginia. The purchase price for the plant, buildings, equipment, leasehold
and contract rights and miscellaneous  assets was $5.3 million and inventory net
of payables of  approximately  $2.0 million.  Also in June of 1998,  the Company



agreed,  subject  to  certain  contingencies,  to sell  certain  Houston,  Texas
property for  approximately  $3.8 million.  This  property is currently  under a
sales  agreement  and the Company has accrued  $0.9  million for the loss on the
projected sale. Management expects this transaction to be completed in the first
quarter of 1999.

In July of 1998, the Company purchased,  for approximately $1.5 million,  assets
primarily  comprised  of  intellectual  property  related  to  the  business  of
supplying rail signaling and communication devices.

In August of 1998,  the  Company  purchased  $1.1  million  of fixed  assets and
patents  and $1.0  million of  associated  working  capital of the  Geotechnical
Division of VSL Corporation. The Geotechnical Division is a leading designer and
supplier of mechanically-stabilized earth wall systems.

In September of 1998, the Company suspended production at its Newport,  Kentucky
pipe coating  facility  due to  unfavorable  market  conditions.  Management  is
currently evaluating the long term viability of this operation.

Management  continues to evaluate the overall performance of certain operations.
A decision to  terminate  an existing  operation  could have a material  adverse
effect  on  near-term  earnings  but would not be  expected  to have a  material
adverse effect on the financial condition of the Company.

Year 2000 Impact on Computer Systems
- ------------------------------------

Because many existing  computer programs have been programmed to use a two digit
number to represent the year (e.g.,  "98" for "1998"),  the Company has analyzed
its  computer  software  systems to ensure  that they are  capable of  correctly
identifying the year "2000" and beyond in all computer transactions. The Company
understands  the  seriousness  of this  issue  and its  Board of  Directors  has
requested an update of the Company's year 2000 compliance at each Board Meeting.

The  Company  completed  the  installation  of  new  integrated  accounting  and
distribution   software  licensed  from  a  national  vendor  in  1992  and  has
periodically  installed  updated  releases of the software to take  advantage of
technological  advances  and  improvements  over prior  releases in the ordinary
course of business. The current releases of this vendor's software are year 2000
compliant.  The Company  installed  the year 2000  compliant  release  including
modifications unrelated to the year 2000 issue to suit the Company's business in
May 1998. The Company expects to complete the testing of these modifications and
to place these  systems in  production  in 1998.  Management  believes that this
schedule is achievable  and does not  anticipate  any adverse impact in becoming
year 2000 compliant. The costs associated with the installation of the year 2000
compliant  release are considered by Management to be in the ordinary  course of
business and are not material to its financial results.

In addition,  the Company has conducted a review of its production equipment and
has determined that it is year 2000 compliant. The Company has also surveyed key
vendors and  suppliers  to  determine  the extent of their year 2000  compliance
readiness and planned action to become year 2000 compliant.

The Company has minimal direct or indirect  computer data transfers with outside
customers,  vendors,  and  suppliers  other  than major  banks,  whose year 2000
compliance  efforts  are well  underway.  Based on this fact as well as internal
assessments, and formal and informal communications with customers, vendors, and
suppliers,  the Company  presently  believes that the year 2000 compliance issue
should not pose significant  operating problems or have a material impact on the
Company's consolidated financial position, results of operations or cash flow. A
failure of third party  vendors or  suppliers  to be year 2000  compliant  could
affect these beliefs and is not quantifiable.



Outlook
- -------

The  Company  has not had a domestic  sheet  piling  supplier  since March 1997.
Revenues  from piling  products have declined and will continue to be at reduced
levels as the Company's  remaining piling inventory is liquidated.  The Company,
however,  will become Chaparral Steel's exclusive domestic  distributor of steel
sheet piling when Chaparral Steel's manufacturing facility, being constructed in
Richmond, Virginia, begins operations in 1999.

The rail segment of the business  depends on one source for  fulfilling  certain
trackwork contracts. The Company has provided $9.0 million of working capital to
this  supplier in the form of loans and progress  payments.  If, for any reason,
this supplier is unable to perform,  the Company  could  experience a short-term
negative effect on earnings.

During 1995, the Company  entered into an interest rate swap agreement to reduce
the impact of changes in  interest  rates on a portion of its  revolving  credit
borrowings.  The LIBOR interest rate on the $10.0 million swap agreement,  which
expires June 1999,  is 6.142%.  The Company  believes that the credit and market
risks associated with this agreement are not material.  Any additional  interest
expense incurred under the agreement is accrued and paid quarterly.

The Company's  operations  are, in part,  dependent on  governmental  funding of
infrastructure projects.  Significant changes in the level of government funding
of these projects could have a favorable or unfavorable  impact on the operating
results of the Company. Additionally,  governmental actions concerning taxation,
tariffs,  the environment or other matters could impact the operating results of
the Company.  The Company is also dependent on the availability of rail cars and
weld trains to ship its products.  The Company has experienced delays in certain
projects  due to the lack of  availability  of rail  cars.  The  current  merger
activities  in the railroads  have  exacerbated  this  problem.  The Company can
provide  no  assurances  that  a  solution  to the  problem  will  occur  in the
near-term.  The  Company's  operating  results  may also be  affected by adverse
weather conditions.

Although  backlog is not  necessarily  indicative of future  operating  results,
total Company  backlog at September 30, 1998, was  approximately  $87.5 million.
The following table provides the backlog by business segment as adjusted for the
exclusion of the Fosterweld Division.



                                       Backlog
                        ----------------------------------
                           September 30,       December 31,
                          1998       1997          1997
                        ---------------------------------- 
                           (Dollars in thousands)

Rail Products .......   $58,519   $38,359         $51,584
Construction Products    22,585    21,599          23,284
Tubular Products ....     6,427     6,989           3,955
  Less Fosterweld ...               2,940           2,295
                        -------   -------         -------
Tubular Products Net      6,427     4,049           1,660
                        -------   -------         -------
  Total Backlog .....   $87,531   $64,007         $76,528
                        =======   =======         =======



Forward-Looking Statements
- --------------------------

Statements  relating  to the  potential  value or  viability  of the DM&E or the
Project,  or  management's  belief  as  to  such  matters,  are  forward-looking
statements  and are  subject to numerous  contingencies  and risk  factors.  The
Company has based its assessment on information provided by the DM&E and has not
independently verified such information. In addition to matters mentioned above,
factors  which  can  adversely  affect  the value of the DM&E,  its  ability  to
complete  the Project or the  viability  of the Project  include the  following:
labor disputes,  any inability to obtain necessary  environmental and government
approvals for the Project in a timely fashion,  an inability to obtain financing
for the Project, competitor's response to the Project, market demand for coal or
electricity  and  changes in  environmental  laws and  regulations.  The Company
wishes to caution readers that various factors could cause the actual results of
the  Company  to differ  materially  from  those  indicated  by  forward-looking
statements made from time to time in news releases,  reports,  proxy statements,
registration   statements  and  other  written  communications   (including  the
preceding  sections of this  Management's  Discussion and Analysis),  as well as
oral statements made from time to time by representatives of the Company. Except
for  historical  information,   matters  discussed  in  such  oral  and  written
communications   are   forward-looking   statements   that  involve   risks  and
uncertainties,  including but not limited to general  business  conditions,  the
availability of material from major  suppliers,  the impact of competition,  the
seasonality  of  the  Company's  business,  taxes,  inflation  and  governmental
regulations.



                            PART II OTHER INFORMATION
                            -------------------------

Item 1. LEGAL PROCEEDINGS
- -------------------------

See  Note  8,  "Commitments  and  Contingent  Liabilities",   to  the  Condensed
Consolidated Financial Statements.



Item 6. EXHIBITS AND REPORTS ON FORM 8-K

  a) EXHIBITS
  -----------
     Unless marked by an asterisk, all exhibits are incorporated by reference:



     3.1      Restated Certificate of Incorporation as amended to date, filed as
              Appendix B to the Company's April 17, 1998 Proxy Statement.

     3.2      Bylaws of the Registrant,  as amended to date, filed as Exhibit 3B
              to Form 8-K on May 21, 1997.

     4.0      Rights  Agreement,  dated as of May 15, 1997,  between L.B. Foster
              Company and American Stock Transfer & Trust Company, including the
              form of Rights  Certificate  and the  Summary  of Rights  attached
              thereto, filed as Exhibit 4A to Form 8-A dated May 23, 1997.

     4.0.1    Amended  Rights  Agreement  dated as of May 14, 1998,  between L. 
              B. Foster Company and American  Stock  Transfer & Trust  Company,
              filed as Exhibit 4.0.1 to Form 10-Q for the quarter ended June 30,
              1998.

  *  4.1      Second Amended and Restated Loan Agreement by and among the
              Registrant and Mellon Bank,  N.A.,  PNC Bank,  National  
              Association,  and First Union National Bank dated as of August 13,
              1998.

    10.15     Lease  between the  Registrant  and Amax,  Inc. for  manufacturing
              facility at  Parkersburg,  West Virginia,  dated as of October 19,
              1978, filed as Exhibit 10.15 to Registration Statement No.
              2-72051.

    10.16     Lease between  Registrant  and Greentree  Building  Associates for
              Headquarters office, dated as of June 9, 1986, as amended to date,
              filed as Exhibit  10.16 to Form 10-K for the year  ended  December
              31, 1988.

    10.16.1   Amendment  dated June 19,  1990 to lease  between  Registrant  and
              Greentree  Building  Associates,  filed as Exhibit 10.16.1 to Form
              10-Q for the quarter ended June 30, 1990.

    10.16.2   Amendment  dated  May 29,  1997 to lease  between  Registrant  and
              Greentree  Building  Associates,  filed as Exhibit 10.16.2 to Form
              10-Q for the quarter ended June 30, 1997.

    10.19     Lease between the  Registrant  and American Cast Iron Pipe Company
              for  Pipe-Coating  facility in Birmingham,  Alabama dated December
              11, 1991,  filed as Exhibit  10.19 to Form 10-K for the year ended
              December 31, 1991.

    10.19.1   Amendment to Lease between the  Registrant  and American Cast Iron
              Pipe  Company for  Pipe-Coating  facility in  Birmingham,  Alabama
              dated April 15,  1997,  filed as Exhibit  10.19.1 to Form 10-Q for
              the quarter ended March 31, 1997.

    10.20     Asset  Purchase  Agreement,  dated June 5, 1998,  by and among the
              Registrant  and Northwest  Pipe Company,  filed as Exhibit 10.0 to
              Form 8-K on June 18, 1998.


    10.33.2   Amended and Restated 1985 Long-Term Incentive Plan, as amended and
              restated  February 26, 1997, filed as Exhibit 10.33.2 to Form 10-Q
              for the quarter ended June 30, 1997. **

  * 10.34     1998 Long-Term Incentive Plan for Officers and Directors.



    10.45     Medical Reimbursement Plan, filed as Exhibit 10.45 to Form 10-K
              for the year ended December 31, 1992. **

    10.46     Leased Vehicle Plan, as amended to date, filed as Exhibit 10.46
              to Form 10-K for the year ended December 31, 1997. **

    10.49     Lease agreement  between Newport Steel  Corporation and Registrant
              dated as of October  12,  1994 and filed as Exhibit  10.49 to Form
              10-Q for the quarter ended September 30, 1994.

    10.49.1   Amendment  to  lease   between   Registrant   and  Newport   Steel
              Corporation  dated March 13, 1998 and filed as Exhibit  10.49.1 to
              Form 10-K for the year ended December 31, 1997.



    10.50     L.B.  Foster Company 1998 Incentive  Compensation  Plan,  filed as
              Exhibit 10.50 to Form 10-K for the year ended December 31, 1997.
              **

    10.51     Supplemental Executive Retirement Plan, filed as Exhibit 10.51 to
              Form 10-K for the year ended December 31, 1994. **

    19        Exhibits marked with an asterisk are filed herewith.

 *  27        Financial Data Schedule as of September 30, 1998.

    **        Identifies management contract or compensatory plan or
              arrangement required to be filed as an Exhibit.



  b)  Reports on Form 8-K

On May 21, 1998,  the  Registrant  filed a Current Report on Form 8-K announcing
the  reincorporation of the Company from Delaware to Pennsylvania  effective May
14, 1998.

On June 18,  1998,  the  Registrant  filed a  Current  Report on Form 8-K and an
Amended  Current Report on Form 8-K/A  announcing that L. B. Foster Company sold
its spiralweld pipe manufacturing facility to Northwest Pipe Company.

On June 24, 1998, the Registrant  filed an Amended Current Report on Form 8-K/A,
amending  the Current  Report  filed on Form 8-K on June 18,  1998.  The Amended
Current Report provides pro forma financial information.





                                    SIGNATURE


Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.





                                                L.B. FOSTER COMPANY
                                                -------------------
                                                    (Registrant)


Date: November 5, 1998                            By /s/ Roger F. Nejes
- ----------------------                            ---------------------
                                                  Roger F. Nejes
                                                  Sr. Vice President-
                                                  Finance and Administration
                                                  & Chief Financial Officer
                                                  (Principal Financial Officer
                                                  and Duly Authorized Officer
                                                  of Registrant)

EX-4

                 SECOND AMENDED AND RESTATED LOAN AGREEMENT
                                  by and among

                              L. B. FOSTER COMPANY

                                   as Borrower

                                       and

                               MELLON BANK, N.A.,
                         PNC BANK, NATIONAL ASSOCIATION
                                       and
                            FIRST UNION NATIONAL BANK
                                  (the "Banks")

                                       and

                               MELLON BANK, N.A.,
                             as Agent for the Banks

                           Dated as of August 13, 1998











                                       -i-



                                TABLE OF CONTENTS
                                                                           Page
ARTICLE I.  CERTAIN DEFINITIONS; ACCOUNTING PRINCIPLES ...............        2
      Section 1.01.     Definitions...................................        2
      Section 1.02.     Accounting Principles.........................       16


ARTICLE II.  THE CREDITS     .........................................       17
      Section 2.01.     Commitments...................................       17
      Section 2.02.     Letters of Credit.............................       18
                        (a)  Documentary Letters of Credit............       18
                        (b)  Standby Letters of Credit................       18
                        (c)  Letter of Credit Fees....................       19
                        (d)  Payments With Respect to Letters of
                        Credit........................................       19
                        (e)  Pro Rata Treatment of Payments...........       20
                        (f)  Participating Interests in Letters
                        of Credit.....................................       21
                        (g)  Additional Understandings Regarding
                        Letters of Credit.............................       21
      Section 2.03.     Making of Revolving Credit Loans..............       23
      Section 2.04.     Notes.........................................       24
      Section 2.05.     Interest Rates................................       25
                        (a)  Interest Rate Options....................       25
                        (b)  Funding Periods..........................       27
                        (c)  Transactional Amounts....................       29
                        (d)  CD Rate or EuroRate
                        Unascertainable; Impracticability.............       29
                        (e)  Conversion or Renewal....................       30
                        (f)  Failure to Convert or Renew..............       31
                        (g)  Effect of Funding Periods on Loan
                        Maturities....................................       32
                        (h)  Changes in Interest Rates;
                        Consolidated Total Indebtedness
                             to EBITDA Ratio..........................       32
      Section 2.06.     Prepayment of Loans...........................       32
      Section 2.07.     Payments......................................       33
                        (a)  Interest Payment Dates...................       33
                        (b)  Principal Payment Dates..................       33
                        (c)  Place, Time and Amounts..................       33
      Section 2.08.     Additional Compensation in Certain
                        Circumstances.................................       34
                        (a)  Compensation for Taxes, Reserves
                        and Expenses on Outstanding Loans.............       34
                        (b)Indemnity..................................       35
      Section 2.09.     Funding By Branch, Subsidiary or
                        Affiliate.....................................       36
                        (a)  Notional Funding.........................       36
                        (b)  Actual Funding...........................       36
      Section 2.10.     Fees; Termination or Reduction of
                        Commitments...................................       37
                        (a)  Fees.....................................       37
                        (b)  Reduction/Termination of Commitments.....       38
      Section 2.11      Extension of Expiration Date..................       38
                        (a)  Request for Extension....................       38
                        (b)  Extension................................       39
                        (c)  Additional Extension.....................       39


ARTICLE III.  REPRESENTATIONS AND WARRANTIES..........................       39
      Section 3.01.     Organization and Qualification.................      39
      Section 3.02      Power and Authority............................      39
      Section 3.03      Financial Statements...........................      40 
      Section 3.04      Litigation or Proceedings; Commitments
                        and Contingencies..............................      40
      Section 3.05      Material Adverse Change........................      40
      Section 3.06      Title to Properties............................      40
      Section 3.07.     No Conflict with Other Documents;
                        Authorizations and Approvals...................      41
      Section 3.08.     Tax Returns....................................      41
      Section 3.09.     Validity and Binding Effect....................      42
      Section 3.10.     Regulations G, U, T and X; Investment
                        Company Status.................................      42
      Section 3.11.     ERISA Compliance...............................      42
      Section 3.12.     Defaults.......................................      43
      Section 3.13.     Compliance with Laws...........................      43
      Section 3.14.     Disclosure.....................................      44
      Section 3.15.     Continuing Effect..............................      44


ARTICLE IV.  CONDITIONS OF LENDING  ......................................44
      Section 4.01.     First Revolving Credit Loans...................   44
      Section 4.02.     Subsequent Revolving Credit Loans; Letters
                        of Credit......................................   46
                        (a)  Effect of Borrowing Request or
                        Application....................................   46
                        (b)  Legal Details.............................   47


ARTICLE V.  COVENANTS   ..................................................47
      Section 5.01.     Affirmative Covenants Other Than
                        Reporting Requirements.........................   47
                        (a)  Preservation of Corporate
                        Existence, etc.................................   47
                        (b)Payment of Taxes, etc.......................   47
                        (c)  Compliance with Laws......................   48
                        (d)  Maintenance of Insurance..................   48
                        (e)  Maintenance of Properties, etc............   48
                        (f)  Financial Accounting Practices............   48
                        (g)  Visitation Rights.........................   49
                        (h)  Maintenance of Minimum Consolidated
                        Fixed Charge Coverage Ratio....................   49
                        (i)  Maintenance of Minimum Consolidated
                        Tangible Net Worth.............................   49
                        (j)  Maintenance of Maximum Consolidated
                               Total Indebtedness to EBITDA
                               Ratio...................................   49
                        (k)  ERISA Covenants...........................   49
                        (l)  Satisfaction of Judgments.................   50
                        (m)  Maintenance of Minimum Eligible
                        Accounts.......................................   50
                        (n)Environmental Covenant......................   50
                        (o)  Guarantors................................   51
      Section 5.02.     Negative Covenants.............................   51
                        (a)Indebtedness................................   51
                        (b)Negative Pledge; Liens......................   53
                        (c)  Contingent Liabilities....................   55
                        (d)Mergers, Etc................................   55
0                       (e)Sales of Assets, Etc........................   55
                        (f)  Investments...............................   56
                        (g)Transactions with Controlling
                        Persons........................................   59
                        (h)Debt Retirement, Purchases and
                        Redemptions....................................   59
                        (i)Operating Leases............................   60
                        (j)Change of Control...........................   60
      Section 5.03.     Reporting Requirements.........................   60
                        (a)Financial Statements........................   60
                        (b)  Accounts Receivable-Inventory
                        Reports; Officer's Certificates................   61
                        (c)Proxy/Registration Statements...............   61
                        (d)ERISA Notifications.........................   61
                        (e)Notices of Default..........................   62
                        (f)Notices of Material Litigation..............   62
                        (g)Notices of Adverse Judgments................   63
                        (h)Material Adverse Changes....................   63
                        (i)Copies of Reports, Filings, etc.............   63
                        (j)Returns, etc................................   63
                        (k)Other Information...........................   63
      Section 5.04      Designated Subsidiaries........................   64


ARTICLE VI.  DEFAULT    ...............................................   64
      Section6.01.      Events of Default..............................   64
      Section6.02.      Consequences of Event of Default...............   66
      Section 6.03.     Rights of Set-Off..............................   66


 ARTICLE VII.  THE AGENT...............................................   67
      Section7.01.      Appointment....................................   67
      Section 7.02.     Delegation of Duties...........................   67
      Section 7.03.     Nature of Duties; Independent Credit
                        Investigation..................................   67
      Section 7.04.     Actions in Discretion of Agent;
                        Instructions from the Banks....................   68
      Section 7.05.     Exculpatory Provisions.........................   68
      Section 7.06.     Reimbursement and Indemnification..............   69
      Section 7.07.     Reliance by Agent..............................   69
      Section 7.08.     Agent in its Individual Capacity...............   69
      Section 7.09.     Holders of Notes...............................   70
      Section 7.10.     Equalization of Banks..........................   70
      Section 7.11.     Successor Agent................................   70


ARTICLE VIII.  MISCELLANEOUS        ......................................71
      Section 8.01.     Modifications, Amendments or Waivers...........   71
      Section 8.02.     No Implied Waivers; Cumulative Remedies;
                        Writing Required...............................   72
      Section 8.03.     Reimbursement of Expenses; Taxes...............   72
      Section 8.04.     Indemnity......................................   73
      Section 8.05.     Holidays.......................................   73
      Section 8.06.     Notices........................................   73
      Section 8.07.     Survival.......................................   74
      Section 8.08.     Governing Law..................................   75
      Section 8.09.     Successors and Assigns.........................   75
      Section 8.10.     Severability...................................   76
      Section 8.11.     Nature of Liabilities..........................   76
      Section 8.12.     Marshalling; Payments Set Aside................   76
      Section 8.13.     Prior Understandings...........................   77
      Section 8.14.     Counterparts...................................   77
      Section 8.15.     Section Headings...............................   77
      Section 8.16.     Waiver of Right to Trial by Jury...............   77







                             EXHIBITS AND SCHEDULES

Exhibit  A Form of  Revolving  Credit  Note  
Exhibit  B Form of Letter of Credit Agreement  
Exhibit  C-1 Form of  Application  For  Documentary  Letter of Credit
Exhibit  C-2 Form of  Application  For Standby Letter of Credit 
Exhibit  D Form of Letter of Credit Summary 
Exhibit  E Form of Agreement Regarding Bailments 
Exhibit  F Form of Accounts Receivable - Inventory Report
Exhibit  G Form of Subsidiary Guaranty and Suretyship Agreement
Exhibit  H Form of Guarantor Security Agreement

Schedule 3.04     Litigation
Schedule 3.11     ERISA Plans
Schedule 3.13     Compliance with Laws
Schedule 5.02(b)  Existing Indebtedness
Schedule 5.02(d)  Existing Guarantees
Schedule 5.04     Designated Subsidiaries










                                                     -1-


                   SECOND AMENDED AND RESTATED LOAN AGREEMENT


                  THIS  SECOND  AMENDED  AND  RESTATED  LOAN   AGREEMENT   (this
"Agreement") made as of this 13th day of August, 1998, by and among L. B. FOSTER
COMPANY, a Pennsylvania  corporation  (hereinafter referred to as "Foster" or as
the "Borrower"), and MELLON BANK, N.A., PNC BANK, NATIONAL ASSOCIATION and FIRST
UNION NATIONAL BANK  (separately  called a "Bank" and  collectively the "Banks")
and MELLON BANK, N.A., as agent for the Banks (in such capacity the "Agent");

                                WITNESSETH THAT:

                  WHEREAS,  the  Borrower  and the Banks are  parties  to a Loan
Agreement  dated as of  February15,  1990, as amended by the First  Amendment to
Loan Agreement dated November29, 1990, by the Second Amendment to Loan Agreement
dated  May22,  1991,  by the  Third  Amendment  to Loan  Agreement  dated  as of
January29,  1992, by the Fourth  Amendment to Loan Agreement  dated as of May11,
1992, by the Fifth Amendment to Loan Agreement dated as of September25, 1992, by
the Sixth  Amendment  to Loan  Agreement  dated  April20,  1993,  by the Seventh
Amendment  to  Loan  Agreement  dated  as of  December31,  1993,  by the  Eighth
Amendment  to Loan  Agreement  dated as of  February22,  1995  and by the  Ninth
Amendment  to  Loan  Agreement  dated  as of May 3,  1995  (as so  amended,  the
"Original Loan Agreement");

- -240 WHEREAS, the Borrower and the Banks are parties to that certain Amended and
Restated Loan Agreement, dated as of November1, 1995, as amended by that certain
First  Amendment to Amended and Restated  Loan  Agreement  dated as of January1,
1996, by that certain  Second  Amendment to Amended and Restated Loan  Agreement
dated as of  December31,  1996, by that certain  Third  Amendment to Amended and
Restated  Loan  Agreement  dated as of  April9,  1997,  by that  certain  Fourth
Amendment to Amended and Restated Loan Agreement  dated as of  November12,  1997
and by that certain Fifth Amendment to Amended and Restated Loan Agreement dated
as of April27, 1998 (as so amended, the "Amended and Restated Loan Agreement").

                  WHEREAS,  the  Borrower  and the  Banks  desire  to amend  and
restate the Amended and Restated Loan Agreement to, among other things,  provide
for an extension of the Expiration Date; and

                  WHEREAS,  it is the  intention  of the  Borrower and the Banks
that this  Agreement and the execution  and delivery of  substituted  promissory
notes by the  Borrower  not  effectuate  a novation  of the  obligations  of the
Borrower to the Banks under  either the Original  Loan  Agreement or the Amended
and Restated Loan Agreement,  but merely a restatement and, where applicable,  a
substitution  of the terms  governing,  evidencing  and securing the  Borrower's
obligations thereunder.

                  NOW,  THEREFORE,  in consideration of the terms and provisions
herein contained and subject to the terms and conditions hereof, the Amended and
Restated  Loan  Agreement is hereby  amended,  consolidated  and restated in its
entirety,  and intending to be legally bound hereby, the parties hereto agree as
follows:


                                    ARTICLE I

                   CERTAIN DEFINITIONS; ACCOUNTING PRINCIPLES

                  Section 1.01. Definitions.  In addition to the words and terms
defined  elsewhere in this Agreement,  as used in this Agreement,  the following
terms shall have the following  meanings (all terms defined in this Section 1.01
or in  other  provisions  of this  Agreement  in the  singular  to have the same
meanings when used in the plural and vice versa):

                  "Accounts  Receivable  -  Inventory  Report"  shall  mean  the
Accounts Receivable - Inventory Reports to be delivered to the Agent pursuant to
Section 4.01(a) hereof,  in substantially the form attached as Exhibit F hereto,
as amended and supplemented by the Borrower and each Guarantor from time to time
hereafter pursuant to Section 5.03(b) hereof.

                  "Affiliate"  of a person or entity  (the  "Specified  Person")
shall mean (a) any person or entity which directly or indirectly controls, or is
controlled by, or is under common control with,  the Specified  Person,  (b) any
director  or  officer  (or,  in the case of a person  or  entity  which is not a
corporation,  any individual having analogous powers) of the Specified Person or
of a person or entity who is an Affiliate  of the  Specified  Person  within the
meaning of the  preceding  clause  (a),  and (c) for each  individual  who is an
Affiliate of the Specified  Person  within the meaning of the foregoing  clauses
(a) or (b), any other  individual  related to such  Affiliate  by  consanguinity
within the third degree or in a step or adoptive  relationship within such third
degree or related by affinity with such  Affiliate or any such  individual.  For
purposes of the  preceding  sentence,  "control" of a person or entity means (a)
the  possession,  directly  or  indirectly,  of the power to direct or cause the
direction  of the  management  or  policies  of such  person or entity,  whether
through the ownership of voting securities,  by contract or otherwise and (b) in
any case shall include direct or indirect ownership  (beneficially or of record)
of, or direct or indirect power to vote, 5% or more of the outstanding shares of
any class of capital  stock of such person or entity (or in the case of a person
or  entity  that  is not a  corporation,  5% or  more  of any  class  of  equity
interest).

                  "Agreement"  shall mean this Second  Amended and Restated Loan
Agreement  and all  exhibits,  schedules,  documents  and  instruments  attached
hereto, as any or all of the foregoing may be amended,  modified or supplemented
from time to time.

                  "Anniversary Date" shall mean each August 13th during the term
of this Agreement.

 Applicable Margin" shall have the meaning set forth in Section 2.05(h) hereof.

                  "Application" shall mean, (i)with respect to Letters of Credit
issued prior to November1, 1995, in the case of Documentary Letters of Credit, a
duly executed and completed  Application and Agreement for Documentary Letter of
Credit in  substantially  the form  attached as Exhibit B to the  Original  Loan
Agreement  and, in the case of Standby  Letters of Credit,  a duly  executed and
completed   Application   and  Agreement   for  Standby   Letter  of  Credit  in
substantially the form attached as Exhibit C to the Original Loan Agreement,  as
either  such form of  application  or  agreement  may be  amended,  modified  or
supplemented  from time to time,  (ii)with  respect to Letters of Credit  issued
prior to August 13, 1998 but on or after  November1,  1995, a duly  executed and
completed  Letter of Credit  Agreement  in the form  attached as ExhibitB to the
Amended and Restated Loan Agreement  together with a duly executed and completed
Application for Documentary  Letter of Credit in substantially the form attached
as ExhibitC1 to the Amended and Restated  Loan  Agreement or a duly executed and
completed  Application  for Standby Letter of Credit in  substantially  the form
attached as ExhibitC2 to the Amended and Restated  Loan  Agreement,  as the case
may be, as either such form of agreement or application may be amended, modified
or  supplemented  from time to time, and (iii)with  respect to Letters of Credit
issued on or after  August 13, 1998, a duly  executed  and  completed  Letter of
Credit  Agreement in the form attached  hereto as ExhibitB  together with a duly
executed  and  completed   Application  for  Documentary  Letter  of  Credit  in
substantially  the form  attached  hereto as  ExhibitC-1  or a duly executed and
completed  Application  for Standby Letter of Credit in  substantially  the form
attached  hereto  as  ExhibitC-2,  as the case may be,  as  either  such form of
agreement or application may be amended,  modified or supplemented  from time to
time.

                  "Base Rate" shall mean at any time the interest rate per annum
equal to the  higher of (a)the  Prime  Rate or (b) the sum of 1/2 of 1% plus the
Federal Funds  Effective Rate for such day;  provided,  however,  if the Federal
Reserve Bank of New York (or its  successor)  does not announce such rate on any
day, the Federal Funds Effective Rate for such day shall be equal to the Federal
Funds  Effective  Rate for the last day on which such rate was  announced by the
Federal Reserve Bank of New York (or its successor).

