OSULLIVAN INDUSTRIES HOLDINGS INC, 10-K, 1997-09-26

OSULLIVAN INDUSTRIES HOLDINGS INC
10-K, 1997-09-26
WOOD HOUSEHOLD FURNITURE, (NO UPHOLSTERED)

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1997

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _________________

Commission file number: 1-12754

O'SULLIVAN INDUSTRIES HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

Delaware 43-1659062
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

1900 Gulf Street, Lamar, Missouri 64759-1899
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (417) 682-3322

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, par value $1.00 per share New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
</TABLE>

Securities registered pursuant to Section 12(g) of the Act: None

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 such 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

As of September 15, 1997, 16,632,703 shares of common stock of O'Sullivan
Industries Holdings, Inc. were outstanding, and the aggregate market value of
the voting stock held by non-affiliates of O'Sullivan Industries Holdings, Inc.
was $207,868,787, based on the New York Stock Exchange composite trading
closing price and using the definition of beneficial ownership contained in
Rule 16a-1(a)(2) promulgated pursuant to the Securities Exchange Act of 1934
and excluding shares held by directors and executive officers, some of whom may
not be held to be affiliates upon judicial determination.

Portions of the definitive proxy statement relating to the 1997 Annual
Meeting of Stockholders of O'Sullivan Industries Holdings, Inc., which will be
filed within 120 days of June 30, 1997, are incorporated by reference in Item
10, Item 11, Item 12 and Item 13 of Part III of this form.

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PART I

ITEM 1. BUSINESS

HISTORY AND OVERVIEW

O'Sullivan Industries Holdings, Inc., a Delaware corporation (the
"Company" or "O'Sullivan," which includes the Company's subsidiaries unless
otherwise indicated), is a leading manufacturer of ready-to-assemble ("RTA")
furniture in the United States. The Company was incorporated in November 1993
and acquired O'Sullivan Industries, Inc. ("Industries") in February 1994,
immediately prior to the sale of its common stock (the "Offerings") in a public
offering by TE Electronics Inc. ("TE"), a subsidiary of Tandy Corporation
("Tandy"). Prior to the Offerings, Industries operated as a wholly owned
subsidiary of TE. Subsequent to the Offerings, neither Tandy nor TE has any
continuing ownership interest in the Company.

The Company owns manufacturing, warehouse and distribution facilities in
Lamar, Missouri, South Boston, Virginia and Cedar City, Utah. O'Sullivan
commenced operations at the Lamar, Missouri plant in 1965, and the South
Boston, Virginia facility became operational in 1989. The Company phased in
production at the Cedar City, Utah facility in the spring of 1995.

The Company is a holding company that owns O'Sullivan Industries, Inc., a
Delaware corporation. Industries owns O'Sullivan Industries - Virginia, Inc.,
a Virginia corporation ("O'Sullivan - Virginia").

The Company engages in one industry segment: the design, manufacture and
sale of ready-to-assemble furniture.

THE RTA FURNITURE INDUSTRY

RTA furniture is purchased in component form and then assembled by the
consumer. RTA furniture is sold at generally lower price points than assembled
furniture. Most RTA furniture is sold through mass merchants, office
superstores, department stores, home centers and catalog showrooms, where
consumers can receive the products immediately.

Producing RTA furniture involves laminating paper, vinyl or other
materials to particle board or fiberboard; cutting the laminated board to size;
processing the laminated board through a combination of edgebanding, boring,
softforming, embossing, ripsawing, routing, molding, wrapping or hotfoiling;
assembling components, as necessary; attaching outsourced items such as knobs
or other detail pieces, as necessary; and adding the components used for
assembly. At various intervals in the process, work in progress is held in
inventory until the next stage of production is available. A particular
product is not manufactured on a single production line; rather, each of its
components may undergo different processing steps on separate production lines.

PRODUCTS AND STYLES

The Company offers over 300 products which can be divided into several
categories, including home office, office and computer, electronics and home
decor furniture.

HOME OFFICE, OFFICE AND COMPUTER. Home office, office and computer
furniture includes desks, computer workcenters, bookcases, filing cabinets,
credenzas, tables, printer stands and computer storage racks.

ELECTRONICS. Electronics furniture includes home entertainment centers,
home theater systems, television and stereo tables and cabinets and audio and
video storage racks.

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HOME DECOR. Home decor furniture includes microwave oven carts, pantries
and other kitchen furniture; dining room, living room and recreation room
furniture; and bedroom pieces such as dressers, night stands and wardrobes.

SALES AND MARKETING

For information regarding the Company's sales, operating profits and
assets, see the consolidated financial statements of the Company included in
Part II of this report.

The Company has developed a diverse and extensive customer base.
O'Sullivan's top 50 customers comprised approximately 92% of its sales in
fiscal 1997. O'Sullivan groups most of its customers into eight major
categories: Office superstores, discount mass merchants, mass merchants
(department stores and catalog showrooms), home centers, electronics retailers,
furniture stores, original equipment manufacture ("OEM") and international.

The Company's products are sold throughout the United States and in
Canada, Mexico, Great Britain and to a smaller extent other countries. Export
sales were $22.5 million, $17.9 million and $14.4 million in fiscal 1997, 1996
and 1995, respectively. In fiscal 1997, international sales increased because
of the success of the Company's United Kingdom operations and the growth of
international office superstores. In fiscal 1996, export sales increased
primarily due to increased sales in international markets of close-out
merchandise.

OfficeMax, Inc., Office Depot, Inc. and Kmart Corporation accounted for
approximately 17.1%, 12.3% and 12.0%, respectively, of O'Sullivan's sales in
fiscal 1997. The Company's top five customers accounted for approximately 57%
of its sales during the same period. The loss of, or significant reductions in
orders from, any of these five customers could have a material adverse effect
on the Company.

As is customary in the RTA furniture industry, O'Sullivan does not have
long-term supply contracts with any of its customers. The Company has entered
into supply contracts with certain OEM customers, but these contracts have
simply provided for the delivery of a specified quantity of goods in accordance
with a specified price formula, and have not had a term in excess of one year.

MARKETING AND DISTRIBUTION. The Company's field sales organization
consists of independent sales representative organizations and sales managers.
The sales managers supervise the independent sales representatives and manage
the Company's relationship with certain of its customers.

The Company's products are promoted by its customers to the public
pursuant to cooperative and other advertising agreements. Under these
agreements, the Company covers a portion of the customer's advertising expenses
if the customer places approved advertisements mentioning the Company and its
products by name. The Company may also provide support to certain customers'
advertising programs. The Company generally does not advertise directly to
consumers, although it does advertise in trade publications to promote its
image as a producer of high quality RTA products.

The Company also participates in a variety of international and regional
furniture markets and trade shows, such as the semiannual international
furniture markets held in High Point, North Carolina.

PRODUCT DESIGN AND DEVELOPMENT

The Company continually introduces new or redesigned products to appeal to
changing consumer tastes and to satisfy customer needs. In-house furniture
designers develop product ideas in conjunction with the Company's marketing
personnel and customers. The Company's engineering department then produces
full-scale prototypes. The prototypes are displayed at High Point and other
trade shows or otherwise shown to customers to measure customer interest. If
the Company determines that a product will be successful, it commences
production. In addition, O'Sullivan sometimes develops a specific product at
the request of a

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customer. The Company expended approximately $0.7 million, $0.8 million and
$0.7 million for product design and development during fiscal 1997, 1996 and
1995, respectively.

MANUFACTURING

The Company manufactures its products in three facilities. The Lamar,
Missouri facility, which began production in 1965, encompasses approximately
1,015,000 square feet. The South Boston, Virginia facility, which was opened
in 1989, covers approximately 450,000 square feet. The Company phased in
production at the Cedar City, Utah facility in the spring of 1995. This
facility has approximately 530,000 square feet.

The Company uses state-of-the-art computer-aided design and computer-aided
manufacturing equipment and software to assist in the manufacturing process.
This equipment and software helps the Company develop conceptual designs,
production drawings, tooling patterns, quality assurance procedures and
customer instruction sheets more quickly. The Company continues to review and
invest in new machinery, equipment and software that will increase
manufacturing efficiency and reduce costs.

SHIPPING

The Company generally makes arrangements for the shipping of products to
its customers on a customer-by-customer basis. When the Company pays freight
costs, it uses independent trucking companies with which it has negotiated
competitive transportation rates.

RAW MATERIALS

The materials used in the Company's manufacturing operations include
particle board, fiberboard, coated paper laminates, glass, furniture hardware
and packaging materials.

The Company is dependent upon outside suppliers for all of its raw
material needs and is therefore subject to fluctuations in prices of raw
materials. In particular, the Company's results of operations were affected
significantly in fiscal 1995 by higher prices of particle board and fiberboard.
The Company buys its particle board and fiberboard at market-based prices from
a number of independent wood product suppliers. In 1995, prices for particle
board and fiberboard increased because demand for these materials increased
more quickly than the available supply. In fiscal 1995, the Company also
experienced increases in the prices of certain other raw materials, including
packaging materials and paper laminates. Packaging materials increased
principally because of price increases for corrugated cardboard. The cost of
imported paper laminates increased because of increases in raw material costs
and the decline of the United States dollar against the Japanese yen.

During fiscal 1996, the average purchase price for raw materials decreased
slightly from the high prices experienced in fiscal 1995. Lower costs
decreased the costs of materials as a percent of cost of goods sold in fiscal
1996, particularly in the last three quarters. In fiscal 1997, price declines
continued, and the lower material costs contributed significantly to the
increases in the Company's gross margins and results of operations.
Projections for fiscal 1998 do not indicate significant price increases in raw
materials; however, there can be no assurance that these projections will be
accurate, particularly in the latter quarters of fiscal 1998 or beyond. The
demand for raw materials may increase, which could result in higher prices.
There can be no assurance that the Company will be able to increase its sales
prices sufficiently or lower manufacturing costs to offset any cost increases
or to maintain its margins.

As is customary in the RTA furniture industry, the Company does not
maintain long-term supply contracts with its suppliers. It does, however, have
long continuous relationships with all of its key suppliers and encourages
supplier partnerships. The Company's supplier base is sufficiently diversified
so that loss of any one supplier in any given commodity should not have a
material adverse effect on the Company's operations. The Company has never been
unable to secure needed raw materials. There could be adverse effects on the
Company's operations and financial conditions should the Company be unable to
secure necessary raw materials such as particle board or fiberboard.

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The Company often purchases its raw materials of a certain type from a
limited number of vendors. These raw materials, however, are generally
available from other suppliers, although the cost from alternate suppliers
might be slightly higher.

BACKLOG

Because the Company's business is characterized by short-term order and
shipment schedules, generally less than two weeks, the Company does not
consider backlog at any given date to be indicative of future sales.

COMPETITION

The residential furniture market is highly competitive and includes a
large number of both domestic and foreign manufacturers. These manufacturers
include not only RTA furniture manufacturers, but also manufacturers of
assembled furniture. Although there are a large number of participants in the
highly competitive RTA furniture market, the market is relatively concentrated;
the top four RTA furniture manufacturers account for over 61% of the domestic
market. Certain of the Company's competitors in the residential furniture
market have greater sales volumes and greater financial resources than the
Company.

The Company and certain of the Company's RTA furniture competitors
completed expansion programs during the last three years pursuant to which they
increased significantly their manufacturing capacity. These increases in
capacity created some surplus in production capacity in the RTA furniture
industry. This extra capacity heightened competition in the industry and
pressured the Company's sales margins in fiscal 1996 through increased price
competition and decreased overhead absorption due to operating at less than
full capacity. As the Company's, and the industry's, sales of RTA furniture
increased in the last quarter of fiscal 1996 and in fiscal 1997, the increased
absorption of overhead improved the Company's capacity utilization and gross
margins. The Company and other manufacturers either recently expanded their
capacity or are in the process of doing so in anticipation of increased sales
of RTA furniture. If the anticipated sales increases do not materialize,
resulting excess capacity and heightened competition may again adversely affect
the Company's margins and results of operations.

Competition in the RTA furniture industry occurs principally (but not
necessarily in order of importance) in the areas of style, price, quality,
functionality, customer service and design.

SEASONALITY

The Company generally experiences a higher level of sales in the first and
second quarters of the fiscal year in anticipation of the back-to-school and
holiday selling seasons.

WORKING CAPITAL

The Company maintains a significant level of finished goods inventory in
order to be able to meet the rapid delivery requirements of its customers. The
addition of the Cedar City, Utah plant increased the level of inventories, but
the Company reduced its inventory levels during fiscal 1996 with careful
monitoring of inventory levels and production. The Company essentially
maintained the reduced level of inventories through fiscal 1997 even with a $30
million increase in net sales. The other major component of the Company's
current assets is accounts receivable, which results from the Company's selling
its products on credit terms negotiated between the Company and each of its
customers.

BUSINESS AND CREDIT RISK CONCENTRATIONS: The largest five customer
accounts receivable balances accounted for approximately 61% of the Company's
trade receivables balance at June 30, 1997. The Company's products are sold
primarily through large chains of retail stores, including office superstores,
discount mass merchants, mass merchants, home centers, electronics superstores
and furniture stores. Credit is extended to these customers based on
evaluation of the customer's financial condition, generally

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without requiring collateral. Exposure to losses on receivables is primarily
dependent on each customer's financial condition. Therefore, the Company would
be exposed to a large loss if one of its major customers were not able to
fulfill its financial obligations. The Company monitors its exposure for
credit losses and maintains allowances for anticipated losses.

In September 1996, one of the Company's largest customers, Best Products
Co., Inc. filed for bankruptcy protection under Chapter 11 of the United States
Bankruptcy Code ("Chapter 11"). It subsequently liquidated all of its assets
and ceased doing business. Sales to Best Products in fiscal 1997 and 1996
approximated $6 million and $20 million, respectively. There can be no
certainty that the Company will be able to replace these sales, particularly in
the first quarter of fiscal 1998 when substantially all of fiscal 1997 sales
occurred.

In July 1997, another large customer of the Company, Montgomery Ward &
Co., filed for bankruptcy protection under Chapter 11. The Company has
established an allowance for doubtful accounts to cover the anticipated bad
debt loss based on estimates from independent sources. The Company believes
this reserve to be adequate, but there is no certainty as to the collection of
the Company's receivables from Montgomery Ward. Further reserves may be
necessary as the reorganization proceeds.

On August 1, 1997, Montgomery Ward announced that it intends to close its
33 Lechmere stores and eleven Electric Avenue outlets. The Lechmere and
Electric Avenue stores currently sell RTA furniture. The Company recorded
fiscal 1997 sales to Lechmere approximating $1.7 million. The Company had no
direct sales in fiscal 1997 to Electric Avenue. The Company expects that
Montgomery Ward should be able to reorganize its operation under Chapter 11
protection and should continue to purchase products from the Company; however,
the level of purchases could decline as a result of any such reorganization or
otherwise.

EMPLOYEES

As of June 30, 1997, the Company had approximately 2,000 employees,
approximately 70% of whom were located in Lamar. None of O'Sullivan's
employees are represented by a labor union. The Company believes that its work
force is relatively stable when compared with furniture industry standards.
Over 700 of its employees have been with the Company for more than eight years
as of June 30, 1997. The Company believes that it has good relations with its
employees.

PATENTS AND TRADEMARKS

The Company has a United States trademark registration and international
trademark registrations or applications for the use of the O'Sullivan(R) name
on furniture. The Company believes that the O'Sullivan name and trademark are
well-recognized and associated with high quality by both its customers and
consumers. The Company's products are sold under a variety of trademarks in
addition to O'Sullivan, some of which are registered trademarks. These
trademarks include the Cockpit(R), Misty Shadows(R), Woodland Hills(R),
Pleasant Hill Collection(R), Kids' Town(R), Cherrywood Estate(R), Durafin(R),
Matchmakers(TM), Intelligent Designs(TM), Quick Fit(TM) and Armortop(TM). The
Company does not believe that the other trademarks it owns enjoy the same level
of recognition as the O'Sullivan trademark, or that the loss of the right to
use any one of these other trademarks would be material to its business. The
Company holds a number of patents and licenses, none of which are individually
considered material to its business.

ENVIRONMENTAL AND SAFETY REGULATIONS

Governmental authorities have the power to enforce compliance with their
regulations, and violators may be subject to fines, injunction or both.
Compliance with these regulations has not in the past had a

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material effect on the Company's earnings, capital expenditures or competitive
position. The Company anticipates increased federal and state environmental
regulations affecting it as a manufacturer, particularly regarding emissions
and the use of certain materials in the production process. In particular,
regulations currently being issued under the Clean Air Act Amendments of 1990
likely will subject the Company to new standards regulating emissions of
certain air pollutants from wood furniture manufacturing operations. The
Environmental Protection Agency's development of these standards is ongoing.
The Company cannot at this time estimate the impact of these new standards on
the Company's operations, future capital expenditure requirements or the cost
of compliance.

The Company's manufacturing process creates by-products such as sawdust
and particle board flats. At the South Boston facility, this material is given
to a recycler. At the Lamar facility, the material has been sent to a recycler
and off-site disposal sites. Wood by-products generated at the Cedar City
facility are shipped to a local landfill. The Company's by-product disposal
costs were approximately $953,000, $850,000 and $625,000 for fiscal 1997, 1996
and 1995, respectively.

The Company's manufacturing facilities ship waste products to various
disposal sites. To the extent that such waste products include hazardous
substances that could be discharged into the environment at such disposal sites
or elsewhere, the Company is potentially subject to laws which provide for
responses to, and liability for, releases of hazardous substances into the
environment and liability for natural resource damages. One example of such
laws is the federal Comprehensive Environmental Response, Compensation and
Liability Act, as amended ("CERCLA"). Generally, liability under CERCLA is
joint and several and is determined without regard to fault. In addition to
CERCLA, similar state or other laws and regulations may impose the same or even
broader liability for releases of hazardous substances. The Company has been
designated as a potentially responsible party ("PRP") under one such state law,
the Arkansas Remedial Action Trust Fund Act, in connection with the cost of
cleaning up a disposal site in Diaz, Arkansas. The Company has entered into a
de minimis buyout agreement with certain other PRP's, pursuant to which it has
contributed $2,000 to date toward cleanup costs. Because O'Sullivan shipped
only 7,410 pounds of waste to the Diaz site, the Company was able to "buy out"
for the minimum price of $2,000. The agreement subjects de minimis PRP's to
liability for additional contributions if cleanup costs exceed $9 million. In
this event, the Company would be liable for an equitable share of the excess.
Cleanup expenses have approached $9 million. A plan has been approved by the
state providing that groundwater at the site be monitored, but that no further
remediation activities be undertaken. The monitoring activities should not
require an assessment of the PRP's. The Company believes that amounts it may
be required to pay in the future, if any, relating to this site will be
immaterial.

The Company's operations also are governed by laws and regulations
relating to workplace safety and worker health, principally the Occupational
Safety and Health Act and regulations thereunder. The Company believes that it
is in substantial compliance with all such laws and regulations.

ITEM 2. PROPERTIES

The Company owns three manufacturing, warehouse and distribution
facilities. The Lamar, Missouri facility, which also serves as the Company's
headquarters, consists of approximately 1,015,000 square feet. The South
Boston, Virginia facility has approximately 450,000 square feet, and the Cedar
City, Utah facility has approximately 530,000 square feet.

The Company has minimal unused land at Lamar on which it could build new
production or warehouse facilities. It does have excess land at South Boston
and Cedar City which may be used for expansion.

The Company also leases space for showrooms in High Point, North Carolina
and Bentonville, Arkansas. It leases warehouse space in Joplin, Lamar and
Neosho, Missouri and South Boston, Virginia.

The Company's Canadian operations are in a leased facility in Markham,
Ontario. The Company's United Kingdom operations are in a leased facility in
Gloucestershire.

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The Company does not consider any of the leased facilities to be material
to its operations.

The Company considers its owned and leased facilities to be adequate for
the needs of the Company and believes that all of its owned and leased
properties are well maintained and in good condition.