 "Base Rate Funding Period" shall have the meaning assigned to such term in 
Section2.05(b)hereof.

                  "Base Rate Loan"  shall mean a Loan  bearing  interest  at any
time under the Base Rate Option.

                  "Base Rate  Option"  shall have the  meaning  assigned to such
term in Section2.05(a)(i) hereof.

                  "Base Rate  Portion"  shall mean,  at any time,  the  portion,
including the whole,  of a loan bearing  interest  under the Base Rate Option at
such  time,  or at a rate  calculated  by  reference  to  the  Base  Rate  under
Section2.05(a) hereof.

                  "Business  Day" shall mean (a)in the case of an outstanding or
proposed  Base Rate Portion or CD Rate  Portion of a Loan,  any day other than a
Saturday,  Sunday  or  other  day  on  which  commercial  banks  in  Pittsburgh,
Pennsylvania are required or authorized to close under applicable law, and (b)in
the case of an  outstanding or proposed  EuroRate  Portion of a Loan, any day on
which dealings for Dollar deposits are transacted in the London interbank market
and  commercial  banks  are open for  domestic  and  international  business  in
Pittsburgh, Pennsylvania.

                  "Capitalized  Lease"  shall  mean  a  lease  under  which  the
obligations  of the lessee  would,  in  accordance  with GAAP,  be  included  in
determining  total liabilities as shown on the liability side of a balance sheet
of the lessee. The term "Capitalized Lease Obligations" shall mean the amount of
the liability  reflecting  the aggregate  discounted  amount of future  payments
under all Capitalized Leases calculated in accordance with GAAP.

                  "CD  Rate"  and "CD  Rate  Option"  shall  have  the  meanings
assigned to such terms in Section 2.05(a)(ii) of this Agreement.

                  "CD  Rate  Funding  Period"  shall  mean  an  interest  period
applicable  to a Loan  bearing  interest  at  the  CD  Rate,  as  determined  in
accordance with Section 2.05(b) of this Agreement.
0
                  "CD Rate Loan" shall mean a Loan bearing  interest at any time
under the CD Rate Option.

                  "CD Rate  Portion"  shall  mean,  at any time,  that  portion,
including the whole, of a Loan bearing interest under the CD Rate Option at such
time, or at a rate calculated by reference to Section 2.05(a) hereof.

                  "Change of Control"  shall mean any person or group of persons
(as used in Sections13 and 14 of the Securities Exchange Act of 1934, as amended
(the  "Exchange  Act"),  and the rules and  regulations  thereunder)  shall have
become the beneficial owner (as defined in Rules 13d-3 and 13d-5  promulgated by
the  Securities and Exchange  Commission  (the "SEC") under the Exchange Act) of
20%  or  more  of the  combined  voting  power  of all  the  outstanding  voting
securities of the Borrower and, at any time following any merger, consolidation,
acquisition, sale of assets or other corporate restructuring of Borrower, during
any period of six consecutive calendar months, individuals who were directors of
the Borrower on the first day of such period,  together with individuals elected
as directors by not less than  two-thirds of the  individuals who were directors
of the  Borrower on the first day of such  period,  shall cease to  constitute a
majority of the members of the board of directors of the Borrower.

                  "Code"  shall  mean the  Internal  Revenue  Code of  1986,  as
amended,  and any successor statute,  and the rules and regulations  promulgated
thereunder.  References to sections or provisions of the Code shall be deemed to
also refer to  corresponding  or similar sections or provisions of any successor
statute or of the Internal Revenue Code of 1954, as amended.

                  "Collateral"  means,  collectively,  all of the Borrower's and
each  Guarantor's  present and future  right,  title and  interest in and to the
following  property,  whether now or hereafter existing or acquired and wherever
located: (a)all inventory (including returned or repossessed goods but excluding
any inventory of third parties which has been  consigned to the Borrower or such
Guarantor (as the case may be) and material owned by third parties for which the
Borrower has performed  coating or other  services),  accounts,  open  accounts,
chattel  paper,  receivables,  and other  amounts  owing to the Borrower or such
Guarantor  (as the case may be) and arising out of the sale or lease of goods or
the  rendition  of  services,  whether or not they arise or are  acquired in the
Borrower's or such Guarantor's  ordinary course of business,  including  without
limitation,  all such property described specifically or by type in the Accounts
Receivable Inventory Report;  (b)all Guarantees,  letters of credit,  collateral
security,  claims,  rights,  remedies  and  privileges  relating  to  any of the
foregoing;  and (c)all products and proceeds of any of the foregoing (including,
without limitation,  any and all instruments,  notes, drafts,  chattel paper and
insurance policies and proceeds).

                  "Commitment"  shall mean,  at any time,  with  respect to each
Bank, the commitment of such Bank hereunder as set forth in Section 2.01 hereof,
as such  commitment  may have been reduced by  termination  or  reduction  under
Section 2.10(b) hereof.

                  "Consolidated  Capital  Expenditures"  shall mean all  amounts
debited  to the  fixed  asset  accounts  on the  consolidated  balance  sheet of
Borrower  and its  Consolidated  Subsidiaries  (or  required to be so debited in
accordance with GAAP) in respect of the acquisition, construction,  improvement,
replacement  or betterment of land,  buildings,  machinery,  equipment or of any
other fixed assets or leaseholds,  and shall include,  without  limitation,  all
amounts  so  debited in respect  of  Capitalized  Lease  Obligations,  but shall
exclude all amounts so debited in respect of  inventory  constituting  equipment
acquired for the purpose of leasing or resale to others.

                  "Consolidated  EBIT"  for  any  period,  with  respect  to the
Borrower   and  its   Consolidated   Subsidiaries,   shall   mean   the  sum  of
(a)Consolidated Net Income for such period (provided that, in the event that the
Borrower  realizes  a net  loss  on  the  disposition  of its  Langfield,  Texas
property,  a maximum  of  $1,000,000  of such net loss  shall be  excluded  from
calculating  Consolidated Net Income in determining  Consolidated EBIT as of the
end of each of the twelve  consecutive  months beginning with the month in which
such  disposition  occurs),  (b)Consolidated  Interest  Expense for such period,
(c)charges against income for foreign, federal, state and local income taxes for
such period,  (d)extraordinary losses to the extent included in determining such
Consolidated Net Income, minus  (e)extraordinary gains to the extent included in
determining such Consolidated Net Income,  minus (f)equity earnings (or plus any
losses) of Affiliates to the extent included in Consolidated Net Income for such
period, all as determined on a consolidated basis in accordance with GAAP.

                  "Consolidated  EBITDA"  for any  period,  with  respect to the
Borrower   and  its   Consolidated   Subsidiaries,   shall   mean   the  sum  of
(a)Consolidated EBIT for such period,  (b)depreciation  expense for such period,
and (c)amortization expense for such period, all as determined on a consolidated
basis in accordance with GAAP.

                  "Consolidated  Fixed Charge  Coverage Ratio" shall mean, as to
any period for which such amount shall be determined, the ratio of (a)the sum of
Consolidated  EBITDA for such period  minus  Consolidated  Capital  Expenditures
(other  than  expenditures  related to  permitted  Investments  in the nature of
acquisitions,  whether by stock or asset purchase,  consolidation or merger) for
such period, to (b)the sum of Consolidated Interest Expense for such period plus
amount of all Distributions (other than intercompany  Distributions  between any
Subsidiary of the Borrower and the  Borrower) by the Borrower or any  Subsidiary
of the  Borrower  for such  period  plus  payments  actually  made in respect of
federal, state and foreign income taxes during such period.

                  "Consolidated Interest Expense" shall mean, for any period for
which such amount shall be computed,  all interest accrued during such period on
the Indebtedness,  including without limitation all interest required under GAAP
to be capitalized  during such period,  determined on a  consolidated  basis for
Borrower and its Consolidated Subsidiaries.

                  "Consolidated  Net  Income"  shall mean,  for any period,  the
consolidated   net  income  after  taxes  of  Borrower   and  its   Consolidated
Subsidiaries  for such period  determined  in  accordance  with GAAP;  provided,
however,  that  Consolidated  Net  Income  shall  not  include  any gain or loss
attributable  to  extraordinary  items or any taxes or tax  savings  as a result
thereof; and provided,  further,  that net income of any Subsidiary shall not be
included for any period prior to the time at which such Subsidiary first becomes
a Subsidiary.

                  "Consolidated   Subsidiary"   shall  mean  any  Subsidiary  of
Borrower  whose  accounts  are  consolidated  with the  accounts  of Borrower in
accordance with the Borrower's  policy of  consolidation  in effect from time to
time and with GAAP.

                  "Consolidated  Tangible  Net  Worth"  means the  stockholders'
equity of Borrower and its  Consolidated  Subsidiaries,  determined,  both as to
classification of items and amounts,  in accordance with GAAP, except that there
shall be deducted from  stockholders'  equity all intangible  assets of Borrower
and its Consolidated  Subsidiaries,  including, but not limited to, organization
costs,  securities  issuance  costs,  unamortized  debt  discount  and  expense,
goodwill,  excess of purchase price over net assets acquired,  agreements not to
compete, patents,  trademarks,  copyrights,  trade secrets, know-how,  licenses,
franchises,  research  and  development  expenses  and any amount  reflected  as
treasury stock.

                  "Consolidated   Total   Indebtedness"   shall  mean:  (a)  all
obligations of Borrower and its  Consolidated  Subsidiaries  on account of money
borrowed  by, or credit  extended  to or on behalf  of, or for or on  account of
deposits with or advances to, Borrower or its Consolidated Subsidiaries; (b) all
obligations of Borrower and its  Consolidated  Subsidiaries  evidenced by bonds,
debentures,  notes or similar  instruments;  (c) all obligations of Borrower and
its  Consolidated  Subsidiaries  for the deferred  purchase price of property or
services;  (d) all  obligations  secured by a Lien on property owned by Borrower
and its Consolidated  Subsidiaries (whether or not assumed); (e) all obligations
of Borrower and its Consolidated  Subsidiaries under Capitalized Leases (without
regard to any  limitation  of the rights and remedies of the holder of such Lien
or the  lessor  under such  Capitalized  Lease to  repossession  or sale of such
property);  (e) the face amount of all letters of credit  issued for the account
of Borrower and its  Consolidated  Subsidiaries  and, without  duplication,  the
unreimbursed amount of all drafts drawn thereunder, and all other obligations of
Borrower  and its  Consolidated  Subsidiaries  associated  with such  letters of
credit or draws thereon;  (f) all  obligations of Borrower and its  Consolidated
Subsidiaries  in respect of  acceptances or similar  obligations  issued for the
account of Borrower and its  Consolidated  Subsidiaries;  (g) all obligations of
Borrower and its Consolidated  Subsidiaries under a product financing or similar
arrangement  described in paragraph 8 of FASB Statement of Accounting  Standards
No. 49 or any similar  requirement of GAAP; (h) all obligations and liability of
Borrower and its  Consolidated  Subsidiaries  under any  Guarantee,  and (i) all
obligations  of Borrower and its  Consolidated  Subsidiaries  under any interest
rate  or  currency  protection  agreement,  interest  rate or  currency  future,
interest rate or currency option, interest rate or currency swap or cap or other
interest  rate or  currency  hedge  agreement.  For the  purpose of  calculating
Consolidated Total  Indebtedness,  (a) Consolidated Total Indebtedness shall not
include any obligation of the Borrower and its Consolidated  Subsidiaries  under
any  performance,  supply  or  payment  bond  posted  by the  Borrower  and  its
Consolidated Subsidiaries in connection with any construction project undertaken
by the Borrower and its Consolidated  Subsidiaries,  and (b) the items in clause
(i) of the foregoing definition shall be calculated on an annual basis as of the
end of the Borrower's most recent fiscal year just ended.

                  "Consolidated  Total Indebtedness to EBITDA Ratio" shall mean,
as to any period for which such  amount  shall be  determined,  the ratio of (i)
Consolidated  Total  Indebtedness  as of the  last  day of such  period  to (ii)
Consolidated EBITDA for such period.

                  "Controlled   Group"  shall  mean  a   "controlled   group  of
corporations"  as that term is  defined in  Section  1563 of the Code,  of which
Borrower is a part from time to time, and all "trades or businesses  (whether or
not  incorporated)  which are under  common  control" as that term is defined in
Section 414 of the Code, of which Borrower is a part from time to time.

                  "Controlling  Person"  shall mean any person or entity who is,
or is an  associate of any person or entity who either alone or with one or more
of its  associates is, in control of Borrower,  including any executive  officer
and any person who is both an  employee  and  director  of  Borrower.  A person,
entity or group of  persons  or  entities  shall be deemed to be in  control  of
another person or entity (including  Borrower) when the first person,  entity or
group of persons or entities  possesses,  directly or  indirectly,  the power to
direct or cause the direction of the management or policies of such other person
or entity,  whether through the ownership of voting  securities,  by contract or
otherwise.  A person or entity  shall not be deemed to be in  control of another
person or entity (including  Borrower) by reason of the fact that such person or
entity  serves as a member of the board of  directors  but not as an employee of
such  other  person  or  entity.  A person  or  entity  shall be deemed to be an
associate of another person or entity when (a)either  shall be in control of the
other,  (b)either shall be an officer, an employee and director,  a partner or a
manager of the  other,  or  (c)there  shall  exist  between  them any  contract,
arrangement or  understanding  (express or otherwise) with respect to the actual
or potential exercise of control of the other.

                  "Corresponding  Source of Funds"  shall mean (a)in the case of
any Funding Segment of a CD Rate Portion, the proceeds of hypothetical issuances
by a Bank of one or more of its  certificates of deposit at the beginning of the
CD Rate Funding Period corresponding to such Funding Segment,  having maturities
approximately  equal to such CD Rate Funding  Period and in an aggregate  amount
approximately  equal to such Funding Segment;  and (b)in the case of any Funding
Segment of a EuroRate  Portion,  the  proceeds  of  hypothetical  receipts  by a
Notional  EuroRate  Funding  Office  or by a Bank  through a  Notional  EuroRate
Funding Office of one or more Dollar deposits in the interbank eurodollar market
at the beginning of the EuroRate  Funding Period  corresponding  to such Funding
Segment,  having maturities  approximately equal to such EuroRate Funding Period
and in an aggregate amount approximately equal to such Funding Segment.

                  "Debt"  means,  collectively,  (a)all loans and advances  made
hereunder by any Bank to or at the request of Borrower,  including  all interest
and other charges  thereon,  (b)all  obligations of Borrower  arising out of the
issuance  of  Letters  of  Credit  by the Agent at  Borrower's  request,  (c)all
covenants, agreements,  liabilities and other obligations of Borrower hereunder,
and (d)all costs,  expenses,  liabilities and obligations,  including attorneys'
fees and  expenses,  incurred by the Agent or any Bank  enforcing  any or all of
this  Agreement or the Debt, in  collecting  any or all of the Debt or in taking
any other action permitted under this Agreement.

                  "Designated  Subsidiary"  shall have the  meaning  assigned to
such term in Section5.04 hereof.

                  "Distribution" shall mean (a)the declaration or payment of any
Dividend  on or in  respect  of any  shares  of any  class of  capital  stock of
Borrower or any  Subsidiary,  other than  Dividends  payable solely in shares of
common stock of the corporation involved;  (b)the purchase,  redemption or other
acquisition  of any  shares of any class of  capital  stock of  Borrower  or any
Subsidiary directly or indirectly through a Subsidiary or otherwise.

                  "Dividend"  shall mean a distribution  of cash,  securities or
other property  (other than capital  stock) on capital stock of the  corporation
involved.

                  "Documentary Letters of Credit" shall mean documentary letters
of credit issued pursuant to an Application and Section 2.02(a) hereof.

                  "Documentary Letter of Credit Limit" shall have the meaning 
assigned to such term in Section 2.02(a) hereof.

                  "Dollar"  and the symbol "$" shall  mean  lawful  money of the
United  States of America,  and the symbol  "CAN$"  shall mean  lawful  money of
Canada.

                  "Eligible  Accounts"  shall  mean  trade  accounts  receivable
created or acquired by Borrower and each  Guarantor  (as the case may be) in the
ordinary course of business in which the Agent has a Prior Security Interest for
the benefit of the Banks, which are not more than ninety (90) days past due from
the date of the invoice or sales journal entry therefor and which are and at all
times  continue  to be  acceptable  to the Agent in the  exercise of the Agent's
reasonable judgment;  provided,  however, without limiting the generality of the
foregoing,  that,  if 50% or more of the accounts of an account  debtor are more
than ninety (90) days past due from the date of invoice or sales  journal  entry
therefor, any other accounts of such account debtor shall also be ineligible.

                  "Eligible Inventory" means Borrower's and each Guarantor's (as
the  case may be)  inventory,  excluding  works  in  process,  of  saleable  raw
materials  and  finished  goods  manufactured  or acquired by Borrower  and each
Guarantor  (as the case may be) in the ordinary  course of business,  subject to
the  Borrower's  and  each  Guarantor's  (as the case  may be)  control  or sole
possession,  stored in an Eligible  Location and in a manner  acceptable  to the
Agent,  valued at the lower of cost or market value,  which  inventory is and at
all times continues to be acceptable to the Agent in the exercise of the Agent's
reasonable  judgment and in which the Agent has a Prior Security Interest at all
times. Standards of acceptability shall be fixed and may be revised from time to
time solely by the Agent in its exclusive judgment.

                  "Eligible  Location" shall mean one of the addresses listed on
Schedule1 to the Security Agreement or any Guarantor Security Agreement at which
Borrower  or any  Guarantor,  as the case  may be,  maintains,  keeps or  stores
Collateral.  The Borrower  and the Agent and the Banks may agree  jointly to add
other  addresses  of the  Borrower to such list at any time by  substituting  an
amended  Schedule1 to either the Security  Agreement or any  Guarantor  Security
Agreement. The Agent may in its reasonable discretion,  at any time after thirty
(30) days' notice to the Borrower,  delete any address from the list of Eligible
Locations.

                  "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may from time to time be amended including, but not limited
to, the  Multiemployer  Pension Plan  Amendments  Act of 1980, and the rules and
regulations  promulgated thereunder by any governmental agency or authority,  as
from time to time in effect, and any successor statute.

                  "EuroRate"  and  "EuroRate  Option"  shall  have the  meanings
assigned to such terms in Section 2.05(a)(iii) of this Agreement.

                  "EuroRate  Funding  Period"  shall  mean any  interest  period
applicable  to a  Loan  bearing  interest  at the  EuroRate,  as  determined  in
accordance with Section 2.05(b) of this Agreement.

                  "EuroRate Loan" shall mean a Loan bearing interest at any time
under the EuroRate Option.

                  "EuroRate  Portion"  shall mean,  at any time,  that  portion,
including the whole,  of a Loan bearing  interest  under the EuroRate  Option at
such time, or at a rate calculated by reference to Section 2.05(a) hereof.

                  "Event of Default" or  "Default"  shall mean any of the events
of default described in Section 6.01 of this Agreement.

                  "Expiration  Date" shall mean August 13, 2002, unless extended
pursuant to Section2.11 hereof.

                  "Extension  Request"  shall have the meaning  assigned to such
term in Section 2.11(a) hereof.

                  "Facility  Fees" shall mean the  Facility  Fees  described  in
Section 2.10(a) hereof.

                  "Federal  Funds  Effective  Rate"  shall  mean for any day the
weighted average of the rates on overnight federal funds  transactions  arranged
on such day by Federal  Funds  Brokers  computed  and  released  by the  Federal
Reserve Bank of New York (or any successor) in substantially  the same manner as
such Federal Reserve Bank currently  computes and releases the weighted  average
it refers to as the "Federal Funds Effective Rate."

                  "Financial Provisions" shall have the meaning assigned to such
term in Section 1.02(d) hereof.

                  "Funding Period Maturity Date" shall have the meaning assigned
 to such term in Section 2.05(b) hereof.

                  "Funding Periods" shall have the meaning assigned to such term
 in Section 2.05(b) of this Agreement.

                  "Funding  Segment" of a CD Rate Portion or a EuroRate Portion,
as the case may be, at any time shall mean the entire  principal  amount of such
Portion to which at such time there is  applicable a particular  Funding  Period
beginning on a particular day.

                  "GAAP" shall have the meaning assigned to such term in Section
1.02 hereof.

                  "Guarantee"  shall  include  any  guarantee  of the payment or
performance of any  Indebtedness or other  obligation and any other  arrangement
whereby credit is extended to one obligor on the basis of any promise of another
person,  firm or  corporation,  whether that promise is expressed in terms of an
obligation to pay the Indebtedness of such obligor, or to purchase an obligation
owed by such  obligor,  or to  purchase  goods and  services  from such  obligor
pursuant to a take-or-pay contract, or to maintain the capital, working capital,
solvency or general financial condition of such obligor, whether or not any such
arrangement  is  listed  in the  balance  sheet of such  other  person,  firm or
corporation,  or  referred  to in a  footnote  thereto,  but shall  not  include
endorsements of items for collection in the ordinary course of business.

                  "Guarantor Security Agreement" shall mean a Security Agreement
(in  substantially  the  form of  Exhibit  H to  this  Agreement)  executed  and
delivered by a Guarantor and "Guarantor  Security  Agreements" shall mean all of
them.

                  "Guarantor"  shall at any  time  mean  any  Subsidiary  of the
Borrower other than a Designated  Subsidiary and "Guarantors"  shall mean all of
them.

                  "Guaranty and  Suretyship  Agreement"  shall mean the Guaranty
and Suretyship Agreement,  dated as of May11, 1992 and executed and delivered by
Borrower  in  favor  of the  Banks,  as the same  may be  amended,  modified  or
supplemented from time to time.

                  The phrases "herein", "hereof", "hereunder", and the like mean
this Agreement as a whole and not any particular section or other subdivision.

                  "Holding  Company  Subsidiary"  shall mean  Natmaya,  Inc.,  a
Delaware corporation which is a Wholly-Owned Subsidiary of the Borrower.

                  "Indebtedness"  shall include all  obligations,  contingent or
otherwise,  which in accordance  with GAAP should be classified on the obligor's
balance sheet as liabilities.

                  "Intercreditor Agreement" shall mean the agreement described 
in Section 5.02(b)(6) hereof.

                  "Interest  Rate  Option"  shall have the  meaning set forth in
Section 2.05(a) of this Agreement.

                  "Investments" means amounts paid or agreed to be paid, whether
in cash or in other consideration, for stock, securities,  liabilities or assets
of, or loaned, advanced or contributed to others (including, without limitation,
to a joint venture partnership or trust). The term Investments shall not include
any  increase  or  decrease in the assets of any  corporation  derived  from the
earnings or losses  thereof or any assets  purchased in the  ordinary  course of
business but shall include the  acquisition of a business.  If any Investment is
made by the transfer or exchange of property other than cash, the amount of such
Investment shall be deemed to have been made in an original principal or capital
amount equal to the fair market value of such property.

                  "Law" shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or
award of any Official Body.

                  "Letters of Credit" shall mean  Documentary  Letters of Credit
and  Standby  Letters of Credit  issued by the Agent  pursuant  to Section  2.02
hereof  together with  (i)Documentary  Letters of Credit and Standby  Letters of
Credit  outstanding  on the date  hereof  and  issued by the Agent  pursuant  to
Section 2.02 of the  Original  Loan  Agreement  and  (ii)Documentary  Letters of
Credit and Standby  Letters of Credit  outstanding on the date hereof and issued
by the Agent pursuant to Section2.02 of the Amended and Restated Loan Agreement.

                  "Lien" shall mean any  mortgage,  pledge,  security  interest,
bailment,  encumbrance,  claim,  lien  or  charge  of any  kind,  including  any
agreement  to give any of the  foregoing,  any  conditional  sale or other title
retention agreement, and any lease in the nature thereof.

                  "Loan" or "Loans" shall mean the  revolving  credit loans made
by the Banks to the Borrower  under this Agreement as described in Article II of
this Agreement.

                  "Loan  Documents"  shall mean this Agreement,  the Notes,  the
Security Agreement, the Guaranty and Suretyship Agreements, the Applications and
Letters of Credit, the Guarantor Security  Agreements,  the Subsidiary  Guaranty
and  Suretyship  Agreements,   and  all  other  instruments,   certificates  and
agreements  and  documents  contemplated  by  or  delivered  or  required  to be
delivered  under this Agreement or in connection  herewith,  in each instance as
the same may be amended, modified or supplemented from time to time.

                  "Margin  Stock"  shall mean all  margin  stock as that term is
from time to time  defined  in  Regulation  U of the Board of  Governors  of the
Federal  Reserve  System,  or  any  regulations,   interpretations   or  rulings
thereunder.

                  "Measurement  Period" shall have the meaning  assigned to such
term in Section 5.02(f)(5).

                  "Note" or "Notes"  shall mean the fourth  amended and restated
promissory  note(s) of Borrower  executed and  delivered  under this  Agreement,
together  with all  extensions,  renewals,  refinancings,  or  refundings of any
thereof in whole or in part.

                  "Notice of Borrowing" shall have the meaning assigned to such 
term in Section 2.03 of this Agreement.

                  "Notice of Conversion" shall have the meaning assigned to such
 term in Section 2.05(e) of this Agreement.

                  "Notice of Renewal" shall have the meaning assigned to such 
term in Section 2.05(e) of this Agreement.

                  "Notional  EuroRate  Funding  Office"  shall have the  meaning
assigned to such term in Section 2.09(a) of this Agreement.

                  "Office"  shall mean the office of the Agent  located at Three
Mellon Bank Center, Pittsburgh, Pennsylvania 15259-0003.

                  "Official Body" shall mean the United States of America or any
foreign  government or state, any state and any political  subdivision  thereof,
and any agency, department,  court, commission, board, bureau or instrumentality
of any of them.

                  "Operating Lease" shall mean any lease other than a 
Capitalized Lease.

                  "Option" shall mean,  when used in  conjunction  with CD Rate,
EuroRate  or Base  Rate,  an  Interest  Rate  Option  bearing  interest  at such
specified rate.

                  "PBGC"  shall mean the Pension  Benefit  Guaranty  Corporation
established under ERISA, or any successor to the PBGC.

                  "Percentage  Share" of any Bank,  when used with  reference to
any Letter of Credit,  shall mean an  undivided  participating  interest in such
Letter of Credit in the  proportion  that such  Bank's  Commitment  at such time
bears to the total Commitments of all the Banks hereunder at such time, and when
used in any other  context,  shall mean such Bank's pro rata share of the amount
involved,  determined in the proportion that such Bank's Commitment at such time
bears to the total Commitments of all the Banks hereunder at such time.

                  "Plan" shall mean any plan,  including a single employer plan,
multiple  employer  plan  or  multiemployer  plan,  established,   sponsored  or
maintained  at any time or from time to time by or for a Plan  Employer  for its
employees to which Section 4021(a) of ERISA applies.

                  "Plan  Employer"  shall mean  Borrower,  any Subsidiary or any
member of a Controlled  Group which is the sponsor of or  contributor  to a Plan
for the benefit of some or all of its or their employees.

                  "Portion" shall mean a Base Rate Portion or a EuroRate 
Portion, as the case may be.

                  "Potential  Event of Default" shall mean an event,  condition,
act or omission to act  constituting a default in the  performance or observance
of an act,  covenant,  agreement or provision of this Agreement,  the other Loan
Documents or any Note, which event,  condition,  act or omission to act with the
passage of time or the giving of notice,  or both, and without  subsequent  cure
within any  applicable  period of time,  would become or  constitute an Event of
Default or Default.

                  "Prime Rate" shall mean the interest rate per annum  announced
from time to time by Mellon Bank,  N.A., at its principal  office in Pittsburgh,
Pennsylvania,  as its Prime Rate. The Prime Rate is determined from time to time
by Mellon Bank,  N.A. as a means of pricing some loans to its customers,  is not
tied to any external  rate of  interest,  and does not  necessarily  reflect the
lowest rate of interest  actually charged by Mellon Bank, N.A. to any particular
category of customers.

                  "Prior  Security  Interest"  means an  enforceable,  perfected
security  interest  under the UCC which is prior to all Liens,  except Liens for
taxes not yet due and payable to the extent given priority by statute.

                  "Private  Placement Debt" shall mean  Indebtedness of Borrower
in an aggregate principal amount not to exceed an amount equal to the difference
between (a)the sum of $60,000,000 and (b)the  Commitment,  which is purchased by
and placed with an entity which is acceptable  to, and has been approved by, the
Agent on behalf of the Banks, and which involves such terms and conditions which
are acceptable to the Agent on behalf of the Banks.

                  "RPF" shall have the meaning set forth in Section 5.02(f) 
hereof.

                  "Relevant Date" shall have the meaning set forth in Section
 1.02(a) hereof.

                  "Reportable  Event" shall mean any of the events  described in
paragraphs (5) or (6) of Section 4043(b) of ERISA.

                  "Required   Banks"  shall  mean,   until  and   including  the
Expiration Date, Banks whose Commitments  aggregate at least 662/3% of the total
Commitments  of all the Banks and  thereafter the holders of at least 66-2/3% of
the aggregate unpaid principal amount of all Loans outstanding at such time.

                  "Responsible  Officer" of Borrower  shall mean the  president,
chief financial officer, treasurer or controller of Borrower.

0 "Rollover  Loan" shall mean any Loan made on the Funding Period  Maturity Date
of any  preceding  Loan or Loans,  with the aggregate  principal  amount of such
Rollover Loan being less than or equal to the aggregate principal amount of such
preceding Loan or Loans, as the case may be.

                  "Security  Agreement" shall mean the Security  Agreement dated
as of January29,  1992,  by and between the Borrower and the Banks,  as the same
may be amended, modified or supplemented from time to time.

                  "Standby  Letters of Credit"  shall  mean  standby  letters of
credit  issued by the Agent  pursuant  to an  Application  and  Section  2.02(b)
hereof.

                  "Standby Letter of Credit Limit" shall have the meaning 
assigned to such term in Section 2.02(b) hereof.

                  "Stock  Purchase" means any  redemption,  acquisition or other
retirement of any capital account or other equity interest in the Borrower or of
warrants,  rights or other options to purchase any such capital account or other
equity interest.