ITEM 3. LEGAL PROCEEDINGS

On July 30, 1996, Fisher-Price, Inc. filed suit against Industries in the
Supreme Court of New York, Erie County, alleging breach of a License Agreement
between Industries and Fisher-Price. Pursuant to the License Agreement, the
Company was to have manufactured a line of furniture under the Fisher-Price
name. The suit alleged a failure to pay minimum royalties under the License
Agreement of $1,400,000. Industries paid Fisher-Price $75,000 to settle this
litigation, and the case was dismissed with prejudice on December 27, 1996.

EXECUTIVE OFFICERS

The Company's executive officers, and their ages and positions with the
Company as of September 1, 1997, are as follows:

<TABLE>
<CAPTION>
NAME AGE OFFICER POSITION(S)
SINCE(1)
<S> <C> <C> <C>
Daniel F. O'Sullivan 56 1969 Chairman of the Board and Chief Executive Officer
Richard D. Davidson 49 1996 President and Chief Operating Officer and Director
Tyrone E. Riegel 54 1969 Executive Vice President and Director
Terry L. Crump 47 1996 Executive Vice President and Chief Financial Officer
Thomas M. O'Sullivan, Jr. 42 1993 Vice President-Sales
Rowland H. Geddie, III 43 1993 Vice President, General Counsel and Secretary
E. Thomas Riegel 53 1993 Vice President-Strategic Operations
James C. Hillman 52 1973 Vice President-Human Resources
Michael P. O'Sullivan 38 1995 Vice President-Marketing
</TABLE>
- ----------------------------------

(1)Includes officer positions held with Industries.

Daniel F. O'Sullivan was named President, Chief Executive Officer and a
Director of the Company in November 1993 and became Chairman of the Board in
December 1993. He relinquished the position of President of the Company in
July 1996. He served as President of Industries from 1986 until July 1996, and
was appointed Chairman of the Board and Chief Executive Officer in 1994. He
also serves as Chairman of the Board and Chief Executive Officer of O'Sullivan
- - Virginia. Mr. O'Sullivan has been employed by the Company since September
1962.

Richard D. Davidson was named President and Chief Operating Officer of the
Company and its subsidiaries in July 1996. He was named a Director of
Industries and O'Sullivan - Virginia in July 1996 and of the Company in August
1996. For more than five years prior to October 1995, he served as a Senior
Vice President of Sunbeam Corporation and as President of Sunbeam's Outdoor
Products Division.

Tyrone E. Riegel has been Executive Vice President of Industries since
July 1986 and a Director since March 1994. He was appointed as Executive Vice
President and a Director of the Company in November 1993. Mr. Riegel also
serves as Executive Vice President and a Director of O'Sullivan - Virginia.
Mr. Riegel has been employed by the Company since January 1964.

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Terry L. Crump has been Executive Vice President and Chief Financial
Officer of the Company and its subsidiaries since July 1997. From January 1996
to July 1997, he served as Vice President-Finance and Chief Financial Officer
of the Company and its subsidiaries. He was appointed as a Director of
Industries and O'Sullivan - Virginia in January 1996. From August 1975 to
January 1996, Mr. Crump was employed by Tandy, a retailer of electronics
products. Mr. Crump held various positions with Tandy, including Vice
President and Controller of Tandy Retail Services and TE and Vice President and
Controller of Tandy Electronics manufacturing and wholesale divisions.

Thomas M. O'Sullivan, Jr. has been Vice President-Sales of the Company and
its subsidiaries since 1993. Prior to his appointment as Vice President-Sales,
Mr. O'Sullivan was the National Sales Manager for Industries and O'Sullivan -
Virginia. Mr. O'Sullivan has been employed by the Company since June 1979.

Rowland H. Geddie, III has been Vice President, General Counsel and
Secretary of the Company and its subsidiaries since December 1993. He was
appointed a Director of Industries and O'Sullivan - Virginia in March 1994.
From January 1993 through November 1993, Mr. Geddie was a contract attorney for
Tandy and TE. From May 1990 to February 1992, Mr. Geddie was Senior Counsel
for Houston Industries Incorporated, a holding company.

E. Thomas Riegel has been Vice President-Strategic Operations of the
Company and its subsidiaries since November 1995. From June 1993 until
November 1995, he was Vice President-Marketing of the Company and its
subsidiaries. Prior to his appointment as Vice President-Marketing, Mr. Riegel
was the National Marketing Manager for Industries and O'Sullivan - Virginia.
Mr. Riegel has been employed by the Company since May 1971.

James C. Hillman has been Vice President-Human Resources of the Company
since November 1993 and of Industries since 1980. He also serves as Vice
President-Human Resources of O'Sullivan - Virginia. Mr. Hillman has been
employed by the Company since May 1971.

Michael P. O'Sullivan has been Vice President-Marketing of the Company and
its subsidiaries since November 1995. He served as National Sales Manager of
the Company from July 1993 until November 1995. From July 1986 to July 1993,
Mr. O'Sullivan was Sales Manager-Office Products of the Company. Mr.
O'Sullivan has been employed by the Company since 1984.

CERTAIN RELATIONSHIPS. Daniel F. O'Sullivan, Thomas M. O'Sullivan, Jr.
and Michael P. O'Sullivan are brothers. Tyrone E. Riegel and James C. Hillman
were, prior to the deaths of their respective spouses, brothers-in-law of
Daniel F. O'Sullivan, Thomas M. O'Sullivan, Jr. and Michael P. O'Sullivan.
Tyrone E. Riegel and E. Thomas Riegel are brothers. Thomas M. O'Sullivan, Sr.,
a Director and the founder of the Company, is the father of Daniel F.
O'Sullivan, Thomas M. O'Sullivan, Jr. and Michael P. O'Sullivan and is the
former father-in-law of Tyrone E. Riegel and James C. Hillman.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders of the Company
during the quarter ended June 30, 1997.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS

The Company's common stock is traded on the New York Stock Exchange under
the symbol "OSU". The following table sets forth the high and low sale prices
of the Company's common stock, as reported on the New York Stock Exchange, for
the periods indicated:

Fiscal 1997 Quarter Ended High Low
------------------------- ---- ---
June 30, 1997 $16.63 $12.50
March 31, 1997 $14.75 $10.50
December 31, 1996 $14.00 $ 8.63
September 30, 1996 $ 9.75 $ 6.88

Fiscal 1996 Quarter Ended High Low
------------------------- ---- ---
June 30, 1996 $ 8.25 $ 5.63
March 31, 1996 $ 6.88 $ 5.25
December 31, 1995 $ 8.13 $ 5.88
September 30, 1995 $ 9.25 $ 7.50

As of September 15, 1997, there were approximately 850 stockholders of
record. No dividends have been paid or declared subsequent to the closing of
the Offerings on February 2, 1994.

The Company currently intends to retain all earnings to finance the
development of its operations and to repurchase a portion of its outstanding
common stock. The Company does not anticipate paying cash dividends on its
shares of common stock in the near future. The Company's future dividend
policy will be determined by its Board of Directors on the basis of various
factors, including but not limited to the Company's results of operations,
financial condition, business opportunities and capital requirements. The
payment of dividends is subject to the requirements of Delaware law, as well as
restrictive financial covenants in its debt agreements. In addition, the
Amended Credit Agreement has provisions specifying certain limitations on
dividends, investments and future indebtedness. At June 30, 1997, the Company
was in compliance with such covenants.

9
<PAGE> 11

ITEM 6. SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

The selected historical consolidated results of operations and balance
sheet data for the five years ending June 30, 1997 are derived from the
Company's audited financial statements. This selected consolidated financial
data should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Consolidated
Financial Statements and related notes included on the following pages.

<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Earnings Data:
Net sales $321,490 $291,766 $269,306 $270,729 $245,465
Cost of sales 230,578 229,262 208,176 200,930 174,067
-------- -------- -------- -------- --------
Gross profit 90,912 62,504 61,130 69,799 71,398
Selling, marketing and administrative
expenses 62,137 52,691 45,489 45,291 41,033
Restructuring charge - 5,212 - - -
-------- -------- -------- -------- --------
Operating income 28,775 4,601 15,641 24,508 30,365
Interest expense, net 2,327 3,831 2,382 1,286 910
-------- -------- -------- -------- --------
Income before income taxes and
cumulative effect of change in
accounting principle 26,448 770 13,259 23,222 29,455
Income tax provision 10,050 433 5,038 9,128 11,016
-------- -------- -------- -------- --------
Income before cumulative effect of change
in accounting principle 16,398 337 8,221 14,094 18,439
Cumulative effect of change in accounting
principle(1) - - - 2,025 -
-------- -------- -------- -------- --------
Net income $ 16,398 $ 337 $ 8,221 $ 16,119 $ 18,439
======== ======== ======== ======== ========
Earnings per common share(2)
Primary $ 0.96 $ 0.02 $ 0.49
Fully diluted $ 0.95 $ 0.02 $ 0.49
Weighted Average Shares Outstanding(2)
Primary 17,019 16,820 16,820
Fully diluted 17,292 16,822 16,820

June 30,
------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(in thousands)
Balance Sheet Data:
Working capital $ 82,045 $71,136 $86,058 $76,433 $53,456
Total assets 232,607 212,317 228,477 197,204 161,969
Long-term debt 30,000 30,000 51,000 28,000 10,515
Stockholders' equity(3) 156,790 141,615 140,624 132,756 118,601
</TABLE>
- --------------

(1)In the first quarter of fiscal 1994, the Company adopted Statement of
Financial Accounting Standard No. 109, "Accounting for Income Taxes."
(2)Historical earnings per share are not presented for periods prior to
July 1, 1994, as the historical capital structure of the Company prior to the
Company's initial public offering is not comparable with the current capital
structure.
(3)The historical stockholders' equity on June 30, 1994 through 1997
represents the Company's capital structure as affected by the Company's initial
public offering. The historical stockholders' equity on June 30, 1993
represents Tandy Corporation's net investment in the Company.

10
<PAGE> 12

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

Fiscal 1997 Compared to Fiscal 1996

Net sales for fiscal 1997 increased $29.7 million or 10.2%, to $321.5
million from $291.8 million for fiscal 1996. The average selling price per
unit was virtually unchanged in fiscal 1997, with the additional sales revenue
due to an increase in the number of units sold. Increased sales through the
discount mass merchant channel accounted for the majority of the year-to-year
sales increase. The Company also experienced healthy gains in the office
products and export channels offset by decreased sales through the catalog
showroom, original equipment manufacturer ("OEM") and furniture/specialty
distribution channels. The sales decrease in the catalog showroom distribution
channel was due to the bankruptcy of Best Products Co., Inc. in September 1996.
OEM sales continued the decline which began in fiscal 1995 because of a lack
of emphasis on lower-margin OEM business.

In September 1996, one of the Company's largest customers, Best Products
Co., Inc., filed for bankruptcy protection under Chapter 11 of the United
States Bankruptcy Code ("Chapter 11"). It subsequently liquidated its assets
and ceased doing business. Sales to Best Products in fiscal 1997 and 1996
approximated $6 million and $20 million, respectively. There can be no
certainty that the Company will be able to replace these sales, particularly in
the first quarter of fiscal 1998 when the majority of fiscal 1997 sales
occurred.

In July 1997, another large customer of the Company, Montgomery Ward &
Co., filed for bankruptcy protection under Chapter 11. Montgomery Ward
subsequently announced that it intends to close its 33 Lechmere stores and 11
Electric Avenue outlets. The Lechmere and Electric Avenue stores sell
ready-to-assemble furniture. The Company recorded fiscal 1997 sales to
Lechmere approximating $1.7 million but had no direct sales to Electric Avenue.
The Company expects that Montgomery Ward will be able to reorganize its
operation under Chapter 11 protection and will continue to purchase products
from the Company; however, the level of purchases could decline as a result of
any such reorganization or otherwise.

In the event that Montgomery Ward or any other major customer ceases or
substantially reduces its purchases from the Company, there can be no certainty
that the Company will be able to replace these sales.

The Company's gross margin increased to $90.9 million in fiscal 1997 from
$62.5 million in fiscal 1996, and increased as a percentage of sales to 28.3%
in fiscal 1997 from 21.4% in the prior year. The Company's gross margin
improved because of lower material costs, decreased overhead on a per unit
basis due to increased volume and capacity utilization rates and improved
operating efficiency partially offset by a loss on sale of fixed assets, which
was primarily reported in cost of sales.

Selling, marketing and administrative expenses were $62.1 million or 19.3%
of sales, and $52.7 million or 18.1% of sales, respectively in fiscal 1997 and
1996. The increase in selling, marketing and administrative expenses, as a
percentage of sales, is due primarily to: (i) higher bad debt expense
associated with the bankruptcies discussed above; (ii) increased profit sharing
and incentive compensation costs associated with the Company's improved
financial results; and (iii) increased salaries and wages due to additional
management, marketing and MIS staff.

In the third quarter of fiscal 1996, the Company incurred a pre-tax
restructuring charge of $5.2 million ($3.2 million after-tax) for the
discontinuance and disposal of certain product lines and certain related
assets, for training costs associated with terminated employees at the Utah
facility and for costs to modify an international division. The restructuring
charge was part of a program to cut costs and better utilize working capital,
with proceeds from the program used to reduce debt and for other general
corporate purposes. The disposal of assets and modification of the
international division which began in fiscal 1996 were completed during fiscal
1997.

11
<PAGE> 13

Interest expense decreased by $1.5 million to $2.3 million in fiscal 1997.
The decrease was due primarily to reduced borrowings caused by lower working
capital requirements and increased cash flow from operations.

The Company's effective tax rate for fiscal 1997 was 38.0% compared to
56.2% for fiscal 1996. The higher effective rate for fiscal 1996 reflects the
inter-relationship of certain non-deductible goodwill for tax purposes and
substantially reduced pre-tax income for that year.

Fiscal 1996 Compared to Fiscal 1995

Net sales for fiscal 1996 increased $22.5 million, or 8.3%, to $291.8
million from $269.3 million for fiscal 1995. The average selling price per
unit increased in fiscal 1996, while the number of units sold remained
virtually unchanged. Excluding the OEM channel, sales through all principal
distribution channels increased, with the majority of the sales dollar
increases in the office superstore and catalog showroom channels. OEM sales
continued the decline which began in fiscal 1995 because of a lack of emphasis
on lower-margin OEM business.

The Company's gross margin increased to $62.5 million in fiscal 1996 from
$61.1 million in fiscal 1995, but decreased as a percentage of sales to 21.4%
in fiscal 1996 from 22.7% in the prior year. The Company's gross margin was
unfavorably impacted by pricing pressures due to excess capacity in the
ready-to-assemble furniture industry, increased overhead on a per unit basis
due to low capacity utilization rates and learning curve inefficiencies at the
Cedar City, Utah plant. These gross margin reductions were offset somewhat by
decreases in raw material costs, especially in the last half of the fiscal
year.

During the fourth quarter of fiscal 1996 the Company's gross profit margin
approximated 24% versus 21.8% for the third quarter ended March 31, 1996. This
increase from the third quarter and from the comparable quarter of fiscal 1995
reflected higher demand increasing capacity utilization rates thus lowering
overhead on a per unit basis, a shift in the product mix to higher margin
products, stabilization of raw material prices and the elimination of learning
curve inefficiencies at the Cedar City, Utah facility.

Selling, marketing and administrative expenses were $52.7 million, or
18.1% of sales, and $45.5 million, or 16.9% of sales, respectively, in fiscal
1996 and 1995. The increase in selling, marketing and administrative expenses
was due primarily to higher advertising costs associated with promotional
efforts with certain customers and higher outbound freight costs associated
with the change in the freight program of a large customer. The Company's
pricing program with the customer took the freight expense into account;
accordingly, the change in the freight program had little or no effect on
operating income.

The Company incurred a pre-tax restructuring charge of $5.2 million ($3.2
million after-tax) for the discontinuance and disposal of certain product lines
which received marginal acceptance in the marketplace ($4.0 million pre-tax),
certain related assets to manufacture these product lines ($0.4 million), the
costs associated with the initial training of terminated employees at the
Company's Utah facility ($0.4 million), and the costs to modify the business
structure of an international division ($0.4 million). The restructuring
charge was a result of a review of the Company's operations and is part of a
program to cut costs and better utilize working capital.

As of June 30, 1996, the inventory and related manufacturing equipment
associated with the discontinued product lines written down to the fully
reserved estimated net realizable value and the costs associated with the
initial training of terminated employees at the Company's Utah facility had
been written off. The remainder of the $5.2 million restructuring reserve,
amounting to $0.3 million, was classified as an accrued liability in the
accompanying consolidated balance sheet. The restructuring charge was included
as a separate line item in the accompanying consolidated results of operations
and statement of cash flows.

12
<PAGE> 14

Interest expense increased by $1.4 million to $3.8 million in fiscal 1996.
The increase was due primarily to increased long-term borrowing related to the
Company's Utah facility as well as capitalized interest charges which reduced
fiscal 1995 expense by $529,000.

The Company's effective tax rate for fiscal 1996 was 56.2% compared to
38.0% for fiscal 1995. The increase in the effective rate reflects the
inter-relationship of certain non-deductible goodwill for tax purposes and
substantially reduced pre-tax income.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 1996, the Company had cash and cash equivalents amounting
to $7.0 million and net working capital of $82.0 million compared to cash and
cash equivalents of $506,000 and working capital of $71.1 million at June 30,
1996. The $10.9 million increase in net working capital was attributable to
increased cash balances and increased investments in receivables and
inventories due to higher sales levels offset by an increase in income taxes
payable due to higher income levels and an increase in accrued liabilities.

Cash provided by operating activities for fiscal 1997 amounted to $23.5
million compared to $25.3 million in the comparable year period. Although the
Company had significantly higher net income in the current year, the decrease
in cash flows from operations resulted primarily from the large reduction in
inventories and restructuring charge in the prior year and an increased
investment in receivables for the current year due to increased sales levels.
The cash flow provided by operating activities was used primarily to fund
capital expenditures and the repurchase of stock pursuant to the stock
repurchase program and for employee benefit plans.

At June 30, 1997, the Company had long-term debt outstanding of $30.0
million: $10.0 million of industrial development revenue bonds that bear
interest at 8.25% and mature on October 1, 2008, and $20.0 million in private
placement debt with certain insurance companies at 8.01% due fiscal 2003.

The Company has an unsecured $25.0 million revolving credit facility with
a bank that expires on February 28, 2000. As of June 30, 1997, there were no
borrowings under the revolving line of credit. The Credit Facility also
includes a $10.8 million standby letter of credit established in favor of Tandy
Corporation ("Tandy"). The letter of credit indemnifies Tandy from its
obligations as guarantor of $10.0 million of industrial development revenue
bonds for which a subsidiary of the Company is the obligor. Tandy can draw
against the standby letter of credit only in the event that it must pay any
amounts with respect to the bonds.

The Credit Facility has several financial ratio covenants including the
maintenance of a minimum working capital ratio and a minimum net worth. In
addition, the Credit Facility has provisions specifying certain limitations on
dividends, investments and future indebtedness. The Company is currently in
compliance with all of its debt agreements.

On May 6, 1997, the Company announced that the Board of Directors had
authorized the purchase of up to five percent of the outstanding shares of its
common stock during the next 24 months. The actual number of shares
repurchased, the timing of the purchases and the prices paid for the shares
will be dependent upon future market conditions. Funding for the purchases is
expected to come from available working capital and existing borrowing
facilities. The program includes no specific pricing or timing targets and may
be suspended at any time or terminated prior to completion. As of June 30,
1997, the Company had purchased approximately 65,000 shares of its common stock
for $965,000.

The Company also purchases common stock for its employee benefit programs.
For the fiscal year, the Company purchased approximately $2.6 million in stock
and transferred $2.1 million, at cost, to its employee benefit plans.

13
<PAGE> 15

$10 million. The effective date of the agreement is October 1, 1998 and the
termination date is October 1, 2008. The Company has contracted to pay a fixed
rate of 7.13% and receive a floating interest rate during the duration of the
swap agreement. The Company has the ability and intent to call its existing
$10.0 million of 8.25% industrial development revenue bonds commencing October
1, 1998 at a redemption premium of 103%. The bonds will be refinanced at the
then existing interest rates. Accordingly, the swap will have the effect of
hedging the Company against an increase in interest rates prior to the first
opportunity to refinance these bonds. Management has designated this swap as a
hedge of the future interest rate exposure of refinancing these bonds.

Amounts to be paid or received under the swap agreement will be accrued as
interest rates change and will be recognized over the life of the swap
agreement as adjustments to interest expense. Gains or losses on terminated
swaps will be recognized over the remaining life of the underlying obligation
as an adjustment to interest expense. The fair value of the forward starting
swap agreement approximated $122,000 at June 30, 1997 (representing the amount
the Company would have to pay to terminate the swap) and has not been
recognized in the Consolidated Financial Statements, since it is accounted for
as a hedge.

The Company believes that cash flow from operations, along with current
unused balances under existing credit agreements, will be sufficient to fund
the Company's operations in fiscal 1998, including the stock repurchase program
and capital expenditures, which are currently estimated at approximately $30.0
million to increase production capacity, improve productivity, enhance new
product development efforts and for replacement equipment. The Company
invested $15.8 million in capital expenditures during fiscal 1997 for new
machinery and equipment and the installation of new management systems and
related hardware and software.

SEASONALITY AND INFLATION

The Company generally experiences a higher level of sales in the first and
second quarters of the fiscal year in anticipation of the back-to-school and
holiday selling seasons.

The Company is dependent upon outside suppliers for all of its raw
material needs and, therefore, is subject to fluctuations in prices of raw
materials. In particular, the Company's results of operations were affected
significantly in fiscal 1995 by higher prices of particle board, fiberboard and
paper products. The Company had limited success in minimizing the effect of
these cost increases through improvements in production, pricing and product
redesign. During fiscal 1996, the average purchase price for raw materials
declined slightly, with additional price decreases in 1997. However, there can
be no assurance that these trends will continue. The demand for raw materials
may increase, which could result in higher prices. There can be no assurance
that the Company will be able to increase its prices or reduce its production
costs sufficiently to offset any cost increases or to maintain its margins.

INCOME TAXES

In connection with the initial public offerings of the Company's common
stock (the "Offerings"), Tandy, TE Electronics Inc. and the Company entered
into a Tax Sharing and Tax Benefit Reimbursement Agreement (the "Tax
Agreement"). Pursuant to the Tax Agreement, Tandy is responsible for all U.S.
federal income taxes, state income taxes and foreign income taxes with respect
to the Company for all periods ending on or prior to the date of consummation
of the Offerings and for audit adjustments to such federal income and foreign
income taxes. The Company is responsible for all other taxes owing with
respect to the Company, including audit adjustments to state and local income
and for franchise taxes.

14
<PAGE> 16

respect to such additional basis. Amounts payable to Tandy pursuant to the Tax
Agreement are recorded as current federal income tax expense in the
accompanying consolidated statements of operations. Income tax expense thus
approximated the amount which would be recognized by the Company in the absence
of the Tax Agreement. Although the amount of the payment required to be made
in a particular year under the Tax Agreement may differ somewhat from the
difference in that tax year between the Company's actual taxes and the taxes
that the Company would have owed had the increase in basis not occurred, the
aggregate amount of payments required to be made by the Company to Tandy over
the life of the Tax Agreement will not differ materially from the difference
over the life of the Tax Agreement between the Company's actual taxes and the
amount of taxes that the Company would have owed had the increase in basis not
occurred. Consequently, such payments should have no effect on the Company's
earnings and should not have a material effect on its cash flow. The Tax
Agreement provides for adjustments to the amount of tax benefit payable in the
event of certain material transactions, such as a business combination or
significant disposition of assets. During fiscal 1997, 1996 and 1995, $6.0
million, $0.0 million and $4.5 million, respectively, was paid to Tandy under
the Tax Agreement.

FORWARD LOOKING INFORMATION

Certain portions of this Report, and particularly the Notes to the
Consolidated Financial Statements and the Management's Discussion and Analysis
of Financial Condition and Results of Operations in Part II of this report and
the portions of Item 1 in Part I captioned "Raw Materials," "Competition" and
"Working Capital" contain forward-looking statements. These statements can be
identified by the use of future tense or dates or terms such as "believe,"
"expect," "anticipate" or "plan." Important factors could cause actual results
to differ materially from those anticipated by some of the statements made in
this report. Some of the factors include, among other things, changes from
anticipated levels of sales, whether due to future national or regional
economic and competitive conditions, customer acceptance of existing and new
products, or otherwise; pending or future litigation; pricing pressures due to
excess capacity; raw material cost increases; transportation cost increases;
the inability of a major customer to meet its obligations; loss of significant
customers in connection with a merger or acquisition, bankruptcy or otherwise;
actions of current or new competitors; increased advertising costs associated
with promotional efforts; change of tax rates; change of interest rates; future
business decisions and other uncertainties, all of which are difficult to
predict and many of which are beyond the control of the Company.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Immediately following are the report of independent accountants, the
consolidated balance sheets of O'Sullivan Industries Holdings, Inc. and
subsidiaries as of June 30, 1997 and 1996, and the related consolidated
statements of operations, cash flows and changes in stockholders' equity for
each of the three years in the three year period ended June 30, 1997, and the
notes thereto.

15
<PAGE> 17

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
O'Sullivan Industries Holdings, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
stockholders' equity present fairly, in all material respects, the financial
position of O'Sullivan Industries Holdings, Inc. and its subsidiaries at June
30, 1997 and 1996, and the results of their operations and their cash flows for
each of the three years in the period ended June 30, 1997, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.

PRICE WATERHOUSE LLP
Kansas City, Missouri
August 15, 1997

16
<PAGE> 18

O'SULLIVAN INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, 1997 and June 30, 1996
(in thousands, except for share data)

<TABLE>
<Ca[tion>
Assets: 1997 1996
------- ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,975 $ 506
Trade receivables, net of allowance for doubtful accounts
of $3,158 and $1,225, respectively 58,661 53,570
Inventories:
Finished merchandise 29,840 26,031
Work in process 4,224 5,116
Raw materials 10,094 10,334
-------- --------
44,158 41,481
Prepaid expenses and other current assets 3,134 2,347
-------- --------
Total current assets 112,928 97,904
-------- --------
Property, plant and equipment, at cost:
Land 1,034 1,034
Buildings and improvements 39,195 38,469
Machinery and equipment 72,290 71,476
Construction in progress 7,047 1,849
-------- --------
119,566 112,828
Less accumulated depreciation and amortization (44,643) (44,838)
-------- --------
74,923 67,990
Goodwill, net of accumulated amortization 44,756 46,423
-------- --------
$232,607 $212,317
======== ========
Liabilities and Stockholders' Equity:
-------------------------------------
Current liabilities:
Accounts payable $ 7,234 $ 11,046
Accrued employee compensation 10,527 8,215
Accrued advertising 7,482 5,059
Other accrued liabilities 1,472 1,681
Income taxes payable 4,168 767
-------- --------
Total current liabilities 30,883 26,768
-------- --------
Long-term debt 30,000 30,000
Deferred income taxes 14,934 13,934
Stockholders' equity:
Preferred stock; $1.00 par value, 20,000,000 shares authorized,
none issued - -
Common stock; $1.00 par value, 100,000,000 shares authorized,
16,819,950 issued 16,820 16,820
Additional paid-in capital 87,968 87,775
Retained earnings 53,418 37,020
-------- --------
158,206 141,615
Less common stock in treasury at cost, 94,000 shares in 1997;
none in 1996 1,416 -
-------- --------
Total stockholders' equity 156,790 141,615
-------- --------
Commitments and contingencies (Notes 2, 5, 6, 9 and 12)
-------- --------
$232,607 $212,317
======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

17
<PAGE> 19

O'SULLIVAN INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended June 30, 1997, 1996 and 1995
(in thousands, except for per share data)

1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net sales $ 321,490 $ 291,766 $ 269,306
Costs and expenses:
Cost of sales 230,578 229,262 208,176
Selling, marketing and administrative 62,137 52,691 45,489
Restructuring charge - 5,212 -
Interest, net 2,327 3,831 2,382
--------- --------- ---------
295,042 290,996 256,047
--------- --------- ---------
Income before income tax provision 26,448 770 13,259
Income tax provision 10,050 433 5,038
--------- --------- ---------
Net income $ 16,398 $ 337 $ 8,221
========= ========= =========
Earnings per common share:
Primary $ 0.96 $ 0.02 $ 0.49
Fully diluted $ 0.95 $ 0.02 $ 0.49
Weighted average common shares outstanding:
Primary 17,019 16,820 16,820
Fully diluted 17,292 16,822 16,820
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

18
<PAGE> 20
O'SULLIVAN INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended June 30, 1997, 1996 and 1995
(in thousands)

<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 16,398 $ 337 $ 8,221
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 9,960 9,235 7,465
Loss on disposal of assets 599 - -
Deferred income taxes 1,000 157 407
Employee option amortization 749 - 690
Restructuring charge - 5,212 -
Changes in current assets and liabilities:
Trade receivables (5,091) (2,680) 178
Inventories (2,677) 7,364 (7,336)
Other assets (792) 1,945 182
Accounts payable, accrued liabilities and
income taxes payable 3,366 3,775 3,381
-------- -------- --------
Net cash provided by operating activities 23,512 25,345 13,188
-------- -------- --------
Cash flows used for investing activities:
Capital expenditures (15,825) (4,403) (30,355)
-------- -------- --------
Cash flows used for financing activities:
Borrowings under long-term debt agreements - - 21,735
Repayment of long-term debt - (21,000) -
Final settlement contingency - - (4,401)
Purchase of common stock for treasury (3,527) - -
Sale of common stock to employee benefit plans 2,309 - -
-------- -------- --------
Net cash flows provided (used) for financing activities (1,218) (21,000) 17,334
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 6,469 (58) 167
Cash and cash equivalents, beginning of year 506 564 397
-------- -------- --------
Cash and cash equivalents, end of year $ 6,975 $ 506 $ 564
======== ======== ========
Supplemental cash flow information:
Interest paid 2,631 3,843 2,092
Income taxes paid 5,983 (1,145) 5,167
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

19
<PAGE> 21
O'SULLIVAN INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the years ended June 30, 1997, 1996 and 1995
(in thousands)

Preferred stock Common stock Additional
--------------- ------------ paid-in Retained
Shares Dollars Shares Dollars capital earnings
------ ------- ------ ------- ------- --------

<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1994 - $ - 16,820 $ 16,820 $ 87,474 $ 28,462
Net income 8,221
Final adjustment to Tandy
settlement (353)
-------- -------- -------- -------- -------- --------
Balance, June 30, 1995 - $ - 16,820 $ 16,820 $ 87,121 $ 36,683
Net income 337
Foreign currency translation 18
Stock option cancellation,
net of taxes of $342 636
-------- -------- -------- -------- -------- --------
Balance, June 30, 1996 - $ - 16,820 $ 16,820 $ 87,775 $ 37,020
Net income 16,398
Foreign currency translation (5)
Purchase of common stock
Sale of common stock 198
-------- -------- -------- -------- -------- --------
Balance, June 30, 1997 - $ - 16,820 $ 16,820 $ 87,968 $ 53,418
======== ======== ======== ======== ======== ========
<CAPTION>

Treasury stock Total
-------------- stockholders'
Shares Dollars equity
------ ------- ------
<S> <C> <C> <C>
Balance, June 30, 1994 - $ - $132,756
Net income 8,221
Final adjustment to Tandy
settlement (353)
-------- -------- --------
Balance, June 30, 1995 - $ - $140,624
Net income 337
Foreign currency translation 18
Stock option cancellation,
net of taxes of $342 636
-------- -------- --------
Balance, June 30, 1996 - $ - $141,615
Net income 16,398
Foreign currency translation (5)
Purchase of common stock (297) (3,527) (3,527)
Sale of common stock 203 2,111 2,309
-------- -------- --------
Balance, June 30, 1997 (94) $ (1,416) $156,790
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

<PAGE> 22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL INFORMATION AND BASIS OF PRESENTATION

O'Sullivan Industries Holdings, Inc., a Delaware corporation, is a
domestic producer of ready-to-assemble ("RTA") furniture. O'Sullivan's RTA
furniture includes desks, computer tables, cabinets, home entertainment
centers, audio equipment racks, microwave oven carts and a wide variety of
other RTA furniture for use in the home, office and home office. The products
are distributed primarily through office superstores, mass merchants, catalog
showrooms, department stores, furniture stores and specialty retailers.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents: Cash and cash equivalents include cash on hand
and all highly liquid investments with maturities of three months or less when
purchased.

Business and Credit Risk Concentrations: The largest five customer
accounts receivable balances accounted for approximately 61% and 52% of the
Company's trade receivable balance at June 30, 1997 and 1996, respectively.
The Company's products are sold primarily through large chains of retail
stores, including office superstores, mass merchants, department stores,
furniture stores and specialty retailers. Credit is extended to these
customers based on evaluation of the customer's financial condition, generally
without requiring collateral. Exposure to losses on receivables is primarily
dependent on each customer's financial condition. Therefore, the Company would
be exposed to a large loss if one of its major customers were not able to
fulfill its financial obligations. The Company monitors its exposure for
credit losses and maintains allowances for anticipated losses.

Revenues: Revenue is recognized at the date of shipment of product to
customers.

Inventories: Inventories are stated at the lower of cost, determined on a
first-in, first-out (FIFO) basis, or market.

Property, Plant and Equipment: Depreciation and amortization of property,
plant and equipment are calculated using the straight-line method, which
amortizes the cost of the assets over their estimated useful lives. The ranges
of estimated useful lives are: buildings--30 to 40 years; machinery and
equipment--3 to 10 years; leasehold improvements--the lesser of the life of the
lease or asset. Maintenance and repairs are charged to expense as incurred.
Renewals and betterments which materially prolong the useful lives of the
assets are capitalized. The cost and related accumulated depreciation of
property retired or sold are removed from the accounts, and gains or losses are
recognized in the statement of operations. Depreciation and amortization
expense was $8,293,000, $7,568,000 and $5,798,000 for fiscal 1997, 1996, and
1995, respectively, of which $7,309,000, $6,317,000 and $5,232,000,
respectively, has been included in cost of sales.

Amortization of Excess Purchase Price Over Net Tangible Assets of
Businesses Acquired: Cost in excess of net assets acquired is amortized over a
40-year period using the straight-line method. Accumulated amortization at
June 30, 1997 and 1996 approximated $23,085,000 and $21,418,000, respectively.

Impairment of Long-Lived Assets: In March 1995, the FASB issued FAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of ("FAS 121"), which is effective for fiscal years
beginning after December 15, 1995. Effective July 1, 1996, the Company adopted
FAS 121, which requires that long-lived assets (i.e., property, plant and
equipment and goodwill) held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the net book value of
the asset may not be recoverable. An impairment loss will be recognized if the
sum of the expected future cash flows (undiscounted and before interest) from
the use of the asset is less than the net book value of the asset. Generally,
the amount of the impairment loss is measured as the difference between the net
book value of the assets and the estimated fair value of the related assets.
The adoption of this statement had no impact on the Company's results of
operations nor its financial position.

21
<PAGE> 23

Fair Value of Financial Instruments: The fair value of financial
instruments is determined by reference to various market data and other
valuation techniques, as appropriate. Unless otherwise disclosed, the fair
value of financial instruments approximates their recorded values due primarily
to the short-term nature of their maturities.

Advertising Costs: Advertising costs are expensed the first time the
advertising takes place. Advertising expense for fiscal 1997, 1996 and 1995
was $15,248,000, $12,961,000 and $10,254,000, respectively.

Income Taxes: Deferred taxes are provided on the liability method whereby
deferred tax assets are recognized for deductible temporary differences and
operating loss carryforwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the date of
enactment.

Environmental Remediation and Compliance: Environmental remediation and
compliance expenditures that relate to current operations are expensed or
capitalized, as appropriate. Expenditures that relate to an existing condition
caused by past operations and that do not contribute to current or future
revenue generation are expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable and the costs can be
reasonably estimated. Generally, the timing of these accruals coincides with
completion of a feasibility study or the Company's commitment to a formal plan
of action. To date, environmental expenditures have not been material, and
management is not aware of any material environmental related contingencies.

Significant Fourth Quarter Adjustments: During the fourth quarter of
fiscal 1997, bad debt charges approximating $700,000, net of tax, were recorded
due to the bankruptcy filing of a major customer. In fiscal 1995 charges
aggregating $380,000, net of tax, were recorded during the fourth quarter to
record inventory adjustments.

Earnings Per Share: Earnings per share are computed based on the weighted
average number of shares outstanding plus common stock equivalents outstanding
during the period, if dilutive. In February 1997, the FASB issued FAS No. 128,
Earnings per Share ("FAS 128"), which is effective for financial statements
issued for periods ending after December 15, 1997, including interim periods.
Effective December 31, 1997, the Company will adopt FAS 128, which establishes
standards for computing and presenting earnings per share ("EPS") and will
retroactively restate EPS for the first quarter of fiscal 1998 at that time.
The statement requires dual presentation of basic and diluted EPS on the face
of the income statement for entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS computation.
Basic EPS excludes the effect of potentially dilutive securities, while diluted
EPS reflects the potential dilution that would have occurred if securities or
other contracts to issue common stock had been exercised, converted into, or
resulted in the issuance of common stock that had then shared in the earnings
of the entity. The pro forma EPS amounts shown below have been calculated
assuming the Company had already adopted the provisions of this statement:

22
<PAGE> 24
Earnings per Share Calculation
(in thousands, except for share data)

<TABLE>
<CAPTION>
For the year ended June 30, 1997 For the year ended June 30, 1996
-------------------------------------------- --------------------------------------------
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Income available to common
stockholders 16,398 16,786 0.98 337 16,820 0.02
======= =======
EFFECT OF DILUTIVE SECURITIES
Stock-based compensation - 270 - 1

DILUTED EPS
Income available to common
stockholders, plus assumed
conversions 16,398 17,056 0.96 337 16,821 0.02
======= ======= ======= ======= ======= =======
</TABLE>

Accounting for Stock-Based Compensation: In October 1995, the FASB issued
FAS No. 123, Accounting for Stock-Based Compensation ("FAS 123"), which is
effective for fiscal years beginning after December 15, 1995. Effective July
1, 1996, the Company adopted FAS 123 establishing financial accounting and
reporting standards for stock-based employee compensation plans. The
pronouncement defines a fair value based method of accounting for an employee
stock option or similar equity instrument and encourages all entities to adopt
that method of accounting for all of their employee stock option compensation
plans. However, it also allows an entity to continue to measure compensation
cost for those plans using the intrinsic value based method of accounting as
prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees ("APB 25"). Entities electing to remain with the
accounting in APB 25 must make pro forma disclosures of net income and earnings
per share as if the fair value based method of accounting defined in FAS 123
had been applied. The Company has elected to account for stock-based employee
compensation plans under the intrinsic method pursuant to APB 25 and to make
the disclosures in its footnotes as required by FAS 123. See Note 7.

Pervasiveness of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, and related revenues and expenses, and disclosure of gain and loss
contingencies at the date of the financial statements. Actual results could
differ from those estimates.

Reclassifications: Certain items in the prior years' financial statements
have been reclassified to conform with the current year's presentation.