                  "Subsidiary" shall mean any corporation of which a majority of
the  outstanding  capital  stock  entitled to vote for the election of directors
(otherwise  than as the result of a default)  is owned by  Borrower  directly or
indirectly through Subsidiaries.  The term "Wholly-Owned  Subsidiary" shall mean
any Subsidiary of which  Borrower shall at the time own,  directly or indirectly
through a Wholly-Owned Subsidiary, 100% of the outstanding voting stock or other
voting interest, other than directors' qualifying shares.

                  "Subsidiary  Guaranty and Suretyship  Agreement"  shall mean a
guaranty and  suretyship  agreement (in  substantially  the form of Exhibit G to
this Agreement)  executed and delivered by a Guarantor and "Subsidiary  Guaranty
and Suretyship Agreements" shall mean all of them.

                  "UCC" shall mean the Uniform Commercial Code (or any successor
statute  thereto) as in effect in the  Commonwealth  of  Pennsylvania or in such
other  jurisdiction  where a security  interest shall be granted to the Agent in
the Collateral.  Terms and phrases defined in the UCC are used herein as therein
defined except where the context otherwise requires.

                  1.02.  Accounting Principles.

                  (a) As used  herein,  "GAAP"  shall  mean  generally  accepted
accounting  principles  as such  principles  shall be in effect at the  Relevant
Date, subject to the provisions of this Section 1.02. As used herein,  "Relevant
Date" shall mean the date a relevant  computation or determination is to be made
or the date of relevant financial statements, as the case may be.

                  (b)  Except  as  otherwise  provided  in this  Agreement,  all
computations and  determinations  as to accounting or financial matters shall be
made,  and all financial  statements to be delivered  pursuant to this Agreement
shall  be  prepared,   in  accordance   with  GAAP   (including   principles  of
consolidation  where  appropriate),  and all accounting or financial terms shall
have the meanings ascribed to such terms by GAAP.


                                   ARTICLE II

                                   THE CREDITS

                  Section 2.01. Commitments. Subject to the terms and conditions
hereof,  and relying upon the  representations  and  warranties  of the Borrower
herein set forth,  each Bank severally agrees to make Loans to Borrower,  on any
Business Day, at any time or from time to time prior to the Expiration  Date, in
an aggregate  principal  amount not  exceeding at any one time  outstanding  the
amount  set forth  opposite  its name  below  (such  amount,  as the same may be
reduced from time to time hereafter in accordance  with Section  2.10(b) hereof,
being herein referred to as the "Commitment"):

Name and                          Commitment until
Address of Bank                   Expiration Date         Percentage
MELLON BANK, N.A.                    $19,406,250            43.125%
  One Mellon Bank Center
  Pittsburgh, PA  15258

PNC BANK, N.A.                        $12,796,875           28.4375%
  PNC Bank Building
  Fifth & Wood Streets
  Pittsburgh, PA 15222

FIRST UNION NATIONAL BANK             $12,796,875           28.4375%
  Broad & Chestnut Streets
  Philadelphia, PA  19101


          Total                       $45,000,000               100%

provided,  that if for any day when the  Borrower's  Consolidated  Fixed  Charge
Coverage  Ratio for the period of twelve  consecutive  months  ending on the day
before the first day of the then most recently  completed  month is less than or
equal to 1.75 to 1, the  aggregate  amount  of Debt  attributable  to the  Loans
outstanding on such day shall not exceed an amount equal to the sum of (a)75% of
Eligible Accounts plus (b)45% of Eligible  Inventory (the sum of such percentage
of  Eligible   Accounts  and  Eligible   Inventory   being  referred  to  herein
collectively as the "Borrowing Base");  provided,  further,  that the sum of all
Loans  outstanding  at any one  time  plus the face  amount  of all  outstanding
Letters of Credit shall not exceed the sum of the Banks' Commitments;  provided,
further,  that the sum of the face amounts of all outstanding  Letters of Credit
shall not exceed $15,000,000 at any time.

                  It is the  intention  of the  parties  that  (a)the  aggregate
outstanding  principal  balances of all Loans  hereunder shall at no time exceed
the lesser of (i)the sum of the Banks'  Commitments less the face amounts of all
outstanding  Letters of Credit and (ii)the  Borrowing Base, and if, at any time,
an excess shall for any reason exist,  the Borrower shall forthwith repay to the
Agent for the ratable account of the Banks, in funds immediately available,  the
amount of such excess, together with all interest on the amount so repaid.

                  Within  such limits of time and amount and  provided  that the
conditions of lending set forth in Section4.02  hereof are satisfied and that no
Event of Default or Potential Event of Default has occurred and is continuing or
exists,  Borrower may borrow,  prepay,  repay and reborrow  hereunder  until the
Expiration  Date,  when the  Commitment  of each Bank shall  cease and all Loans
shall  become  immediately  due and payable in full.  The  proceeds of the Loans
shall be used by Borrower for working capital, general corporate purposes.

                  Section 2.02.  Letters of Credit.

                  (a) Documentary  Letters of Credit. At the request of Borrower
(which  shall be made at least five (5) Business  Days prior to the date,  which
shall be a  Business  Day,  on which  such  Letter of Credit is  proposed  to be
issued),  and pursuant to an Application duly executed by Borrower,  one or more
Documentary  Letters  of Credit  will be issued by the Agent for the  account of
Borrower in an aggregate  face amount not  exceeding  the lesser of (i)an amount
equal to the Borrowing Base at such time minus the aggregate principal amount of
all then  outstanding  Loans (including the aggregate face amount of outstanding
Letters of Credit,  as the same may be changed from time to time by amendment or
otherwise pursuant to the terms thereof) and  (ii)$15,000,000  (the "Documentary
Letter of Credit Limit").  The aggregate face amount of outstanding  Documentary
Letters of Credit,  as the same may be changed from time to time by amendment or
otherwise  pursuant  to  the  terms  thereof,   shall  be  charged  against  the
Documentary  Letter of Credit  Limit and  against the total  Commitments  of the
Banks  hereunder.  The Banks shall  participate in such  Documentary  Letters of
Credit as provided in Section 2.02(f) hereof.

                  (b)  Standby  Letters of Credit.  At the  request of  Borrower
(which  shall be made at least five (5) Business  Days prior to the date,  which
shall be a  Business  Day,  on which  such  Letter of Credit is  proposed  to be
issued),  and pursuant to an  Application  duly executed by Borrower one or more
Standby  Letters  of Credit  will be issued  by the  Agent  for the  account  of
Borrower in an aggregate  face amount not  exceeding  the lesser of (i)an amount
equal to the Borrowing Base at such time minus the aggregate principal amount of
all then  outstanding  Loans (including the aggregate face amount of outstanding
Letters of Credit,  as the same may be changed from time to time by amendment or
otherwise  pursuant to the terms  thereof)  and  (ii)$15,000,000  (the  "Standby
Letter of Credit  Limit").  The  aggregate  face amount of  outstanding  Standby
Letters of Credit,  as the same may be changed from time to time by amendment or
otherwise  pursuant to the terms thereof,  shall be charged  against the Standby
Letter of Credit Limit and against the sum of the Banks' Commitments.  The Banks
shall  participate in such Standby  Letters of Credit as provided in the Section
2.02(f) hereof.

                  (c)  Letter of Credit  Fees.  In lieu of any  letter of credit
fronting fees provided for in the Applications or otherwise, the Borrower agrees
to pay to the Agent upon the  issuance  of each  Standby  Letter of Credit a fee
equal to 1/10 of 1% of the face amount of such Standby Letter of Credit, and the
Borrower  further  agrees  to pay to the Agent  from time to time any  issuance,
amendment,  payment,  telex,  postage and courier fees, at the Agent's  standard
rates (a schedule of which has been  provided  to the  Borrower),  in respect of
Letters of Credit. The Borrower agrees that upon and following the issuance of a
Standby Letter of Credit, the Agent shall be paid a fee per annum based upon the
amount of the Standby Letter of Credit issued,  which fee shall be calculated at
a rate per annum for each day equal to the Applicable Margin with respect to the
Euro-Rate in effect pursuant to Section2.05(h)  hereof for such day. Such letter
of credit  commission shall be payable on the last Business Day of each calendar
quarter,  and on the last date on which  any  Standby  Letter  of Credit  issued
hereunder expires, in each case for the preceding period from which such fee has
not been paid.  The  Borrower  agrees that upon the  issuance  of a  Documentary
Letter of Credit,  the Agent  shall be paid a fee equal to 1/2 of 1% of the face
amount of the Documentary Letter of Credit issued;  provided,  however,  that in
the case of the  acceptance  by the Agent of any time  draft  with  respect to a
Documentary Letter of Credit issued hereunder, the Borrower agrees to pay to the
Agent an  acceptance  fee per annum  based  upon the  amount of the  Documentary
Letter of Credit issued,  which acceptance fee shall be calculated at a rate per
annum for each day during the period from the  acceptance  of such draft through
its maturity  equal to the  Applicable  Margin with respect to the  Euro-Rate in
effect  pursuant to  Section2.05(h)  hereof at the time of the acceptance of any
such time draft.

                  (d)  Payments  with  Respect to Letters of Credit.  As to each
Letter of Credit:

                  (i)   Reimbursement.   Borrower  shall  reimburse  the  Agent,
         forthwith  and  otherwise in  accordance  with the terms of any related
         Application or reimbursement  or other like agreement,  for any payment
         made by the Agent  under a Letter of Credit  issued for the  benefit of
         such  entity.  Any  such  reimbursement  to the  Agent  shall  be  made
         absolutely and unconditionally and without any set-off, counterclaim or
         reduction and free and clear of any  withholding or similar taxes other
         than any tax, levy, impost or duty based, in whole or in part, upon the
         income,  revenues or operations of the Agent. Borrower shall pay to the
         Agent interest on any unreimbursed portion of each such payment made by
         the  Agent  from  the  date  of  such   payment  by  the  Agent   until
         reimbursement  in full therefor at a rate per annum equal to 2.0% above
         the rate applicable to the Base Rate Option from time to time.

                  (ii)  Funding.  If at any time the Agent  honors a draft drawn
         under a Letter of Credit in accordance with the terms of such Letter of
         Credit and is not  reimbursed  therefor on the same  Business  Day, the
         Agent shall promptly notify each other Bank of such payment.  Forthwith
         upon and not later  than one  Business  Day after its  receipt  of such
         notice,  each other Bank shall  transfer to the Agent,  in  immediately
         available funds, an amount equal to such other Bank's  Percentage Share
         of such payment. If any Bank shall fail to so transfer to the Agent its
         percentage of any unreimbursed  payment made by the Agent on account of
         any Letter of Credit,  such Bank shall pay to the Agent interest on its
         Percentage  Share of such  unreimbursed  payment  from the date of such
         Bank's receipt of such notice from the Agent until payment by such Bank
         of such Percentage Share in full at a rate per annum for each day equal
         to the Federal Funds Effective Rate for such day, such interest rate to
         change automatically from time to time effective as of the date of each
         change in the Federal Funds Effective Rate.

                  (e) Pro Rata  Treatment of Payments.  If at any time after the
Agent has made a payment on  account  of any  Letter of Credit and has  received
from any other Bank such Bank's Percentage of such payment, the Agent shall hold
any  reimbursement  (in whole or in part)  for such  payment,  any other  amount
received from the account party, Borrower or any other person in respect of such
payment  (including  any  payment of interest  or fees,  any  payment  under any
guarantee of the obligations of the account party and any amount received by way
of set-off,  but excluding  any funds  received by the Agent from any other Bank
pursuant to Section 2.02(c)(ii)  hereof),  any documents evidencing the right to
reimbursement  for such  payment  for the pro rata  benefit of the Agent and any
other Bank from whom the Agent has received such Bank's Percentage Share of such
payment  and shall  forthwith  transfer  to such other  Bank such  other  Bank's
Percentage Share of such reimbursement or other amount; provided,  however, that
in the event that the receipt by the Agent of such reimbursement or other amount
is found to have been a transfer in fraud of creditors or a preferential payment
under the United States Bankruptcy Code or is otherwise  required to be returned
pursuant to a final order of a court of competent jurisdiction,  such other Bank
shall,  upon  demand  therefor  by the  Agent,  return to the Agent any  portion
thereof previously transferred by the Agent to such other Bank.

                  (f) Participating  Interests in Letters of Credit.  Subject to
the terms and  conditions  and relying upon the  representations  and warranties
herein set forth,  effective  as of the date  hereof in the case of  outstanding
Letters of Credit and  effective as of the date of issuance of other  Letters of
Credit,  the Agent agrees to allot and does allot,  and each Bank  severally and
irrevocably  agrees to take and does take, such Bank's  Percentage Share of each
such  Letter of Credit.  Within  five  Business  Days after the  issuance of any
Letter of Credit by the Agent under this Agreement, the Agent shall send to each
Bank and to the Borrower a letter of credit summary substantially in the form of
Exhibit D hereto.

                  Notwithstanding  anything to the contrary contained herein, in
any other  Loan  Document  or in any  document  to be  delivered  in  connection
herewith or therewith,  Borrower  acknowledges and agrees that all rights of the
Agent under any Application and any reimbursement or like agreement with respect
to any Letter of Credit shall inure to the benefit of each Bank to the extent of
its Percentage Share as fully as if such Bank was a party to such Application or
such reimbursement or like agreement.

                  (g) Additional  Understandings Regarding Letters of Credit. In
order to induce the Agent to establish  each Letter of Credit and to induce each
other Bank to take its Percentage Share thereof:

                           (i)  Borrower  agrees that  neither the Agent nor any
                  other  Bank  shall  be  responsible  or  liable  for,  and the
                  obligation  of Borrower to reimburse the Agent for any payment
                  made by the Agent  under or in respect of any Letter of Credit
                  shall not be affected by (A)the  validity,  enforceability  or
                  genuineness of any instrument or document (or any  endorsement
                  thereof)  presented  under such Letter of Credit  which,  upon
                  examination   by  the  Agent  and  in  the  absence  of  gross
                  negligence or willful misconduct, appears on its face to be in
                  accordance  with the terms and  conditions  of such  Letter of
                  Credit,   even  if  such   instrument  or  document  (or  such
                  endorsement)   is   proven  to  be   invalid,   unenforceable,
                  fraudulent or forged,  or (B)any dispute between  Borrower and
                  the beneficiary or beneficiaries under such Letter of Credit;

                           (ii) Borrower agrees that any action taken or omitted
                  to be taken by the  Agent in  connection  with any  Letter  of
                  Credit,  if taken or  omitted to be taken in good faith and in
                  the absence of gross negligence or willful  misconduct,  shall
                  be binding upon  Borrower  and shall not create any  liability
                  for the Agent or any other  Bank to the  Borrower  and  agrees
                  that no other  Bank  shall be liable to the  Borrower  for any
                  such  action  taken or omitted to be taken by the Agent in bad
                  faith or constituting gross negligence or willful misconduct;

                           (iii)  Borrower  agrees that the  provisions  of each
                  Application  and  each  reimbursement  or  like  agreement  in
                  respect  of  any  Letter  of  Credit,   including   provisions
                  providing for  reimbursement  to the Agent in the event of the
                  imposition or implementation  of, or increase in, any reserve,
                  special  deposit  or  similar  requirement  in  respect of the
                  Letter of Credit relating thereto, shall apply equally to each
                  other Bank in respect of its  Percentage  Share in such Letter
                  of  Credit  as  fully  as if such  Bank  was a  party  to such
                  Application or reimbursement or like agreement;

                           (iv)  Borrower  agrees  that  (A)drawings  under  any
                  Letter  of  Credit  issued  hereunder  may be made  only  upon
                  presentation   of  an   appropriate   sight   draft   or  upon
                  presentation  of a time  draft  which  requires  payment at no
                  later  than 180 days,  (B)no  Letter of Credit  will be issued
                  hereunder at or after the Expiration  Date and (C)no Letter of
                  Credit will be issued  hereunder  which expires later than the
                  Expiration   Date,   after  giving  effect  to  the  foregoing
                  provision for time drafts requiring payment not later than 180
                  days after the issuance thereof;

                           (v) Each Bank  severally  and not  jointly  agrees to
                  reimburse  the  Agent  for all  expenses  (including,  without
                  limitation,  reasonable counsel fees and the expenses incurred
                  by officers or  employees  of the Agent's  assetbased  lending
                  division or credit  recovery  group) incurred by the Agent and
                  not  reimbursed by Borrower in enforcing the  obligations  and
                  liabilities  of  Borrower  under  any   Application  or  other
                  reimbursement  agreement  relating  to a Letter  of  Credit in
                  accordance  with  such  Bank's  Percentage  Share.  Each  Bank
                  further  severally  and not jointly  agrees to  indemnify  the
                  Agent (to the extent not  reimbursed by Borrower)  against any
                  and  all  other  liabilities,  obligations,  losses,  damages,
                  penalties,   actions,   judgments,   suits,  costs,   expenses
                  (including,  without  limitation,  reasonable counsel fees and
                  expenses  incurred  by officers  or  employees  of the Agent's
                  asset-based  lending  division  or credit  recovery  group) or
                  disbursements of any kind or nature whatsoever (A)which may at
                  any time be imposed on,  incurred  by or asserted  against the
                  Agent in any way  relating  to any  Letter  of  Credit  or any
                  action  taken or omitted by the Agent  under or in  connection
                  with any of the  foregoing,  and (B)which  would not have been
                  imposed on, incurred by or asserted  against the Agent but for
                  its having entered into any  Application;  provided,  however,
                  that the Banks  shall in no event be liable for any portion of
                  such liabilities,  obligations,  losses,  damages,  penalties,
                  actions,  judgments,  suits, costs, expenses and disbursements
                  resulting from the gross  negligence or willful  misconduct of
                  the Agent.  In determining  whether to pay any drawing under a
                  Letter of Credit,  the Agent shall have no  obligation  to the
                  Banks  other than to confirm in good faith that any  documents
                  required to be delivered under such Letter of Credit appear to
                  have been  delivered  in  compliance  and that they  appear to
                  comply on their face with the  requirements  of such Letter of
                  Credit. The agreements in the three preceding  sentences shall
                  survive the  termination of any Application or this Agreement;
                  and

                           (vi) Each Bank by its execution hereof represents and
                  warrants  that its  participation  in  Letters  of  Credit  is
                  without recourse to the Agent,  that it expressly  assumes all
                  risk of loss in connection with its  participation  therein as
                  if it had  issued  said  Letters  of  Credit,  that it has not
                  relied  upon  any  statement,  information  or  representation
                  furnished or made by the Agent and that it has made,  and will
                  continue   to  make,   its  own   independent   investigation,
                  evaluation  and  analysis  of  Borrower.  Except as  otherwise
                  expressly   provided   herein,   the  Agent  has  no  duty  or
                  responsibility,  either initially or on a continuing basis, to
                  provide  any  Bank  with  any  credit,   financial   or  other
                  information with respect to Borrower,  whether coming into its
                  possession prior to the issuance of any Letter of Credit or at
                  any time thereafter.

                  Section  2.03.  Making of Revolving  Credit  Loans.  All Loans
shall  be made  ratably  from  the  Banks  in  proportion  to  their  respective
Commitments;  provided,  however,  that the  failure  of any Bank to make a Loan
shall not relieve any other Bank of its obligation to lend  hereunder.  Whenever
Borrower desires that the Banks make Loans (including Rollover Loans),  Borrower
shall give to the Agent at its Office at least three (3)  Business  Days' notice
in the case of a EuroRate  Loan,  two (2) Business Days' notice in the case of a
CD Rate  Loan,  and notice on the same  Business  Day in the case of a Base Rate
Loan, of the date,  which shall be a Business Day, on which such Loans are to be
made.  Each notice (a "Notice of Borrowing")  required  pursuant to this Section
2.03 shall be given no later than 11:00 a.m.,  Pittsburgh  time,  in the case of
Base Rate Loans, or no later than 10:00 a.m., Pittsburgh time, in the case of CD
Rate Loans or  EuroRate  Loans,  on the last date  permitted  for such Notice of
Borrowing, shall be signed by a Responsible Officer of Borrower, and shall state
(a)the date on which the Loan is to be made,  (b)the  amount of the Loan,  which
shall be the sum of the principal amounts selected pursuant to subsection (c) of
this  Section  2.03 and,  (c)the  Interest  Rate  Option or Options  selected in
accordance  with Section  2.05(a)  hereof and the principal  amounts of Portions
selected  in  accordance  with  Section  2.05(c)  hereof  and,  in the case of a
EuroRate  Portion or a CD Rate Portion,  the EuroRate  Funding Period or CD Rate
Funding  Period,  as the  case  may  be.  Each  Notice  of  Borrowing  shall  be
irrevocable and shall be written,  telecopied, by telephone confirmed in writing
or by electronic request. The rights and obligations of the parties set forth in
this Agreement, including without limitation all representations, warranties and
covenants, shall not be affected by the medium chosen by Borrower to make a Loan
request,  except that  Borrower  assumes all  liability  for any and all losses,
liabilities,  obligations,  costs or damages  ("Losses") arising from the chosen
medium,  including without limitation,  in the case of electronic Loan requests,
any  Losses   arising   from   transmission   errors,   delayed   transmissions,
transmissions  not  received  or  unauthorized  transmissions.  The Agent  shall
promptly give  telecopied or telexed  notice or telephoned  notice  confirmed in
writing to each Bank of its Percentage Share and the date of such borrowings. On
the date  specified  in such  Notice  of  Borrowing,  each Bank  shall  make the
proceeds of its Loan  available at the Office of the Agent,  no later than 12:00
noon,  Pittsburgh time, in immediately  available funds, and upon fulfillment of
all applicable conditions set forth herein (and against delivery to the Agent of
an  appropriate  Note for the initial  Loans,  with payment  schedules  attached
thereto, for each Bank, payable to the order of such Bank as provided in Section
2.04 hereof), the Agent shall pay or deliver the proceeds of the borrowing to or
upon the order of  Borrower.  Upon  making the  initial  Loans,  the Agent shall
deliver each such Note to or upon the order of the Bank to, which it is payable.

                  Section 2.04.  Notes. The obligations of Borrower to repay the
aggregate  unpaid  principal  amount  of the Loans  made by the  Banks  shall be
evidenced by three amended and restated  promissory notes of Borrower payable to
the respective  Banks in the aggregate amount of each Bank's  Commitment,  dated
the date of this  Agreement  (hereinafter  called a "Note"  or the  "Notes")  in
substantially   the  form   attached   hereto  as  Exhibit  A  with  the  blanks
appropriately  filled,  payable  at the Office of the Agent to the order of each
Bank in a face  amount  equal to each  Bank's  initial  Commitment,  and bearing
interest  as  provided  in Section  2.05  hereof  and in said form of Note,  and
maturing as provided in said form of Note. Each Note of Borrower payable to each
Bank shall be dated, and shall be delivered to the Agent on behalf of such Bank,
on or prior to the date of the initial Loans to Borrower hereunder.  Each holder
shall, and is hereby  authorized by Borrower to, endorse on the schedule annexed
to its Note an appropriate  notation evidencing the date and amount of each Loan
made by such Bank as well as the date and  amount of each  payment  by  Borrower
with  respect  thereto;  provided,  however,  that the  failure to make any such
notation shall not limit or otherwise  affect the  obligations of Borrower under
any such Note.



                  Section 2.05.  Interest Rates.

                  (a) Interest  Rate  Options.  Borrower  agrees to pay interest
upon the unpaid  principal  balance of the Loans disbursed and outstanding  from
time to time on a basis selected by Borrower from one of the three interest rate
options set forth below (each an "Interest Rate Option" and,  collectively,  the
"Interest Rate Options"),  it being understood that subject to the provisions of
this Agreement,  Borrower may select any number of such Interest Rate Options to
apply  simultaneously  to different parts of a Loan and may select any number of
different  Funding  Segments to apply  simultaneously  to different parts of the
EuroRate Portion of a Loan:

                  (i)Base Rate Option.  Interest shall accrue on Base Rate Loans
         at a rate per  annum  for each day  equal to the Base Rate for such day
         plus the Applicable Margin for such day.

                  Loans accruing interest pursuant to the Base Rate Option shall
         be referred to herein as "Base Rate Portions".  The rate of interest on
         Base Rate Portions shall be calculated on the basis of a year of 365 or
         366 days, as the case may be, and shall change  automatically from time
         to time effective on and as of the effective date of each change in the
         Base Rate. The Agent shall  promptly  notify the Borrower and each Bank
         of any such  change in the Base Rate and the  effective  date  thereof;
         however,  any  failure of the Agent to so notify  shall not relieve the
         Borrower of its obligations hereunder or under the Notes.

                  (ii) CD Rate Option. Interest shall accrue on CD Rate Loans at
         a rate per annum (based on a year of 360 days and actual days  elapsed)
         for each day at a rate equal to the CD Rate plus the Applicable  Margin
         for such day.

                  "CD Rate" for any day,  as used  herein,  shall  mean for each
         Funding Segment of the CD Rate Portion  corresponding  to a proposed or
         existing CD Rate Funding  Period the rate per annum  determined  by the
         Agent by adding:

                           (A) the rate per  annum  obtained  by  dividing  (the
                  resulting  quotient to be rounded  upward to the nearest 1/100
                  of 1%) (1)the  rate of interest  (which  shall be the same for
                  each day in such CD Rate Funding  Period)  determined  in good
                  faith by the Agent in  accordance  with its  usual  procedures
                  (which  determination  shall  be  conclusive  absent  manifest
                  error) to be the average of the secondary  market bid rates at
                  or about 11:00 a.m., Pittsburgh time, on the first day of such
                  CD Rate Funding  Period by dealers of  recognized  standing in
                  negotiable  certificates  of deposit for the  purchase at face
                  value of negotiable  certificates  of deposit of the Agent for
                  delivery  on such day in amounts  comparable  to such  Funding
                  Segment  and  having  maturities  comparable  to  such CD Rate
                  Funding  Period by (2)a number equal to 1.00 minus the CD Rate
                  Reserve Percentage; and

                           (B) the Assessment Rate.

                  The "CD Rate"  described in this Section  2.05(a)(ii) may also
         be expressed by the following formula:

                    [average of the secondary market]
                    [bid rates determined by the Agent]
                    [per subsection (ii)(A)(1) of this]
CD Rate =           [Section 2.05(a)] + AssessmentRate
                    [1.00 - CD Rate Reserve Percentage]

                  The "CD Rate  Reserve  Percentage"  for any day is the maximum
         effective  percentage  (expressed as a decimal,  rounded  upward to the
         nearest  1/100 of 1%), as  determined in good faith by the Agent (which
         determination  shall be conclusive absent manifest error),  which is in
         effect  on such day as  prescribed  by the  Board of  Governors  of the
         Federal  Reserve System (or any successor) for  determining the reserve
         requirements (including without limitation  supplemental,  marginal and
         emergency  reserve  requirements)  for a member  bank of such system in
         respect of  nonpersonal  time deposits in Dollars in the United States.
         The CD Rate shall be adjusted automatically as of the effective date of
         each change in the CD Rate Reserve Percentage.

                  The  "Assessment  Rate"  for any  day is the  rate  per  annum
         (rounded upward to the nearest 1/100 of 1%) determined in good faith by
         the Agent in accordance with its usual procedures (which  determination
         shall be conclusive  absent manifest error) to be the maximum effective
         assessment  rate per annum  payable by a bank  insured  by the  Federal
         Deposit  Insurance  Corporation  (or any  successor)  for  such day for
         insurance  on Dollar time  deposits,  exclusive  of any credit  allowed
         against such annual  assessment on account of assessment  payments made
         or to be made by such bank. The CD Rate shall be adjusted automatically
         as of the effective date of each change in the Assessment Rate.

                  The Agent shall give prompt  notice to Borrower of the CD Rate
         so determined or adjusted,  which  determination or adjustment shall be
         conclusive if made in good faith and absent manifest error.

                           (iii)  EuroRate  Option.  Interest  shall  accrue  on
         EuroRate  Loans at a rate per  annum  (based  on a year of 360 days and
         actual days elapsed) for each day at a rate equal to the Euro-Rate plus
         the Applicable Margin for such day.

                           "EuroRate"  as  used  herein  shall  mean,  for  each
         Funding Segment of a proposed or existing EuroRate Portion of the Loans
         corresponding to a proposed or existing  EuroRate  Funding Period,  the
         rate per annum  obtained  by  dividing  (the  resulting  quotient to be
         rounded upward to the nearest 1/100 of 1%) (A)the rate per annum (which
         shall  be the  same  for  each  day in such  EuroRate  Funding  Period)
         determined  in good  faith by the  Agent in  accordance  with its usual
         procedures  (which  determination  shall be conclusive  absent manifest
         error) to be the average of the rates per annum for deposits in Dollars
         offered to the Agent in the London  interbank  market at  approximately
         11:00 a.m.,  London time,  two (2) Business Days prior to the first day
         of such EuroRate  Funding  Period for delivery on the first day of such
         EuroRate  Funding Period in amounts  comparable to such Funding Segment
         and having  maturities  comparable to such EuroRate  Funding  Period by
         (B)a number equal to 1.00 minus the EuroRate Reserve Percentage.

                  The "EuroRate" may also be expressed by the following formula:

                              [average of the rates offered to]
                              [the Agent estimated            ]
                              [by the Agent per subsection    ]
         EuroRate=  [(iii) of this Section 2.05(a)   ]
                              [1.00 - EuroRate Reserve Percentage)]

                  The "EuroRate  Reserve  Percentage"  for any EuroRate  Funding
         Period  for each  Bank's  EuroRate  Loan  applicable  to such  EuroRate
         Funding   Period   bearing   interest  as  provided  in  this   Section
         2.05(a)(iii) is that percentage  which is specified on the first day of
         such EuroRate  Funding Period in Regulation D of the Board of Governors
         of the Federal  Reserve System (or any successor) for  determining  the
         maximum reserve  requirement  with respect to Eurocurrency  Liabilities
         (as defined in such Regulation D), but only to the extent  demonstrated
         to have been actually incurred by such Bank, such Bank's  determination
         thereof to be conclusive in the absence of manifest error.

                  The Agent shall give prompt notice to Borrower of the EuroRate
         so determined,  which determination shall be conclusive if made in good
         faith and absent manifest error.