23
<PAGE> 25

NOTE 3 - RESTRUCTURING CHARGE

In March 1996 the Company adopted a business restructuring plan to cut
costs and better utilize working capital. The plan included the discontinuance
of certain product lines which had received marginal acceptance in the
marketplace, costs associated with the initial training of terminated employees
at the Company's Utah facility and the modification of the business structure
of an international division. A pre-tax charge of $5.2 million was recognized
in the third quarter of fiscal 1996 related to the restructuring plan. The
components of the restructuring charge and an analysis of the amounts charged
against the reserve are outlined in the table below:

<TABLE>
<CAPTION> Charges Charges
through Balance through Balance
Restructuring Charges Original June 30, June 30, June 30, June 30,
(in thousands) Reserve 1996 1996 1997 1997
--------------------- ------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Discontinued product lines(1) $ 4,155 $(4,117) $ 38 $ (38) $ -
Initial training costs of terminated employees(2) 387 (387) - - -
Impairment of fixed assets(3) 274 (274) - - -
Modification costs of international division(4) 396 (121) 275 (275) -
------- ------- ------- ------- --------
Total $ 5,212 $(4,899) $ 313 $ (313) $ -
======= ======= ======= ======= =======
</TABLE>
- --------------

(1)Relates to certain product lines that have been discontinued and the
remaining inventory was written down to net realizable value.
(2)Certain manufacturing employees were terminated at the Utah facility
and the costs associated with the initial training of these employees was
written off.
(3)Represents the write off of certain machinery that was used to
manufacture the discontinued product lines.
(4)Represents the cost to modify the business structure of an
international division.

Proceeds through June 30, 1997, from the disposal of the discontinued
inventory approximated $1.5 million. The restructuring charge has been
included as a separate line item in the accompanying consolidated statement of
operations and consolidated statement of cash flows.

NOTE 4 - DISPOSITION OF FIXED ASSETS

During fiscal 1997, the Company disposed of certain machinery and tooling
with a net book value of $743,000 for aggregate proceeds of $46,000 and a note
receivable of $98,000, realizing a loss of $599,000, which has been primarily
classified as cost of sales in the accompanying consolidated statement of
operations.

NOTE 5 - LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS

<TABLE>
<CAPTION>
June 30,
-------------------------
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Variable-rate revolving credit agreement $ - $ -
8.01% senior notes, due fiscal 2003 20,000 20,000
8.25% industrial development revenue bonds, due
fiscal 2009 10,000 10,000
------- -------
$30,000 $30,000
======= =======
</TABLE>

The Company has a Credit Agreement with a bank. The Credit Agreement
includes a $25.0 million revolving line of credit (reduced from $30.0 million
on June 13, 1997) and a $10.8 million standby letter of credit indemnifying
Tandy Corporation ("Tandy") from its obligations as guarantor of the $10.0
million industrial development revenue bonds for which the Company is the
obligor. Tandy can draw against the standby letter

24
<PAGE> 26

of credit only in the event that it must pay any amounts with respect to the
industrial development revenue bonds.

The Credit Agreement has several financial ratio covenants including the
maintenance of a minimum working capital ratio and a minimum net worth. In
addition, the Credit Agreement has provisions specifying certain limitations on
dividends, investments and future indebtedness. In June 1997, the terms of the
Credit Agreement were amended. The amendment (a) extended the term of the
Credit Agreement through February 28, 2000; (b) reduced the bank's lending
commitment from $30 million to $25 million; and (c) facilitated the removal of
another bank from the Credit Agreement. At June 30, 1997, the Company was in
compliance with such covenants.

Borrowings under the Credit Agreement accrue interest at varying rates
based upon a Eurodollar based rate or the lead lending bank's prime lending
rate and upon the Company's debt ratio. The Company must pay a commitment fee
of 0.15% annually on the lending commitment. The obligation is paid quarterly.
Amounts advanced under the Credit Agreement are due on February 28, 2000.

In May 1995, the Company completed a private placement of $20 million
principal amount of senior notes. Under the terms of the Note Purchase
Agreements, the Company is required to meet certain financial ratio
requirements, including a funded debt-to-earnings ratio requirement, a minimum
net worth requirement and an earnings to fixed charges ratio requirement.

At June 30, 1997, the Company was in compliance with all of its debt
agreements.

Interest on the 8.25% industrial development revenue bonds is paid
semiannually. The loan is secured by the $10.8 million standby letter of
credit under the Credit Agreement.

Aggregate contractual principal payments for the next five fiscal years
subsequent to June 30, 1997 are summarized as follows: 1998 - None; 1999 -
$4,000,000; 2000 - $4,000,000; 2001 - $4,000,000; 2002 - $4,000,000; and
thereafter - $14,000,000.

Consolidated interest expense was $2,327,000, $3,831,000 and $2,417,000
for the years ended June 30, 1997, 1996 and 1995, respectively. The Company
capitalized interest in connection with the construction of its new
manufacturing facility in Utah in fiscal 1995 aggregating $529,000.

Derivative financial instruments are utilized by the Company to reduce
interest rate risks. The Company does not hold or issue derivative financial
instruments for trading purposes. During fiscal 1997, the Company entered into
a forward starting interest rate swap agreement with a notional principal
amount of $10.0 million. The effective date of the agreement is October 1,
1998 and the termination date is October 1, 2008. The Company has contracted
to pay a fixed rate of 7.13% and receive a floating interest rate during the
duration of the swap agreement. The Company has the ability and intent to call
its existing $10.0 million of 8.25% industrial development revenue bonds
commencing October 1, 1998 at a redemption premium of 103%. The bonds will be
refinanced at the then existing interest rates. Accordingly, the swap will
have the effect of hedging the Company against an increase in interest rates
prior to the first opportunity to refinance these bonds. Management has
designated this swap as a hedge of the future interest rate exposure of
refinancing these bonds.

25
<PAGE> 27

NOTE 6 - INCOME TAXES

The income tax provision consists of the following:

<TABLE>
<CAPTION>
Year ended June 30,
-----------------------------
1997 1996 1995
---- ---- ----
(in thousands)
<S> <C> <C> <C>

Current:
Federal $ 9,955 $ 275 $4,324
State 473 1 307
------- ------ ------
10,428 276 4,631
Deferred (378) 157 407
------- ------ ------
$10,050 $ 433 $5,038
======= ====== ======
</TABLE>

The following table reconciles the Company's federal corporate statutory
rate and its effective income tax rate:

<TABLE>
<CAPTION>
Year ended June 30,
-------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory rate 35.0% 34.0% 35.0%
State income taxes, net of federal benefit 1.7 - 1.7
Goodwill amortization 1.2 39.2 2.3
Other, net 0.1 (17.0) (1.0)
------ ------ ------
Effective tax rate 38.0% 56.2% 38.0%
====== ====== ======
</TABLE>

The principal current and non-current deferred tax assets and liabilities
consist of the following at June 30, 1997 and 1996:

<TABLE>
<CAPTION>
June 30,
-----------------------
1997 1996
---- ----
(in thousands)
<S> <C> <C>
Deferred tax assets:
Inventories $ 336 $ 573
Bad debt reserve 1,168 453
Insurance reserves 378 693
Other amounts expensed for financial reporting
purposes not yet deducted for tax 117 108
-------- --------
1,999 1,827
Deferred tax liabilities:
Depreciation and amortization 15,067 14,221
-------- --------
Net deferred tax liability $(13,068) $(12,394)
======== ========
Reported as:
Current assets (included in prepaid expenses
and other current assets) $ 1,866 $1,540
Noncurrent liabilities-deferred income taxes (14,934) (13,934)
-------- --------
Net deferred tax liability $(13,068) $(12,394)
======== ========
</TABLE>

In connection with the initial public offerings of the Company's common
stock (the "Offerings"), Tandy, TE Electronics Inc. and the Company entered
into a Tax Sharing and Tax Benefit Reimbursement Agreement (the "Tax
Agreement"). Pursuant to the Tax Agreement, Tandy is primarily responsible for
all U.S. federal income taxes, state income taxes and foreign income taxes with
respect to the Company for all periods ending on or prior to the date of
consummation of the Offerings and for audit adjustments to such federal income
and foreign income taxes. The Company is responsible for all other taxes owing
with respect to the Company, including audit adjustments to state and local
income and for franchise taxes.

26
<PAGE> 28

The Company and Tandy made an election under Sections 338(g) and
338(h)(10) of the Internal Revenue Code with the effect that the tax basis of
the Company's assets was increased to the deemed purchase price of the assets.
An amount equal to such increase was included in income in the consolidated
federal income tax return filed by Tandy. This additional tax basis results in
increased income tax deductions and, accordingly, reduced income taxes payable
by the Company. Pursuant to the Tax Agreement, the Company pays Tandy an
amount that approximates the federal tax benefit expected to be realized with
respect to such additional basis. Amounts payable to Tandy pursuant to the Tax
Sharing Agreement are recorded as current federal income tax expense in the
accompanying consolidated statements of operations. Income tax expense thus
approximates the amount which would be recognized by the Company in the absence
of the Tax Agreement. Although the amount of the payment required to be made
in a particular year under the Tax Agreement may differ somewhat from the
difference in that tax year between the Company's actual taxes and the taxes
that the Company would have owed had the increase in basis not occurred, the
aggregate amount of payments required to be made by the Company to Tandy over
the life of the Tax Agreement will not differ materially from the difference
over the life of the Tax Agreement between the Company's actual taxes and the
amount of taxes that the Company would have owed had the increase in basis not
occurred. Consequently, such payments should have no effect on the Company's
earnings and should not have a material effect on its cash flow. The Tax
Agreement provides for adjustments to the amount of tax benefit payable in the
event of certain material transactions, such as a business combination or
significant disposition of assets. During fiscal 1997, 1996 and 1995, $6.0
million, $0.0 million and $4.5 million, respectively, were paid to Tandy
pursuant to this agreement.

NOTE 7 - STOCK OPTIONS

Under the Company's Amended and Restated 1994 Incentive Stock Plan (the
"ISP"), designated officers, employees, employee directors and consultants of
the Company are eligible to receive awards in the form of incentive stock
options, nonqualified stock options, stock appreciation rights ("SAR's"),
restricted stock grants or performance awards. Annually, non-employee
directors receive options to purchase 1,000 shares of common stock (increased
to 2,000 shares beginning in fiscal 1998). The purchase price of common stock
subject to an option shall not be less than the market value of the stock on
the date of the grant and for a term not to exceed ten years. Pursuant to
amendments to the ISP, an aggregate of 2,000,000 shares of common stock have
been reserved for issuance under the Plan, no more than 300,000 of which may be
awarded as restricted stock or performance awards. The Company has awarded
restricted shares of common stock totaling 19,950 shares.

During the first quarter of fiscal 1996, the Company canceled 1,150,500
options that had been granted in February 1994. Associated with these options,
compensation expense of $690,300 was recognized during fiscal 1995. As part of
the cancellation, the accumulated liability at June 30, 1995, approximating
$636,000, net of taxes, was reclassified to additional paid-in capital.

In July 1996, the Compensation Committee granted, subject to stockholder
approval, options to purchase 625,250 shares of common stock to the Company's
officers and other key employees. Depending on whether certain performance
objectives were met, the options would become exercisable in one-third
increments on each of the first three anniversaries of the date of the grant
and would expire ten years after the date of the grant. To the extent
performance objectives were not met, the options would become exercisable on
August 10, 2003 and would expire September 10, 2003. As a result of the
Company's performance in fiscal 1997, the options will become exercisable over
three years and will expire in July 2006. The stockholders approved the grants
in November 1996; accordingly, the Company will recognize compensation expense
of approximately $2.2 million over the three year vesting period, which amount
is based on the difference between the exercise price and the fair market value
of common stock on the date of stockholder approval. The Company recognized
compensation expense of $749,000 in fiscal 1997 related to the granting of
these options.

Additionally, during fiscal 1997, the Board of Directors granted options
to purchase 284,150 shares of common stock that were not based on performance
objectives. Full vesting terms ranged from three to five years with the
options expiring ten years from the date of the grant. The exercise prices for
these options

27
<PAGE> 29

were equal to the fair market value on the respective dates of grant;
therefore, no compensation expense was recognized.

<TABLE>
<CAPTION>
Summary of Stock Option Transactions
(share amounts in thousands)

June 30, 1997 June 30, 1996 June 30, 1995
----------------------- -------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>

Outstanding at beginning of year 324 $9.14 1,275 $18.37 1,151 $19.00
Grants 909 7.31 242 7.34 124 12.57
Exercised 1 7.50 - - - -
Canceled 17 8.02 1,193 18.64 - -
------- ------ ------
Outstanding at end of year 1,215 7.61 324 9.14 1,275 18.37
======= ====== ======
Exercisable at end of year 145 $10.04 42 $12.57
======= ======
Weighted average fair value of options
granted during the year $ 6.53 $ 4.04
====== ======

</TABLE>

Options Outstanding Options Exercisable
------------------------------------------------------- --------------------------------------
Weighted
Average Weighted Weighted
Range of Shares Remaining Average Shares Average
Exercise Outstanding Contractual Exercise Exercisable Exercise
Prices at 6/30/97 Life Price at 6/30/97 Price
<S> <C> <C> <C> <C> <C>
$6.19 - 7.81 1,082 8.88 years $ 7.21 70 $ 7.31
$9.31 - 12.81 133 7.69 years 12.41 75 12.57
------- ------
$6.19 - 12.81 1,215 8.75 years $ 7.79 145 $10.04
======= ======
</TABLE>

The Company has adopted the disclosure-only provisions of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation ("FAS
123"). Accordingly, no compensation cost has been recognized for options
granted except as mentioned above. Had compensation cost for the Company's
stock option plans been determined based on the fair value at the grant date
for awards in fiscal 1996 and fiscal 1997 in accordance with the provisions of
FAS 123, the Company's net income and net income per share would have been
reduced to the pro forma amounts indicated below (in thousands, except per
share amounts):

28
<PAGE> 30

<TABLE>
<CAPTION>
Year Ended June 30,
----------------------
1997 1996
---- ----
<S> <C> <C> <C>
Net income As reported $16,398 $ 337
Pro forma 15,521 232

Primary earnings per share As reported 0.96 0.02
Pro forma 0.92 0.01

Fully diluted earnings per share As reported 0.95 0.02
Pro forma 0.91 0.01
</TABLE>

The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model based upon the following
assumptions: expected volatility of 47.30% to 51.16%; risk-free interest rate
ranging from 5.39% to 6.73%; expected lives of 6 or 7 years and no expected
dividend payments. For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the vesting period.

The effects of applying FAS No. 123 in this pro forma disclosure are not
indicative of future amounts as the pro forma amounts above do not include the
impact of stock option awards granted prior to fiscal 1996 and additional
awards are anticipated in future years.

NOTE 8 - EMPLOYEE BENEFIT PLANS

The Company maintains stock purchase programs that have been available to
most employees during the three-year period ended June 30, 1997. Effective
July 1, 1995, the stock purchase program (the "SPP"), as amended, allows a
maximum employee contribution of 5%, while the Company's matching contribution
is 25%, 40% or 50% of the employee's contribution, depending on the length of
the employee's participation in the program. The matching contributions to the
stock purchase program were $0.6 million in fiscal 1997, $0.6 million in fiscal
1996 and $1.5 million in fiscal 1995.

Effective July 1, 1995, the Company implemented a new Savings and Profit
Sharing Plan (the "Plan") in which most employees are eligible to participate.
Under the savings or Section 401(k) portion of the Plan, employees may
contribute from 1% to 15% of their compensation (subject to certain limitations
imposed by the Internal Revenue Code), and the Company makes matching
contributions equal to 50% of the first 5% of eligible employee contribution.
Under the profit sharing portion of the Plan, the Company may contribute
annually an amount up to 7.5% of the Company's pre-tax earnings, subject to
Board approval. Employees may direct the investment of profit sharing
contributions and employee contributions among five investment funds and a fund
investing in Company common stock. Employer matching contributions are
invested in Company common stock. All contributions are held in a trust by the
Plan trustee. Employer matching contributions vest immediately, while profit
sharing contributions vest 100% when the employee has five years of service
with the Company. For fiscal 1997 and 1996, the Company accrued approximately
$2.0 million and $1.3 million, respectively, for the profit sharing portion of
the Plan. The matching contributions to the savings portion of the Plan was
$0.6 million for both fiscal 1997 and 1996.

Employees can direct the voting of Company common stock attributable to
their SPP and Plan accounts. The failure of an employee to direct the Trustee
with respect to stock (other than stock attributable to employer matching
contributions in the Plan) is treated as an instruction that such stock is not
to be voted. If an employee fails to direct the voting of shares attributable
to employer matching contributions in the Plan, such shares will be voted in
the same proportion as the directed stock of other employees participating in
the Plan; provided, however, that in the case of a proxy contest, the
Administrative Committee of the Plan, or any

29
<PAGE> 31

investment manager appointed by the Administrative Committee, shall direct the
Trustee with respect to the voting of such stock.

NOTE 9 - TERMINATION PROTECTION AGREEMENTS

The Company has entered into Termination Protection Agreements with its
executive officers (collectively, the "Executives"). The Termination
Protection Agreements, all of which are substantially similar, have initial
terms of two years which automatically extend to successive one-year periods
unless terminated by either party. If the employment of any of the Executives
is terminated, with certain exceptions, within 24 months following a change in
control, or in certain other instances in connection with a change in control,
the Executives are entitled to receive certain cash payments, as well as the
continuation of fringe benefits for a period of up to twelve months.
Additionally, all benefits under the Savings and Profit Sharing Plan vest, all
restrictions on any outstanding incentive awards or shares of restricted common
stock will lapse and such awards or shares will become fully vested, all
outstanding stock options will become fully vested and immediately exercisable,
and the Company will be required to purchase for cash, on demand made within 60
days following a change in control, any shares of unrestricted common stock and
options for shares at the then current per-share fair market value. The
Agreements as amended in February 1996 also provide one year of outplacement
services for the Executive and that, if the Executive moves more than 20 miles
from his primary residence in order to accept permanent employment within 36
months after leaving the Company, the Company will, upon request, repurchase
the Executive's primary residence at a price determined in accordance with the
Agreement.

NOTE 10 - STOCKHOLDER RIGHTS PLAN

The Company has adopted a Stockholder Rights Plan under which one right (a
"Right") was issued with respect to each share of common stock. Each Right
entitles the holder to purchase from the Company a unit consisting of one
one-thousandth of a share of Series A Junior Participating Preferred Stock, par
value $1.00 per share, at a purchase price of $110 per Right, subject to
adjustment in certain events.

The Rights are currently attached to all certificates representing
outstanding shares of common stock, and separate certificates for the Rights
will be distributed only upon the occurrence of certain specified events. The
Rights will separate from the common stock and a "Distribution Date" will occur
upon the earlier of (i) ten days following a public announcement that a person
or group of affiliated or associated persons (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
of the outstanding shares of common stock, or (ii) ten business days (or such
later date as may be determined by the Company's Board of Directors before the
Distribution Date occurs) following the commencement of a tender offer or
exchange offer that would result in a person becoming an Acquiring Person.

The Rights are not exercisable until the Distribution Date and will expire
at the close of business on February 1, 2004, unless earlier redeemed or
exchanged by the Company.

NOTE 11 - COMMITMENTS AND CONTINGENCIES

The Company is a party to various legal actions arising in the ordinary
course of its business. The Company does not believe that any such pending
actions will have a material adverse effect on its results of operations or
financial position. The Company maintains liability insurance at levels which
it believes are adequate for its needs and comparable with levels maintained by
other companies in the furniture manufacturing business.

On July 30, 1996, Fisher-Price, Inc. filed suit against O'Sullivan
Industries, Inc. in the Supreme Court of New York, Erie County, alleging breach
of a License Agreement between O'Sullivan Industries, Inc. and Fisher-Price.
Pursuant to the License Agreement, the Company was to have manufactured a line
of furniture under the Fisher-Price name. The suit alleged a failure to pay
minimum royalties under the License Agreement of $1,400,000. In December 1996,
the Company paid Fisher-Price $75,000 to settle this litigation, and the case
was dismissed with prejudice on December 27, 1996.

30
<PAGE> 32

The Company's operations are subject to extensive federal, state and local
laws, regulations and ordinances relating to the generation, storage, handling,
emission, transportation and discharge of certain materials, substances and
waste into the environment. Permits are required for certain of the Company's
operations and are subject to revocation, modification and renewal by
governmental authorities. In general, compliance with air emission regulations
is not expected to have a material adverse effect on the Company's business,
results of operations or financial condition.