                  (b)  Funding  Periods.  At any time  when the  Borrower  shall
select,  convert to or renew the CD Rate  Option,  EuroRate  Option or Base Rate
Option to apply to any part of the Loans, Borrower shall fix one or more periods
during which such Option shall apply, such periods (the "Funding Periods") being
set forth in the chart below:





      Interest Rate Option                        Available Funding Periods

      CD Rate Option                              30, 60 or 90 days or other 
                                                  period as agreed to among 
                                                  Borrower, the Agent and
                                                  the Banks ("CD Rate Funding 
                                                  Period")


     EuroRate                                    Option  One,  two,
                                                 three or six month
                                                 or other period as
                                                 agreed   to  among
                                                 Borrower,      the
                                                 Agent    and   the
                                                 Banks   ("EuroRate
                                                 Funding Period")

    Base Rate Option                             One (1) day

The selection of Funding Periods shall be subject to the following limitations:

         (i) Each CD Rate  Funding  Period  which would  otherwise  end on a day
         which is not a Business  Day shall be extended  to the next  succeeding
         Business Day.

                  (ii) The  initial  EuroRate  Funding  Period for any  EuroRate
         Portion shall begin on the day the EuroRate  Portion is made (including
         the day of any  conversion  from  another  Interest  Rate  Option  to a
         EuroRate  Portion) and each renewed EuroRate Funding Period  thereafter
         in respect of such  EuroRate  Portion shall begin on the day upon which
         the next preceding  EuroRate  Funding Period expires.  Interest payable
         with respect to any  EuroRate  Funding  Period shall  include the first
         day, but not the last day, of such Funding  Period,  provided  that (to
         the extent not repaid on such last day) interest under another Interest
         Rate  Option  is  accruing  on and  after  the last day on the  Funding
         Segment in respect of which a EuroRate Funding Period is terminating.

                  (iii) If any EuroRate  Funding Period would otherwise end on a
         day which is not a Business  Day, such  EuroRate  Funding  Period shall
         expire on the next succeeding  Business Day unless such next succeeding
         Business  Day  falls in  another  calendar  month,  in which  case such
         EuroRate Funding Period shall end on the next preceding Business Day.

                  (iv)  Borrower  may not fix a Funding  Period  that  would end
after the Expiration Date.

Each Loan made hereunder  shall mature,  and the principal  amount thereof shall
become due and payable, on the last day of each CD Rate Funding Period, EuroRate
Funding  Period or Base Rate Funding  Period  (each such date being  referred to
herein as a "Funding Period Maturity Date") for such Loan.

                  (c)  Transactional  Amounts.  Every  selection of,  conversion
from,  conversion  to or renewal of an Interest Rate Option and every payment in
respect  of the Loans  (other  than a payment in full)  shall be in a  principal
amount  such that after  giving  effect  thereto  the  principal  amount of each
Portion of the Loans or of each Funding Segment of such Portion of the Loans, as
the case may be, shall be as set forth in the table below:

Portion or Funding Segment               Allowable Principal Amounts
Base Rate Portion                        $100,000 minimum;

Each Funding Segment of the              $1,000,000 or an integral
CD Rate Portion                          multiple thereof; and

Each Funding Segment                     $1,000,000 or an integral
of the EuroRate Portion                  multiple thereof.


                  (d)      CD Rate or EuroRate Unascertainable; Impracticability
  If:

                  (i) on any  date  on  which  a CD  Rate  or a  EuroRate  would
                  otherwise  be set a Bank shall  have in good faith  determined
                  (which good faith determination shall be conclusive) that:

                           (A)      adequate and reasonable means do not exist
 for ascertaining such CD Rate or EuroRate, or

                           (B) a contingency  has occurred which  materially and
                  adversely   affects  the  secondary   market  for   negotiable
                  certificates  of deposit  maintained  by dealers of recognized
                  standing or the interbank  eurodollar  market, as the case may
                  be, or

                           (C) the  effective  cost to such  Bank of  funding  a
                  proposed  Funding  Segment of a CD Rate  Portion or a EuroRate
                  Portion  of the  Loans  from a  Corresponding  Source of Funds
                  shall exceed the CD Rate or the EuroRate,  as the case may be,
                  applicable to such Funding Segment, or

                  (ii) at any time a Bank  shall have  determined  in good faith
         (which good faith  determination  shall be conclusive) that the making,
         maintenance  or funding of any part of a CD Rate  Portion or a EuroRate
         Portion of the Loans has been made  impracticable or unlawful by (A)the
         occurrence of a contingency  which materially and adversely affects the
         interbank  eurodollar  market,  or  (B)compliance  by  such  Bank  or a
         Notional  EuroRate  Funding  Office  in  good  faith  with  any  Law or
         guideline or interpretation  or administration  thereof by any Official
         Body charged with the interpretation or administration  thereof or with
         any request or  directive  of any such  Official  Body  (whether or not
         having the force of Law);

then,  and in any such  event,  such  Bank (a  "Terminating  Bank")  may  notify
Borrower  and the  Agent  of such  determination.  Upon  such  date as  shall be
specified  in such notice  (which shall not be earlier than the date such notice
is given) the  obligation of the  Terminating  Bank to allow Borrower to select,
convert to or renew the CD Rate Option or the EuroRate  Option,  as the case may
be,  shall be suspended  until the  Terminating  Bank shall have later  notified
Borrower of the Terminating Bank's determination in good faith (which good faith
determination  shall be conclusive) that the  circumstances  giving rise to such
previous determination no longer exist.

                  If the Terminating  Bank notifies  Borrower of a determination
under this Section 2.05(d) with respect to the maintenance of any part of the CD
Rate Portion or the EuroRate  Portion of the Loans, as the case may be, Borrower
shall,  as to such part of the CD Rate  Portion or the  EuroRate  Portion of the
Loans,  as the case may be, on the date  specified in such notice either convert
such  Portion of the Loans to the Base Rate Option in  accordance  with  Section
2.05(e)  hereof or prepay such Portion of the Loans in  accordance  with Section
2.06 hereof.  Absent due notice from Borrower of conversion or prepayment the CD
Rate  Portion or the  EuroRate  Portion of the Loans,  as the case may be, shall
automatically be converted to the Base Rate Option upon such specified date.

                  If at the  time the  Terminating  Bank  makes a  determination
under this  Section  2.05(d)  Borrower  has  previously  notified the Agent that
Borrower  wishes  to  select,  convert  to or renew  the CD Rate  Option  or the
EuroRate  Option,  as the case may be,  but such  Option  has not yet gone  into
effect,  such notification shall be deemed to provide for selection,  conversion
to or renewal of the Base Rate Option  instead of the CD Rate Option or EuroRate
Option, as the case may be.

                  (e)  Conversion  or  Renewal.  Subject  to the  provisions  of
Sections  2.05(c) and (d) hereof Borrower may convert any part of the Loans from
any  Interest  Rate  Option or Options to one or more  different  Interest  Rate
Options  and may  renew  the CD Rate  Option  or the  EuroRate  Option as to any
Funding Segment of a CD Rate Portion or a EuroRate Portion of the Loans:

                           (i)       at any time with respect to conversion from
 the Base Rate Option;

                           (ii) at the  expiration  of any  Funding  Period with
                  respect to conversions  from or renewals of the CD Rate Option
                  or  EuroRate  Option,  as the case may be,  as to the  Funding
                  Segment corresponding to such expiring Funding Period; or

                           (iii)  on  the  date  specified  in  a  notice  by  a
                  Terminating  Bank  pursuant  to Section  2.05(d)  hereof  with
                  respect to  conversions  from the CD Rate  Option or  EuroRate
                  Option, as the case may be.

Whenever  Borrower  desires  to  convert or renew any  Interest  Rate  Option or
Options,  Borrower  shall provide to the Agent at its Office a notice (a "Notice
of Conversion" or "Notice of Renewal," respectively) setting forth the following
information:

                           (iv) the date,  which  shall be a  Business  Day (not
                  earlier  than the second  Business  Day after  such  notice is
                  given, in the case of a conversion to or renewal of a EuroRate
                  Option),  on which the proposed conversion or renewal is to be
                  made;

                           (v) the principal amounts selected in accordance with
                  Section  2.05(c)  hereof  of the Base Rate  Portion,  and each
                  Funding Segment of the CD Rate Portion or EuroRate  Portion of
                  the  Loans,  as the  case  may  be,  to be  converted  from or
                  renewed;

                           (vi) the Interest Rate Option or Options  selected in
                  accordance  with  Section  2.05(a)  hereof  and the  principal
                  amounts  selected in  accordance  with Section  2.05(c) of the
                  Base Rate  Portion,  and each  Funding  Segment of the CD Rate
                  Portion or EuroRate  Portion of the Loans, as the case may be,
                  to be converted to or renewed; and

                           (vii) with respect to each Funding  Segment of a Loan
                  to be converted to or renewed,  the Funding Period selected in
                  accordance  with  Section  2.05(b)  hereof  to  apply  to such
                  Funding Segment.

Notice of  Conversion  or Notice of Renewal  having been so provided,  after the
date specified in such Notice  interest  shall be calculated  upon the principal
amount of the Loans as so converted or renewed. Interest on the principal amount
of any part of the Loans required to be converted or renewed  (automatically  or
otherwise) shall be due and payable on the conversion or renewal date.

                  (f)  Failure  to Convert  or Renew.  Absent  due  notice  from
Borrower of  conversion  or renewal in the  circumstances  described  in Section
2.05(e) hereof, any part of the CD Rate Portion or EuroRate Portion of the Loans
for which such notice is not  received  automatically  shall be converted to the
Base Rate Option on the last day of the expiring Funding Period. Any part of the
Base Rate Portion of the Loans which is outstanding  on the  applicable  Funding
Period Maturity Date shall be renewed  automatically  under the Base Rate Option
on the last day of the expiring Funding Period.

                  (g) Effect of  Funding  Periods  on Loan  Maturities.  Without
limiting the effects of Article VI hereof,  each Loan hereunder shall mature and
the  principal  amount  thereof  shall become due and payable on the  applicable
Funding Period  Maturity Date. On each day on which a Loan so matures,  Borrower
may  request  that a  Rollover  Loan be made in the  same  principal  amount  by
exercising  its rights to convert or renew the  applicable  Interest Rate Option
under Section 2.05(e) hereof for such principal amount; provided,  however, that
(i)the making of each such Rollover Loan shall be subject to the  conditions set
forth in Section 4.02 hereof,  and (ii)the  proceeds of each Rollover Loan shall
simultaneously  and  automatically  be applied on the applicable  Funding Period
Maturity  Date to the  payment of the  principal  of such Loan  maturing on such
Funding Period Maturity Date.


                  (h) Changes in Interest Rates; Consolidated Total Indebtedness
to EBITDA  Ratio.  The  Applicable  Margin for any day and for each type of Loan
shall be determined  with reference to the  Consolidated  Total  Indebtedness to
EBITDA Ratio for the period of four  consecutive  fiscal  quarters most recently
completed prior to such day, as follows:

Consolidated Total Indebtedness           Applicable Margin
to EBITDA Ratio (X)                    Base Rate    CD Rate    Euro-Rate

      X > 4.25                             0.125    1.375%   1.375%
      3.75 < X < 4.25                    0                 1.15%          1.15%
      3.25 < X < 3.75                    0                 0.90%          0.90%
      2.75 < X < 3.25                    0                 0.70%          0.70%
      2.00 < X < 2.75                    0                 0.50%          0.50%
      1.25 < X < 2.00                    0                 0.425%         0.425%
      X < 1.25                           0                 0.35%          0.35%

                  Borrower  shall  provide  evidence of the  Consolidated  Total
Indebtedness  to EBITDA Ratio to the Agent and the Banks  within  twenty days of
the end of each fiscal quarter.

                  Section 2.06.  Prepayment of Loans.  Subject to the provisions
of Section  2.08(b) hereof,  Borrower shall have the right at Borrower's  option
from time to time to pay the Loans in whole or part:

                  (a) with respect to any part of the Base Rate Portion,  at any
time without premium or penalty; provided,  however, that the minimum prepayment
amount with respect to payment of a Base Rate Portion shall be $100,000;

                  (b) with  respect to payment of any Funding  Segment of the CD
Rate Portion or the Euro-Rate Portion of the Loans:

                           (i) at the  expiration of any CD Rate Funding  Period
         or Euro-Rate Funding Period without premium or penalty;

                           (ii)  on  the  date   specified  in  a  notice  by  a
         Terminating Bank pursuant to Section2.05(d) hereof, with respect to any
         part of the CD Rate Portion or the Euro-Rate  Portion,  without premium
         or penalty; or

                           (iii) at any time prior to the  expiration  of any CD
         Rate Funding Period or any Euro-Rate  Funding  Period,  as the case may
         be, by giving not less than five(5)  Business Days' prior telecopied or
         telexed notice or telephone  notice confirmed in writing to such effect
         to the Agent; provided,  however, that in such event the Borrower shall
         forthwith  pay to the Agent  for the  ratable  account  of the Banks an
         amount  equal  to the  sum of any  costs,  expenses  and  lost  profits
         incurred by any of the Banks as a result of such voluntary  prepayment,
         as determined in the sole discretion of the Banks;

provided, however, that the minimum prepayment amount with respect to payment or
prepayment  of the  Funding  Segment  of the CD Rate  Portion  or the  Euro-Rate
Portion shall be $1,000,000 and any  prepayment  amounts in excess of $1,000,000
shall be integral multiplies of $500,000.

                  Section 2.07.  Payments.

                  (a) Interest Payment Dates. Interest on the Loans shall be due
and  payable  monthly  in  arrears  on the  first  day of each  month and on the
Expiration Date. After maturity of any part of the Loans by demand or otherwise,
interest on such part of the Loans shall be due and payable on demand.

                  (b) Principal Payment Dates. Loans shall be due and payable on
the  Expiration  Date  without  demand or, after the  occurrence  of an Event of
Default,  immediately  upon  demand  made by the Agent and the Banks at any time
under Section 6.02(a) hereof or automatically  under Section 6.02(b) hereof,  as
the case may be.

                  (c)  Place,  Time  and  Amounts.  All  payments  to be made in
respect of principal,  interest,  Facility  Fees,  Administrative  Fee, or other
charges  or  amounts  due from the  Borrower  hereunder  shall be payable at the
Agent's  Office at 12:00  Noon,  Pittsburgh  time,  on the day when due  without
presentment,  demand,  protest  or notice of any kind,  all of which are  hereby
expressly waived, and an action therefor shall immediately accrue. Such payments
shall be, made to the Agent in Dollars in  immediately  available  funds without
setoff,  counterclaim  or other  deduction  of any nature.  After the  principal
amount of any part of the Base Rate  Portion of the Loans  shall have become due
(by  acceleration or by maturity at the Expiration  Date, but excluding  Funding
Period Maturity Dates), such amounts shall bear interest for each day until paid
(before and after judgment),  payable on demand, at a rate per annum (based on a
year of 365 or 366 days, as the case may be) equal to two percent (2%) above the
rate  applicable  to  the  Base  Rate  Option,  such  interest  rate  to  change
automatically  from time to time  effective on and as of the  effective  date of
each change in the Prime Rate.  After the principal amount of any part of the CD
Rate  Portion or the  EuroRate  Portion of the Loans  shall have  become due (by
acceleration or by maturity at the Expiration Date, but excluding Funding Period
Maturity  Dates),  such  amounts  shall  bear  interest  for each day until paid
(before  and  after  judgment),  payable  on  demand,  (i)until  the  end of the
applicable  then current Funding Period at a rate per annum equal to two percent
(2%) above the rate otherwise  applicable to such amounts and  (ii)thereafter in
accordance with the immediately  preceding  sentence.  All payments to the Agent
shall be made in the amount due,  absolutely free, clear and net of any charges,
taxes or other amounts withheld. -240
                  Section 2.08.  Additional Compensation in Certain 
Circumstances.

                  (a)   Compensation   for  Taxes,   Reserves  and  Expenses  on
Outstanding  Loans.  If any Law or guideline or  interpretation  or  application
thereof by any Official Body charged with the  interpretation  or administration
thereof or compliance with any request or directive of any central bank or other
Official Body (whether or not having the force of Law):

                           (i)  subjects any Bank  (including  the Agent) or any
                  Notional  EuroRate  Funding  Office to any tax, or changes the
                  basis of taxation with respect to this  Agreement,  the Notes,
                  the Loans,  or payments by Borrower of principal,  interest or
                  other amounts due from  Borrower  hereunder or under the Notes
                  (except  for taxes on the  overall  net income of such Bank or
                  such  Notional   EuroRate   Funding   Office  imposed  by  the
                  jurisdiction in which such Bank's  principal  executive office
                  or Notional EuroRate Funding Office is located);

                           (ii)  imposes,   modifies  or  deems  applicable  any
                  reserve, special deposit or similar requirement against assets
                  held by, credit  extended by, deposits with or for the account
                  of, or other acquisition of funds by, any Bank or any Notional
                  EuroRate  Funding  Office (other than  requirements  expressly
                  included  herein  in  the  determination  of the  CD  Rate  or
                  EuroRate, as the case may be, hereunder); or

                           (iii) imposes upon any Bank or any Notional  EuroRate
                  Funding Office any other  condition or expense with respect to
                  this  Agreement,  the Notes,  the  Commitment,  or its making,
                  maintenance  or funding  of any part of the Loans,  including,
                  without   limitation,   any   capital   adequacy   or  similar
                  requirement;

and the result of any of the  foregoing is to increase  the cost to,  reduce the
income  receivable  by,  or impose  any  expense  upon any Bank or any  Notional
EuroRate  Funding  Office  with  respect to this  Agreement,  the Notes,  or the
making,  maintenance  or funding of any part of the Loans by an amount which any
Bank deems to be material (such Bank being deemed for this purpose to have made,
maintained  or  funded  each  Funding  Segment  of the CD Rate  Portion  and the
EuroRate Portion of the Loans from a Corresponding  Source of Funds),  such Bank
shall from time to time notify  Borrower of the amount  determined in good faith
(using any averaging  and  attribution  methods  employed in good faith) by such
Bank (which  determination  shall be  conclusive)  to be necessary to compensate
such Bank or such Notional  EuroRate  Funding  Office for such increase in cost,
reduction in income or additional expense.  Such amount shall be due and payable
by Borrower to such Bank ten (10) Business Days after such notice is given. Such
notice shall be given to the Borrower  within a reasonable  time  following such
Bank's determination of the amount owed.

                  (b)  Indemnity.  In addition to the  compensation  required by
Section 2.08(a)  hereof,  Borrower shall indemnify the Banks against any loss or
expense (including loss of margin) which any Bank has sustained or incurred as a
consequence of any:

                           (i) payment,  prepayment or conversion  (other than a
                  prepayment  or  conversion  made  pursuant to Section  2.05(d)
                  hereof)  of any  part of any  Funding  Segment  of the CD Rate
                  Portion  or the  EuroRate  Portion of the Loans on a day other
                  than the last day of the corresponding Funding Period (whether
                  or not such payment,  prepayment or conversion is mandatory or
                  automatic  and whether or not such  payment or  prepayment  is
                  then due);

                           (ii)  attempt by  Borrower to revoke  (expressly,  by
                  later inconsistent  notices or otherwise) in whole or part any
                  notice stated herein to be irrevocable (any Bank having in its
                  sole discretion the option (A)to give effect to such attempted
                  revocation and obtain  indemnity under this Section 2.08(b) or
                  (B)to treat such  attempted  revocation  as having no force or
                  effect, as if never made); or

                           (iii)  default  by  Borrower  in the  performance  or
                  observance  of any  covenant or  condition  contained  in this
                  Agreement or the Notes or any other Loan  Document,  including
                  without limitation any failure of Borrower to pay when due (by
                  acceleration  or  otherwise)  any  principal,  interest or any
                  other  amount  due  hereunder  or under the Notes or any other
                  Loan Document.

If any Bank  sustains  or incurs  any such loss or expense it shall from time to
time notify Borrower of the amount  determined in good faith by such Bank (which
determination  shall be  conclusive  absent  manifest  error) to be necessary to
indemnify  such Bank for such loss or expense  (such Bank being  deemed for this
purpose to have made,  maintained or funded each Funding  Segment of the CD Rate
Portion and the EuroRate  Portion from a  Corresponding  Source of Funds).  Such
amount shall be due and payable by Borrower to such Bank ten (10)  Business Days
after such  notice is given.  Such notice  shall be given to  Borrower  within a
reasonable time following such Bank's determination of the amount owed.

                  Section 2.09.  Funding by Branch, Subsidiary or Affiliate.

                  (a) Notional Funding.  Any Bank shall have the right from time
to time,  prospectively or retrospectively,  without notice to Borrower, to deem
any branch,  subsidiary  or affiliate of such Bank to have made,  maintained  or
funded any part of the  EuroRate  Portion of the Loans at any time.  Any branch,
subsidiary or affiliate so deemed shall be known as a "Notional EuroRate Funding
Office."  Any Bank shall deem any part of the  EuroRate  Portion of the Loans or
the funding therefor to have been transferred to a different  Notional  EuroRate
Funding  Office  if such  transfer  would  avoid or cure an  event or  condition
described  in  Section  2.05(e)  hereof  or would  lessen  any  compensation  or
indemnity  payable  to such Bank under  Section  2.08  hereof,  and if such Bank
determines in its sole  discretion  that such transfer would be practicable  and
would not have a material adverse effect on such part of the Loans, such Bank or
any  Notional  EuroRate  Funding  Office (it being  assumed for purposes of such
determination  that each part of the  EuroRate  Portion of the Loans is actually
made or  maintained by or funded  through the  corresponding  Notional  EuroRate
Funding Office).  Notional EuroRate Funding Offices may be selected by each Bank
without regard to such Bank's actual  methods of making,  maintaining or funding
the Loans or any sources of funding actually used by or available to such Bank.

                  (b) Actual Funding. Any Bank shall have the right from time to
time to make or  maintain  any  part of the  EuroRate  Portion  of the  Loans by
arranging for a branch, subsidiary or affiliate of such Bank to make or maintain
such part of the EuroRate Portion of the Loans. Any Bank shall have the right to
(i)hold any applicable  Note payable to its order for the benefit and account of
such branch,  subsidiary  or affiliate or  (ii)request  Borrower to issue one or
more  promissory  notes in the  principal  amount of such  part of the  EuroRate
Portion of the Loans in  substantially  the form  attached  hereto as Exhibit A,
with the blanks  appropriately  filled,  payable to such branch,  subsidiary  or
affiliate and with appropriate changes reflecting that the holder thereof is not
obligated to make any additional  Loans to Borrower.  Borrower  agrees to comply
promptly with any request under subsection (ii) of this Section 2.09(b).  If any
Bank causes a branch,  subsidiary  or  affiliate to make or maintain any part of
the Loans hereunder,  all terms and conditions of this Agreement  shall,  except
where the context clearly requires otherwise,  be applicable to such part of the
Loans  and to any note  payable  to the  order  of such  branch,  subsidiary  or
affiliate  to the same  extent as if such part of the  EuroRate  Portion  of the
Loans were made or  maintained by such Bank and Such note were a Note payable to
such Bank's order.

                  Section 2.10.  Fees; Termination or Reduction of Commitments.

                  (a)      Fees.

                   (i)_ Amendment Fee.  Borrower agrees to pay to the Agent, for
                   the  account  of each Bank in  accordance  with  such  Bank's
                   Percentage  Share, as consideration for each Bank's agreement
                   to extend the  Expiration  Date of the Amended  and  Restated
                   Loan Agreement a fee payable on the date of the execution and
                   delivery of this Second  Amended and Restated Loan  Agreement
                   equal to 0.125%  of the  aggregate  Commitments  of the Banks
                   hereunder.

                           (ii)  Facility  Fees.  Borrower  agrees to pay to the
                  Agent,  for the account of each Bank in  accordance  with such
                  Bank's  Percentage  Share,  as  consideration  for each Bank's
                  Commitment hereunder,  for each day during the period from the
                  date hereof  through and including the Expiration  Date,  fees
                  (the  "Facility  Fees"),  payable  quarterly in arrears on the
                  last day of each fiscal  quarter,  on the average daily amount
                  of the sum of the  Banks'  Commitments  (whether  borrowed  or
                  unborrowed) at a rate per annum (based on a year of 365 or 366
                  days,  as the case may be)  determined  with  reference to the
                  Consolidated Total Indebtedness to EBITDA Ratio for the period
                  of four  consecutive  fiscal quarters most recently  completed
                  prior to such day, as follows: :






                  Consolidated Total Indebtedness
                  to EBITDA Ratio (X)                      Fee Rate
                       X > 4.25                               .50%
                       3.75 < X < 4.25                        .40%
                       3.25 < X < 3.75                        .35%
                       2.75 < X < 3.25                       0.30%
                       2.00 < X < 2.75                       0.25%
                       1.25 < X < 2.00                       0.20%
                       X < 1.25                             0.175%

                           (iii)  Administration Fee. As a consideration for the
                  Agent's  administration of the credit facility contemplated by
                  this  Agreement,  Borrower  agrees to pay to the Agent for the
                  Agent's own account an administration fee (the "Administration
                  Fee")  in an  amount,  and at such  times,  as set  forth in a
                  letter  from Agent to  Borrower  dated on or about the date of
                  this Agreement.

                  (b) Reduction/Termination of Commitments.  Borrower may at any
time or from time to time terminate in whole or reduce  ratably the  Commitments
of the Banks hereunder to an amount not less than the aggregate principal amount
of the Loans then  outstanding,  by giving not less than five (5) Business Days'
prior telecopied or telexed notice or telephoned  notice confirmed in writing to
such  effect to the  Agent,  provided  that any such  reduction  shall be in the
aggregate amount of $1,000,000 or an integral multiple thereof.  After each such
termination  or  reduction,   the  Facility  Fees  payable  hereunder  shall  be
calculated upon the Commitments of the Banks as so reduced.  Facility Fees shall
be paid  quarterly on the last day of each fiscal  quarter after the date hereof
to and including the Expiration  Date of the Commitments and on the date of each
termination  or reduction of the Banks'  Commitments on the amount so terminated
or reduced, for the preceding period for which such fee has not been paid.

                  Section 2.11.  Extension of Expiration Date.

                  (a) Request  for  Extension.  Not more than 120 days,  but not
later than the date 60 days, prior to the third Anniversary Date,  Borrower may,
at its option, in a written notice to the Agent request (an "Extension Request")
that the  Expiration  Date be extended for a period of one year. The Agent shall
promptly inform the Banks of such Extension Request.  Each Bank that agrees with
such Extension Request shall deliver to Agent its express written consent hereto
no later than 30 days prior to such  Anniversary  Date. Each Bank shall have the
right to withhold such consent in its sole  discretion,  and such consent may be
withheld regardless of whether any prior consent to any extension has been given
by any Bank.

                  (b) Extension. If all of the Banks shall have consented to any
such Extension Request,  Agent shall so notify Borrower and then as of 5:00 p.m.
Pittsburgh  time, on the date which is 1 day prior to such  Anniversary Date the
Expiration  Date  shall be deemed to have been  extended  for,  and shall be the
date, one year after the then effective Expiration Date.

                  (c)  Additional  Extension.  The  foregoing  procedure  may be
followed with respect to additional  one-year  extensions  requested by Borrower
not more  than 120  days,  but not  later  than the date 60 days,  prior to each
successive  Anniversary Date after the third Anniversary Date; provided that, in
each case,  any Extension  Request made by the Borrower  shall be subject to the
consent of all of the Banks,  which  consent  may be withheld by any Bank in its
sole  discretion,  and which  consent may be withheld  regardless of whether any
prior consent to any extension has been given by any Bank.


                                                    ARTICLE III

                                          REPRESENTATIONS AND WARRANTIES

                  Borrower,   in  addition  to  its  other  representations  and
warranties  contained  herein or made pursuant  hereto,  hereby  represents  and
warrants to the Agent and each of the Banks that:

                  Section 3.01. Organization and Qualification. The Borrower and
each Guarantor is a corporation  duly  organized,  validly  existing and in good
standing under the laws of its state of incorporation,  and duly qualified to do
business as a foreign  corporation and in good standing in each  jurisdiction in
which the nature of the Borrower's and each Guarantor's  activities or ownership
(or  leasing)  of  property,  or both  makes  such  qualification  or  licensing
necessary  and where the failure to be so  qualified  or  licensed  would have a
material  adverse  effect on the financial  condition or business of Borrower or
any Guarantor (as the case may be).

                  Section 3.02. Power and Authority. Borrower and each Guarantor
has corporate  power and authority to make and carry out this  Agreement and the
Loan  Documents  to which  Borrower  and any  Guarantor  are a  party,  and that
Borrower has the corporate  power and authority to make the borrowings  provided
for herein,  and to perform its  obligations  hereunder and under the other Loan
Documents and under the Notes;  and all such action has been duly  authorized by
all  necessary  corporate  proceedings  on the  part of the  Borrower  and  each
Guarantor.  Borrower and each Subsidiary have all requisite  corporate power and
authority to own and operate their respective  properties and to carry out their
respective  businesses  as now  conducted  and as presently  contemplated  to be
conducted.

                  Section 3.03. Financial Statements.  Borrower has furnished to
each Bank  copies  of its 1997  audited  consolidated  financial  statements  of
Borrower and its Consolidated Subsidiaries for the fiscal year ended December31,
1997.  The  consolidated  financial  statements  fairly  present  the  financial
position of Borrower and its Consolidated  Subsidiaries and the results of their
operations and the changes in financial  position for the periods then ended, in
conformity with GAAP.

                  Section 3.04.  Litigation or Proceedings; Commitments and
Contingencies.

                  (a) There is no  litigation or  governmental  proceeding by or
against  Borrower or any  Subsidiary  pending or, to the  knowledge of Borrower,
threatened  which, in the opinion of Borrower,  involves any substantial risk of
any material adverse effect on the financial  condition or business of the total
enterprise represented by Borrower and its Subsidiaries on a consolidated basis.
As of the date of this Agreement,  Borrower and its  Subsidiaries are parties to
the pending litigation or governmental investigations or proceedings,  involving
exposure  to  possible  loss  individually  in the amount of  $500,000  or more,
identified in the Schedule of Litigation attached hereto as Schedule3.04.