The Company's manufacturing facilities ship waste product to various
disposal sites. The Company has been designated as a potentially responsible
party ("PRP") under the Arkansas Remedial Action Trust Fund Act in connection
with the cost of cleaning up one site in Diaz, Arkansas and has entered into a
de minimis buyout agreement with certain other PRP's, pursuant to which it has
contributed $2,000 to date toward cleanup costs. The Company believes that
amounts it may be required to pay in the future, if any, will be immaterial.

NOTE 12 - SHARE REPURCHASE PROGRAM

On May 2, 1997, the Board of Directors authorized the purchase of up to
five percent of the outstanding shares of the Company's common stock during the
next 24 months. The actual number of shares purchased, the timing of the
purchases and the prices paid for the shares will be dependent upon future
market conditions. The program includes no specific pricing nor timing targets
and may be suspended at any time or terminated prior to completion. As of
June 30, 1997, the Company had purchased 64,300 shares for $965,000 pursuant to
this program.

NOTE 13 - MAJOR CUSTOMERS AND INTERNATIONAL OPERATIONS

Sales to three customers exceeded 10% of net sales in the fiscal year
ended June 30, 1997. Sales to such customers as a percentage of net sales are
presented in the following table:

Year ended June 30,
-------------------
1997 1996 1995
---- ---- ----

Customer A 17.1% 15.6% 15.1%
Customer B 12.3% 12.5% 11.9%
Customer C 12.0% 7.4% 8.0%

There are no material foreign operations or export sales.

31
<PAGE> 33

NOTE 14 - QUARTERLY OPERATING RESULTS - UNAUDITED (in thousands, except per
share data)

<TABLE>
<CAPTION>
Fiscal 1997 (By Quarter)
-----------------------------------
1 2 3 4
------- ------- -------- -------
<S> <C> <C> <C> <C>
Net sales $83,126 $80,593 $77,505 $80,266
Gross profit 22,552 23,626 22,322 22,412
Net income 3,476 4,574 3,895 4,453
Earnings per common share (primary) 0.21 0.27 0.23 0.26
Earnings per common share (fully diluted) 0.21 0.27 0.23 0.26

Fiscal 1996 (By Quarter)
-----------------------------------
1 2 3 4
------- ------- -------- -------
Net sales $74,774 $79,574 $67,430 $69,988
Gross profit 14,884 16,144 14,707 16,769
Restructuring charge - - 5,212 -
Net income (loss) 1,348 458 (2,942) 1,473
Earnings (loss) per common share (primary) 0.08 0.03 (0.17) 0.09
Earnings (loss) per common share (fully diluted) 0.08 0.03 (0.17) 0.09
</TABLE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

32
<PAGE> 34

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT*

ITEM 11. EXECUTIVE COMPENSATION*

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT*

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS*

*The information called for by Items 10, 11, 12 and 13, to the extent not
set forth under the caption "Executive Officers of the Company" in Part I of
this annual report, is or will be set forth in the definitive proxy statement
relating to the 1997 Annual Meeting of Stockholders of O'Sullivan Industries
Holdings, Inc. pursuant to the Securities and Exchange Commission's Regulation
14A. Such definitive proxy statement relates to a meeting of stockholders
involving the election of directors and the portions thereof called for by
Items 10, 11, 12 and 13 of Form 10-K are incorporated herein by reference
pursuant to Instruction G of Form 10-K.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) Financial Statements

The following consolidated statements of O'Sullivan Industries
Holdings, Inc. and subsidiaries are filed as part of this report:

<TABLE>
<S> <C>
Report of Independent Accountants .............................................. 16
Consolidated Balance Sheets as of June 30, 1997 and 1996 ........................ 17
Consolidated Statements of Operations for the three years ended June 30, 1997 ... 18
Consolidated Statements of Cash Flows for the three years ended June 30, 1997 ... 19
Consolidated Statements of Changes in Stockholders' Equity for the three years
ended June 30, 1997 ............................................................. 20
Notes to Consolidated Financial Statements ...................................... 21
</TABLE>

(a)(2) Financial Statements Schedules

Schedules have been omitted because they are not required or are not
applicable or the information required to be set forth therein either is
not material or is included in the financial statements or notes thereto.

(a)(3) Exhibits:

A list of exhibits required to be filed as part of this report is
set forth in the Index to Exhibits, which immediately precedes such
exhibits, and is incorporated herein by reference.

(b) Reports on Form 8-K

None.

33
<PAGE> 35

SIGNATURES

Pursuant to the requirements of Sections 13 and 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Lamar, State of Missouri, on the 24th day of September, 1997.

O'SULLIVAN INDUSTRIES HOLDINGS, INC.

By /s/ Daniel F. O'Sullivan
--------------------------------
Daniel F. O'Sullivan
Chairman of the Board and
Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

/s/ Daniel F. O'Sullivan Chairman of the Board and September 24, 1997
- ------------------------------------- Chief Executive Officer
Daniel F. O'Sullivan (Principal Executive Officer)

/s/ Richard D. Davidson President and September 24, 1997
- ------------------------------------- Chief Operating Officer
Richard D. Davidson and Director

/s/ Tyrone E. Riegel September 24, 1997
- ------------------------------------- Executive Vice President
Tyrone E. Riegel and Director

/s/ Terry L. Crump Executive Vice President and September 24, 1997
- ------------------------------------- Chief Financial Officer
Terry L. Crump (Principal Financial and Accounting Officer)

/s/ William C. Bousquette Director September 24, 1997
-------------------------------------
William C. Bousquette

/s/ Charles G. Hanson Director September 24, 1997
- -------------------------------------
Charles G. Hanson

/s/ Stewart M. Kasen Director September 24, 1997
- -------------------------------------
Stewart M. Kasen

/s/ Thomas M. O'Sullivan, Sr. Director September 24, 1997
-------------------------------------
Thomas M. O'Sullivan, Sr.

/s/ Ronald G. Stegall Director September 24, 1997
- -------------------------------------
Ronald G. Stegall
</TABLE>

34
<PAGE> 36

<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION PAGE
<S> <C> <C>
3.1 & 4.1 Certificate of Incorporation of O'Sullivan Industries Holdings, Inc. (the
"Company") (incorporated by reference from Exhibit 3.1 to Registration Statement
on Form S-1 (File No. 33-72120))

3.2 & 4.2 By-laws of the Company (incorporated by reference from Exhibit 3.2 to
Registration Statement on Form S-1 (File No. 33-72120))

4.3 Specimen Stock Certificate of the Company (incorporated by reference from Exhibit
4.1 to Amendment No. 3 to Registration Statement on Form S-1 (File No. 33-72120))

4.4 Rights Agreement dated as of February 1, 1994 between the Company and the First
National Bank of Boston, as Rights Agent (incorporated by reference from Exhibit
4.4 to Quarterly Report on Form 10-Q for the quarter ended March 31, 1994 (File
No. 1-12754))

*10.1 Amended and Restated O'Sullivan Industries Holdings, Inc. 1994 Incentive Stock
Plan (the "ISP") (incorporated by reference from Exhibit 4.5 to the Registration
Statement on Form S-8 (File No. 333-21609))

*10.1a First Amendment to the ISP (incorporated by reference from Exhibit 4.5(a) to
Registration Statement on Form S-8 (File No. 333-21609))

*10.1b Second Amendment to the ISP ...................................................... 37

*10.2 Form of Amended and Restated Termination Protection Agreement between the Company
and certain members of management (incorporated by reference from Exhibit 10.2 to
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 (File No.
1-12754))

*10.3 O'Sullivan Industries Holdings, Inc. Stock Plan for Directors (incorporated by
reference from Exhibit 10.1 to Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997 (File No. 1-12754))

*10.4 O'Sullivan Industries Holdings, Inc. Deferred Compensation Plan (the "DCP")
(incorporated by reference from Exhibit 10.2 to Quarterly Report on Form 10-Q for
the Quarter ended March 31, 1997 (File No. 1-12754))

*10.4a First Amendment to the DCP ....................................................... 38

10.5 Amended and Restated Tax Sharing and Tax Reimbursement Agreement dated as of June
19, 1997 between the Company and Tandy Corporation and TE Electronics Inc. ....... 39

*10.7 Form of Indemnity Agreement between the Company and certain directors and
officers (incorporated by reference from Exhibit 10.7 to Amendment No. 1 to
Registration Statement on Form S-1 (File No. 33-72120))

*10.8 Schedule of Director Fees ........................................................ 56

10.9 Indenture of Trust dated as of October 1, 1988 between the Industrial Development
Authority of Halifax County, Virginia and Texas American Bank/Fort Worth, N.A.,
as Trustee (incorporated by reference from Exhibit 10.9 to Amendment No. 1 to
Registration Statement on Form S-1 (File No. 33-72120))

</TABLE>

35
<PAGE> 37
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION PAGE
<S> <C> <C>

10.10 Agreement of Sale dated as of October 1, 1988 between the Industrial Development
Authority of Halifax County, Virginia and O'Sullivan Industries - Virginia, Inc.
(incorporated by reference from Exhibit 10.10 to Amendment No. 1 to Registration
Statement on Form S-1 (File No. 33-72120))

10.11 Composite Form of Note Purchase Agreement dated as of May 15, 1995 between the
Company and each of New York Life Insurance Company and New York Life Insurance
and Annuity Corporation (incorporated by reference from Exhibit 10.11 to Annual
Report on Form 10-K for the year ended June 30, 1995 (File No. 1-12754))

10.12 Amended and Restated Credit Agreement dated as of November 22, 1994, by and among
the Company, O'Sullivan Industries, Inc., O'Sullivan Industries - Virginia, Inc.,
The Boatmen's National Bank of St. Louis and Wachovia Bank of Georgia, N.A. ...... 57

10.12a First Amendment to Amended and Restated Credit Agreement dated as of May 15, 1995 107

10.12b Second Amendment to Amended and Restated Credit Agreement dated as of December
29, 1995 ......................................................................... 110

10.12c Third Amendment to Amended and Restated Credit Agreement dated as of June 13, 1997 114

21 Subsidiaries of the Registrant (incorporated by reference from Exhibit 21 to
Annual Report on Form 10-K for the year ended June 30, 1995 (File No. 1-12754))

23 Consent of Independent Accountants ............................................... 120

27 Financial Data Schedule .......................................................... 121
</TABLE>

- --------------
* Each of these exhibits is a "management contract or compensatory plan
or arrangement."

<PAGE> 1

EXHIBIT 10.1b

SECOND AMENDMENT TO THE O'SULLIVAN INDUSTRIES HOLDINGS, INC.
AMENDED AND RESTATED 1994 INCENTIVE STOCK PLAN

THIS SECOND AMENDMENT amends the O'Sullivan Industries Holdings,
Inc. Amended and Restated 1994 Incentive Stock Plan effective July 8, 1997.

W I T N E S S E T H:

WHEREAS, the O'Sullivan Industries Holdings, Inc. 1994 Incentive
Stock Plan was approved and adopted by the Board of Directors of O'Sullivan
Industries Holdings, Inc. (the "Company") on January 22, 1994 and was approved
by the sole stockholder of the Company on January 26, 1994; and

WHEREAS, the O'Sullivan Industries Holdings, Inc. 1994 Incentive
Stock Plan was amended and restated effective September 20, 1996 by action of
the Board of Directors of the Company, which amendment and restatement was
approved by the stockholders of the Company at the annual meeting held on
November 14, 1996; and

WHEREAS, the O'Sullivan Industries Holdings, Inc. Amended and
Restated 1994 Incentive Stock Plan was further amended by a First Amendment
dated November 14, 1996 (as so amended, the "Plan"); and

WHEREAS, the Board of Directors of the Company wishes to make an
additional amendment to the Plan;

NOW, THEREFORE, the Plan is hereby amended as follows:

1. Section 5.1. The second sentence of Section 5.1 of the Plan is hereby
amended to read as follows: "Each Director Option granted shall be in respect
of 2,000 Shares."

All other terms and provisions of the Plan and all Awards and
Options granted under the Plan shall remain in full force and effect.
Capitalized terms used herein without definition shall have the respective
meanings assigned to them in the Plan.

Page 1 of 1

<PAGE> 1

EXHIBIT 10.4a

FIRST AMENDMENT TO
O'SULLIVAN INDUSTRIES HOLDINGS, INC.
DEFERRED COMPENSATION PLAN

WHEREAS, O'Sullivan Industries Holdings, Inc. has established its
Deferred Compensation Plan (the "Plan") for the benefit of a select group of
management and highly compensated employees; and

WHEREAS, pursuant to the terms of the Plan, the Company reserved the
right to amend the Plan from time to time in its discretion; and

WHEREAS, the Company desires to amend the Plan as set forth below;

NOW, THEREFORE, in consideration of these premises, the Plan is
amended as follows, effective July 1, 1997:

5.6 Method of Payment. A Participant may elect distribution of the
Accounts in a lump sum or in installments over a period of years (not to exceed
ten). Any such election must be made no later than twelve months prior to the
time a Participant first becomes eligible to receive a distribution of his
Accounts under the Plan. If the Participant elects installment payments, the
unpaid amount shall continue to be invested as provided in Article IV and shall
continue to accrue earnings until paid. A distribution shall be made in cash,
except that with respect to any amount credited to the Phantom Stock Unit
investment at the time of distribution, the Participant or his Beneficiary may
elect to receive his distribution in the form of whole shares of common stock
of O'Sullivan Industries Holdings, Inc., provided, however, that: (1) the
restrictions specified in Section 4.2 shall apply to such latter election by an
officer, as defined in Section 4.2; and (2) any Participant or Beneficiary's
right to receive a distribution in the form of shares of stock is limited to
the right to receive shares of treasury stock, and to the extent there are no
shares of treasury stock available, the distribution shall be made in cash.
Any election pursuant to this Section 5.6 shall be made on a form prescribed by
the Administrator and shall be irrevocable once made.

IN WITNESS WHEREOF, this First Amendment has been duly executed as of
the 3rd day of September, 1997.

O'SULLIVAN INDUSTRIES HOLDINGS, INC.

By: /s/ Daniel F. O'Sullivan
Chairman of the Board and
Chief Executive Officer
"Sponsoring Employer"

ATTEST:

/s/ Rowland H. Geddie, III
Vice President, General Counsel
and Secretary

Page 1 of 1

<PAGE> 1
EXHIBIT 10.5

AMENDED AND RESTATED
TAX SHARING AND TAX BENEFIT REIMBURSEMENT AGREEMENT

This Amended and Restated Tax Sharing and Tax Benefit Reimbursement
Agreement (the "Agreement") dated as of June 19, 1997, is entered into by and
among Tandy Corporation, a Delaware corporation, having its principal office at
1800 One Tandy Center, Fort Worth, Texas 76102 ("Tandy"), TE Electronics Inc.,
a Delaware corporation and a wholly-owned subsidiary of Tandy having its
principal office at 1800 One Tandy Center, Fort Worth, Texas 76102 ("TE") and
O'Sullivan Industries Holdings, Inc., a Delaware corporation, having its
principal office at 1900 Gulf Street, Lamar, Missouri 64759 ("Holdings").

WHEREAS, this Agreement supersedes as of February 1, 1994, the Tax Sharing
and Tax Benefit Reimbursement Agreement dated as of February 1, 1994, entered
into by and among Tandy, TE and Holdings.

WHEREAS, Tandy and certain of its subsidiaries, including Holdings,
effected the initial public offering of the stock of Holdings (the "IPO") and
certain related transactions described in the Registration Statement on Form
S-1 under the Securities Act of 1933, dated November 24, 1993, and the
Prospectus contained therein, as amended from time to time; and

WHEREAS, prior to the Contribution (as defined below), TE owned one
hundred shares of Holdings common stock; and

WHEREAS, following the execution of the Underwriting Agreement, dated
January 26, 1994, by and among TE, Holdings, Merrill Lynch & Co., Wheat First
Butcher & Singer, The Chicago Dearborn Company and Rauscher Pierce Refsnes,
Inc. (the "Underwriting Agreement"), TE transferred (the "Contribution") to
Holdings all of the issued and outstanding stock of O'Sullivan Industries, Inc.
("OSI-Missouri") in exchange for fourteen million nine hundred ninety-nine
thousand nine hundred (14,999,900) shares of Holdings common stock pursuant to
a Stock Exchange Agreement, dated January 24, 1994, by and among TE and
Holdings (the "Contribution Agreement"); and

WHEREAS, upon consummation of the closing (the "Closing") of the IPO,
Holdings and its subsidiaries became members of an affiliated group of
corporations of which Holdings is the common parent (the "Holdings Group") and
the members of the Holdings Group ceased to be members of the affiliated group
of corporations of which Tandy is the common parent (the "Tandy Group");

NOW, THEREFORE, Tandy, on behalf of itself and the other members of the
Tandy Group and Holdings, on behalf of itself and the other members of the
Holdings Group enter into this Agreement to provide for the allocation between
the Tandy Group and the Holdings Group of all

Page 1 of 17 Pages

<PAGE> 2

responsibilities, liabilities and benefits relating to or affecting Taxes (as
hereinafter defined) paid or payable by either of them for all taxable periods,
whether beginning before, on or after the date of the Closing (the "Closing
Date") and to provide for certain other matters.