                  (b) Neither Borrower nor any of its Subsidiaries has any known
contingent liabilities which, in the opinion of Borrower,  could have a material
adverse  effect on the financial  condition or business  represented by Borrower
and its Subsidiaries on a consolidated basis which are not referred to (i)in the
financial  statements  referred  to in  Section  3.03  hereof,  (ii)in the notes
thereto, or (iii)in Section 5.02(d) hereof.

                  Section 3.05. Material Adverse Change. Since December31, 1997,
there has been no material  adverse change in the business,  assets or financial
condition of the total  enterprise  represented by Borrower and its Subsidiaries
on a consolidated basis.

                  Section 3.06.  Title to Properties.

                  (a)  Borrower and each  Guarantor  have and will have good and
marketable title to all material properties,  assets and other rights which they
purport to own, or which are  reflected  in their  books and records  other than
leasehold  property,  free and clear of all Liens  (except  those  permitted  by
Section5.02(c)  hereof  and those  which are not  material  to the  business  or
financial condition of Borrower or such Guarantor (as the case may be)).

                  (b) Borrower and each Guarantor have good and marketable title
to all Eligible Accounts and all Eligible Inventory, free and clear of all Liens
except  Liens  permitted  under clause (1),  (2),  (4) or (6) of  Section5.02(c)
hereof.

                  (c) All  information  set forth in the  financial  statements,
other documents and reports furnished by Borrower to the Agent or the Banks from
time to time is true, correct and complete and is expressly  incorporated herein
by this reference.

                  (d) On each occasion on which Borrower  evidences to the Agent
the balances on and the nature and extent of those accounts in which Borrower or
any Guarantor has rights,  Borrower  shall be deemed to have  warranted,  to the
best of its knowledge  after due inquiry in accordance with  established  credit
and  accounting  policies,  that  (i)every  account  so  evidenced  is valid and
enforceable without performance by any person of any other act, (ii)the balances
so  evidenced  are in fact owing to  Borrower  and  (iii)there  are no  setoffs,
counterclaims or defenses against any such account.

                  Section 3.07. No Conflict with Other Documents; Authorizations
and  Approvals.  Neither the execution and delivery of this  Agreement or any of
the other  Loan  Documents,  the  consummation  of the  transactions  herein and
therein  contemplated  nor compliance  with the terms and  provisions  hereof or
thereof will conflict with or result in a breach of any of the terms, conditions
or  provisions of the articles or by-laws of Borrower or any Guarantor or of any
law or of any  regulation,  order,  writ,  injunction  or decree of any court or
governmental instrumentality or of any material agreement or instrument to which
Borrower or any of its Subsidiaries (including without limitation any Guarantor)
is a party or by which it is bound or to which it is subject,  or  constitute  a
default  thereunder  or result in the  creation or  imposition  of any  security
interest,  Lien,  charge or encumbrance of any nature whatsoever upon any of the
material  properties of Borrower or of any of its  Subsidiaries  pursuant to the
terms of any such agreement or instrument.  No approval,  authorization or other
action by any governmental authority or any other person, firm or corporation is
required to be obtained by  Borrower or any of its  Subsidiaries  in  connection
with the execution,  delivery and performance of this Agreement,  the other Loan
Documents,  or any other agreement  between or among any or all of the Banks and
Borrower or any of its Subsidiaries or the transactions  contemplated  hereby or
thereby, or the making of any borrowing by Borrower hereunder.

                  Section 3.08. Tax Returns. The Borrower and each Guarantor has
filed all Federal tax returns  which are  required to be filed and all other tax
returns  which are  required  to be filed  (except  for tax returns for which an
unexpired  extension has been granted by the appropriate  Official Body) and has
paid, or made adequate provision for the payment of, all taxes which have or may
become due pursuant to said returns or to assessments received.  All Federal tax
returns of the Borrower through the fiscal years ended on December 31, 1992 have
been audited by the Internal Revenue Service or are not subject to such audit by
virtue of the expiration of the applicable period of limitations and the results
of such audits are fully  reflected in the most recent balance sheet referred to
in Section 3.03 hereof. The Borrower knows of no material additional  assessment
since said date for which adequate reserves  appearing in the said balance sheet
have not been  established.  The Borrower and each  Guarantor have made adequate
provision for all current  taxes,  and in the opinion of the Borrower there will
not be any material  additional  assessments for any fiscal periods prior to and
including that which ended  December 31, 1988 in excess of the amounts  reserved
therefor in such balance sheet.

                  Section 3.09.  Validity and Binding Effect. This Agreement has
been duly and  validly  executed  and  delivered  by  Borrower.  This  Agreement
constitutes,  and the other Loan  Documents  when duly executed and delivered by
Borrower and each Guarantor  pursuant to the provisions  hereof will constitute,
valid and binding  obligations  of Borrower and each  Guarantor,  enforceable in
accordance  with their  respective  terms except as such  enforceability  may be
limited by bankruptcy,  insolvency, or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity.

                  Section 3.10.  Regulations G, U, T and X;  Investment  Company
Status. Neither Borrower nor any Subsidiary is engaged principally, or as one of
its most  important  activities,  in the  business of  extending  credit for the
purpose of purchasing or carrying Margin Stock.  This Agreement does not violate
Regulations  G, U, T, and X of the Board of  Governors  of the  Federal  Reserve
System.  Neither Borrower nor any Subsidiary,  or any agent acting on the behalf
of Borrower or any Subsidiary, has taken any action or will take any action that
might cause this Agreement or any Note to violate  Regulations G, U, T, and X or
any other  regulation the Board of Governors of the Federal Reserve System or to
violate Section 7 of the Securities Act of 1934, as in effect from time to time.
Neither  Borrower  nor any  Guarantor  is an  "investment  company" or a company
"controlled"  by an  investment  company  within the  meaning of the  Investment
Company Act of 1940, as amended.

                  Section  3.11.  ERISA  Compliance.  (a)Borrower  or any of its
Subsidiaries or member of a Controlled  Group maintains only the Plans described
on the Schedule of Plans attached hereto as Schedule 3.11; (b)each Plan has been
funded  in all  material  respects  in  accordance  with its  terms and with the
minimum  funding  standards of Part Three of Title I of ERISA and will be funded
in all material  respects in accordance  with such terms and standards;  (c)each
Plan has been maintained in accordance with its terms and with all provisions of
ERISA  applicable  thereto and will be  maintained  in all material  respects in
accordance with such terms and will be in material  compliance with ERISA; (d)no
Reportable Event which would have a material adverse effect on the Plan Employer
and which could cause PBGC to institute  proceedings under Section 4042 of ERISA
has  occurred  and is  continuing  with  respect  to any  Plan;  (e)no  material
liability to PBGC has been  incurred  with  respect to any Plan,  other than for
premiums due and payable;  (f)except as disclosed on Schedule  3.11, no Plan has
been terminated,  no proceedings have been instituted to terminate any Plan, and
no decision has been made by the board of directors of a Plan Employer or by the
Plan administrator to terminate or institute  proceedings to terminate any Plan;
(g)no  withdrawal,  either  complete or partial,  has occurred or commenced with
respect to any multiemployer  Plan and no decision has been made by the board of
directors of a Plan Employer or by the Plan  administrator  either to completely
or partially withdraw from any multiemployer Plan; and (h)except as disclosed on
Schedule 3.11,  there has been no cessation of, and no decision has been made by
the board of directors of a Plan Employer or by the Plan administrator to cease,
operations at a facility or facilities  where such cessation could reasonably be
expected to result in a separation from employment of more than 20% of the total
number of employees who are participants under a Plan. Each single-employer Plan
has been timely amended to comply with all the applicable  provisions of the Tax
Equity and Fiscal  Responsibility Act of 1982, the Deficit Reduction Act of 1984
and the Retirement  Equity Act of 1984, and the Borrower has no knowledge of any
fact  relating to any Plan which  involves any  substantial  risk or  reasonable
possibility of resulting in a material adverse change in the financial condition
of  Borrower  and its  Subsidiaries  taken  together  as a whole.  Borrower  has
provided  to the Agent and each of the  Banks a copy of the most  recent  Annual
Report (Form 5500 or 5500C),  including all attachments thereto,  filed with the
Internal  Revenue  Service in respect of each Plan and each such  Annual  Report
fairly  presents the funding  status of the Plan to which it relates.  There has
been no material  deterioration in the funding status of any Plan since the date
of the Annual Report filed in respect thereof.

                  Section 3.12. Defaults. Neither Borrower nor any Subsidiary is
in  default  under any  provision  of its  charter or bylaws or, so as to affect
adversely  in any  material  manner  the  business  or assets or the  condition,
financial or otherwise,  of Borrower on an individual  basis, or of the Borrower
and its  Subsidiaries  on a  consolidated  basis,  under  any  provision  of any
agreement,  lease or other  instrument  to which it is a party or by which it is
bound.

                  Section 3.13.  Compliance with Laws. To the best of Borrower's
knowledge, except as set forth in Schedule 3.13 hereto, neither Borrower nor any
Subsidiary is in violation of or subject to any contingent  liability on account
of any Law  (including  but not  limited  to  ERISA,  the Code,  any  applicable
occupational  and  health  or  safety  Law,  environmental  protection  Law,  or
hazardous  waste or toxic  substances  management,  handling or disposal Law and
including but not limited to (a)any restrictions, specifications or requirements
pertaining  to products  that either  Borrower or any  Subsidiary  manufactures,
processes or sells or pertaining to the services each  performs,  (b)the conduct
of their respective  businesses and (c)the use,  maintenance or operation of the
real and personal  properties owned or possessed by them), except for violations
which in the  aggregate do not have a material  adverse  effect on the business,
operations  or  financial  condition of Borrower or the  Subsidiary  which is in
violation of such Law.

                  Section 3.14.  Disclosure.  To the best knowledge of Borrower,
neither this  Agreement nor any  agreement,  document,  certificate or statement
furnished  to the Agent or the Banks by or on behalf of Borrower  in  connection
with the  transactions  contemplated  hereby  contains  any untrue  statement of
material fact or omits to state a material  fact  necessary in order to make the
statements contained herein or therein not misleading.

                  Section  3.15.  Continuing  Effect.  All  representations  and
warranties of Borrower  hereunder are and shall be continuing  ones and shall be
true,  correct and  complete so long as  Borrower  or any  Guarantor  shall have
obligations  outstanding and unperformed under this Agreement and the other Loan
Documents.


                                                    ARTICLE IV

                                               CONDITIONS OF LENDING

                  The  obligations  of the  Bank to  make  Loans  hereunder  are
subject to the  accuracy,  as of the date  hereof,  of the  representations  and
warranties herein  contained,  to the performance by Borrower of its obligations
to be  performed  hereunder  on or before  the date of each such Loan and to the
satisfaction of the following further conditions:

                  Section 4.01.  First Revolving Credit Loans.  At the time of 
the making of the initial Loans
after the date of this Agreement:

                  (a)      The Agent shall have received the following
documents:

                           (i) Opinion of Counsel for the Borrower.  A favorable
                  opinion of David Voltz, Esq., counsel for Borrower,  dated the
                  date of the initial Loans,  in form and scope  satisfactory to
                  Reed Smith Shaw & McClay  LLP,  special  counsel for the Agent
                  and the Banks,  as to (A)the  matters  referred to in Sections
                  3.01, 3.02,  3.07, and 3.09 hereof;  and (B)such other matters
                  incident to the transactions  herein contemplated as the Agent
                  and said special counsel may reasonably request;

                           (ii) Certified Resolutions, Articles of Incorporation
                  and  Bylaws,  etc.  (A)Copies  of  all  documents   evidencing
                  corporate action taken by Borrower  relative to this Agreement
                  and  the  other   Loan   Documents   in  form  and   substance
                  satisfactory  to the Agent and said  special  counsel  for the
                  Agent and the Banks,  certified by the  Secretary of Borrower,
                  (B)copies  of the  Articles  of  Incorporation  and By-Laws of
                  Borrower  (such  Articles of  Incorporation  and By-Laws being
                  certified by the Secretary of Borrower)  and  (C)certificates,
                  dated a  recent  date,  of the  Secretary  of  State  or other
                  similar  officials as to the good  standing of Borrower  under
                  the laws of the state of its incorporation;

                           (iii) Incumbency Certificates.  Certificates,  signed
                  by  a  Secretary  or  an  Assistant   Secretary  of  Borrower,
                  certifying  as to the  name  of the  officer  or  officers  of
                  Borrower  authorized to sign this Agreement and the other Loan
                  Documents  and as to the  specimens of the true  signatures of
                  such officer or officers, on which the Agent and the Banks may
                  conclusively rely until a revised  certificate is similarly so
                  delivered;

                           (iv)      Officer's Certificate.  Certificates, 
signed by a Responsible Officer of
                  Borrower as to the fulfillment of the condition precedent set
 forth in Sections
                  4.01(b)(i)-(iii) hereof;

                           (v) Other Loan  Documents.  The duly executed  Notes,
                  initial  Accounts  Receivable-Inventory  Report,  any required
                  Subsidiary  Guaranty and  Suretyship  Agreements and Guarantor
                  Security Agreements in form and substance  satisfactory to the
                  Agent and the Banks,  a  certificate  of the  Borrower  to the
                  effect that the Subsidiaries, if any, which are providing such
                  Agreements are the only Subsidiaries of the Borrower which are
                  not Designated  Subsidiaries  and such other Loan Documents as
                  the Agent and the Banks may request; and

                  (b)      The following conditions precedent shall be
satisfied:

                           (i)   Representations   and  Warranties.   Borrower's
                  representations  and warranties in Article III hereof shall be
                  true  and  accurate  with  the  same  effect  as  though  such
                  representations and warranties had been made on and as of such
                  date  (except  representations  and  warranties  which  relate
                  solely to an earlier date);

                           (ii)      Absence of Event of Default.  No Event of 
Default and no Potential Event of
                  Default shall have occurred and be continuing or shall exist;

                           (iii)     Compliance with Covenants.  Borrower shall 
be in compliance with the
                  covenants set forth in Article V hereof;

                           (iv)   Opinion   of   Accountants.   The   report  of
                  independent certified public accountants accompanying the most
                  recent  audited  financial  statements  delivered  pursuant to
                  Section   5.03  hereof   shall  not   contain   any   material
                  qualification or exception not acceptable to the Agent;

                           (v)  Material  Adverse  Change.  No material  adverse
                  change (individually or in the aggregate) shall have occurred,
                  in the reasonable  judgment of the Agent,  with respect to the
                  condition  (financial  or  otherwise),   business,  assets  or
                  financial  condition of the total  enterprise  represented  by
                  Borrower and its Subsidiaries on a consolidated basis from the
                  date  of  the  last  audited  financial  statements  delivered
                  pursuant to Section 5.03 hereof to the date of such borrowing;

                           (vi) Legal Details. All legal details and proceedings
                  in  connection  with  the  transactions  contemplated  by this
                  Agreement and all documents delivered to the Agent pursuant to
                  this Section 4.01 shall be in form and substance  satisfactory
                  to the  Agent  and the  Agent  shall  have  received  all such
                  counterpart  originals  or  certified  or other copies of such
                  documents   and    proceedings   in   connection   with   such
                  transactions, in form and substance satisfactory to the Agent,
                  as the Agent shall reasonably request; and

                           (vii)  Amendment Fee. The Borrower shall have paid to
                  the Agent, for the pro rata benefit of the Banks, an amendment
                  fee equal to 0.125% of the aggregate Commitments of the Banks.

                  Section 4.02.  Subsequent  Revolving Credit Loans;  Letters of
Credit.  The making of Loans made  subsequent to the initial Loans made pursuant
to  Section4.01  hereof and the  issuance  of  Letters of Credit,  shall be made
subject to the following terms and conditions:

                  (a) Effect of Borrowing Request or Application. The submission
of a Notice of Borrowing  pursuant to Section 2.04 hereof subsequent to the date
of this Agreement and the submission of an Application  pursuant to Section 2.02
hereof, shall be deemed to be a certification, as of the date of such submission
or request, that:

                           (i)  Representations,  Warranties and Covenants.  The
                  representations  and warranties in Article III hereof shall be
                  true  and  accurate  with  the  same  effect  as  though  such
                  warranties and representations had been made on and as of such
                  date  (except  representations  and  warranties  which  relate
                  solely to an earlier date) and Borrower is in compliance  with
                  the covenants set forth in Article V hereof; and

                           (ii)  Event  of  Default.  No  Event  of  Default  or
                  Potential   Event  of  Default  shall  have  occurred  and  be
                  continuing or shall exist.

                  (b)  Legal  Details.  All legal  details  and  proceedings  in
connection with the transactions contemplated by this Agreement shall be in form
and  substance  satisfactory  to the Agent and the Agent shall have received all
such  counterpart  originals or certified or other copies of such  documents and
proceedings  in  connection  with  such  transactions,  in  form  and  substance
satisfactory to the Agent, as the Agent shall reasonably request.


                                                     ARTICLE V

                                                     COVENANTS

                  Section  5.01.  Affirmative  Covenants  Other  Than  Reporting
Requirements.  Borrower  covenants  to the Agent and each of the Banks that,  so
long as Borrower may borrow  hereunder  and until  payment in full of all of the
Debt, Borrower will:

                  (a)  Preservation of Corporate  Existence,  etc.  Preserve and
maintain,  and cause each  Guarantor to preserve  and  maintain,  its  corporate
existence,  rights, franchises,  licenses, and privileges in the jurisdiction of
its incorporation,  and qualify and remain qualified as a foreign corporation in
each  jurisdiction  in which  such  qualification  is  necessary  in view of its
business and  operations  or the ownership of its  properties,  except where the
failure  to do so would not have a  material  adverse  effect  on the  financial
condition or business of Borrower or any Guarantor.

                  (b) Payment of Taxes,  etc. Pay and discharge,  and cause each
Subsidiary to pay and discharge, all taxes, assessments and governmental charges
or levies imposed upon it or upon its income or profits,  or upon any properties
owned by it, prior to the date on which penalties attach thereto, and all lawful
claims for labor,  materials or supplies which,  if unpaid,  might become a Lien
upon any  material  properties  of Borrower  or any  Subsidiary,  provided  that
neither  Borrower  nor any  Subsidiary  shall be  required  to pay any such tax,
assessment,  charge, levy or claim which is being contested in good faith and by
proper  proceedings  and for which  Borrower or the Subsidiary in question shall
have set aside on its books in accordance  with GAAP  appropriate  reserves with
respect thereto.

                  (c) Compliance with Laws. Comply, and cause each Subsidiary to
comply,  with all applicable Laws (including but not limited to ERISA, the Code,
and any applicable tax law,  occupational safety or health Law, or environmental
protection  or pollution  control Law) in all material  respects;  provided that
Borrower  shall not be deemed to be in violation  of this  Section  5.01(c) as a
result of any  failure  to comply  that  would not  result in fines,  penalties,
injunctive  relief  or  other  civil  or  criminal  liabilities  which,  in  the
aggregate,  would  materially  affect  the  business,  operations  or  financial
condition  of Borrower and its  Subsidiaries  taken as a whole or the ability of
the Borrower to perform its  obligations  under this Agreement or any other Loan
Document.

                  (d)  Maintenance  of  Insurance.   Maintain,  and  cause  each
Subsidiary to maintain,  insurance on its or their  properties with  responsible
and reputable  insurance  companies or associations in such amounts and covering
such risks as is usually carried by companies engaged in similar  businesses and
owning  similar  properties in the same general areas in which  Borrower or such
Subsidiary  operates.  Borrower will deliver to the Agent, at the time of making
the first Loans and on the last day of each fiscal year  thereafter  a statement
or insurance  company  certificate in such detail as the Agent may request as to
all insurance coverage of Borrower and all of its Subsidiaries.

                  (e)  Maintenance  of  Properties,   etc.  Maintain,  keep  and
preserve,  and cause each Subsidiary to maintain,  keep and preserve, all of its
properties (tangible and intangible) which are necessary or useful in the proper
conduct of its business in good working order and  condition,  ordinary wear and
tear excepted,  except where the failure to do so would not effect adversely the
financial  condition or business of Borrower or the  Subsidiary  which owns such
property.

                  (f) Financial Accounting Practices. Make, and shall cause each
Subsidiary to make, and keep books,  records and accounts  which,  in reasonable
detail and determined on a consolidated  basis for Borrower and its Consolidated
Subsidiaries,  accurately and fairly reflect  transactions  and  dispositions of
assets and  maintain a system of  internal  accounting  controls  sufficient  to
provide reasonable  assurances that  (i)transactions  are executed in accordance
with  management's  general  or  specific  authorization,  (ii)transactions  are
recorded  as  necessary  (A)to  permit  preparation  of  consolidated  financial
statements in conformity with GAAP and (B)to maintain accountability for assets,
(iii)access to assets is permitted only in accordance with management's  general
or specific  authorization  and (iv)the  recorded  accountability  for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

                  (g) Visitation Rights. At any reasonable time and from time to
time, permit the Agent or the Banks or any agents or representatives  thereof to
examine and make copies of and  abstracts  from the records and books of account
of, and visit the properties of,  Borrower and any of the  Subsidiaries,  and to
discuss  the  affairs,  finances  and  accounts  of  Borrower  and  any  of  the
Subsidiaries with any of their respective officers,  employees,  or directors or
independent accountants.

                  (h) Maintenance of Minimum  Consolidated Fixed Charge Coverage
Ratio. Maintain a Consolidated Fixed Charge Coverage Ratio greater than or equal
to 1.25 to 1 as of the end of each month on the basis of the twelve  consecutive
months then ending.

                  (i)  Maintenance of Minimum  Consolidated  Tangible Net Worth.
From and after July1,  1998,  maintain at all times a Consolidated  Tangible Net
Worth  greater  than or equal to the sum of  (A)59,102,000  plus  (b)50%  of the
cumulative positive Consolidated Net Income for all completed fiscal quarters of
the Borrower  commencing  with the fiscal quarter  ending  March31,  1998,  plus
(c)75% of the  cumulative  amount of the proceeds (net of issuance  expenses) to
the Borrower of the issuance after  December31,  1997 of the Borrower's  capital
stock. For purposes of this Section 5.01(i) only,  Consolidated Net Income shall
not include any loss attributable to any such period of determination.

                  (j) Maintenance of Maximum  Consolidated Total Indebtedness to
EBITDA Ratio.  Maintain a Consolidated  Total  Indebtedness to EBITDA Ratio less
than or  equal  to 4.75 to 1 as of the end of each  month  on the  basis  of the
period of twelve consecutive months then ending.

                  (k) ERISA Covenants.  (i)Cause each Plan Employer with respect
to its Plans (A) to satisfy the minimum funding  standards of Section 412 of the
Code with respect to any  single-employer  Plan and (B)to comply in all material
respects with the  provisions of ERISA and the Code which are  applicable to any
Plan and  (ii)not  permit any Plan  Employer  with  respect  to its Plans  (A)to
terminate  any  single-employer  Plan which could result in any liability to the
PBGC under Title IV of ERISA as set forth on IRS Form 5310 in an amount  greater
than $500,000 for any individual  Plan or greater than $750,000 for any group of
Plans   terminated  in  any  calendar  year,  (B)to  engage  in  any  prohibited
transaction as described in Section 406 of ERISA or to incur a Reportable Event,
(C)to withdraw from any multi-employer Plan which could result in the incurrence
of withdrawal liability in an amount greater than $500,000,  (D)to adopt any new
Plan without  prior  written  notice to the Agent and the Banks,  (E)to lose the
qualified  status of any Plan under Section 401 of the Code or the exempt status
of any related trust under Section 501 of the Code or (F)to cease  operations at
a  multiple-plant  facility  within the meaning of Section  4062(e) of ERISA and
which could  reasonably  be expected  to result in  liability  to the PBGC under
Title  IV of ERISA in an  amount  greater  than  $750,000,  whether  or not such
liability is paid to the PBGC or secured by the filing of a bond with the PBGC.

                  (l) Satisfaction of Judgments.  Pay or otherwise satisfy,  and
cause of each of its  Subsidiaries  to pay or  otherwise  satisfy,  every  final
judgment from which no further appeal may be taken in excess of $100,000 entered
against it or such  Subsidiary  within 60 days after entry  thereof or after the
expiration of any stay of execution with respect thereto.

                  (m) Maintenance of Minimum Eligible Accounts. On each day when
the Borrower's Consolidated Fixed Charge Coverage Ratio for the period of twelve
consecutive  months  ending  on the day  before  the  first day of the then most
recently  completed month is less than or equal to 1.75 to 1, maintain  Eligible
Accounts  which are, in the  aggregate,  greater than or equal to the product of
(i)forty  percent  (.40) times (ii)the sum of all Debt  outstanding  on such day
under this Agreement.

                  (n) Environmental Covenant.  Notwithstanding the provisions of
Section5.01(d) hereof, Borrower will, and will cause each of its Subsidiaries to
(i)use and operate all of its facilities  and properties in material  compliance
with all environmental Laws (including,  but not limited to, those Laws designed
to  protect  human  health and the  environment),  keep all  necessary  permits,
approvals,   certificates,   licenses  and  other  authorizations   relating  to
environmental matters in effect and remain in material compliance therewith, and
handle all hazardous  substances  and materials,  toxic  materials and all other
materials  hazardous to human health or the  environment in material  compliance
with all  applicable  environmental  Laws;  provided that Borrower  shall not be
deemed to be in violation of this  Section5.01(n)(i)  as a result of any failure
to comply that would not result in fines, penalties,  injunctive relief or other
civil or criminal  liabilities which, in the aggregate,  would materially affect
the business, operations or financial condition of Borrower and its Subsidiaries
taken as a whole or the ability of the Borrower to perform its obligations under
this Agreement or any other Loan Document,  (ii)immediately notify the Agent and
provide  copies  upon  receipt of all  written  claims,  complaints,  notices or
inquiries  relating  to  the  condition  of its  facilities  and  properties  in
connection with environmental  Laws, or compliance with or responsibility  under
environmental  Laws,  that may give rise to  liability or  responsibility  under
applicable environmental Laws, (iii)promptly respond in an appropriate manner to
any such claims, complaints, notices or inquiries and, additionally, take action
where appropriate to remedy any such alleged  condition or  non-compliance  with
environmental good faith by proper proceedings; and (iv)provide such information
and  certifications  which the Agent may reasonably request from time to time to
evidence compliance with this Section 5.01(n).

                  o.  Guarantors.  Upon  the  execution  and  delivery  of  this
Agreement  (with  respect to  Subsidiaries  of the  Borrower on the date of such
execution and delivery ) and upon the  acquisition or formation  after such date
of any Subsidiary of the Borrower,  Borrower  immediately will provide notice to
the Agent of the Subsidiary's status as a Guarantor or a Designated  Subsidiary,
as the case may be,  together  with such other  information  as the Agent or any
Bank shall  reasonably  request,  and will cause each Subsidiary  which is not a
Designated   Subsidiary  to  execute  and  deliver  a  Subsidiary  Guaranty  and
Suretyship   Agreement,   pursuant  to  which  such  Subsidiary  shall  guaranty
Borrower's obligations  hereunder,  a Guarantor Security Agreement,  pursuant to
which such Subsidiary  will grant to the Agent,  for the benefit of the Banks, a
security interest in its Collateral,  and such other agreements,  instruments or
other documents as the Agent or any Bank may reasonably request, all in form and
substance satisfactory to the Agent and the Banks. Borrower will, and will cause
any such  Subsidiary  to,  maintain and preserve such  Subsidiary's  status as a
Guarantor  until  such  time  that  Borrower  designates  such  Subsidiary  as a
Designated Subsidiary pursuant to Section 5.04 below.

                  Section 5.02.  Negative Covenants.  Borrower covenants that,
 so long as Borrower may borrow
hereunder and until payment in full of the Debt, Borrower will not:

                  (a) Indebtedness.  Create,  incur, assume,  guarantee or be or
remain liable for, contingently or otherwise,  or suffer to exist, or permit any
Subsidiary  to create,  incur,  assume,  guarantee  or be or remain  liable for,
contingently  or  otherwise,  or suffer to exist,  any  Indebtedness  (including
Guarantees) other than the following:

                           (1)      Indebtedness in respect of obligations to
 the Agent and the Banks hereunder or
                  under the other Loan Documents;

                           (2)  Indebtedness in the ordinary course of business,
                  in respect of  accounts  payable,  accrued  payroll  expenses,
                  accrued pensions,  progress billings and, unbilled  retentions
                  in excess of related cost,  estimated  replacements  on sales,
                  deferred income taxes, liabilities of a character described as
                  accrued  liabilities  on the  consolidated  balance  sheet  of
                  Borrower  and  its  Consolidated  Subsidiaries,  other  taxes,
                  assessments,  governmental  charges,  and  claims  for  labor,
                  materials or supplies to the extent that payment thereof shall
                  not at the time be required to be made in accordance  with the
                  provisions of Section 5.01(b) hereof;

                           (3)  Indebtedness  not  existing  on the date  hereof
                  arising in respect of the  purchase of property on which Liens
                  are permitted under clause (5) of Section 5.02(b) hereof;

                           (4)  Indebtedness  (other  than  Capitalized  Leases)
                  existing on the date hereof and set forth on Schedule  5.02(a)
                  attached  hereto  or  reflected  in the  financial  statements
                  delivered pursuant to Section 3.03 hereof;

                           (5)  Indebtedness  arising in respect of  Capitalized
                  Leases  which in the  aggregate  do not provide  for  payments
                  during any fiscal year in excess of $2,500,000;

                           (6)   Private   Placement   Debt,   which   shall  be
                  permissible only in the event of the execution and delivery of
                  an  intercreditor  agreement (the  "Intercreditor  Agreement")
                  between the Agent and the  purchaser of the Private  Placement
                  Debt,  which agreement shall contain such terms and conditions
                  as  are  appropriate  and as are  satisfactory  to the  Agent,
                  including  but not  limited to  provisions  for the pari passu
                  treatment of any  collateral and for the  acceleration  of any
                  Indebtedness;

                           (7) Indebtedness  assumed or incurred by Borrower not
                  exceeding  $2,045,000  principal  amount  evidenced  by, or in
                  connection with, industrial development revenue bonds relating
                  to facilities of Precise Fabricating  Corporation  acquired by
                  Borrower;

                           (8)  Intercompany  Indebtedness  in  the  form  of  a
                  promissory  note  executed by the Borrower in favor of Holding
                  Company   Subsidiary   in  a  maximum   principal   amount  of
                  $15,000,000;  provided that  (i)prior  notice of the execution
                  thereof  shall  have been  given to the  Agent and the  Banks,
                  (ii)Borrower's  board of directors  has  determined  that such
                  intercompany  Indebtedness is in the best interest of Borrower
                  and its Subsidiaries,  (iii) Borrower is continuing to receive
                  the intended tax benefit in connection with such  intercompany
                  Indebtedness,  (iv) neither Holding Company Subsidiary nor any
                  Wholly-Owned  Subsidiary of Holding Company  Subsidiary  shall
                  have any  creditors  other  than  the  Borrower,  except  that
                  Holding Company  Subsidiary and its Subsidiaries (all of which
                  shall be Wholly-Owned)  may have creditors other than Borrower
                  for Indebtedness  (other than Indebtedness for borrowed money)
                  incurred in the ordinary course of business up to an aggregate
                  amount  outstanding  at any one time of $100,000,  (v) Holding
                  Company  Subsidiary or any Wholly-Owned  Subsidiary of Holding
                  Company  Subsidiary  shall  continue to hold title,  right and
                  interest  to  Borrower's   trademarks,   patents,   investment
                  securities and debt assets (vi) Holding Company Subsidiary and
                  its Subsidiaries  (all of which shall be  Wholly-Owned)  shall
                  continue  to  manage  the  trademarks,   patents,   investment
                  securities  and debt  assets of Borrower  only,  and shall not
                  engage  in  any  other   business   (other   than  making  the
                  intercompany  loan  to  Borrower  permitted  by  this  Section
                  5.02(a)(8)) without the prior written consent of the Agent and
                  the Required Banks.

                           (9)  Other  Indebtedness  in an  aggregate  principal
                  amount not exceeding $1,500,000 at any time outstanding.

                  (b) Negative  Pledge;  Liens.  (i)Create,  assume,  incur,  or
suffer to be created, assumed, incurred or to exist, or permit any Subsidiary to
create,  incur,  assume or suffer to exist, any Lien upon any of its property or
assets of any  character  whether now owned or hereafter  acquired,  or upon the
income or  profits  therefrom;  or  (ii)transfer  or permit  any  Subsidiary  to
transfer any of such  property or assets or the income or profits  therefrom for
the purpose of subjecting the same to the payment of Indebtedness or performance
of any other  obligation  in priority to payment of its  general  creditors;  or
(iii)acquire, or agree or have an option to acquire, any property or assets upon
conditional sale or other title retention or purchase money security  agreement,
device or arrangement,  including,  without  limitation,  Capitalized Leases; or
(iv)suffer  to  exist  any  Indebtedness  which if  unpaid  might by law or upon
bankruptcy  or  insolvency,  or  otherwise,  be given  priority over its general
creditors;  or  (v)enter,  or permit or cause any  Subsidiary  to enter into any
agreement  which  purports to restrict in any manner the ability of the Borrower
or any  Subsidiary  to grant  security  interests  or liens to the Agent for the
benefit of the Agent and the Banks,  in respect of assets  either of the Company
or of any Subsidiary,  which assets have not theretofore been encumbered or made
subject to the grant of a security  interest  in favor of or for the  benefit of
the  Agent  and  the  Banks;  provided,  however,  that  the  Borrower  and  its
Subsidiaries  may  create or incur or suffer to be  created  or  incurred  or to
exist:

                           (1)      Liens in favor of the Agent for the benefit 
of the Agent and the Banks;

                           (2)      Nonconsensual Liens to secure claims for 
Indebtedness permitted by Section
                  5.02(b)(2) hereof;

                           (3)      Liens existing on the date hereof and Liens
 securing Indebtedness permitted by
                  Section 5.02(b) hereof;

                           (4) Deposits or pledges made in  connection  with, or
                  to secure  payment  of,  workers'  compensation,  unemployment
                  insurance,   old  age  pensions  or  other   social   security
                  obligations;
                           (5)  Purchase  money  security  interests  (including
                  mortgages, conditional sales, and any other title retention or
                  deferred purchase devices) in personal property of Borrower or
                  a  Subsidiary  existing or created at the time of  acquisition
                  thereof, and the renewal,  extension and refunding of any such
                  security  interest  in an  amount  not  exceeding  the  amount
                  thereof  remaining unpaid  immediately  prior to such renewal,
                  extension or refunding;  provided, however, that the principal
                  amount of Indebtedness  secured by each such security interest
                  in each item of property  does not exceed the cost  (including
                  all such Indebtedness secured thereby, whether or not assumed)
                  of the item subject thereto;

                           (6) Liens securing taxes, assessments or governmental
                  charges or levies or the  claims or  demands  of  materialmen,
                  mechanics,  carriers,  warehousemen,  landlords and other like
                  persons,  provided  the  payment  thereof  is not at the  time
                  required by Section 5.01(b);

                           (7) Liens  incurred or deposits  made in the ordinary
                  course of business (x) to secure the performance of letters of
                  credit,  bids,  tenders,  sales contracts,  leases,  statutory
                  obligations,  surety,  appeal and performance  bonds and other
                  similar  obligations  not  incurred  in  connection  with  the
                  borrowing of money,  the  obtaining of advances or the payment
                  of the deferred purchase price of property,  or payment of the
                  deferred purchase price of property, or (y) on the proceeds of
                  insurance  policies  securing  the  borrowings  to finance the
                  premiums thereon;

                           (8)  Attachment,  judgment  and other  similar  Liens
                  arising in connection with court proceedings,  so long as such
                  Liens have not been in force for the applicable appeal period,
                  execution  or  other  enforcement  has  not  been  levied  and
                  thereafter  so long as the execution or other  enforcement  of
                  such Liens is effectively stayed,  provided the claims secured
                  thereby  are being  actively  contested  in good  faith and by
                  appropriate proceedings;

                           (9)      Liens on property of a Subsidiary securing
 obligations owing to Borrower or a
                  Wholly-Owned Subsidiary;

                           (10)   Reservations,    exceptions,    encroachments,
                  easements, rights of way, covenants, conditions, restrictions,
                  leases and other  similar  title  exceptions  or  encumbrances
                  affecting real property, provided they do not in the aggregate
                  materially interfere with the ordinary conduct of the business
                  of Borrower and its Subsidiaries;

                           (11)  Liens  or  deposits  made  in  connection  with
                  contracts  with or made at the request of the United States of
                  America or any  department or agency thereof or resulting from
                  progress   payments  or  partial   payments   under  any  such
                  contracts;

                           (12)  Bailments of property  (a)to bailees which have
                  entered  into an  agreement  with  Borrower  and the  Agent in
                  substantially  the form  attached  hereto as  Exhibit  E, with
                  blanks  appropriately  filled,  as the  same  may be  amended,
                  supplemented or modified from time to time, provided, however,
                  that  Borrower  may  enter  into an  agreement  or  agreements
                  regarding  the  bailment  of  commingled  goods  which are not
                  substantially in the form of Exhibit E so long as the value of
                  commingled  goods  subject to such  bailments  does not exceed
                  $250,000 in the aggregate,  or (b)other bailments of property,
                  including  bailments in connection with Borrower's  relay rail
                  activities  and consistent  with  Borrower's  past  practices,
                  provided,  however,  that the value of such bailments does not
                  exceed $20,000,000 in the aggregate for all such property; and

                           (13)  Liens in  favor of one or more of the  Banks to
                  secure  the  obligations  of the  Company  under  one or  more
                  Interest  Rate Swap  Agreements  (as  defined in the  Security
                  Agreement).

                  (c)  Contingent  Liabilities.  Become  liable  or  permit  any
Subsidiary to become liable in respect of any  Guarantees  except  (i)Guarantees
existing on the date hereof and disclosed on Schedule  5.02(c)  attached hereto,
(ii)Guarantees  entered  into  by  Borrower  for  the  benefit  of one  or  more
Wholly-Owned Subsidiaries of Borrower,  (iii)Guarantees which may be required in
order to  comply  with  applicable  Law,  including  but not  limited  to ERISA,
(iv)Guarantees  or obligations  arising in respect of bid or performance  bonds,
(v)Guarantees  in favor of the  Banks,  and  (vi)other  Guarantees  which in the
aggregate could not result in payments in excess of $1,000,000.

                  (d)  Mergers,  etc.  Merge or  consolidate  with any person or
agree to do so or permit any  Subsidiary  to do so, or create or acquire any new
Subsidiary,  except  that,  after  notice  to the Agent  and the  Banks,  (i)any
Subsidiary of Borrower may merge with Borrower in a transaction  where  Borrower
is the surviving entity, (ii)any Subsidiary may merge with any other Subsidiary,
and  (iii)Borrower  may create  Subsidiaries not existing on the date hereof for
the purpose of  effecting  transactions  permitted  under  clause (5) of Section
5.02(f) hereof.

                  (e) Sales of Assets,  etc.  Sell,  assign,  lease or otherwise
dispose of (whether in one  transaction or in a series of  transactions)  any of
its assets (whether now owned or hereafter acquired) to any person or entity, or
permit any Subsidiary to do so, except (i)sales of assets in the ordinary course
of business,  (ii)sales of inventory  previously  categorized as obsolete,  slow
moving  or  surplusage  and  sales of  machinery,  equipment  or  other  similar
operating  assets  previously  categorized  as  obsolete or  surplusage  and not
utilized  at the time of such sale in the  ordinary  course of  business  of the
selling  entity,  (iii)sales of artwork,  (iv)sales of the stock of Subsidiaries
permitted to be created under Section  5.02(e)(iii)  hereof,  (v)after notice to
the Agent and the Banks, sales of properties and assets following an approval by
Borrower's  board of directors that such sales are made for cash on commercially
reasonable  terms at fair  market  value and do not  exceed  5% of  Consolidated
Tangible Net Worth (at the beginning of the applicable fiscal year) in any given
fiscal year of the  Borrower or 15% of  Consolidated  Tangible Net Worth (at the
beginning of the  applicable  fiscal year) in the  aggregate  during the term of
this  Agreement  (provided that the net cash proceeds of asset sales which shall
have been  reinvested  by the Borrower or any  Subsidiary  of the  Borrower,  in
accordance with, and as permitted by, Section  5.02(f)(5) of this Agreement,  in
tangible assets having comparable value shall be deducted as of the date of such
permitted reinvestment in calculating compliance with the 15% limitation in this
clause  (v)),  (vi)a  lease or  sublease of new  machining  equipment  valued at
approximately  $1,500,000  to Rail  Products  &  Fabrications,  Inc.,  based  in
Seattle, Washington ("RPF"),  (viii)after notice to the Agent and the Banks, and
with the approval of the Borrower's  board of directors,  the sale of all or any
portion of the Borrower's  Langfield,  Texas manufacturing  plant, and the land,
buildings,  equipment,  inventory,  books,  records and other  property  related
thereto at any time on or prior to June30,  1999,  and (ix) sales of  Borrower's
investment in Dakota,  Minnesota & Eastern  Railroad  Corp. for a price at least
equal to the value of that investment as shown in the then most recent financial
statements  of the  Borrower  provided to the Agent.  By the Agent and the Banks
agreeing to permit a sale,  assignment,  lease or other disposition of assets by
the Borrower  pursuant to this Section 5.02(e),  the Banks shall  automatically,
and without  the need for further  action on the part of the Agent or the Banks,
be deemed to have (1)consented to the release by the Agent, immediately prior to
the  disposition  of such assets,  of all liens and  security  interests in such
assets  held by the Agent for itself  and as agent for the  benefit of the Banks
under the Loan Documents,  and (2)directed the Agent to take all appropriate and
customary  action required to assure and to effect the full and complete release
of all of such liens and security interests in such assets.

                  (f)  Investments.  Make  or  permit  any  Subsidiary  to  make
Investments in any individual, firm or corporation except:

                           (1) direct  obligations  of or  obligations  directly
                  guaranteed by the United States of America,  prime  commercial
                  paper (rated by Moody's Investors Service at not less than A-2
                  and  by   Standard  &  Poors  at  not  less  than  P-2),   and
                  certificates of deposit or repurchase agreements issued by any
                  commercial  bank  having  capital  and  surplus  in  excess of
                  $100,000,000;

                           (2)  Investments of Borrower and the  Subsidiaries in
                  the ordinary  course of business and under usual and customary
                  terms  in the  form  of  advances  to the  Borrower's  and the
                  Subsidiaries' suppliers and subcontractors;

                           (3)  Investments  in  foreign  Subsidiaries,  and  in
                  Subsidiaries (other than Wholly-Owned  Subsidiaries) and joint
                  ventures,  in each case the  business  of which is  reasonably
                  related  to  the  Borrower's   principal  lines  of  business,
                  provided that (i)prior notice thereof shall have been given to
                  the Agent and the Banks,  (ii)each  such  Investment  shall be
                  made in  connection  with and  following  a  determination  by
                  Borrower's  board of directors that such  Investment is in the
                  best interest of Borrower and its  Consolidated  Subsidiaries,
                  and (iii)  the  amount of such  Investments  shall not  exceed
                  $2,500,000 in any given fiscal year of the Borrower;

                           (4) Deposit  accounts  (including time and demand) in
                  and bankers'  acceptances  of commercial  banks referred to in
                  clause (1) of subsection 5.02(f);

                           (5) Investments in domestic Wholly-Owned Subsidiaries
                  not in  existence  on the  date  of this  Agreement,  domestic
                  product lines not part of the Borrower's  business on the date
                  of this Agreement,  or new domestic businesses not operated by
                  the Borrower on the date of this  Agreement,  in each case the
                  business  of which is  reasonably  related  to the  Borrower's
                  principal  lines  of  business  and in each  case in a  single
                  transaction or related series of  transactions,  provided that
                  (i)prior notice thereof shall have been given to the Agent and
                  the  Banks,   (ii)each  such  Investment   shall  be  made  in
                  connection with, and following,  a determination by Borrower's
                  board  of  directors  that  such  Investment  is in  the  best
                  interest of Borrower and its  Consolidated  Subsidiaries,  and
                  (iii) the  aggregate  amount of such  Investments  during  any
                  period of four consecutive  fiscal quarters including the then
                  current  fiscal quarter (the  "Measurement  Period") shall not
                  exceed the sum of  $5,000,000  (or,  if the "Pro  Forma  Test"
                  described  in the  next  sentence  is met  with  respect  to a
                  particular proposed  Investment,  $10,000,000) plus the amount
                  of cash proceeds of asset sales made in accordance  with,  and
                  as permitted by, Section  5.02(e)(v) in tangible assets during
                  the Measurement Period through the date of the Investment. The
                  "Pro  Forma  Test" will be met with  respect  to a  particular
                  proposed  Investment if the Consolidated Total Indebtedness to
                  EBITDA  Ratio  would  have  been  less  than  3.0  to 1,  such
                  determination   to  be  made  on  a  pro  forma   basis   with
                  Consolidated  EBITDA  being  calculated  as of the  end of the
                  prior four  consecutive  fiscal  quarters for the Borrower and
                  the acquired entity and as if Consolidated  Total Indebtedness
                  on the last day of the most recent  fiscal  quarter just ended
                  had been increased by the amount of the Investment in question
                  (including any assumed Indebtedness), such determination to be
                  made  using  assumptions  and  other  calculations  reasonably
                  satisfactory  to the  Agent,  which  assumptions  in any event
                  shall not include any cost  savings or other  variations  from
                  historical performance;

                           (6)      Investments existing on the date of this 
Agreement (including extensions or
                  renewals thereof);

                           (7)  Advances  to RPF  under  the Loan  and  Security
                  Agreement,  dated June 8, 1995,  between the Borrower and RPF,
                  aggregating,  on a cumulative basis, not more than $2,500,000.
                  At the option of the  Borrower  and RPF, all or any portion of
                  such advances,  once made to RPF, may be converted into equity
                  interests in RPF at any time thereafter, but such conversions,
                  if any, shall not have the effect of increasing the cumulative
                  amount of  advances  permitted  under  this  Section5.02(f)(7)
                  above  $2,500,000 in the aggregate.  If requested by the Agent
                  or  the  Banks,   the  Borrower  will  cause  RPF's  repayment
                  obligation to be evidenced by a promissory note;

                           (8)  Loans  to  officers  of  the  Borrower  and  its
                  Subsidiaries  for the sole purpose of purchasing  common stock
                  of the Borrower, such loans (i)not to exceed $1,200,000 in the
                  aggregate and $60,000 per officer, (ii) to be made pursuant to
                  a plan  approved by the board of directors of the Borrower and
                  (iii)to  be secured by the  common  stock  purchased  with the
                  proceeds thereof;

                           (9)  Trademarks and patent rights of Borrower held by
                  Holding  Company  Subsidiary or a  Wholly-Owned  Subsidiary of
                  Holding  Company  Subsidiary and associated  royalty  payments
                  from Borrower to Holding Company  Subsidiary or a Wholly-Owned
                  Subsidiary  of  Holding  Company  Subsidiary  so  long  as the
                  conditions in Section  5.02(a)(8)  continue to be satisfied at
                  all relevant times; and

                           (10)  Investments in existing  domestic  Wholly-Owned
                  Subsidiaries,  provided that  Borrower is in  compliance  with
                  Section5.04  hereof  before,  and will be in  compliance  with
                  Section5.04 hereof after, the Investment is made.

provided,  however,  that  Borrower  may  make  Investments  which  are  not  in
compliance with this Section 5.02(f) in the aggregate  amount of $500,000 at any
one time outstanding.

                  (g) Transactions  with Controlling  Persons.  Pay, directly or
indirectly, any funds to or for the account of, make any Investment in, or enter
into a Guarantee in respect of the Indebtedness of, or lease, sell,  transfer or
otherwise  dispose of any  assets,  tangible  or  intangible,  other than in the
ordinary  and usual  conduct of business and upon fair and  reasonable  terms no
less  favorable to Borrower  than those it would  obtain in a  comparable  arm's
length  transaction  with one not affiliated  with Borrower,  to any Controlling
Person,  or permit any of its  Subsidiaries to do so;  provided,  however,  that
notwithstanding   the  provisions  of  this  Section  5.02(g)  Borrower  or  its
Subsidiaries  may pay to its  officers  and  directors  salaries  and  fees  for
services  rendered in such capacities and usual and ordinary  business  expenses
and advances for travel expenses,  incentive  compensation  pursuant to plans of
Borrower and its  Subsidiaries  existing on the date hereof and plans  hereafter
adopted by the board of  directors of Borrower,  may make  payments  pursuant to
existing  contractual  relationships  between  Borrower or its  Subsidiaries and
officers and employees thereof and contractual employment relationships approved
by the board of directors of Borrower  between  Borrower or its Subsidiaries and
employees  thereof,  may provide and make available to eligible employees fringe
and other usual benefits in accordance with past practices, and may, pursuant to
an  agreement  approved  by the board of  directors  of  Borrower,  pay fees for
services and advice (in an amount which bears a reasonable  relationship  to the
amount and type of such  services and advice) to directors and Borrower may make
loans to officers of the Borrower and its  Subsidiaries  for the sole purpose of
purchasing common stock of the Borrower,  such loans (i)not to exceed $1,200,000
in the  aggregate  and $60,000 per  officer,  (ii)to be made  pursuant to a plan
approved by the board of directors of the Borrower and (iii)to be secured by the
common stock purchased with the proceeds thereof.

                  (h) Debt Retirement,  Purchases and  Redemptions.  Voluntarily
purchase,  prepay, redeem or otherwise retire any preferred or preference stock,
subordinated  debentures,  sinking fund  debentures,  promissory  notes or other
securities  (other than capital stock) issued by Borrower or any Subsidiary,  or
agree to the rescheduling to shorten scheduled  maturities or principal payments
of or to increase the rate of interest payable on outstanding indebtedness under
any agreement or  instrument  evidencing  an  obligation  for borrowed  money of
Borrower or any  Subsidiary,  or permit any of its  subsidiaries to do so, other
than the  Indebtedness  referred to in paragraphs (7) and (8) of Section 5.02(a)
hereof;  provided that, in the case of Indebtedness referred to in paragraph (8)
of Section  5.02(a)  hereof,  an Event of Default or Potential  Event of Default
shall not have occurred and be continuing or shall not exist.

                  (i)  Operating  Leases.  Enter into or become  subject  to, or
permit any of its  Subsidiaries  to enter into or become  subject to,  Operating
Leases which in the  aggregate  provide for  payments  during any fiscal year in
excess of $6,000,000.

                  (j) Change of Control.  Enter into any merger,  consolidation,
reorganization,  corporation  restructuring  or other  transaction,  or take any
other action,  that shall cause or result in, or for any reason suffer, a Change
of Control.

                  Section 5.03. Reporting Requirements. Borrower covenants that,
so long as it may borrow hereunder and until payment in full of all Notes issued
hereunder and interest due thereon and all other amounts due hereunder and under
any other Loan Document, Borrower will furnish to each Bank:

                  (a) Financial Statements. (i)Within 15 calendar days after the
due date of filing with the Securities and Exchange  Commission  copies of forms
8-K,  10-Q and 10-K (or if any of such  forms  are  discontinued,  substantially
equivalent  reports)  accompanied,  (A)in  the  case of  each  form  10-Q,  by a
certification of a Responsible  Officer of Borrower of all financial  statements
set forth  therein  and (B)in  the case of each  form  10-K,  by a report on the
financial  statements  set forth therein of  independent  public  accountants of
recognized  standing  selected by  Borrower  which  report or opinion  shall not
contain any  qualification  or exception not reasonably  acceptable to the Agent
or, if Borrower is no longer  required to file such reports with the  Securities
and Exchange Commission, Borrower shall furnish:

                           (1) within 60 days  after the end of the first  three
                  quarters  of each  fiscal  year,  consolidated  statements  of
                  profit and loss and changes in cash flow of  Borrower  and its
                  Consolidated  Subsidiaries  for such fiscal  quarter,  for the
                  period  between the end of the  preceding  fiscal year and the
                  end  of  the  most   recent   fiscal   quarter   and  for  the
                  corresponding  periods of the  preceding  fiscal  year,  and a
                  balance sheet of Borrower and its Consolidated Subsidiaries at
                  the end of such quarter and at the end of the preceding fiscal
                  year, all in reasonable detail, subject,  however, to year-end
                  audit adjustments,  and certified by a Responsible  Officer of
                  Borrower;

                           (2) within 90 days after the end of each fiscal year,
                  a  consolidated  statement  of profit and loss and  changes in
                  cash flow and changes in shareholders'  equity of Borrower and
                  its Consolidated Subsidiaries for such year and a consolidated
                  balance sheet of Borrower and its Consolidated Subsidiaries as
                  of the  end of  such  year,  setting  forth  in  each  of such
                  statements  and  balance  sheets in  comparative  form (or, if
                  comparative  form  is  not  required  by  regulations  of  the
                  Securities  and Exchange  Commission  applicable  to companies
                  with securities  registered  under the Securities Act of 1933,
                  in the form required by such  regulations)  the  corresponding
                  statements  for the preceding  fiscal year,  all in reasonable
                  detail and reported on by  independent  public  accountants of
                  recognized  standing  selected by  Borrower,  whose  report or
                  opinion  accompanying  such  financial  statements  shall  not
                  contain  any   qualification   or  exception  not   reasonably
                  acceptable to the Agent;

and (ii)as soon as  practicable  and in any event within  twenty (20) days after
the close of each month of each fiscal year of Borrower,  unaudited consolidated
statements  of income and changes in cash flow of Borrower and its  Consolidated
Subsidiaries for such month and for the period from the beginning of such fiscal
year to the end of such month,  and an unaudited  consolidated  balance sheet of
Borrower and its Consolidated Subsidiaries as of the close of such month, all in
reasonable detail.

                  (b)   Accounts    Receivable-Inventory    Reports;   Officer's
Certificates.  At the time the  statements  and balance  sheets  required by the
preceding clause (a)are furnished, (i)an updated Accounts Receivable - Inventory
Report in detail and form  satisfactory to the Banks and signed by a Responsible
Officer  of  the  Borrower  and  each  Guarantor,  and  (ii)a  certificate  of a
Responsible  Officer of Borrower and each Guarantor  setting forth in reasonable
detail the data and  computations  necessary  to  indicate  compliance  with the
provisions of Sections 2.05, 5.01(h),  5.01(i),  and 5.01(j) hereof. In addition
to the requirements  set forth in this paragraph,  the Borrower shall, and shall
cause each Guarantor to, from time to time upon the  reasonable  requests of the
Banks provide to the Banks update Accounts Receivable-Inventory Reports.

                  (c) Proxy/Registration Statements.  Promptly upon the sending,
making  available  or filing of the same,  a copy of each  financial  statement,
report  and  proxy  statement  sent by  Borrower  to its  stockholders,  of each
registration statement or information statement that shall have become effective
and of each  regular or periodic  report  filed by Borrower or any  Consolidated
Subsidiary  with the  Securities  and Exchange  Commission  or any  governmental
authority succeeding to the functions thereof.

                  (d)  ERISA  Notifications.   (i)Notice  (or  cause  each  Plan
Employer  with  respect  to its Plans to notify  the Agent and each of the Banks
prior to taking final corporate  action) (A)of the Plan Employer's  intention to
adopt any new Plan,  and (B)of the Plan  Employer's  intention to terminate  for
purposes of Title IV of ERISA any  single-employer  Plan or to withdraw  from or
cease making timely contributions to any multi-employer Plan,  (ii)copies of (or
cause each Plan  Employer  with respect to its Plans to deliver to the Agent and
each of the Banks  copies of  contemporaneously  with the filing with or receipt
from the applicable  governmental agency or Plan) (A)IRS Form 5310 relating to a
Plan termination or transfer of Plan assets,  (B)of any 30day Notice to the PBGC
of a reportable event as described in Section 4043 of ERISA,  (C)of any IRS Form
5500, including all schedules, for any Plan which, on the date on which such IRS
Form 5500 is filed, has unfunded vested liabilities in excess of $100,000, (D)of
any  writing  from the PBGC to the  effect  that it may or will  take  action to
terminate any Plan under Title IV of ERISA or from any multi-employer  Plan that
it may and will take  action to assert  withdrawal  liability  against the Plan,
(E)of any notice filed with the PBGC pursuant to Section 4041 of ERISA and (F)of
any notice from the Secretary of the Treasury to the effect that a Plan has lost
its qualified status under Section 401 of the Code or has been terminated within
the meaning of Section  411(d)(3) of the Code, and (iii)within  thirty (30) days
of the  filing or  receipt of each such  document  other  than IRS Form 5500,  a
certificate of a Responsible  Officer of Borrower  certifying as to what further
action has been taken by the Plan Employer in  connection  therewith and whether
the matter  referred to in such document is likely to cause the Plan Employer to
incur  liability  to the PBGC or  multi-employer  Plan in an amount in excess of
$100,000.  For all purposes of this paragraph,  Borrower shall be deemed to have
all knowledge of all facts  attributable to any Plan  administrator or any other
Plan Employer,  or with respect to a multiemployer  Plan on notice of withdrawal
liability from any multiemployer Plan.

                  (e) Notices of Default. As soon as possible,  and in any event
within  five days after the  occurrence  of each  Event of Default or  Potential
Event of Default a statement of a Responsible  Officer of Borrower setting forth
details of such Event of Default or  Potential  Event of Default  and the action
which Borrower proposes to take with respect thereto.

                  (f) Notices of Material  Litigation.  Promptly  upon  becoming
aware thereof, notice of the commencement, existence or threat of any proceeding
against or affecting Borrower or any Subsidiary (i)which,  if adversely decided,
could have a material  adverse  effect on the business,  operations or financial
condition of the Borrower or any Subsidiary or on the ability of Borrower or any
Guarantor  to perform its  obligations  under this  Agreement  or any other Loan
Document or (ii)arising under any federal, state or local Law, regulating (A)the
discharge  of  materials  into  or the  protection  of the  environment,  (B)the
management,  handling or  disposal of  hazardous  waste or toxic  substances  or
(C)the public health.

                  (g)  Notices  of  Adverse   Judgments.   Promptly   after  the
institution  thereof,  notice of all adverse  judgments in excess or $250,000 or
which  involve  any  substantial  risk of any  material  adverse  effect  on the
business,  operations  or condition  (financial or otherwise) of Borrower or any
Subsidiary entered by an Official Body against Borrower or any Subsidiary,  said
notice to include the exact Dollar  amount of any such adverse  judgment as well
as  any  other  estimated  adverse  economic  impact  on  the  Borrower  or  its
Subsidiaries.

                  (h) Material  Adverse  Changes.  Promptly after the occurrence
thereof, notice and a reasonably detailed description of all events, conditions,
acts,  facts and omissions  (except  general  economic  conditions in the United
States which are a matter of public knowledge) which would constitute a material
adverse change in or which involve any substantial  risk of any material adverse
effect on the  business,  operations  or condition  (financial  or otherwise) of
Borrower.

                  (i)  Copies  of  Reports,  Filings,  etc.  Promptly  after the
sending or filing thereof, copies of all proxy statements,  financial statements
and reports which  Borrower or any  Subsidiary  sends to its  stockholders,  and
copies  of all  regular,  periodic  and  special  reports  and all  registration
statements  which  Borrower or any  Subsidiary  may file with the Securities and
Exchange  Commission  or any  governmental  authority  which may be  substituted
therefor, or with any national securities exchange.

                  (j) Returns,  etc. Promptly after the occurrence thereof,  and
if  material  individually  or in  the  aggregate,  notice  of  (i)all  returns,
rejections,  repossessions  or losses of or damage to  property  incurred  by an
account and (ii)any requests for audit or adjustment,  or any dispute,  relating
to an account.

                  (k) Other Information. Such information and documents relating
and to Borrower's or any Guarantor's  financial condition,  business,  assets or
liabilities,  at such times and in such form and detail as the Agent or any Bank
may  request,  including,  without  limitation,   (i)all  invoices,   documents,
contracts,   chattel  paper,   instruments  and  other  writings  pertaining  to
Borrower's or any Guarantor's contracts or the performance thereof, (ii)evidence
of  Borrower's or any  Guarantor's  accounts and  statements  showing the aging,
identification,  reconciliation and collection  thereof,  (iii)reports as to the
Borrower's  or any  Guarantor's  inventory and sales,  shipment,  damage or loss
thereof,  and (iv)a list of all of the locations  where any of Borrower's or any
Guarantor's  Eligible  Inventory is kept or stored,  such list to be updated and
revised,  if necessary,  on a quarterly  basis and provided to the Agent and the
Banks at the time financial statements are submitted pursuant to Section 5.03(a)
hereof or as  requested  by any Bank,  all of the  foregoing  to be certified by
authorized officers or other employees of Borrower or the applicable  Guarantor,
and such other  information  respecting  the  business,  the  properties  or the
condition  or  operations,  financial  or  otherwise,  of Borrower or any of the
Subsidiaries as the Agent or any Bank may from time to time reasonably request.