ARTICLE I
DEFINITIONS

"Allocation" shall have the meaning ascribed thereto in Section 5.02
hereof.
"Business Combination" shall have the meaning ascribed thereto in Section
5.03(a)(iv) hereof.
"Canadian Asset Sale" means the sale of assets pursuant to that certain
Canadian Asset Transfer Agreement dated as of December 1, 1993 between Tandy
Marketing (Canada) Ltd. and OSI-Missouri.
"Change" shall mean any audit, amendment, determination or other change in
a Tax Return which changes the amount of Taxes paid or payable by the filer of
such Tax Return from the amount shown thereon to be due.
"Change of Control" means the occurrence of any one or more of the
following events: (i) the acquisition by an individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or
more of either (A) the then outstanding shares of either the common stock of
Holdings (the "Outstanding Holdings Stock"), or OSI-Missouri (the "Outstanding
OSIM Stock") or (B) the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors of either
Holdings (the "Outstanding Holdings Voting Securities") or OSI-Missouri (the
"Outstanding OSIM Voting Securities"); or (ii) any acquisition, reorganization,
merger, share exchange, consolidation or other transaction involving Holdings
or any member of the Holdings Group (each, a "Holdings Merger"), unless,
immediately following any such Holdings Merger (a) more than 50% of the then
Outstanding Holdings Stock or the then Outstanding Holdings Voting Securities
is then beneficially owned, directly or indirectly, by Persons who were the
beneficial owners, respectively, of the Outstanding Holdings Voting Securities
immediately prior to such Holdings Merger, (b) no Person beneficially owns
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) 25% or
more of either (1) the then Outstanding OSIM Stock and the then Outstanding
OSIV Stock and at least 80% of both the then Outstanding OSIM Voting Securities
and the then Outstanding OSIV Voting Securities.
"Closing" shall have the meaning ascribed thereto in the preamble to this
Agreement.
"Closing Date" shall have the meaning ascribed thereto in the preamble to
this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, and shall
include corresponding provisions of any subsequently enacted federal tax laws.
"Contribution" shall have the meaning ascribed thereto in the preamble
hereof.
"Contribution Agreement" shall have the meaning ascribed thereto in the
preamble to this Agreement.
"Current Assets" shall have the meaning ascribed thereto in Section 5.02
hereof.
"Election" shall have the meaning ascribed thereto in Section 5.01 hereof.
"Group" shall mean, as the context requires, either the Tandy Group or the

Page 2 OF 17 Pages
<PAGE> 3

Holdings Group or both.
"Government Notice" shall have the meaning ascribed thereto in Section
4.01 hereof.
"Holdings Change" shall have the meaning ascribed thereto in Section 3.02
hereof.
"Holdings Group" shall have the meaning ascribed thereto in the preamble
to this Agreement.
"Income Taxes" shall mean, all United States federal, state and local, and
foreign taxes on, based on, measured by or with respect to income, net worth or
capital, together with any related interest, penalties and additions thereto.
"Income Tax Return" means any return, form, filing, questionnaire or other
document required to be filed (or which may be filed), including requests for
extensions of time, filings made with estimated tax payments, claims for refund
and amended returns that may be filed, for any period with any taxing authority
(whether domestic or foreign) in connection with any Income Tax or Income Taxes
(whether or not a payment is required to be made with respect to such filing).
"Indemnified Party" shall have the meaning ascribed thereto in Section
3.03 hereof.
"Indemnifying Party" shall have the meaning ascribed thereto in Section
3.03 hereof.
"Intangible Retained Assets" shall mean all Retained Assets which
represent the goodwill, going concern value, customer relationships, know-how,
workforce-in-place, and all other intangible assets owned by Holdings,
OSI-Missouri, and OSI-Virginia on the Closing Date.
"IPO" shall have the meaning ascribed thereto in the preamble hereof.
"IRS" shall mean the Internal Revenue Service.
"Non-Income Tax Return" means any return, form, filing, questionnaire or
other document required to be filed (or which may be filed) in connection with
any Non-Income Tax or Non-Income Taxes (whether or not payment is required to
be made with respect to such filing).
"Non-Income Taxes" means all forms of taxation other than Income Taxes,
whenever created or imposed, and whether of the United States or elsewhere, and
whether imposed by a local, municipal, governmental, state, federation or other
body, and without limiting the generality of the foregoing, shall include
sales, use, ad valorem, gross receipts, value added, transfer, recording,
withholding, payroll, employment, excise, occupation, premium, self procurement
and property taxes, together with any related interest, penalties and additions
to any such tax, or additional amounts imposed by an taxing authority (domestic
or foreign) upon any member, division, branch, or other entity of the Holdings
Group or the Tandy Group.
"OSI-Missouri" shall have the meaning ascribed thereto in the preamble
hereof.
"OSI-Virginia" shall mean O'Sullivan Industries-Virginia, Inc., a Virginia
corporation.
"Recipient" shall have the meaning ascribed thereto in Section 3.04
hereof.
"Reimbursor" shall have the meaning ascribed thereto in Section 3.04
hereof.
"Retained Asset" shall have the meaning ascribed thereto in Section 5.02
hereof.
"Tandy Change" shall have the meaning ascribed thereto in Section 3.02
hereof.
"Tandy Group" shall have the meaning ascribed thereto in the preamble to
this Agreement.
"Tax Benefit Amount" shall have the meaning ascribed thereto in Section
5.02 hereof.
"Tax Benefit Base" shall have the meaning ascribed thereto in Section 5.03
hereof.
"Tax Benefit Deduction" shall have the meaning ascribed thereto in Section
5.02 hereof.
"Tax Benefit Issue" shall have the meaning ascribed thereto in Section
4.02(a) hereof.
"Tax Benefit Payment" shall have the meaning ascribed thereto in Section
5.03 hereof.
"Tax Benefits Schedule" shall have the meaning ascribed thereto in Section
5.02 hereof.
"Tax Rate" shall have the meaning ascribed thereto in Section 5.03 hereof.

Page 3 of 17 Pages

<PAGE> 4

"Tax Returns" shall mean all Income Tax Returns and Non-Income Tax
Returns.
"Taxes" shall mean Income Taxes and Non-Income Taxes.
"TE" shall have the meaning ascribed thereto in the preamble hereof.
"Underwriting Agreement" shall have the meaning ascribed thereto in the
preamble to this Agreement.
"Underpayment Rate" shall have the meaning ascribed thereto in Section
4.02(b) hereof.

ARTICLE II
PREPARATION AND FILING OF TAX RETURNS

Section 2.01. Manner of Preparation. All Tax Returns filed after the
Closing Date and on or before the date on which the statute of limitations for
assessing federal income tax deficiencies against the Holdings Group (or any
successor thereto) expires for the tax year in which the final Tax Benefit
Payment is made pursuant to the terms of this Agreement shall, to the extent
permitted by applicable law and in the absence of a controlling change in law
or circumstances, be prepared on a basis which is consistent with the Election
and shall be filed on a timely basis (including pursuant to extensions) by the
party responsible for such filing under this Agreement. To the extent
permitted by applicable law and in the absence of a controlling change in law
or circumstances, or except as otherwise agreed in writing by Tandy and
Holdings, all Tax Returns filed after the Closing Date shall be prepared on a
basis consistent with the elections, accounting methods, conventions, and
principles of taxation used for the most recent taxable periods for which Tax
Returns involving similar items have been filed prior to the Closing Date and
on or before the date on which the statute of limitations for assessing federal
income tax deficiencies against the Holdings Group (or any successor thereto)
expires for the tax year in which the Final Tax Benefit Payment is made
pursuant to the terms of this Agreement with respect to items relating to the
Contribution, the IPO or the Election (including, without limitation, the
method of depreciation used with respect to each Asset (as defined below));
provided, that subject to the first sentence of this Section 2.01, Holdings
shall be permitted to elect such accounting methods, conventions, principles of
taxation and depreciation methods for Tax and/or financial reporting purposes
as it desires to the extent such elections have no effect on the determination
of the amount of any Tax Benefit Deduction; and provided, further, that for Tax
purposes members of the Holdings Group shall amortize intangibles (including
goodwill and going concern value) created as a result of the Election over the
shortest period permitted by law. Subject to the provisions of this Agreement,
all decisions relating to the preparation of Tax Returns shall be made in the
sole discretion of the party responsible under this Agreement for such
preparation; provided, however, that to the extent a party (or any of its
subsidiaries) is included in a Tax Return prepared by the other party, the
party not responsible for preparing the Tax Return shall have the right to
review and comment on such Tax Return prior to the filing thereof. Subject to
the foregoing (including the Election), and unless otherwise required by the
IRS, or any governmental authority or a court, Tandy and Holdings (on behalf of
itself and all members of the Holdings Group) hereby agree to file all Tax
Returns (including IRS Form 1122), and to take all other actions, to enable
Tandy to include OSI-Missouri and OSI-Virginia in any consolidated or combined
Tax Returns for the "affiliated group" of which Tandy is the "common parent"
for the period January 1, 1994 through the Closing Date.

Page 4 of 17 Pages
<PAGE> 5

Section 2.02. Pre-Closing Tax Returns. (a)(i) Except as provided to the
contrary in Sections 2.02(a)(ii) or 2.02(b) hereof, Tandy shall prepare and
file, or cause to be prepared and filed, when due (including pursuant to
extension), all Income Tax Returns which include members of the Tandy Group
and/or the Holdings Group that are required to be filed for periods beginning
on or before the Closing Date.

(ii) Holdings shall prepare and file, or cause to be prepared and filed,
when due (including pursuant to extension) all local Income Tax Returns which
include members of the Holdings Group, but do not include members of the Tandy
Group, that are required to be filed for periods beginning on or before the
Closing Date.

(b) All Non-Income Tax Returns, including, without limitation, all foreign
Non- Income Tax Returns required to be filed for periods beginning on or before
the Closing Date shall be prepared and filed by the member of the Tandy Group
or the Holdings Group which would be responsible for the payment of such
Non-Income Taxes if each of such companies were at all times during the periods
covered by such Non-Income Tax Returns unrelated to such other companies;
provided that Tandy and Holdings may file such Non-Income Tax Returns on behalf
of the members of their respective Groups.

Section 2.03. Post-Closing Tax Returns. Preparation and filing of all Tax
Returns of members of the Holdings Group for periods beginning after the
Closing Date, shall be the responsibility of the individual members of the
Holdings Group as determined by Holdings. Preparation and filing of all Tax
Returns of members of the Tandy Group for periods beginning after the Closing
Date, shall be the responsibility of the individual members of the Tandy Group
as determined by Tandy.

ARTICLE III
PAYMENT OF TAXES

Section 3.01. Responsibility for Taxes. Each of Tandy and Holdings agree
to pay when due (to the appropriate taxing authority) all Taxes that may be due
with respect to any Tax Return for which any member of the Tandy Group or the
Holdings Group, respectively, has filing responsibility pursuant to Article II
hereof; provided, that within 30 days of a written demand therefor, but in no
event before the date on which Tandy is required to pay (or deemed to pay by
reason of offset against refunds due or similar credits) Income Taxes with
respect to any state or local Income Tax Return or any foreign Income Tax
Return which includes a member of the Holdings Group, for which Tandy has
filing responsibility pursuant to Article II hereof, Holdings or the
appropriate member of the Holdings Group shall pay to Tandy the portion of
Taxes shown as due and owing, or Tandy shall pay to Holdings the portion of any
refund of Taxes shown, on the relevant state or local or foreign Income Tax
Return prepared pursuant to Section 2.02 hereof, in each case which relates to
the portion of the taxable period covered by such Income Tax Return beginning
on the day after the Closing Date. In determining the portion of any Taxes or
refund of Taxes which relates to such period, the total amount shown on the Tax
Return as either due and owing or as a refund shall be allocated
proportionately (according to the number of days) to the period ending on the
Closing Date which is covered by such Tax Return and to the period beginning
after the Closing Date which

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is covered by such Tax Return. Notwithstanding anything to the contrary
contained in this Section 3.01, the apportionment of the responsibility for
foreign Taxes with respect to the assets sold in the Canadian Asset Sale shall
be made as if the Closing Date occurred on November 30, 1993; provided, that
Tandy agrees to pay when due (to the appropriate taxing authority) all foreign
and United States Federal Income Taxes that may be due as a direct result of
the Canadian Asset Sale. Tandy agrees to indemnify and hold harmless each
member of the Holdings Group from and against any and all Taxes for which Tandy
has payment responsibility under this Section 3.01. Holdings agrees to
indemnify and hold harmless each member of the Tandy Group from and against any
and all Taxes for which Holdings has payment responsibility under this Section
3.01 (including by application of the proviso to the first sentence of this
Section 3.01).

Section 3.02. Responsibility for Tax Deficiencies and Right to Receive
Refunds. If there is a Change in a Tax Return as filed by any member of the
Tandy Group or the Holdings Group then (a) Tandy shall be (i) responsible for,
and shall indemnify and hold harmless each member of the Holdings Group from
and against, any payments required to be made to any taxing authority by such
Change insofar as it relates to any Tax Return which includes members of the
Tandy Group (to the extent that the Change relates to a member of the Tandy
Group) or, with respect to any taxable period beginning on or before the
Closing Date, any United States federal Income Tax Return or any foreign Income
Tax Return which includes members of the Tandy Group and/or the Holdings Group
(each a "Tandy Change") or (ii) entitled to receive payment of any refund
receivable by reason of such Tandy Change; and (b) Holdings shall be (i)
responsible for, and shall indemnify and hold harmless each member of the Tandy
Group from and against, any payments required to be made to any taxing
authority by such Change insofar as it relates to any Tax Return which includes
members of the Holdings Group and is not a Tandy Change (each a "Holdings
Change") or (ii) entitled to receive payment of any refund receivable by reason
of such Holdings Change; provided that if one party to this Agreement or any
member of its Group pays fewer Taxes (or receives a larger refund in respect of
Taxes) than it would otherwise have paid (or received) as a result of the other
party to this Agreement or any member of its Group paying additional Taxes
because of a Change, the first party shall pay the amount of such reduction in
Taxes (or the amount of such increase in refund), such payment to be made at
the time such reduced Taxes are due or such refund is received, to the party
paying additional Taxes. Notwithstanding anything to the contrary contained in
this Section 3.02, a Tandy Change shall not include any Change insofar as it
relates to foreign Taxes arising with respect to the assets sold in the
Canadian Asset Sale and relating to the period of time after December 1, 1993.

Section 3.03. Assignment of Refunds. Holdings agrees to assign and
promptly remit to Tandy all refunds (including interest thereon) of any Taxes
received by any member of the Holdings Group for which Tandy indemnifies the
Holdings Group hereunder and Tandy agrees to assign and promptly remit to
Holdings all refunds (including interest thereon) of any Taxes received by any
member of the Tandy Group for which Holdings indemnifies the Tandy Group
hereunder. Each party entitled to indemnification hereunder (the "Indemnified
Party") agrees that upon the request of the party providing such
indemnification (the "Indemnifying Party"), the Indemnified Party shall file a
claim for refund in such form as the Indemnifying Party may reasonably request,
of any Tax for which the Indemnifying Party has indemnified the Indemnified
Party hereunder. Further, if the

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Indemnifying Party so requests, the Indemnified Party will allow the
Indemnifying Party to prosecute any such claim for refund (by suit or
otherwise) at the Indemnifying Party's expense and with counsel of the
Indemnifying Party's choice.

Section 3.04. Consistency. The parties agree to report payments made
between the parties pursuant to Sections 3.01 and 3.03 consistently.
Specifically, the parties shall treat any such payment as a reimbursement of
taxes, which the party receiving such payment (the "Recipient") paid to the
appropriate taxing authority as a conduit on behalf of the party making such
payment (the "Reimbursor"). The parties agree that when a party makes a
payment under Section 3.01 or 3.02 which is a reimbursement for state or local
Taxes, then the Reimbursor (and not the Recipient) shall be entitled, for
United States federal income tax purposes, to any deduction which arises as the
result of the payment of any such state or local taxes. Should any taxing
authority, including but not limited to the IRS, make a Change with respect to
any such payment such that the Recipient must include the payment in taxable
income, the Recipient shall be entitled to receive from the Reimbursor an
additional amount such that on an after-tax basis (taking into account any
Taxes due as a result of such Change and as a result of any payment under this
Section 3.04) the Recipient shall be in the same position it would have been if
such Change had not occurred.

ARTICLE IV
TAX AUDITS, TRANSACTIONS AND OTHER MATTERS

Section 4.01. Tax Audits and Controversies. (a) Promptly upon receipt of
notice from an applicable governmental taxing authority ("Government Notice")
that an item exists which could give rise to a claim for indemnification
hereunder, an Indemnified Party shall provide the Indemnifying Party with
written notice of such Government Notice.

(b) Except as otherwise provided in Section 4.02 hereof, an Indemnifying
Party shall have the sole and exclusive discretion to contest or not to
contest, negotiate and settle proposed adjustments relating to the inclusion in
any Tax Return of the income, deductions, credits, allowances or other tax
items affecting any Taxes the payment for which such Indemnifying Party has
indemnified the other party hereto; provided, that to the extent the
participation of the Indemnified Party does not interfere with the Indemnifying
Party's sole and exclusive discretion granted by this Section 4.01(b), the
Indemnified Party shall have the right to participate, at its own expense, in
any audit or administrative court proceeding which could reasonably be expected
materially to affect the Indemnified Party's liability for Taxes, irrespective
of whether the Indemnified Party has been indemnified hereunder.

Section 4.02. Contesting Disputed Tax Benefits. (a) In the event that the
IRS or a state taxing authority disputes (the "Tax Benefit Issue") the
existence or amount of any Tax Benefit Amount (as hereinafter defined),
including any challenge to the Allocation (as hereinafter defined), Holdings
and/or OSI-Missouri and OSI-Virginia shall (unless Tandy agrees in writing that
such contest need not be undertaken) contest, at (subject to Section 6.01(c))
Tandy's expense, the matter on audit, through IRS or state appellate
proceedings and through appropriate judicial proceedings. Representatives of
Tandy shall be allowed to participate in such proceedings in so far as they
relate

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<PAGE> 8

to the Tax Benefit Issue and such participation shall be reflected by the grant
of appropriate powers of attorney. Decisions regarding the conduct of such
proceedings, to the extent involving a Tax Benefit Issue, shall be made by
Tandy and its representatives after consultation with Holdings and its
representatives. Holdings and its representatives shall be allowed to
participate, at Holdings expense, in such proceedings; provided, however, that
ultimate control over contesting the Tax Benefit Issue, including control over
procedural matters that necessarily relate to all issues being contested
(including, without limitation, choice of forum), shall be exercised in good
faith by Tandy and its representatives, and Holdings, OSI-Missouri and
OSI-Virginia shall take any action as is necessary to effectuate the decisions
of Tandy, except to the extent such action would materially adversely affect
the Holdings Group; provided further, however, that decisions relating
primarily to tax issues affecting members of the Holdings Group (and for which
Holdings has not been indemnified hereunder) shall be made exclusively by
Holdings and its representatives.

(b) If, as the result of a Change, Tax Benefit Amounts are less than
those taken into account in computing any payments made under Section
5.03 hereof, such payments will be recomputed on the basis of such revised Tax
Benefit Amounts, and any excess payments shall be refunded by Tandy to Holdings
(or any underpayments paid by Holdings to Tandy) together with any related
penalties imposed by a taxing authority. Interest shall be payable at the
rates prescribed for underpayments in Section 6621(a) of the Code with respect
to tax underpayments (the "Underpayment Rate").

Section 4.03. Retention of Books and Records. Tandy shall retain all
existing files relating to Taxes and all Tax Returns except that Holdings may
take possession of all files relating exclusively to operations of members of
the Holdings Group. If in the reasonable judgment of Tandy such files are
required by Tandy to perform its obligations or exercise its rights hereunder,
Tandy shall be entitled to retain such files. Holdings shall be entitled to a
copy of all existing files relating to Taxes and all Tax Returns that are
retained by Tandy and which relate to the operations of members of the Holdings
Group. If, as permitted above, Holdings takes possession of files from Tandy,
Holdings shall be responsible for retention of such files for the period
prescribed in Section 6.01(b) hereof.

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<PAGE> 9

ARTICLE V
TAX ELECTION AND TAX BENEFITS

Section 5.01. Section 338 Election. Except to the extent otherwise
required by law, Tandy and Holdings agree to report the Contribution as a
"qualified stock purchase" within the meaning of Section 338(d)(3) of the Code.
Unless Tandy notifies Holdings in writing to the contrary, Tandy and Holdings
shall timely make or cause to be made valid elections under Section 338(a) and
338(h)(10) of the Code and under any comparable provisions of state law in
respect of the Contribution and the IPO so as to have such transactions treated
as if (a) "old" OSI-Missouri and "old" OSI-Virginia sold all of their assets to
"new" OSI-Missouri and "new" OSI-Virginia, respectively, while members of the
Tandy Group; (b) "old" OSI-Missouri and "old" OSI-Virginia transferred the
proceeds from the deemed asset sales to TE in liquidations described in Section
332 of the Code; and (c) "new" OSI-Missouri and "new" OSI-Virginia purchased
assets from "old" OSI-Missouri and "old" OSI-Virginia, respectively, on the day
after the Closing Date (the "Election").

Section 5.02. Tax Benefits Schedule. Attached as Exhibit A is a schedule
(the "Tax Benefits Schedule"), which includes the following: (i) an allocation
(the "Allocation") among the assets (each an "Asset" and together the "Assets")
of OSI-Missouri and OSI-Virginia, as determined by Business Valuation Services,
Inc., of the deemed purchase price of the Assets pursuant to the Election, and
(ii) a determination on an Asset by Asset basis of the Federal Income Tax
deductions (the "Tax Benefit Deduction") which will be generated during each of
the forty taxable years following the Closing Date as a result of the Election,
taking into account the depreciation or amortization available or gain (loss)
realized from the sale of an Asset as compared to such depreciation,
amortization or gain (loss) which would have been realized in the absence of
such Election. For purposes of the determination required by clause (ii) of
the first sentence of this Section 5.02, (A) any Assets which are inventory or
which are classified as current assets on the most recent balance sheet of
OSI-Missouri or OSI-Virginia (collectively "Current Assets") are assumed to be
sold on or before June 30, 1994, (B) each of the taxable years of Holdings,
OSI-Missouri, and OSI-Virginia shall be treated as ending on June 30 of the
applicable year, and (C) any Asset which is not assumed to be sold pursuant to
clause (A) of this sentence (a "Retained Asset"), shall be assumed to be held
for the entire forty taxable year period. In the event of any adjustment to
the deemed purchase price of the Assets, including as a result of the payments
required under Section 5.03 (which shall be deemed to be payments for goodwill
and imputed interest), the Tax Benefits Schedule shall be revised to take any
such adjustment into account. In the event that any Retained Asset is treated
as having been sold pursuant to the last sentence of Section 5.03(a)(i) hereof,
the Tax Benefits Schedule shall be revised by removing therefrom all Tax
Benefit Deductions attributable to such sold Retained Asset for the taxable
year of sale and all subsequent taxable years. In the event Holdings,
OSI-Missouri, or OSI-Virginia elect to change year ends for federal income tax
purposes, Tandy and Holdings shall jointly revise the Tax Benefits Schedule to
reflect such different year end.

Section 5.03. Tax Benefit Payments. (a)(i) In each of Holdings' forty
(40) taxable years ending after the Closing Date, Holdings shall determine an
amount (the "Tax Benefit Amount") equal to the result obtained by multiplying
(A) the sum of (I) the aggregate amount of the Tax

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<PAGE> 10

Benefit Deductions allocable to such taxable year plus (II) the excess of (1)
any increase in basis as a result of the Election with respect to any Retained
Asset which is sold (or otherwise disposed of in a taxable transaction),
including as a result of any disposition of in excess of 50% percent of the
stock of any entity which at the time of such disposition owns such Retained
Asset, in the taxable year with respect to which the Tax Benefit Amount is
being determined over (2) the Tax Benefit Deductions determined with respect to
such Retained Asset for all taxable years prior to the taxable year with
respect to which the Tax Benefit Amount is being determined, by (B) the highest
marginal federal income tax rate applicable to any member of the Holdings Group
in such taxable year (other than any surtax rate the purpose of which is to
offset the effect of lower marginal rates) (the "Tax Rate"). If, with respect
to any taxable year, the Tax Benefit Amount exceeds the amount determined in
Section 5.03(a)(ii) below, then the Tax Benefit Deductions allocable to the
next succeeding year (including, for purposes of clause (A) above) shall be
increased by such excess divided by the Tax Rate for the immediately preceding
year. For purposes of the calculation required by this Section 5.03, a
Retained Asset shall not be treated as having been sold unless such Retained
Asset is disposed of as part of a transaction involving the sale or other
disposition of Retained Assets which, in the aggregate, have a tax basis,
immediately following the Election, which exceeds $100 million.

(ii) In each of Holdings' forty (40) taxable years next ending after the
Closing Date, Holdings shall determine the "Tax Benefit Base." In each such
year the Tax Benefit Base shall equal the lesser of (A) the Tax Benefit Amount
for such year and (B) the sum of (I) the result obtained by multiplying (a) the
positive Federal consolidated taxable income of Holdings and members of the
Holdings Group with respect to such year without regard to the effect of the
Election by (b) the Tax Rate in effect for such year plus (II) that portion of
the amount of any reduction in the Federal Income Tax of Holdings and members
of the Holdings Group for prior taxable years as a result of the carryback of
any losses from the taxable year with respect to which the Tax Benefit Base is
being determined which is equal to such reduction multiplied by a fraction (not
to exceed one), the numerator of which is the aggregate amount of the Tax
Benefit Deductions allocable to the taxable year with respect to which the Tax
Benefit Base is being determined and the denominator of which equals the amount
of any losses which are incurred in the taxable year with respect to which the
Tax Benefit Base is being determined and which are available to be carried back
to prior taxable years of Holdings and members of the Holdings Group. In
making the computations required by this section, such computations shall be
based on regular federal taxable income only; i.e., the impact of the
alternative minimum tax and tax credits on actual tax liability shall be
ignored. Thus, for example, a net operating loss carryback shall be considered
utilized in the taxable year to which it is carried to the extent it reduces
regular taxable income to (but not below) zero for such year notwithstanding
that the alternative minimum tax may affect the actual reduction in federal
income tax liability in that year. It is expressly agreed that, except as
otherwise provided in Section 5.03(a)(iv)(y), for purposes of the calculations
contemplated in Sections 5.02 and 5.03; (a) the tax basis of all Intangible
Retained Assets in the absence of the Election is assumed to be $0; (b) the
depreciation and/or amortization of the Intangible Retained Assets in the
absence of the Election is zero for all periods covered by this Agreement; (c)
if the Intangible Retained Assets are treated as having been sold pursuant to
the last sentence of Section 5.03(a)(i), the tax basis of the Intangible
Retained Assets in the absence of the Election is assumed to be $0; and (d) the
actual tax basis of

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<PAGE> 11

the Intangible Retained Assets in the hands of OSI-Missouri in the absence of
the Election is disregarded.

For any year in which Holdings, OSI-Missouri and OSI-Virginia file
separate federal income tax returns, the Tax Benefit Base shall be computed by
combining (rather than consolidating) the separate taxable income data for each
entity. For this purpose, Holdings' taxable income for any year ending on
December 31 shall be combined with the taxable incomes of OSI-Missouri and
OSI-Virginia for their taxable year ending with the following June 30. If the
taxable year end of Holdings, OSI-Missouri or OSI-Virginia is changed in the
future, Holdings and TE agree that this Agreement will be amended to conform
the provision herein to the changed year end.

(iii) In each of Holdings' forty (40) taxable years next ending after the
Closing Date, Holdings shall pay to TE, as additional purchase price under the
Contribution Agreement, the "Tax Benefit Payment." Except as otherwise
provided in Section 5.03(a)(iv)(y) below where the Tax Benefit Payments are
equal to one hundred percent (100%) of the excess of the amount of federal
income tax liabilities that the Holdings Group would have incurred in the
absence of the Election over the actual federal income tax liabilities of the
Holdings Group, the Tax Benefit Payment shall be equal to ninety five percent
(95%) of the Tax Benefit Base. The computations required by this Section 5.03
are illustrated in the examples attached as Exhibit B hereto.

(iv) If Holdings can at any time demonstrate in writing to the reasonable
satisfaction of Tandy that the aggregate amount of Tax Benefit Payments
required pursuant to the terms of this Agreement would cause the net present
value of the aggregate net cash flow of the members of the Holdings Group over
the life of this Agreement to be materially less than the net present value of
the aggregate net cash flow which such members would have had over the life of
this Agreement in the absence of the Election and the payment of the Tax
Benefit Payments pursuant to the terms of this Agreement, then (x) Section
5.03(a)(ii) as originally included herein shall be void and of no further
effect, and (y) Holdings shall pay to Tandy as Tax Benefit Payments hereunder
an amount equal to one hundred percent (100%) of the excess of the amount of
federal income tax liabilities that the Holdings Group would have incurred in
the absence of the Election over the actual federal income tax liabilities of
the Holdings Group. For purposes of Section 5.03(a)(iv)(y), the tax basis of
all Intangible Retained Assets in the absence of the Election shall be assumed
to be $43,584,721 in the determination of the amount of federal income tax
liabilities that the Holdings Group would have incurred in the absence of the
Election. The first Tax Benefit Payment becoming payable under the provisions
of Section 5.03(a)(iv) shall include any difference between the sum of all Tax
Benefit Payments previously paid to Tandy and one hundred percent (100%) of the
excess of the aggregate amount of federal income tax liabilities that the
Holdings Group would have incurred in the absence of the Election during the
period that Section 5.03(a)(ii) was in effect over the aggregate amount of
federal income tax liabilities actually incurred by the Holdings Group during
the period that Section 5.03(a)(ii) was in effect.

If the sum of the payments made by the Holdings Group to TE under
Section 5.03 of this Agreement exceed one hundred percent (100%) of the excess
of the amount of federal income tax liabilities that the Holdings Group would
have incurred in the absence of the

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Election over the actual federal income tax liabilities of the Holdings Group
over the life of this Agreement, then TE shall pay back to Holdings as a
reduction of the purchase price under the Contribution Agreement the amount of
such excess payments received. TE shall make such payment, without interest,
within 30 days after both TE and Holdings agree in writing as to the
appropriate amount of such payment.

(v) Holdings shall pay TE the Tax Benefit Payment with respect to any
taxable year in up to six installments. Four of the installments (the
"Estimated Payments") shall be paid via electronic funds transfer ("EFT") and
received by TE on or before the applicable due dates for payment of estimated
Federal Income Taxes with respect to such year. The fifth installment (the
"Extension Payment") shall be paid by EFT and received by TE on or before the
due date(s) for the federal income tax returns filed by the Holdings Group
(without regard to extensions). The final installment (the "Final Payment"),
if necessary, shall be paid by EFT and received by TE on or before the date the
federal income tax returns are actually filed by the Holdings Group. Each
Estimated Payment shall be computed as the difference between the aggregate
Federal Income Tax payments which would be required to be made under Code
Section 6655(d) for each Estimated Payment due date in the absence of the
Election and the actual Federal Income Tax payments made by the Holdings Group
for such date. The Extension Payment shall equal 100% of the good-faith
estimate of the Tax Benefit Payment due by the Holdings Group to TE for the
taxable year over the Estimated Payments paid by the Holdings Group to TE for
such taxable year. The Final Payment, if required, shall be equal to any
additional amount due by the Holdings Group to TE as determined on the date the
Holdings Group files its federal income tax returns.

For any year in which Holdings, OSI-Missouri and OSI-Virginia file
separate federal Income Tax Returns, the Estimated Payments, Extension Payment
and Final Payment shall be separately computed for each entity and shall become
payable on the respective due dates as set forth in the preceding paragraph
corresponding to the taxable year end of each entity. The sum of such payments
shall equal the combined Tax Benefit Payment required for the Holdings Group.

If the sum of the Estimated Payments, Extension Payment and Final
Payment made by the Holdings Group to TE exceed the actual Tax Benefit Payment
for any taxable year, TE shall pay, as a reduction of the purchase price under
the Contribution Agreement, the amount of such excess within 15 days of the
receipt by TE of a written notice from Holdings that such payment is due.

The determination of whether the Estimated Payments were
calculated in a proper manner and paid to TE on a timely basis shall be
determined by applying the principles of Code Section 6655. If any Estimated
Payment is not made on a timely basis, interest on such payment shall be
calculated and paid by Holdings to TE in an amount equal to the addition to
tax determined by applying the principles of Code Section 6655. TE shall have
the right to review the calculation of each Estimated Payment, including any
source documents upon which such calculations are based.

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If a Final Payment is made by the Holdings Group to TE, interest
on such payment shall be payable by the Holdings Group to TE by
applying the principles of Code Section 6601. Notwithstanding the foregoing,
any interest that has accrued prior to the execution of this Agreement pursuant
to this Section 5.03(a)(v) is hereby waived; any interest that accrues on or
after the date of execution of this Agreement shall be due and payable by
Holdings to TE. OSI-Missouri and OSI-Virginia shall each be jointly and
severally liable with respect to any obligation of Holdings to make a payment
to TE under this Section 5.03(a).

(vi) In the event Holdings or any member of the Holdings Group enters
into any transaction (a "Business Combination") involving a merger, an
acquisition of all or substantially all the assets or stock of any entity or
any other business combination or similar transaction which does not result in
a Change of Control, the amount of any Tax Benefit Payment required to be made
under Section 5.03(a) hereof after the date of the consummation of the Business
Combination shall be determined without giving effect to any net operating
loss, built-in deduction or other tax attribute carryovers of businesses not
owned by the Holdings Group immediately prior to such Business Combination. In
the event Holdings or any member of the Holdings Group undergoes a Change of
Control, the amount of any Tax Benefit Payment required to be made under
Section 5.03(a) hereof after the date of the change in Control shall be
determined without giving effect to any items of income, expense, loss,
deduction, credit or related carryovers or carrybacks of businesses other than
those conducted by the Holdings Group immediately prior to such Change of
Control.

(b) As promptly as practicable following the fifteenth taxable year
ending after the Closing Date, Holdings and TE shall negotiate in good
faith to reach an agreement which requires Holdings to pay TE an amount equal
to the then present value of the aggregate tax benefits which Holdings and the
members of the Holdings Group would reasonably be expected to realize as a
result of the Election in any taxable year beginning after Holdings' fifteenth
taxable year ending after the Closing Date, in consideration of Holdings being
relieved thereafter of its future obligations under this Section 5.03.
However, TE, in its sole and absolute discretion, may require that such
negotiations must be postponed until the Intangible Retained Assets are fully
amortized for federal income tax purposes and TE has received cumulative Tax
Benefit Payments equal to its proportionate share of the tax benefits from the
amortization of the Intangible Retained Assets.

Section 5.04. Allocation Binding. Tandy, Holdings and the members of
their respective Groups (i) shall be bound by the Allocation for purposes of
determining any Taxes and (ii) shall prepare and file all Tax Returns in a
manner consistent with the Allocation. Within 30 days of any member of the
Holdings Group filing a Federal Income Tax Return for any taxable year with
respect to which Section 5.03 hereof applies, Holdings shall provide a true and
complete copy of any such Federal Income Tax Return to Tandy.

ARTICLE VI
POST-DISTRIBUTION OBLIGATIONS

Section 6.01. Certain Post-Transaction Covenants.

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(a) Section 338 Election. The Holdings Group shall not take any action,
or omit to take any action, which would adversely affect the ability to make,
or the validity of, the Election.

(b) Mutual Cooperation. Except to the extent provided to the contrary in
this Agreement, the parties hereto agree to consult in good faith and to
provide each other with such assistance as reasonably may be requested in
writing by any of them in connection with (i) the preparation and execution of
any Tax Return, (ii) the negotiation and settlement of any audit or other
examination of any Tax Return by any tax authority, or (iii) the handling of
any judicial or administrative proceeding relating to any liability for periods
of OSI-Missouri and OSI-Virginia prior to the Closing Date. The parties'
general obligation to cooperate shall require, but not be limited to requiring,
each party (i) to notify the other of any taxing authority initiating an audit,
requesting information or proposing an adjustment, or any extension of statutes
of limitation and of final determinations of adjustments, (ii) to preserve
records, documents and other information relevant to liabilities as required by
relevant statutes of limitations or extensions thereof and to provide, upon
written request, copies of such records and/or reasonable access thereto, (iii)
to make available without charge at a reasonable location during normal working
hours, upon written request, personnel responsible for preparing, maintaining,
or explaining information, records and documents in connection with matters
relating to Taxes, and (iv) to execute and deliver such powers of attorney,
consents, and other documents as are necessary to carry out the intent of this
Agreement.

(c) Expenses. Fees and expenses paid to third-party service providers and
incurred after the date hereof by Tandy, Holdings or any of their subsidiaries
for the purpose of obtaining the Tax Benefit Amounts, including, without
limitation, legal and accounting expenses relating to (i) the determination of
the amount of Tax Benefit Amounts, (ii) the resolution of any dispute with any
tax authority regarding the Tax Benefit Issue or (iii) any related activity,
shall be borne by Tandy in the same percentage as the total Tax Benefit Amounts
in controversy bear to the total tax amounts in controversy for the Holdings
Group. Notwithstanding the above, (i) Tandy's obligation to bear any portion
of such fees or expenses related to service providers not retained by it shall
be contingent upon Tandy's prior written approval, which approval shall not be
unreasonably withheld, of the retention of any such advisors and (ii) in no
event shall Tandy be obligated, except pursuant to Article IV hereof, to pay
any fees or expenses incurred by Holdings or its subsidiaries in connection
with any non-Federal Income Taxes.

(d) Attorney's Fees. Each party shall, upon a breach of this Agreement,
in addition to other penalties, damages or liabilities, be responsible for and
shall pay to the other party an amount equal to reasonable attorney's fees
actually incurred by such other party in its efforts to enforce its rights
under this Agreement.

Section 6.02. Computers/Reference Materials. Computer software, library
materials, casebooks, reference materials, or similar items, related to Taxes
and/or the preparation of Tax Returns shall remain the property of Tandy;
however, Holdings may request that software and reference materials be
duplicated for its use and at its expense (including payment of any applicable
royalty and license fees to third parties).

Page 14 of 17 Pages

<PAGE> 15

Section 6.03. Transaction Restrictions. No member of the Holdings Group
will enter into any transaction a significant purpose of which is to reduce the
Tax Benefit Payments which would otherwise be due under Section 5.03(a) hereof
in the absence of any such transaction.

ARTICLE VII
MISCELLANEOUS

Section 7.01. Expenses. Except to the extent provided herein to the
contrary; each party shall bear any and all expenses that arise from their
respective obligations under this Agreement.

Section 7.02. Entire Agreement; Termination of Prior Agreements. This
Agreement constitutes the entire agreement of the parties concerning the
subject matter hereof and supersedes all other agreements, whether or not
written, in respect of any Tax between or among any member or members of the
Tandy Group, on the one hand, and any member or members of the Holdings Group,
on the other hand. Any and all such other agreements are hereby canceled and
any rights or obligations existing thereunder are hereby fully and finally
settled without any payment by any party thereto. This Agreement may not be
amended except by an agreement in writing, signed by the parties hereto. In
the event and to the extent that there shall be a conflict between the
provisions of this Agreement and the Contribution Agreement with respect to
Taxes, the provisions of this Agreement shall control.

Section 7.03. Notices. All notices, requests, demands or other
communications required or permitted to be given or made under this Agreement
shall be in writing and shall be deemed to have been given (a) on the date of
personal delivery or (b) provided such notice, request, demand or other
communication is actually received by the party to which it is addressed in the
ordinary course of delivery, (i) on the fifth day following deposit in the
United States mail, postage prepaid, by certified mail, return receipt
requested, (ii) on the date of transmission by telegram, cable, telex or
facsimile transmission or (iii) on the date following delivery to a nationally
recognized overnight courier service, in each case addressed as follows, or to
such other person or entity as either party shall designate by notice to the
other in accordance herewith:

To Tandy or any member of the Tandy Group:

Tandy Corporation
1800 One Tandy Center
Fort Worth, Texas 76102
Attention: Vice President - Tax

Page 15 of 17

<PAGE> 16

To Holdings or any member of the Holdings Group:

O'Sullivan Industries Holdings, Inc.
1900 Gulf Street
Lamar, Missouri 64759
Attention: General Counsel

If the last day for providing any notice, communication or payment hereunder is
a Saturday, Sunday or legal holiday, such due date shall be extended to the
next business day.

Section 7.04. Resolution of Disputes. Any disputes between the parties
with respect to this Agreement shall first be referred to the chief executive
officers of Tandy and Holdings for resolution. If they cannot agree, such
dispute shall be resolved by a public accounting firm or a law firm reasonably
satisfactory to Tandy and Holdings, whose fees and expenses shall be shared
equally between Tandy and Holdings.

Section 7.05. Application to Present and Future Subsidiaries. This
Agreement is being entered into by Tandy, TE and Holdings on behalf of
themselves and each member of the Tandy Group and Holdings Group, respectively.
This Agreement shall constitute a direct obligation of each such member and
shall be deemed to have been readopted and affirmed on behalf of any direct or
indirect subsidiary corporation of Tandy or Holdings which becomes a successor
to a member of the Tandy Group or Holdings Group in the future or acquires a
significant portion of a member's assets. Tandy and Holdings shall, upon the
written request of the other, cause any of their respective Group members
formally to execute this Agreement. This Agreement shall be binding upon, and
shall inure to the benefit of, the successors, assigns and persons controlling
any of the corporations bound hereby for so long as such successors, assigns or
controlling persons are members of the Tandy Group or the Holdings Group,
respectively, or their respective successors and assigns.

Section 7.06. Guarantees. Tandy hereby guarantees the performance of all
actions, agreements, payments and obligations provided for under this Agreement
of each member of the Tandy Group. Holdings hereby guarantees the performance
of all actions, agreements, payments and obligations provided for under this
Agreement of each member of the Holdings Group.

Section 7.07. Term. This Agreement shall be effective as of February 1,
1994 and shall continue in effect until otherwise agreed to in writing by Tandy
and Holdings, or their successors.