                  Section 5.04. Designated Subsidiaries.  Borrower may from time
to time exclude,  by delivering a written notice to the Agent together with such
other  information  as the  Agent  or  any  Bank  shall  reasonably  request,  a
Subsidiary  or  Subsidiaries  of the Borrower  (whether now owned or acquired or
formed  after the date  hereof)  from  being a  Guarantor  hereunder  (each such
excluded Subsidiary being called herein a "Designated Subsidiary") provided that
the Designated  Subsidiaries shall not at any time have aggregate gross revenues
or assets that, individually or in the aggregate,  constitute 10% or more of the
gross  revenues or assets of the  Borrower  and its  Consolidated  Subsidiaries.
Schedule 5.04 sets forth a list of the  Designated  Subsidiaries  as of the date
hereof.  Holding  Company  Subsidiary and the  Subsidiaries  of Holding  Company
Subsidiary (all of which shall be Wholly-Owned) shall at all times be designated
by the Borrower as Designated  Subsidiaries.  Any  Subsidiary  designated by the
Borrower as a Designated  Subsidiary after the date hereof shall be deemed added
to Schedule  5.04 upon Agent's  receipt of the notice  provided for in the first
sentence of this Section 5.04. In the event that the Designated  Subsidiaries at
any time have aggregate  gross revenues or assets that,  individually  or in the
aggregate,  constitute  10% or more  of the  gross  revenues  or  assets  of the
Borrower  and its  Consolidated  Subsidiaries,  the Borrower  shall  immediately
provide a notice to Agent  specifying  which  Subsidiary or Subsidiaries  (other
than Holding Company  Subsidiary and its  Wholly-Owned  Subsidiaries)  are to be
removed  from  the  list  of  Designated  Subsidiaries  on  Schedule  5.04.  Any
Subsidiaries  of the  Borrower  that are not  Designated  Subsidiaries  shall be
Guarantors hereunder.


                                                    ARTICLE VI

                                                      DEFAULT

                  Section  6.01.  Events of  Default.  If any one or more of the
following  described  Events of Default  shall occur and be continuing or exist,
the Banks and the Agent shall have the rights and  remedies,  in addition to all
other  rights and remedies  available  to the Banks and the Agent,  set forth in
Sections 6.02 and 6.03 of this Agreement:

                  (a)  Borrower  shall fail to pay  interest,  principal  or any
other amount due hereunder within two Business Days of the date when due; or

                  (b) Borrower  shall  default (i)in any payment of principal of
or interest on any other  obligation  for  borrowed  money  beyond any period of
grace  provided with respect  thereto,  or (ii)in the  performance  of any other
agreement,  term or condition  contained in any  agreement  under which any such
obligation is created and as a result of such default such obligation has become
due prior to its stated  maturity and the result of an event specified in clause
(ii) is to  accelerate  or permit the  acceleration  of any such  obligation  in
excess of $500,000; or

                  (c) Any representation or warranty herein made by Borrower, or
any  certificate  or financial  statement  furnished  pursuant to the provisions
hereof,  shall prove to have been false or misleading in any material respect as
of the time made or  furnished  and  Borrower  shall not have  taken  corrective
measures  satisfactory to the Agent and the Banks with respect thereto within 30
days after a written notice is sent to Borrower by the Agent; or

                  (d) A Default  shall occur  under  Section  5.01(h),  5.01(i),
5.01(j),  5.01(o), 5.02(d), 5.02(g), 5.02(h), 5.02(j) or 5.04 hereof or an Event
of  Default  shall  occur  under the  Security  Agreement  or the  Guaranty  and
Suretyship  Agreements,  any  Guarantor  Security  Agreement  or any  Subsidiary
Guaranty and Suretyship Agreement; or

                  (e) A  Default  shall  occur  under  either  Section  5.01(d),
5.01(m), 5.01(n), 5.02(a), 5.02(b), 5.02(c), 5.02(e), or 5.02(f) hereof and such
Default  shall not have been  cured  within  30 days of the  occurrence  of such
Default; or

                  (f) Borrower  shall  default in the  performance  of any other
covenant,  condition  or  provisions  hereof and  Borrower  shall not have taken
corrective measures satisfactory to the Agent and the Banks with respect thereto
within 30 days after a written notice is sent to Borrower by the Agent; or

                  (g) Both the  following  events shall occur:  (i)a  Reportable
Event,  the occurrence of which would have a material adverse effect on the Plan
Employer and which could cause the  imposition  of a lien under  Section 4068 of
ERISA,  shall have  occurred with respect to any Plan or Plans and be continuing
30 days after written  notice of such event shall have been given to Borrower by
the Agent;  and (ii)the  aggregate  amount of the then current  value of benefit
commitments  under such Plan or Plans  guaranteed  under  Title IV of ERISA (and
determined   using  the  PBGC  actuarial   assumptions  for  determining   asset
sufficiency)  exceeds the then  current  value of the assets  allocable  to such
benefit commitments by more than $1,000,000 at such time; or

                  (h) A proceeding  shall have been instituted in a court having
jurisdiction in the premises  seeking a decree or order for relief in respect of
Borrower  or  any  Subsidiary  in  an  involuntary  case  under  any  applicable
bankruptcy,  insolvency or other similar law now or hereafter in effect,  or for
the  appointment  of  a  receiver,  liquidator,  assignee,  custodian,  trustee,
sequestrator  (or similar  official)  of Borrower or any  Subsidiary  or for any
substantial  part of its property,  or for the  winding-up or liquidation of its
affairs,  and such proceeding shall remain undismissed or unstayed and in effect
for a period of 60 consecutive  days or such court shall enter a decree or order
granting the relief sought in such proceeding; or

                  (i) Borrower or any Subsidiary shall commence a voluntary case
under  any  applicable  bankruptcy,  insolvency  or  other  similar  law  now or
hereafter  in  effect,  shall  consent to the entry of an order for relief in an
involuntary  case under any such law, or shall consent to the  appointment of or
taking  possession  by a receiver,  liquidator,  assignee,  trustee,  custodian,
sequestrator  (or other  similar  official) of Borrower or Subsidiary or for any
substantial  part of its property,  or shall make a general  assignment  for the
benefit of  creditors,  or shall fail  generally to pay its debts as they become
due, or shall take any corporate action in furtherance of any of the foregoing.

                  Section 6.02.  Consequences of Event of Default.

                  (a) If an Event of  Default  specified  under  paragraphs  (a)
through  (g) of Section  6.01 shall  occur,  the Banks shall be under no further
obligation  to make  Loans  hereunder  and the Agent  shall be under no  further
obligation  to  issue  Letters  of  Credit   hereunder;   and  the  Agent,  upon
instructions  from the Required Banks, may by written notice to Borrower declare
the unpaid balance of all Loans then  outstanding and interest  accrued thereon,
and all other  liabilities of Borrower  hereunder and thereunder to be forthwith
due and payable,  and the same shall thereupon become and be immediately due and
payable,  without  presentment,  demand or protest of any kind, all of which are
hereby expressly waived.

                  (b) If an Event of Default,  specified under paragraphs (h) or
(i) of Section 6.01 shall occur, the Banks shall be under no further  obligation
to make Loans  hereunder  and the Agent shall be under no further  obligation to
issue  Letters of Credit  hereunder;  and the  unpaid  balance of all Loans then
outstanding and interest accrued thereon and all other Debt shall be immediately
due and payable, without presentment, demand, protest or notice of any kind, all
of which are hereby expressly waived.

                  Section 6.03.  Rights of Set-Off.  In case an Event of Default
shall occur and be continuing or shall exist, the Agent and each Bank shall have
the right, in addition to all other rights and remedies available to it, without
notice to the Borrower,  to set-off  against and to appropriate and apply to the
unpaid  balance of the Debt all the Notes and all other  obligations of Borrower
hereunder  any debt  owing to,  and any other  funds  held in any manner for the
account of Borrower by such holder, including,  without limitation, all funds in
all deposit accounts (whether general or special, time or demand,  provisionally
credited or finally  credited,  or  otherwise)  now or hereafter  maintained  by
Borrower for its own account  with such  holder,  and the Agent and each Bank is
hereby granted a security  interest in and lien on all such debts (including all
such deposit  accounts) for such purpose;  provided,  however,  that, except for
operating expenses due the Agent from the Borrower,  obligations of the Borrower
to the Banks arising in connection  with the Loans shall be satisfied first with
the  proceeds  of  any  exercise  of the  right  of  set-off  before  any  other
obligations of the Borrower to any of the Banks shall be paid.  Such right shall
exist  whether  or not any such  holder or the Agent or any Bank shall have made
any demand  under this  Agreement  or any Note and  whether or not the Notes and
such other  obligations are matured or unmatured.  Borrower hereby confirms each
such holder's and the Agent's and each Bank's right of banker's lien and set-off
and nothing in this  Agreement  shall be deemed any waiver or prohibition of any
such  holder's  or of the Agent's  and each  Bank's  right of banker's  lien and
set-off.


                                                    ARTICLE VII

                                                     THE AGENT

                  Section 7.01.  Appointment.  The Banks hereby  appoint  Mellon
Bank, N.A. to act as Agent as herein specified for the Banks hereunder and under
the Loan  Documents.  Each of the Banks does hereby  accept and agree to all the
terms and conditions of the Loan Documents. Each of the Banks hereby irrevocably
authorizes,  and each  holder of any Note by the  acceptance  of a Note shall be
deemed  irrevocably  to  authorize,  the Agent to take such action on its behalf
under the  provisions  of this  Agreement  and the Loan  Documents and any other
instruments and agreements  referred to herein,  and to exercise such powers and
to perform such duties hereunder and thereunder,  as are specifically  delegated
to or required of the Agent by the terms hereof and thereof,  together with such
powers as are reasonably incidental thereto.  Mellon Bank, N.A. agrees to act as
the Agent on behalf of the Banks to the extent  provided in this  Agreement  and
the Loan  Documents.  The Banks hereby appoint the law firm of Reed Smith Shaw &
McClay to act as  counsel  to the Agent and each of the Banks as to all  matters
arising in connection with this Agreement or the other Loan Documents.

                  Section 7.02.  Delegation of Duties. The Agent may perform any
of its duties  hereunder  or under the Loan  Documents  by or through  agents or
employees  and shall be  entitled  to advice of counsel  concerning  all matters
pertaining to its duties hereunder.

                  Section   7.03.   Nature   of   Duties;   Independent   Credit
Investigation.  The Agent shall have no duties or responsibilities  except those
expressly set forth in this Agreement and the Loan Documents.  The duties of the
Agent shall be mechanical and administrative in nature; the Agent shall not have
by reason of this  Agreement or any Loan  Document a fiduciary  relationship  in
respect  of any  Bank;  and  nothing  in this  Agreement  or any Loan  Document,
expressed or implied,  is intended to or shall be so construed as to impose upon
the Agent any  obligations  in respect of this  Agreement or any Loan  Document,
except  as  expressly  set  forth  herein  or  therein.   Each  Bank   expressly
acknowledges (a)that the Agent has not made any representations or warranties to
it and that no act by the Agent  hereafter  taken,  including  any review of the
affairs of Borrower or any of its  Subsidiaries,  shall be deemed to  constitute
any representation or warranty by the Agent to any Bank; (b)that it has made and
will make its own  independent  investigation  of the  financial  condition  and
affairs and its own appraisal of the  creditworthiness of Borrower in connection
with the making and continuance of the Loans hereunder;  (c)that it has made its
own independent  investigation  of the legal matters relating to this Agreement,
the other Loan  Documents and the Notes to be issued to it pursuant to the terms
hereof;  and  (d)that  the Agent  shall have no duty or  responsibility,  either
initially or on a continuing basis, to provide any Bank with any credit or other
information with respect thereto,  whether coming into its possession before the
making of a Loan or at any time or times thereafter.

                  Section 7.04.  Actions in  Discretion  of Agent;  Instructions
from the Banks. The Agent agrees, upon the written instructions of all the Banks
to take any action of the type  specified  as being  within the Agent's  rights,
powers or discretion  herein. In the absence of instructions by all he Banks the
Agent shall have authority,  in its sole discretion,  to take or not to take any
such action,  unless this Agreement or a Loan Document specifically requires the
consent of all the Banks.  Any action  taken  pursuant to such  instructions  or
discretion  shall be  binding on all the Banks and on all  holders of Notes.  No
Bank shall have any right of action whatsoever  against the Agent as a result of
the Agent  acting or  refraining  from acting  hereunder or under the other Loan
Documents in accordance with the instructions of all Banks, or in the absence of
such  instructions,  in the  absolute  discretion  of the Agent,  subject to the
provisions of Section 7.06 hereof.

                  Section 7.05.  Exculpatory  Provisions.  Neither the Agent nor
any of its directors,  officers, employees or agents shall be liable to any Bank
for any action taken or omitted to be taken by it or them hereunder or under the
other Loan Documents,  or in connection herewith or therewith,  unless caused by
its or their own gross  negligence  or willful  misconduct.  In  performing  its
functions and duties  hereunder on behalf of the Banks, the Agent shall exercise
the same care which it would exercise in dealing with loans for its own account,
but it shall not  (a)be  responsible  in any  manner to any of the Banks for the
effectiveness,  enforceability,  genuineness,  validity or the due  execution of
this  Agreement,  any Loan  Document  or any of the Notes,  or for any  recital,
representation,  warranty, document,  certificate, report or statement herein or
made or  furnished  under  or in  connection  with  this  Agreement  or any Loan
Document,  or (b)be under any  obligation to any of the Banks to ascertain or to
inquire as to the  performance  or observance of any of the terms,  covenants or
conditions  hereof or  thereof  on the part of the  Borrower,  or the  financial
condition of the Borrower,  or the existence or possible  existence of any Event
of Default or Potential Event of Default.

                  Section 7.06.  Reimbursement  and  Indemnification.  Each Bank
agrees to reimburse  and  indemnify  the Agent (to the extent not  reimbursed by
Borrower) ratably, in proportion to its Commitment, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses or disbursements of any kind or nature  whatsoever which may be
imposed on, incurred by or asserted  against the Agent, in its capacity as such,
in any way relating to or arising out of this Agreement, the Loan Documents, the
Letters  of Credit  or the Notes or any  action  taken or  omitted  by the Agent
hereunder or  thereunder,  provided that no Bank shall be liable for any portion
of  such  liabilities,   obligations,   losses,  damages,  penalties,   actions,
judgments,  suits, costs,  expenses or disbursements (a)if the same results from
the Agent's gross negligence or willful  misconduct,  or (b)if such Bank was not
given notice of the subject  claim and the  opportunity  to  participate  in the
defense thereof, at its expense, or (c)if the same results from a compromise and
settlement  agreement  entered  into  without the consent of such Bank.  Without
limitation of the  foregoing,  each Bank agrees to reimburse the Agent  promptly
upon  demand for its  ratable  share of any  out-of-pocket  expenses  (including
attorney's  fees)  incurred  by the Agent in  connection  with the  preparation,
execution,  administration  or enforcement of, or the preservation of any rights
under,  this Agreement and the other Loan Documents to the extent that the Agent
is not reimbursed for such expenses by Borrower.

                  Section 7.07.  Reliance by Agent.  The Agent shall be entitled
to rely  upon  any  writing,  telegram,  telecopy,  telex or  teletype  message,
resolution, notice, consent, certificate, letter, cablegram, statement, or order
or other document or conversation by telephone or otherwise believed by it to be
genuine and correct and to have been signed,  sent or made by the proper person,
firm or  corporation,  and upon  opinions  of  counsel  and  other  professional
advisers selected by the Agent. The Agent shall be fully justified in failing or
refusing to take any action hereunder or under any Loan Document unless it shall
first be  indemnified  to its  satisfaction  by the  Banks  against  any and all
liability  and  expense  which  may be  incurred  by it by  reason  of taking or
continuing to take any such action.

                  Section 7.08. Agent in its Individual  Capacity.  With respect
to its  Commitments,  the Loans  made by it and any Note  held by it,  the Agent
shall  have the same  rights  and  powers  hereunder  as any other  Bank and may
exercise  the same as though it were not the  Agent,  and the terms  "Banks"  or
"holders of the Notes" shall,  unless the context otherwise  indicates,  include
the Agent in its individual capacity.  The Agent and its affiliates may, without
liability to account,  make loans to, accept deposits from, act as trustee under
indentures  of, and  generally  engage in any kind of banking or trust  business
with,  Borrower and its Subsidiaries and affiliates as though it were not acting
as Agent hereunder.

                  Section 7.09.  Holders of Notes.  The Agent may deem and treat
any payee of any Note as the owner  thereof for all purposes  hereof  unless and
until written notice of the assignment or transfer thereof shall have been filed
with the Agent. Any request, authority or consent of any legal entity who at the
time of making such request or giving such authority or consent is the holder of
any Note shall be conclusive and binding on any subsequent holder, transferee or
assignee of such Note or of any Note or Notes issued in exchange therefor.

                  Section  7.10.  Equalization  of Banks.  The Banks agree among
themselves  that,  with  respect  to  all  amounts  received  by  any  Bank  for
application on any obligation hereunder or on the Notes, after the earlier of an
exercise of any Bank's rights of set-off  pursuant to the  provisions of Section
6.03  or the  acceleration  of  maturity  of any of the  Notes  pursuant  to the
provisions  of Section  6.02,  equitable  adjustment  will be made in the manner
stated in the next succeeding sentence so that, in effect, all such amounts will
be shared ratably among the Banks,  in proportion to the sum of the amounts then
outstanding  under the Notes,  plus all other  Indebtedness of Borrower to them,
whether  received by voluntary  payment,  by realization  upon security,  by the
exercise  of the right of set-off or banker's  lien,  by  counterclaim  or cross
action or any other  non-pro rata  source.  Any Bank  receiving  any such amount
shall  purchase  for cash  from the  other  Banks an  interest  in their  Notes,
Borrower's  Indebtedness to the Banks, and all other  obligations of Borrower to
the Banks, if any, in such amount as shall result in a ratable  participation by
each of the Banks in the aggregate  unpaid amount of all outstanding  Notes then
held by all of the Banks,  all  Indebtedness  of Borrower to the Banks,  and all
other obligations of Borrower to the Banks,  provided that if all or any portion
of such excess  amount is  thereafter  recovered  from such Bank,  such purchase
shall be  rescinded  and the  purchase  price  restored  to the  extent  of such
recovery but without interest.

                  Section  7.11.  Successor  Agent.  The Agent may resign at any
time by giving written  notice thereof to the Banks and Borrower.  Upon any such
resignation,  the Required  Banks (with the consent of Borrower,  which  consent
shall not be unreasonably  withheld) shall have the right to appoint a successor
Agent.  If no  successor  Agent  shall  have been so  appointed,  and shall have
accepted such  appointment  within 30 days after the retiring  Agent's giving of
notice of  resignation,  then the  retiring  Agent may,  on behalf of the Banks,
appoint a successor  Agent which shall be a commercial  bank organized under the
laws of the United  States of America or any State thereof and having a combined
capital and surplus of at least $100,000,000. Upon the acceptance by a successor
Agent  of its  appointment  as  Agent  hereunder,  such  successor  Agent  shall
thereupon succeed to and become vested with all the rights,  powers,  privileges
and duties of the retiring  Agent,  and the retiring  Agent shall be  discharged
from its duties under this  Agreement.  After any retiring  Agent's  resignation
hereunder  as Agent,  the  provisions  of this  Article  VII shall  inure to its
benefit as to any  actions  taken or omitted by it while it was Agent under this
Agreement.


                                                    ARTICLE VIII
                                                   MISCELLANEOUS

                           Section 8.01.  Modifications, Amendments or Waivers.
  With the written consent of the
Required Banks,  the Agent,  acting on behalf of all the Banks, and Borrower may
from time to time enter into  agreements  amending or changing any  provision of
this Agreement or the rights of the Banks or Borrower  hereunder,  or the Agent,
with the written consent of the Required Banks, may grant waivers or consents to
a departure from the due performance of the  obligations of Borrower  hereunder,
any such  agreement,  waiver or consent  made with such  written  consent  being
effective to bind all the Banks;  provided,  that no such  agreement,  waiver or
consent may be made which will:

                           (a) Reduce or  increase  the amount or alter the term
                  of  the  Commitment  of  any  Bank  hereunder,  or  alter  the
                  provisions  relating to the Facility  Fees payable to any Bank
                  hereunder,  or amend  Section2.07  hereof  without the written
                  consent of all the Banks; or

                           (b)  Extend  the time for  payment  of  principal  or
                  interest on any Note, or reduce the principal amount of or the
                  rate of interest  borne by any Note,  or otherwise  affect the
                  terms of payment of the  principal of or interest on any Note,
                  without the written consent of the holder of such Note; or

                           (c)  Amend Sections 2.05(d) or 2.08 hereof without
 the written consent of all of the
                  Banks;

                           (d)  Change   the   percentages   specified   in  the
                  definition  herein of "Required  Banks", or amend this Section
                  8.01 without the written consent of all the Banks;

                           (e)  Amend Section 5.02(c) hereof without the written
 consent of all the Banks;

                           (f) Amend the  definitions of "Eligible  Accounts" or
                  "Eligible  Inventory"  set forth in Section 1.01 hereof,  such
                  that  the  standards  of  eligibility  are  more  restrictive,
                  without the written  consent of the Required  Banks,  or amend
                  these definitions,  such that the standards of eligibility are
                  more permissive, without the written consent of all the Banks;

                           (g) Release the security  interest in the  Collateral
                  granted  in any of the  Loan  Documents  without  the  written
                  consent of all of the Banks; or

                           (h) Grant any  extension  of the  Expiration  Date or
                  otherwise amend Section2.11  hereof without the consent of all
                  of the Banks.

                  Section 8.02. No Implied Waivers; Cumulative Remedies; Writing
Required.  No delay or failure  of the Agent,  any Bank or holder of any Note in
exercising any right, power or remedy hereunder or under any Loan Document shall
affect or operate as a waiver thereof;  nor shall any single or partial exercise
thereof or any abandonment or  discontinuance  of steps to enforce such a right,
power or remedy  preclude  any further  exercise  thereof or of any other right,
power or  remedy.  The rights and  remedies  hereunder  and under the other Loan
Documents of the Agent,  any Bank,  and holders of the Notes are  cumulative and
not  exclusive of any rights or remedies  (including,  without  limitation,  the
right of specific  performance)  which they or any of them would otherwise have.
Any waiver,  permit, consent or approval of any kind or character on the part of
the Agent,  any Bank or the  holder of any Note of any  breach or default  under
this  Agreement,  any other Loan  Document or any Note or any such waiver of any
provision  or  condition  hereof  or  thereof  must be in  writing  and shall be
effective only to the extent in such writing specifically set forth.

                  Section  8.03.  Reimbursement  of  Expenses;  Taxes.  Borrower
agrees upon demand to pay or cause to be paid or to reimburse the Agent and save
the  Agent  harmless  against  liability  for  the  payment  of  all  reasonable
out-of-pocket  expenses,   including  without  limitation  reasonable  fees  and
reasonable  expenses  of Reed Smith Shaw & McClay LLP,  special  counsel for the
Agent and the  Banks,  and all other  reasonable  fees and  expenses  (including
counsel  fees and the costs and  expenses  incurred by the  Agent's  asset-based
lending  division or credit recovery group) incurred by the Agent  (a)arising in
connection   with  the   development,   preparation,   execution,   performance,
administration  and  interpretation  of this  Agreement,  all of the other  Loan
Documents,  and other  instruments  and  documents  to be  delivered  hereunder,
(b)relating to any  amendments,  waivers or consents  pursuant to the provisions
hereof  or  thereof,  (c)arising  in  connection  with the  enforcement  of this
Agreement,  or the other Loan  Documents,  collection of the Notes, or the proof
and  allowability  of any claim arising  under this  Agreement or the other Loan
Documents,  whether in any bankruptcy or  receivership  proceeding or otherwise,
and (d)arising in connection  with any litigation or preparation  for litigation
related to the  collection  of amounts owed under this  Agreement,  or the other
Loan  Documents.  Borrower  agrees  upon demand to pay or cause to be paid or to
reimburse  each Bank and save  each  Bank  harmless  against  liability  for the
payment of all reasonable out-of-pocket expenses (including fees and expenses of
their  respective  counsel)  incurred  by  such  Bank  in  connection  with  the
collection of the Notes or the proof and allowability of any claim arising under
this  Agreement  or the other  Loan  Documents,  whether  in any  bankruptcy  or
receivership  proceeding  or  otherwise.  The  Borrower  agrees  to  pay  and to
indemnify  and save the Banks  harmless from any and all liability for any stamp
or other taxes,  fees or similar  impositions which may be payable in connection
with this Agreement,  the Notes or the other Loan Documents,  or the performance
of any transactions contemplated hereby or thereby.

                  Section 8.04. Indemnity.  Borrower agrees to indemnify each of
the Agent and the Banks, their directors,  officers and employees and each legal
entity,  if any,  who  controls  the Agent and each of the Banks and to hold the
Agent  and each of the  Banks  harmless  from and  against  any and all  claims,
damages, liabilities and expenses (including, without limitation, all reasonable
fees of counsel  with whom the Agent and each Bank may consult and all  expenses
of  litigation  or  preparation  thereon which any of the Agent or the Banks may
incur or which may be asserted by a third party  against the Agent or any of the
Banks in connection with or arising out of the matters  referred to herein or in
the other Loan Documents. The indemnity agreement contained in this Section 8.04
shall survive the  termination of this  Agreement.  Promptly and upon receipt by
any  indemnified  party  hereunder of notice of the  commencement of any action,
such  indemnified  party  shall,  if a claim in  respect  thereof  is to be made
against Borrower  hereunder,  notify the Borrower in writing of the commencement
thereof.  Borrower  may  participate  at its  expense in the defense of any such
action or claim.

                  Section 8.05.  Holidays.  Whenever any payment or action to be
made or  taken  hereunder  shall  be  stated  to be due on a day  which is not a
Business  Day,  such  payment  or  action  shall  be made or  taken  on the next
following  Business  Day,  and  such  extension  of time  shall be  included  in
computing interest or fees, if any, in connection with such payment or action.

                  Section 8.06.  Notices.  All notices and other  communications
given to or made upon any party hereto in connection with this Agreement  shall,
except as otherwise expressly herein provided, be in writing (including telexed,
telecopied  or  telegraphic  communication)  and  mailed,  telexed,  telecopied,
telegraphed or delivered to the respective parties, as follows:




                  Borrower:
                           L.B. Foster Company
                           415 Holiday Drive
                           Pittsburgh, Pennsylvania 15220
                           Attn:  Chief Financial Officer
                           Telephone:  (412) 928-3400
                           Telecopier:  (412) 928-3486
                           Telex:  (710) 664-4325
                           Answerback:  Foster Hqs

                  The Agent:

                           Mellon Bank, N.A.
                           One Mellon Bank Center
                           45th Floor
                           Pittsburgh, Pennsylvania 15258-0001
                           Attention:  Charles H. Staub
                           Telephone:  (412) 234-1068
                           Telecopier:  (412) 236-1914
                           Telex:  812-367
                           Answerback:  Mel Bnk PGH

                           With a copy to:

                           Mellon Bank, N. A.
                           Loan Administration
                           Three Mellon Bank Center
                           Pittsburgh, Pennsylvania  15259
                           Attn:  Agented Credits

                  The Banks:

                           Their respective names and
                           addresses set forth in
                           Section 2.01 hereof

or in accordance  with any  subsequent  written  direction from any party to the
others.  All such notices and other  communications  shall,  except as otherwise
expressly  herein  provided,  be effective when  deposited in the mail,  postage
prepaid;  in the case of telex or telecopier,  when received;  or in the case of
telegraph, when delivered to the telegraph company, charges prepaid.

                  Section  8.07.  Survival.  All  representations,   warranties,
covenants  and  agreements  of  Borrower  contained  herein or in any other Loan
Document or made in writing in connection  herewith  shall survive the execution
and  delivery  hereof  and  thereof  and the making of Loans  hereunder  and the
issuance of Letters of Credit  hereunder,  and shall  continue in full force and
effect so long as Borrower may borrow hereunder and until payment in full of the
Debt.

                  Section 8.08. Governing Law. This Agreement and the other Loan
Documents,  and the rights and  obligations  of the parties  hereto and thereto,
shall be governed by and construed  and enforced in accordance  with the laws of
the Commonwealth of  Pennsylvania,  excluding its rules relating to the conflict
of laws.

                  Section 8.09.  Successors and Assigns. This Agreement shall be
binding  upon and inure to the  benefit of the Agent,  the Banks,  Borrower  and
their respective successors and assigns,  except that Borrower may not assign or
transfer any of its rights or obligations  hereunder or any interest herein. Any
Bank may from time to time sell,  assign or grant one or more  participations in
all or any part of its Commitment or any Loan made by it or which may be made by
it, or of its  right,  title and  interest  therein  or thereto or in or to this
Agreement  (collectively,   "Interests"),   to  another  lending  office,  bank,
financial institution,  or other entity  ("Transferees"),  provided,  (a)that no
Transferee  shall be  entitled to receive any  greater  payment  under  Sections
2.05(d) and 2.08 than the Bank making such transfer  would have been entitled to
receive with respect to the rights  transferred;  (b)that any Transferee (unless
otherwise  provided in the  instrument  of  transfer)  may  exercise any and all
rights of banker's lien,  set-off and counterclaim  with respect to its Interest
as fully as if such  Transferee  were the  holder of a Loan in the amount of its
Interest; and (c)that, unless

                  (i) Borrower consents in writing to the absolute assignment to
                  a Transferee by a Bank  hereunder,  which consent shall not be
                  unreasonably withheld,

                  (ii) the transferring  Lender shall have paid to the Agent the
                  then standard fee in connection with the  registration of such
                  transfer, and

                  (iii) such  Transferee  shall have  executed and  delivered to
                  Borrower and the Agent an agreement  satisfactory  in form and
                  substance  to counsel  for the Agent by which such  Transferee
                  agrees to become a party  hereto and to be bound by all of the
                  terms, conditions and provisions hereof,

any agreement pursuant to which any Bank may grant a participation in its rights
with respect to any particular Loan or Loans shall provide that, with respect to
such Loan or Loans, insofar as Borrower is concerned, such Bank shall retain the
sole right and  responsibility  to exercise  (or refrain  from  exercising)  the
rights of such Bank and enforce the  obligations of Borrower or any other person
relating  to such  Loan or Loans  including,  without  limitation,  the right to
approve any amendment, modification or waiver of any provision of this Agreement
and the right to take action to have the Notes declared due and payable pursuant
to Section 6.02 hereof; but the foregoing provision shall not restrict the right
of any Bank to agree with any  Transferee  concerning  the  circumstances  under
which such Bank will exercise or refrain from exercising any rights so retained,
including  without  limitation an agreement that such Bank will not, without the
participant's  prior  written  consent,  exercise  any such  rights  which would
(i)reduce  the  principal  amount of or the rate of  interest  on any  Note,  or
(ii)extend  the time for  payment of  principal  or  interest  on any Note;  and
provided further,  that, unless Borrower  otherwise  consents in writing,  which
consent shall not be  unreasonably  withheld,  no such grant of a  participation
shall be  deemed  to  relieve  any Bank of its  obligation  to lend  under  this
Agreement  or  constitute  a waiver  of any  rights  of  Borrower  or the  Agent
hereunder against any Bank. The Banks may furnish any information concerning the
Borrower  in the  possession  of the  Agent or the  Banks  from  time to time to
assignees and  participants,  including  prospective  assignees or participants.
Each Bank  represents  to Borrower  that it will acquire the Notes in connection
with the making of loans in the ordinary course of its normal commercial banking
business.  Except to the extent  otherwise  required  by its  context,  the word
"Bank"  where used in this  Agreement  shall mean and  include the holder of any
Note originally  issued to such Bank, and the holder of such Note shall be bound
by and have the benefits of this Agreement the same as if such holder had been a
signatory hereto.  Nothing in this Section 8.09 shall limit or impair any Bank's
rights under Section 2.09 hereof.

                  Section 8.10.  Severability.  The provisions of this Agreement
and of the other Loan Documents are severable, and if any clause or provision of
this Agreement or of any Loan Document shall be held invalid or unenforceable in
whole or in part in any jurisdiction, then such clause or provision shall, as to
such  jurisdiction,   be  ineffective  to  the  extent  of  such  invalidity  or
unenforceability  without in any manner affecting the validity or enforceability
of  such  clause  or  provision  in any  other  jurisdiction  or  the  remaining
provisions hereof and of the other Loan Documents in any jurisdiction.

                  Section 8.11.  Nature of Liabilities.  Any and all obligations
and liabilities in respect of this Agreement (including, without limitation, the
Notes and the other Loan Documents) on the part of Borrower and its Subsidiaries
shall be joint and several.  Any and all  obligations and liabilities in respect
of this Agreement (including,  without limitation,  the Notes and the other Loan
Documents)  on the  part of one or more of the  Agent  and the  Banks  shall  be
several and not joint.

                  Section  8.12.  Marshalling;  Payments Set Aside.  Neither the
Agent nor any of the Banks shall be under any  obligation  to marshal any assets
in favor of Borrower or any other  person or against or in payment of any or all
of the Debt.  To the extent  that  Borrower  makes a payment or  payments to the
Agent or any Bank or the  Agent or any of the  Banks  exercises  its  rights  of
setoff,  and such  payment or payments or the  proceeds of such  enforcement  or
setoff  or  any  part  thereof  are  subsequently  invalidated,  declared  to be
fraudulent  or  preferential,  set aside,  recovered  from,  disgorged by or are
required to be refunded,  repaid or  otherwise  restored to either  Borrower,  a
trustee,  receiver  or  any  other  person  under  any  Law,  including  without
limitation  any bankruptcy  Law,  state or federal Law,  common Law or equitable
cause,  then to the  extent  of any such  restoration,  the  obligation  or part
thereof  originally  intended to be satisfied  shall be revived and continued in
full force and effect as if such  payment had not been made or such  enforcement
or setoff had not occurred.

                  Section 8.13.  Prior Understandings.  This Agreement 
supersedes all prior understandings and
agreements, whether written or oral, among the parties hereto relating to the 
transactions provided for herein.

                  Section 8.14. Counterparts.  This Agreement may be executed in
any  number  of  counterparts  and  by  different  parties  hereto  on  separate
counterparts,  each of  which,  when so  executed  and  delivered,  shall  be an
original,  but all such counterparts shall together  constitute one and the same
instrument.

                  Section 8.15.  Section Headings.  The underlined section 
headings herein are for convenience of
reference only and shall not in any way affect the interpretation or 
construction hereof.

                  Section  8.16.  Waiver  Of Right  To  Trial By Jury.  BORROWER
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OR ANY CLAIM, DEMAND,  ACTION
OR CAUSE OF ACTION  (1)ARISING  UNDER THIS  AGREEMENT  OR ANY OTHER  DOCUMENT OR
INSTRUMENT  ATTACHED  HERETO,  REFERRED  TO HEREIN OR  DELIVERED  IN  CONNECTION
HEREWITH,  OR (2)IN ANY WAY  CONNECTED  WITH OR  RELATED  OR  INCIDENTAL  TO THE
DEALINGS OF BORROWER  WITH RESPECT TO THIS  AGREEMENT  OR ANY OTHER  DOCUMENT OR
INSTRUMENT  ATTACHED  HERETO,  REFERRED  TO HEREIN OR  DELIVERED  IN  CONNECTION
HEREWITH,  OR THE TRANSACTIONS  RELATED HERETO OR THERETO,  IN EACH CASE WHETHER
SOUNDING  IN CONTRACT  OR TORT OR  OTHERWISE;  AND  BORROWER  HEREBY  AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY,  AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN
ORIGINAL  COUNTERPART  OR A COPY OF THIS  SECTION  WITH  ANY  COURT  AS  WRITTEN
EVIDENCE OF THE  CONSENT OF BORROWER  HERETO TO THE WAIVER OF ITS RIGHT TO TRIAL
BY JURY.






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

Attest:                                   L. B. FOSTER COMPANY


/s/ D. L. Minor                          By:  /s/ Roger F. Nejes

Title:  VP, Treasurer                    Title:  Sr.VP Finance Admin,
                                                 CFO
[CORPORATE SEAL]


                                              MELLON BANK, N A.


                                              By:  /s/ Mark F. Johnston

                                              Title: AVP


                                              PNC BANK, NATIONAL ASSOCIATION


                                              By:  /s/ Melissa DiMartini

                                              Title:  Corporate Banking
                                                         Officer


                                              FIRST UNION NATIONAL BANK


                                              By:  /s/ Donna J. Emhart

                                              Title:  Vice President

EX-10

                              L.B. FOSTER COMPANY
            1998 LONG-TERM INCENTIVE PLAN FOR OFFICERS AND DIRECTORS





                                   ARTICLE I

                  PURPOSE, EFFECTIVE DATE AND AVAILABLE SHARES


1.1 Purpose.  The purpose of this Plan is to provide  financial  incentives  for
officers  and  directors  of  L.B.   Foster  Company  (the  "Company")  and  its
subsidiaries,  thereby  promoting the long-term growth and financial  success of
the  Company  by  (i)  attracting  and  retaining   officers  and  directors  of
outstanding  ability,  (ii)  strengthening the Company's  capability to develop,
maintain and direct a competent  management team,  (iii) motivating  officers to
achieve  long-range  performance  goals  and  objectives,   and  (iv)  providing
incentive   compensation   opportunities   competitive   with   those  of  other
corporations.

1.2 Effective  Date and Expiration of Plan. The Plan was adopted by the Board of
Directors  of the Company on October 23, 1998 and was made  effective as of that
date.  Unless earlier  terminated by the Board pursuant to Section 5.3, the Plan
shall  terminate on the fifth  anniversary of its Effective Date. No Award shall
be made pursuant to the Plan after its  termination  date, but Awards made prior
to the termination date may extend beyond that date.

1.3 Shares  Available  Under the Plan.  L.B.  Foster Company stock to be offered
under the Plan  pursuant  to Options  and SARs may be  authorized  but  unissued
common  stock or  previously  issued  shares of  common  stock  which  have been
reacquired  by the Company and are held in its  treasury.  Subject to adjustment
under  Section 5.6, no more than 25,000 shares of common stock shall be issuable
upon the exercise of Options or SARs.  Any shares of stock  subject to an Option
which  for any  reason  is  cancelled  (excluding  shares  subject  to an Option
cancelled upon the exercise of a related SAR) or terminated  without having been
exercised shall again be available for Awards under the Plan.  Shares subject to
an Option cancelled upon the exercise of an SAR shall not again be available for
Awards under the Plan.









                                   ARTICLE II

                                  DEFINITIONS


2.1 "Award" means,  individually or  collectively,  any Option or SAR under this
Plan.

2.2      "Board" means the Board of Directors of L.B. Foster Company.

2.3  "Committee"  means  directors  of the  Company,  not to be less  than  two,
appointed  by the Board,  each of who is a  "non-employee  director"  within the
meaning of Rule 16b-3 under the Securities  Exchange Act of 1934, as amended. In
the absence of such a committee, the term "Committee" shall mean the Board.

2.4      "Company" means L.B. Foster Company and its successors and
assigns.

2.5      "Director" means a director of the Company or of a Subsidiary.

2.6      "Effective Date" means the date on which the Plan is effective as
 provided in Section 1.2.

2.7 "Fair Market  Value" of the Stock as to a particular  time or date means the
last sale price of the Stock as reported in the NASDAQ  National  Market  System
or, if the Stock is listed on a  securities  exchange,  the last  reported  sale
price of the Stock on such  exchange that shall be for  consolidated  trading if
applicable  to such  exchange,  or if neither so  reported  or listed,  the last
reported bid price of the Stock.

2.8      "Incentive  Stock Option"  means an option within the meaning of 
Section 422 of the Internal  Revenue Code
of 1986, as amended.

2.9  "Nonqualified  Stock  Option"  means a stock option  granted under the Plan
other than an Incentive Stock Option.

2.10 "Officer" means an officer of the Company or of a Subsidiary.

2.11  "Option"  means both a  Nonqualified  Stock Option and an Incentive  Stock
Option to purchase common stock of the Company.

2.12 "Option  Price" means the price at which common stock of the Company may be
purchased under an Option as provided in Section 4.6.

2.13 "Participant" means a person to whom an Award is made under the Plan.

2.14 "Personal  Representative" means the person or persons who, upon the death,
disability or incompetency of a Participant,  shall have acquired, by will or by
the laws of descent and distribution or by other legal proceedings, the right to
exercise an Option or SAR theretofore granted to such Participant.

2.15     "Plan" means this 1998 Long-Term Incentive Plan for Officers and 
Directors.

2.16     "SAR" means a stock appreciation right under the Plan.

2.17     "Stock" means common stock of the Company.

2.18  "Stock  Option  Agreement"  means an  agreement  entered  into  between  a
Participant and the Company under Section 4.5.

2.19  "Subsidiary"  means a corporation  or other business  entity,  domestic or
foreign,  the majority of the voting stock or other voting interests in which is
owned directly or indirectly by the Company.


                                  ARTICLE III

                                 ADMINISTRATION


3.1  Committee  to  Administer.  (a)  The  Plan  shall  be  administered  by the
Committee.  The  Committee  shall have full power and authority to interpret and
administer  the Plan and to establish  and amend rules and  regulations  for its
administration.  The  Committee's  decisions  shall be final and conclusive with
respect to the interpretation of the Plan and any Award made under it.

(b) A majority of the members of the Committee shall constitute a quorum for the
conduct of business at any meeting.  The Committee shall act by majority vote of
the members present at a duly convened meeting,  including a telephonic  meeting
in accordance  with Section 1708 of the  Pennsylvania  Business  Corporation Law
("BCL").  Action may be taken  without a meeting if written  consent  thereto is
given in accordance with Section 1727 of the BCL.

3.2  Powers of  Committee.  (a)  Subject  to the  provisions  of the  Plan,  the
Committee shall have authority,  in its discretion,  to determine those Officers
and Directors who shall receive  Awards,  the time or times when each such Award
shall be made and the type of Award  to be  made,  whether  an  Incentive  Stock
Option or a Nonqualified  Stock Option shall be granted and the number of shares
to be subject to each Option.

(b) A Director  shall not  participate  in a vote granting  himself an Option or
SAR.

(c) The Committee shall determine the terms,  restrictions and provisions of the
agreement  relating  to each  Award,  including  such  terms,  restrictions  and
provisions  as shall be  necessary  to  cause  certain  Options  to  qualify  as
Incentive  Stock  Options.  The  Committee  may correct any defect or supply any
omission  or  reconcile  any  inconsistency  in the  Plan,  or in any  agreement
relating  to an Award,  in such  manner and to the extent  the  Committee  shall
determine in order to carry out the purposes of the Plan.  The Committee may, in
its discretion,  accelerate the date on which an Option or SAR may be exercised,
if the Committee  determines  that to do so will be in the best interests of the
Company and the Participant.


                                   ARTICLE IV

                                     AWARDS


4.1 Awards.  Awards  under the Plan shall  consist of Incentive  Stock  Options,
Nonqualified Stock Options and/or SARs. All Awards shall be subject to the terms
and  conditions  of the Plan and to such other terms and  conditions  consistent
with the Plan as the Committee deems appropriate. Awards need not be uniform.

4.2  Eligibility  for Awards.  Awards may be made to Officers and Directors.  In
selecting  Participants and in determining the form and amount of the Award, the
Committee may give  consideration to his or her functions and  responsibilities,
his or her present and  potential  contributions  to the success of the Company,
the  value of his or her  services  to the  Company,  and other  factors  deemed
relevant by the Committee.

4.3 Award of Stock  Options.  The Committee  may, from time to time,  subject to
Section 3.2(b) and other provisions of the Plan and such terms and conditions as
the Committee may  prescribe,  grant  Incentive  Stock Options and  Nonqualified
Stock  Options to any Officers or Directors.  Awards of Incentive  Stock Options
and Nonqualified Stock Options shall be separate and not in tandem.

4.4 Period of Option.  (a) Unless otherwise provided in the related Stock Option
Agreement,  an Option  granted  under the Plan shall be  exercisable  only after
twelve (12) months have elapsed







from the date of grant and, after such twelve-month  waiting period,  the Option
may be exercised in cumulative installments in the following manner:

                           (i) The  Participant  may  purchase up to  one-fourth
         (1/4) of the total optioned  shares at any time after one year from the
         date of grant and prior to the termination of the Option.

                           (ii) The  Participant may purchase an additional one-
         fourth (1/4) of the total  optioned  shares at any time after two years
         from the date of grant and prior to the termination of the Option.

                           (iii) The Participant may purchase an additional one-
         fourth (1/4) of the total optioned shares at any time after three years
         from the date of grant and prior to the termination of the Option.

                           (iv) The  Participant may purchase an additional one-
         fourth (1/4) of the total optioned  shares at any time after four years
         from the date of grant and prior to the termination of the Option.

                           The  duration  of each  Option  shall not be more 
than ten (10)  years  from the date of grant.

(b) Except as otherwise  provided in the Stock Option  Agreement,  an Option may
not  be  exercised  by a  Participant  unless  such  Participant  is  then,  and
continually (except for sick leave,  military service or other approved leave of
absence) after the grant of an Option has been, an officer, director or employee
of the Company or a Subsidiary.

4.5 Stock  Option  Agreement.  Each Option  shall be evidenced by a Stock Option
Agreement, in such form and containing such provisions not inconsistent with the
provisions of the Plan as the Committee from time to time shall approve.

4.6 Option Price and  Exercise.  (a) The Option Price of Stock under each Option
shall be  determined by the Committee but shall be not less than the Fair Market
Value of the Stock on the trading day  immediately  preceding  the date on which
the Option is granted, as determined by the Committee.

(b)  Options  may be  exercised  from time to time by giving  written  notice of
exercise to the Company  specifying  the number of shares to be  purchased.  The
notice of  exercise  shall be  accompanied  by (i) payment in full of the Option
Price in cash,  certified check or cashier's check or (ii) a copy of irrevocable
instructions  to a broker to promptly  deliver to the Company the amount of sale
or loan proceeds sufficient to cover the Option Price.



Delivery  of Option  Shares.  The  Company  shall not be
obligated to deliver any shares upon the exercise of an Option unless and until,
in the opinion of the Company's counsel, all applicable federal, state and other
laws and regulations have been complied with. In the event the outstanding Stock
is at the time listed on any stock  exchange,  no delivery  shall be made unless
and until the shares to be delivered  have been listed or authorized to be added
to the list upon official notice of issuance on such exchange. No delivery shall
be made  until all other  legal  matters in  connection  with the  issuance  and
delivery of shares have been approved by the Company's counsel.

Without  limiting the generality of the foregoing,  the Company may require from
the Participant or other person  purchasing  shares of Stock under the Plan such
investment  representation or such agreement, if any, as counsel for the Company
may consider  necessary in order to comply with the  Securities  Act of 1933, as
amended, and the regulations thereunder.  Certificates evidencing the shares may
be required to bear a restrictive  legend. A stop transfer order may be required
to be placed with the  transfer  agent,  and the  Company  may require  that the
Participant  or such other person agree that any sale of the shares will be made
only  on one or more  specified  stock  exchanges  or in such  other  manner  as
permitted by the Committee.

The  Participant  shall notify the Company when any  disposition  of the shares,
whether by sale,  gift or  otherwise,  is made.  The Company  shall use its best
efforts to effect any such compliance and listing,  and the Participant or other
person  shall  take any  action  reasonably  requested  by the  Company  in such
connection.

4.8 Limitations on Incentive Stock Options.  (a) The aggregate Fair Market Value
(determined  at the time the Option is  granted)  of the Stock  with  respect to
which  Incentive  Stock  Options  are  exercisable  for  the  first  time  by  a
Participant  during any  calendar  year  (under  all plans of the  Participant's
employer  corporation  and its parent  and  subsidiary  corporations)  shall not
exceed  $100,000.  (b) An  Incentive  Stock  Option  shall not be granted to any
Officer or Director who, at the time of grant,  owns stock  possessing more than
ten percent of the total  combined  voting  power of all classes of stock of the
Company or any Subsidiary.

(c) No Incentive  Stock Option may be  exercisable  more than three months after
termination of the Participant's employment with the Company or with a parent or
Subsidiary  of the  Company,  except that where such  employment  is  terminated
because  of  permanent  and total  disability,  within  the  meaning  of Section
22(e)(3) of the  Internal  Revenue  Code of 1986  ("Permanent  Disability"),  or
death, such period may be one year.

4.9 Termination of Service. Except as otherwise provided in this Plan, or in the
applicable Stock Option Agreement,  if the service of a Participant (i.e., as an
officer, director or employee of the Company or a Subsidiary) terminates for any
reason other than death,  permanent disability or retirement with the consent of
the  Company,  all  Options  held by the  Participant  shall  expire and may not
thereafter be exercised.  For purposes of this section,  the employment or other
service  in  respect  to  Options  held by a  Participant  shall be  treated  as
continuing in tact while the  participant is on military  leave,  sick leave, or
other  bona  fide  leave of  absence  (such  as  temporary  employment  with the
Government)  if the period of such leave does not exceed 90 days, or, if longer,
so long as the  Participant's  right to reestablish his service with the Company
is  guaranteed  either by  statute  or by  contract.  Where the  period of leave
exceeds 90 days and where the Participant's  right to reestablish his service is
not  guaranteed  by statute or by contract,  his service shall be deemed to have
terminated  on the  ninety-first  day of  such  leave.  Anything  herein  to the
contrary   notwithstanding  and  unless  the  Stock  Option  Agreement  provides
otherwise, if the service of a Participant terminates more than four years after
the  grant  of the  Option,  other  than due to a  termination  for  Cause,  the
Participant may exercise such Option within 30 days of such termination.  Except
as so  exercised,  such Option  shall  expire at the end of such  period.  In no
event,  however,  may any Option be exercised  after the  expiration of ten (10)
years from the date of grant of such Option.

For the purpose of the Plan,  termination  for Cause shall mean (i)  termination
due to (a) willful or gross  neglect of duties or (b) willful  misconduct in the
performance  of such duties,  so as to cause material harm to the Company or any
Subsidiary as determined by the Board,  (ii)  termination due to the Participant
committing fraud,  misappropriation or embezzlement in the performance of his or
her duties or (iii) termination due to the Participant  committing any felony of
which he or she is  convicted  and  which,  as  determined  in good faith by the
Board,  constitutes a crime  involving  moral  turpitude and results in material
harm to the Company or a Subsidiary.

4.10  Death.  Except  as  otherwise  provided  in the  applicable  Stock  Option
Agreement,  if a  Participant  dies  at a time  when  his  Option  is not  fully
exercised,  then at any time or times within such period after his death, not to
exceed 12 months, as may be provided in the Stock Option Agreement,  such Option
may be  exercised  as to any or all of the  shares  which  the  Participant  was
entitled to purchase  under the Option  immediately  prior to his death,  by his
executor  or  administrator  or the  person  or  persons  to whom the  Option is
transferred by will or the applicable  laws of descent and  distribution.  In no
event,  however,  may any Option be exercised  after the  expiration of ten (10)
years from the date of grant of such Option.

4.11  Retirement or Permanent  Disability.  Except as otherwise  provided in the
applicable Stock Option  Agreement,  if a Participant  retires from service with
the consent of the Company, or suffers Permanent  Disability,  at a time when he
or she is entitled to exercise an Option, then at any time or times within three
years after his or her  termination  of service  because of such  retirement  or
Permanent  Disability the  Participant may exercise such Option as to all or any
of the  shares  which  he or she was  entitled  to  purchase  under  the  Option
immediately prior to such termination. Except as so exercised, such Option shall
expire  at the end of such  period.  In no  event,  however,  may any  Option be
exercised  after the expiration of ten (10) years from the date of grant of such
Option.

The Committee shall have authority to determine whether or not a Participant has
retired from service or has suffered Permanent Disability, and its determination
shall be binding on all concerned.  In the sole  discretion of the Committee,  a
transfer of service to an affiliate of the Company other than a Subsidiary  (the
latter type of transfer not  constituting  a termination of service for purposes
of the Plan) may be deemed to be a  retirement  from service with the consent of
the Company so as to entitle the  Participant  to exercise the Option  within 90
days after such transfer.

4.12 Stockholder Rights and Privileges.  A Participant shall have no rights as a
stockholder with respect to any Stock covered by an Option until the issuance of
a stock certificate to the Participant representing such Stock.

4.13  Award of SARs.  (a) At any time  prior to six  months  before an  Option's
expiration  date,  the Committee may award to the  Participant an SAR related to
the Option.

(b) The SAR  shall  represent  the right to  receive  payment  of an amount  not
greater than the amount,  if any, by which the Fair Market Value of the Stock on
the trading day  immediately  preceding  the date of exercise of the SAR exceeds
the Option Price.

(c) SARs  awarded  under the Plan shall be  evidenced by either the Stock Option
Agreement or a separate agreement between the Company and the Participant.

(d) An SAR shall be exercisable only at the same time and to the same extent and
subject to the same  conditions as the Option  related  thereto is  exercisable,
except that the Committee may prescribe additional conditions and limitations on
the exercise of any SAR, including a maximum appreciation value. An SAR shall be
transferable  only when the related Option is  transferable,  and under the same
conditions.  The exercise of an SAR shall cancel the related Option. SARs may be
exercised  only when the Fair  Market  Value of a share of Stock  subject to the
related Option  exceeds the Option Price.  Such value shall be determined in the
manner specified in Section 4.13(b).

(e) An SAR shall be  exercisable  only by written notice to the Company and only
to the extent that the related Option is exercisable.  However,  an SAR shall in
no event be  exercisable  during the first six months of its term  except in the
event  of  death  or  Permanent  Disability  of  the  Participant  prior  to the
expiration of such six-month period.

(f) All SARs shall  automatically  be exercised on the last trading day prior to
the  expiration of the related  Option,  so long as the Fair Market Value of the
Stock at the time of exercise exceeds the Option Price, unless prior to such day
the holder instructs the Company otherwise in writing.

(g) Payment of the amount to which a  Participant  is entitled upon the exercise
of an SAR shall be made in cash,  Company stock, or partly in cash and partly in
Company stock, as the Committee shall determine at the time of the Award. To the
extent  that  payment is made in Company  stock,  the shares  shall be valued at
their fair market value, as determined by the Committee.

(h) At any time  when a  Participant  is,  in the  judgment  of  counsel  to the
Company,  subject  to  Section 16 of the  Securities  Exchange  Act of 1934 with
respect to any equity securities of the Company:

                           (i) any election by such  Participant to receive cash
         in whole or in part  upon the  exercise  of such SAR shall be made only
         during the period  beginning on the third  business day  following  the
         date of release by the  Company for  publication  of any  quarterly  or
         annual  summary  statement  of its sales and earnings and ending on the
         twelfth business day following such date of release, and

                           (ii) in the event the  Committee  has not  determined
         the form in which such SAR will be paid (i.e.,  cash, shares of Company
         stock, or any combination thereof), any election to exercise such right
         in whole or in part for cash shall be subject to the subsequent consent
         thereto,  or  disapproval   thereof,  by  the  Committee  in  its  sole
         discretion.

(i) Each SAR shall expire on a date  determined  by the Committee at the time of
Award, or, if later, upon the termination of the related Option.


                                   ARTICLE V


                            MISCELLANEOUS PROVISIONS


5.1  Nontransferability.  No Award under the Plan shall be  transferable  by the
Participant  other than by will or the laws of  descent  and  distribution.  All
Awards  shall be  exercisable  during the  Participant's  lifetime  only by such
Participant  or his  Personal  Representative.  Any  transfer  contrary  to this
Section 5.1 will nullify the Award.

5.2      Amendments.  The Committee may at any time  discontinue  granting 
 Awards under the Plan. The Board may at any time amend



the  Plan or amend any outstanding  Option for the purpose of
satisfying the  requirements of any changes in applicable laws or regulations or
for any other purpose  which may at the time be permitted by law;  provided that
no such amendment  shall result in Rule 16b-3 under the Securities  Exchange Act
of 1934, as amended,  becoming  inapplicable to any Options.  No amendment shall
adversely  affect  the right of any  Participant  under  any  Award  theretofore
granted to him or her except upon his or her written consent to such amendment.

5.3  Termination.  The Board  may  terminate  the Plan at any time  prior to its
scheduled  expiration date but no such  termination  shall adversely  affect the
rights of any Participant under any Award theretofore granted without his or her
written consent.

5.4 Nonuniform  Determinations.  The Committee's  determinations under the Plan,
including without limitation (i) the determination of the Officers and Directors
to receive Awards,  (ii) the form,  amount and timing of such Awards,  (iii) the
terms and provisions of such Awards and (iv) the Agreements evidencing the same,
need  not be  uniform  and may be  made by it  selectively  among  Officers  and
Directors  who receive,  or who are eligible to receive,  Awards under the Plan,
whether or not such Officers or Directors are similarly situated.

5.5 No Right to Employment.  Neither the action of the Board in establishing the
Plan, nor any action taken by the Committee under the Plan, nor any provision of
the Plan, shall be construed as giving to any person the right to be retained in
the employ, or as an officer or director, of the Company or any Subsidiary.

5.6  Changes  in  Stock.  In the  event  of a  stock  dividend,  split-up,  or a
combination  of shares,  recapitalization  or merger in which the Company is the
surviving  corporation or other similar capital  change,  the number and kind of
shares of stock or  securities  of the  Company to be subject to the Plan and to
Options or SARs then outstanding or to be granted thereunder, the maximum number
of shares of stock or  security  which may be issued on the  exercise of Options
granted under the Plan, the Option Price and other relevant  provisions shall be
appropriately adjusted by the Board, whose determination shall be binding on all
persons. In the event of a consolidation or a merger in which the Company is not
the surviving corporation,  or any other merger in which the shareholders of the
Company  exchange  their  shares of stock in the  Company  for stock of  another
corporation,  or in the event of complete  liquidation of the Company, or in the
case of a tender  offer  accepted  by the Board of  Directors,  all  outstanding
Options and SARs shall thereupon  terminate,  provided that the Board may, prior
to the effective date of any such  consolidation or merger,  either (i) make all
outstanding Options and SARs immediately exercisable or (ii) arrange to have the
surviving corporation grant to the Participants  replacement Options and SARs on
terms which the Board shall determine to be fair and reasonable.

EX-27

 


<ARTICLE>                     5
<LEGEND>
     Financial Data Schedule for Third Quarter 1998 Filing

<MULTIPLIER>                                   1,000
       
                             
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                              DEC-31-1998
<PERIOD-END>                                   SEP-30-1998
<CASH>                                         3,493
<SECURITIES>                                   0
<RECEIVABLES>                                  38,550
<ALLOWANCES>                                   1,516
<INVENTORY>                                    40,889
<CURRENT-ASSETS>                               84,195
<PP&E>                                         44,390
<DEPRECIATION>                                 22,845
<TOTAL-ASSETS>                                 116,805
<CURRENT-LIABILITIES>                          24,870
<BONDS>                                        15,074
<PREFERRED-MANDATORY>                          0
<PREFERRED>                                    0
<COMMON>                                       102
<OTHER-SE>                                     73,250
<TOTAL-LIABILITY-AND-EQUITY>                   116,805
<SALES>                                        158,585
<TOTAL-REVENUES>                               158,585
<CGS>                                          135,355
<TOTAL-COSTS>                                  135,355
<OTHER-EXPENSES>                               0
<LOSS-PROVISION>                               0
<INTEREST-EXPENSE>                             1,377
<INCOME-PRETAX>                                5,603
<INCOME-TAX>                                   2,243
<INCOME-CONTINUING>                            3,360
<DISCONTINUED>                                 0
<EXTRAORDINARY>                                0
<CHANGES>                                      0
<NET-INCOME>                                   3,360
<EPS-PRIMARY>                                  0.33
<EPS-DILUTED>                                  0.33