Section 7.08. Titles and Headings. Title and headings to sections herein
are inserted for the convenience of reference only and are not intended to be a
part or to affect the meaning or interpretation of this Agreement.

Section 7.09. Legal Enforceability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition of
unenforceability without invalidating the remaining provisions hereof. Any
such

Page 16 of 17 Pages

<PAGE> 17

prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

Section 7.10. Remedy for Failure to Comply. If any member of the Tandy
Group or the Holdings Group shall fail to fulfill its obligations under this
Agreement, the members of the Group damaged by such breach shall be entitled to
recover reasonable damages from the breaching party in addition to the specific
rights to recover Taxes, tax benefits, or other amounts conferred in this
Agreement.

Section 7.11. Singular and Plural. As used herein, the singular shall
include the plural and vice versa.

Section 7.12. Governing Law. This Agreement shall be governed by the laws
of the State of New York.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and the year first above mentioned.

TANDY CORPORATION O'SULLIVAN INDUSTRIES HOLDINGS,
INC.

By: /s/ Dwain H. Hughes By: /s/ Terry L. Crump
Title: Senior Vice President Title: Vice President & CFO
and Chief Financial Officer

TE ELECTRONICS, INC.

By: /s/ Dwain H. Hughes
Title: Vice President

Page 17 of 17 Pages

<PAGE> 1

EXHIBIT 10.8

(Revision of Director Compensation)

RESOLVED, that effective July 1, 1997, non-employee directors of O'Sullivan
Industries Holdings, Inc. shall be paid quarterly in arrears, to the extent
applicable, the following retainers:

(a) an annual retainer of $25,000; and
(b) an annual retainer of $1,000 for service as a committee chairman;

and further

RESOLVED, that effective July 1, 1997, no meeting fees will be payable to
Directors for the attendance of Board of Directors or Committee meetings;
provided, however, that Directors shall continue to be reimbursed for the
expenses of attending Board of Director and Committee meetings.

Page 1 of 1

<PAGE> 1
EXHIBIT 10.12

AMENDED AND RESTATED

CREDIT AGREEMENT

BY AND AMONG

O'SULLIVAN INDUSTRIES, INC.

AND

O'SULLIVAN INDUSTRIES HOLDINGS, INC.

AS BORROWERS

AND

O'SULLIVAN INDUSTRIES-VIRGINIA, INC.

AS A GUARANTOR AND LETTER OF CREDIT ACCOUNT PARTY

AND

THE BOATMEN'S NATIONAL BANK OF ST. LOUIS

AS AGENT AND ISSUER OF LETTERS OF CREDIT

AND

THE BOATMEN'S NATIONAL BANK OF ST. LOUIS

AND

WACHOVIA BANK OF GEORGIA, N.A.

AS PARTICIPATING LENDERS

NOVEMBER 22, 1994

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<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Recitals .............................................................................. 1

Agreement ............................................................................. 1

1. Definitions ................................................................... 2

1.1. Generally ............................................................... 2
1.2. References to Borrower .................................................. 2
1.3. References to Applicable Lending Office ................................. 2
1.4. References to Covered Person ............................................ 2
1.5. Accounting Terms; Consolidated Basis .................................... 2
1.6. "Satisfactory to Lender"; "Discretion" .................................. 2

2. Commitments ................................................................... 2
2.1. Revolving Loan Facility ................................................. 2
2.1.1. Advances ........................................................ 3
2.1.2. Limitation on Advances .......................................... 3
2.2. Letters of Credit ....................................................... 3
2.2.1. Documentary (Commercial) and Standby Letters of Credit .......... 3
2.2.2. IRB Letter of Credit ............................................ 3
2.2.3. Lenders' Participations ......................................... 4
2.2.4. Replacement of IRB Letter of Credit ............................. 4

3. Interest ...................................................................... 4
3.1. Rates ................................................................... 4
3.2. Definition of Alternate Base Rate ....................................... 4
3.3. Definition of Adjusted LIBO Rate ........................................ 4
3.3.1. "LIBO Rate" ..................................................... 5
3.4. Interest Periods for LIBOR Tranches ..................................... 5
3.5. Conversion of Tranches .................................................. 5
3.6. Rate After Maturity ..................................................... 6
3.7. Time of Accrual ......................................................... 6
3.8. Computation ............................................................. 6
3.9. Usury ................................................................... 6
.................................
4. Fees .......................................................................... 6
4.1. Facility Fee ............................................................ 6
4.2. Standby LC Fee .......................................................... 6
4.3. Fees for Commercial LC's ................................................ 6
4.4. IRB LC Fee .............................................................. 7
4.5. Calculation of Fees ..................................................... 7

5. Payments ...................................................................... 7
5.1. Scheduled Payments on Revolving Loans ................................... 7
5.1.1. Interest ........................................................ 7
5.1.2. Principal ....................................................... 7

</TABLE>

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<PAGE> 3

5.2. Prepayments on Revolving Loans and Reduction of Revolving Commitment .... 7
5.2.1. Voluntary ....................................................... 7
5.2.2. Reduction of Commitment ......................................... 7
5.2.3. Mandatory Prepayment for Over Advances .......................... 7
5.3. Reimbursement for Draws on Letters of Credit ............................ 8
5.4. Manner of Payments and Timing of Application of Payments ................ 8
5.4.1. Payment Requirement ............................................. 8
5.4.2. Application of Payments ......................................... 8
5.4.3. Returned Instruments ............................................ 8
5.4.4. Compelled Return of Payments or Proceeds ........................ 8
5.5.Due Dates Not on Business Days ...................................... 8

6. Procedure for Use of Facilities ............................................... 9
6.1. Advances ................................................................ 9
6.1.1. Advance Requests by Borrower .......................................... 9
6.1.2. Lenders' Right to Make Other Advances ................................. 9
6.1.3. Agent's Notice to Lenders; Funds Deposit .............................. 9
6.1.4. Advances Ratable ...................................................... 9
6.1.5. Agent's Availability Assumption ....................................... 9
6.1.6. Suspension of Obligation to Make LIBOR Tranches ....................... 10
6.2. Letters of Credit ..................................................... 10

7. Yield Protection .............................................................. 11
7.1.Compensation for Increase In LIBOR Tranche Costs .......................... 11
7.2.Funding Losses ............................................................ 11

8. Guaranty ...................................................................... 12

9. Conditions to Advances ........................................................ 12
9.1. Conditions to Initial Advances .......................................... 12
9.1.1. No Default ...................................................... 12
9.1.2. Representations and Warranties .................................. 12
9.1.3. Material Adverse Change ......................................... 12
9.1.4. Pending Material Proceedings .................................... 12
9.2. Conditions to Subsequent Advances ....................................... 12
9.2.1. No Default ...................................................... 13
9.2.2. Material Adverse Change ......................................... 13

10. Conditions to Issuance of Letters of Credit ................................... 13
10.1. Reimbursement Agreement ................................................ 13
10.2. Other Conditions ....................................................... 13

11. Representations and Warranties ................................................ 13
11.1. Organization and Existence ............................................. 13
11.2. Authorization .......................................................... 13
11.3. Due Execution .......................................................... 13
11.4. Enforceability of Obligations........................................... 13
11.5. Burdensome Obligations ................................................. 13
11.6. Legal Restraints ....................................................... 14
11.7. Labor Disputes ......................................................... 14
11.8. No Material Proceedings ................................................ 14

</TABLE>

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<PAGE> 4

<TABLE>
<S> <C> <C>
11.9. Compliance with Laws ............................................ 14
11.9.1. Compliance .................................................. 14
11.9.2. Proceedings ................................................. 14
11.9.3. Investigations .............................................. 14
11.9.4. Hazardous Material........................................... 14
11.10. Other Names ......................................................... 14
11.11. Financial Statements ................................................ 14
11.12. No Change in Condition .............................................. 15
11.13. No Defaults ......................................................... 15
11.14. Investments ......................................................... 15
11.15. Indebtedness ........................................................ 15
11.16. Indirect Obligations ................................................ 15
11.17. Operating Leases .................................................... 15
11.18. Tax Liabilities; Governmental Charges ............................... 15
11.19. Pension Benefit Plans ............................................... 15
11.19.1. Prohibited Transactions .................................... 15
11.19.2. Claims ..................................................... 15
11.19.3. Reporting and Disclosure Requirements ...................... 16
11.19.4. Accumulated Funding Deficiency ............................. 16
11.19.5. Multi-employer Plan ........................................ 16
11.20. Welfare Benefit Plans ............................................... 16
11.21. Retiree Benefits .................................................... 16
11.22. State of Property ................................................... 16
11.23. Margin Stock ........................................................ 16
11.24. Securities Matters .................................................. 16
11.25. Investment Company Act, Etc. ........................................ 16
11.26. No Material Misstatements or Omissions .............................. 17
11.27. Filings ............................................................. 17
11.28. Broker's Fees ....................................................... 17

12. Survival of Representations .................................................. 17

13. Affirmative Covenants ........................................................ 17
13.1. Use of Proceeds .................................................... 17
13.2. Corporate Existence ................................................ 17
13.3. Maintenance of Property and Leases ................................. 17
13.4. Insurance .......................................................... 17
13.5. Payment of Taxes and Other Obligations ............................. 18
13.6. Compliance With Laws ............................................... 18
13.6.1. Environmental Laws .......................................... 18
13.6.2. Pension Benefit Plans........................................ 18
13.6.3. Employment Laws ............................................. 18
13.7. Discovery and Clean-Up of Hazardous Material ....................... 18
13.7.1. In General .................................................. 18
13.8. Termination of Pension Benefit Plan ................................ 19
13.9. Notice to Agent of Material Events ................................. 19
13.10. Borrowing Officer .................................................. 20
13.11. Accounting System .................................................. 20
13.12. Financial Statements and Certificate of Compliance ................. 20
13.12.1. Annual Financial Statements ................................ 20
13.12.2. Quarterly Financial Statements ............................. 21
</TABLE>

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<PAGE> 5
<TABLE>
<S> <C> <C>
13.13. Stockholder and SEC Reports .......................................... 21
13.14. Other Information .................................................... 21
13.15. Audits by Agent and Lenders .......................................... 21
13.16. Access to Officers ................................................... 21

14. Negative Covenants ........................................................... 22
14.1. Investments ........................................................ 22
14.2. Indebtedness ....................................................... 22
14.3. Indirect Obligations ............................................... 23
14.4. Security Interests ................................................. 23
14.5. Disposal of Property ............................................... 24
14.6. Capital Change ..................................................... 24
14.7. Change of Business ................................................. 24
14.8. Transactions With Affiliates ....................................... 24
14.9. Debt Payments ...................................................... 24
14.10. Conflicting Agreements ............................................. 24
14.11. New Subsidiaries ................................................... 24
14.12. Acquisitions ....................................................... 25

15. Financial Covenants .......................................................... 25
15.1. Special Definitions ................................................ 25
15.2. Maximum Indebtedness ............................................... 25
15.3. Minimum Current Ratio .............................................. 25
15.4. Tangible Net Worth ................................................. 25

16. Default ...................................................................... 26
16.1. Events of Default .................................................. 26
16.1.1. Failure to Pay Principal or Interest ....................... 26
16.1.2. Failure to Pay Other Amounts Owed to Lenders ............... 26
16.1.3. Failure to Pay Amounts Owed to Other Persons ............... 26
16.1.4. Representations or Warranties .............................. 26
16.1.5. Covenants .................................................. 26
16.1.6. Acceleration of Other Indebtedness ......................... 26
16.1.7. Default Under Other Agreements ............................. 26
16.1.8. Bankruptcy; Insolvency; Etc. ............................... 26
16.1.9. Judgments; Attachment; Etc. ................................ 27
16.1.10. Pension Benefit Plan Termination, Etc. ..................... 27
16.1.11. Liquidation or Dissolution ................................. 27
16.1.12. Seizure of Assets .......................................... 27
16.1.13. Change of Control .......................................... 27
16.1.14. Loan Documents ............................................. 27
16.2. Rights and Remedies in the Event of Default ........................ 28
16.2.1. Termination or Suspension of Commitments .................... 28
16.2.2. Acceleration ................................................ 28
16.2.3. Right of Setoff ............................................. 28
16.2.4. Miscellaneous ............................................... 28
16.2.5. Application of Funds ........................................ 28
16.3. Notice ............................................................. 28
</TABLE>

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<PAGE> 6

<TABLE>
<S> <C> <C>
17. Agent and Lenders ..................................................... 28
17.1. Appointment of Agent .......................................... 28
17.2. Powers ........................................................ 29
17.3. General Immunity of Agent ..................................... 29
17.4. No Responsibility for Revolving Loans, Recitals, etc. ......... 29
17.5. Action on Instructions of Majority Lenders .................... 29
17.6. Employment of Agents and Counsel .............................. 29
17.7. Reliance on Documents; Counsel ................................ 29
17.8. Agent's Reimbursement and Indemnification ..................... 29
17.9. Rights as a Lender ............................................ 29
17.10. INDEPENDENT CREDIT DECISIONS .................................. 29
17.11. Successor Agent ............................................... 30
17.12. Notification of Lenders ....................................... 30
17.13. No Knowledge of Default ....................................... 30
17.14. Collections and Distributions to Lenders by Agent; Setoffs .... 30

18. General ............................................................... 31
18.1. Agent and Lenders' Right to Cure .............................. 31
18.2. Rights Not Exclusive .......................................... 31
18.3. Survival of Agreements ........................................ 31
18.4. Participations ................................................ 31
18.5. Payment of Expenses ........................................... 31
18.6. General Indemnity ............................................. 31
18.7. Letters of Credit ............................................. 32
18.8. Changes in Accounting Principles .............................. 32
18.9. Loan Records .................................................. 33
18.10. Choice of Forum ............................................... 33
18.11. Service of Process ............................................ 33

19. Miscellaneous ......................................................... 33
19.1. Computation of Time Periods ................................... 33
19.2. Notices ....................................................... 33
19.3. Confidentiality ............................................... 34
19.4. Amendments, Waivers and Consents .............................. 34
19.5. Successors and Assigns ........................................ 34
19.6. Severability .................................................. 34
19.7. Governing Law; No Third Party Rights .......................... 34
19.8. Captions ...................................................... 35
19.9. Counterpart and Facsimile Execution ........................... 35
19.10. Singular and Plural Forms ..................................... 35
19.11. References .................................................... 35
19.12. No Other Agreements .......................................... 35
19.13. Incorporation By Reference .................................... 35
19.14. Statutory Notice .............................................. 35

APPENDIX 1.1 GLOSSARY AND INDEX OF DEFINED TERMS .............................. i
</TABLE>

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<PAGE> 7
AMENDED AND RESTATED
CREDIT AGREEMENT

This is an Amended and Restated Credit Agreement (this "Agreement") by
and among O'Sullivan Industries, Inc., a Delaware corporation ("Industries");
and O'Sullivan Industries Holdings, Inc., a Delaware corporation ("Holdings");
O'Sullivan Industries - Virginia, Inc., a Virginia corporation and wholly owned
subsidiary of Industries ("O'Sullivan - Virginia"); The Boatmen's National Bank
of St. Louis, a national banking association ("Boatmen's"); and Wachovia Bank of
Georgia, N.A., a national banking association ("Wachovia").

RECITALS

A. Industries and Holdings as Borrowers, O'Sullivan - Virginia, as
Guarantor, Boatmen's as Funding Agent and Issuing Bank, Texas Commerce Bank
National Association, a national banking association, ("Texas Commerce") as
Syndication Agent, and Texas Commerce, Boatmen's, and Wachovia, as lenders are
parties to a Revolving Credit, Letter of Credit and Term Loan Agreement by and
among them dated as of the 31st day of January, 1994 (the "Original Loan
Agreement").

B. Texas Commerce is withdrawing as a lender and Industries, Holdings,
O'Sullivan - Virginia, Boatmen's, and Wachovia all desire to amend the Original
Loan Agreement to reflect (i) the withdrawal of Texas Commerce as a lender, (ii)
the substitution of Boatmen's as sole "Agent" as of the date hereof, (iii) the
elimination of the Total Maximum Term Commitment as defined in the Original Loan
Agreement, the Term Loan Commitment as defined in the Original Loan Agreement
having lapsed with no Term Loan having been made, and (iv) certain other changes
to which all of the parties have agreed.

AGREEMENT

Therefore, in consideration of the mutual agreements herein and other
sufficient consideration, the receipt of which is hereby acknowledged,
Industries, Holdings, O'Sullivan - Virginia, Boatmen's (as "Agent" and a
"Lender"), and Wachovia (as a "Lender" and, together with Boatmen's, "Lenders")
mutually agree as follows:

A. EFFECTIVE DATE. This Agreement shall become effective on November 22,
1994 (the "Effective Date"), as an amendment and restatement of the Original
Loan Agreement, subject to the following conditions:

(i) all of the documents and other items listed or described in Exhibit A
hereto shall have been delivered to Lenders, with each being (as applicable)
duly executed and (also as applicable) sealed, attested, acknowledged,
certified, or authenticated;

(ii) Lenders shall have received such other consents, approvals, opinions,
certificates or documents as they reasonably deem necessary;

(iii) The Lenders shall have fully paid to Texas Commerce in immediately
available funds their Prorata Shares (as defined herein) of the principal amount
of all advances that have been made to Borrower by Texas Commerce and which are
then outstanding plus all interest accrued thereon and accrued fees and other
amounts to which Texas Commerce is entitled as a lender under the terms of the
Original Loan Agreement but has not received, and Borrower shall have fully paid
to Texas Commerce such other fees to which it is entitled in a capacity other
than a lender under the terms of the Original Loan Agreement but has not
received; and

Page 1 of 50
<PAGE> 8
(iv) Borrower shall have executed and delivered to Texas Commerce such documents
as Texas Commerce may require to evidence the termination of all of its
commitments to Borrower under the Original Loan Agreement, which Borrower
acknowledges are hereby terminated.

B. NO NOVATION. The obligations of Industries, Holdings, and O'Sullivan -
Virginia as outstanding on the Effective Date under the Original Loan Agreement
and all agreements, notes, certificates and documents executed and delivered in
connection therewith (with the exception of the term loans contemplated in the
Original Loan Agreement, which are hereby acknowledged to never have been made)
continue to be outstanding as "Loan Obligations" as defined herein, both with
Boatmen's and Wachovia as the only creditors with respect thereto in accordance
with their Prorata Shares (as defined herein), to the extent they are
outstanding on the Effective Date, there being no novation or refinancing
thereof made or intended as a consequence hereof.

C. AMENDMENT AND RESTATEMENT. Upon the Effective Date, the Original Loan
Agreement shall be deemed amended and restated to read in its entirety as
follows:

1. DEFINITIONS.

1.1. GENERALLY. Each capitalized term in this Agreement shall have the
meaning defined in the Glossary which is attached hereto as Appendix 1.1. If a
capitalized term is not defined in the Glossary, it shall have the meaning
defined elsewhere in this Agreement. If a capitalized term is not defined in
either the Glossary or elsewhere in this Agreement, it shall have the meaning
defined in the UCC.

1.2. REFERENCES TO BORROWER. The term "Borrower" herein refers to
Industries and Holdings both separately and collectively. The words "a
Borrower", "any Borrower", "each Borrower" and "every Borrower" refer to each
of Industries and Holdings separately. The obligations of Industries and
Holdings under the Loan Documents are joint and several.

1.3. REFERENCES TO APPLICABLE LENDING OFFICE. The term "Applicable
Lending Office" means the office of Agent at One Boatmen's Plaza, St. Louis,
Missouri 63101.

1.4. REFERENCES TO COVERED PERSON. The term "Covered Person" means
each of Industries and Holdings and each of their Subsidiaries. The words "a
Covered Person", "any Covered Person", "each Covered Person" and "every Covered
Person" refer to Industries and Holdings and each of their Subsidiaries
separately.

1.5. ACCOUNTING TERMS; CONSOLIDATED BASIS. Unless the context
otherwise requires, accounting terms herein that are not defined herein shall be
calculated under GAAP. All financial measurements herein respecting "Borrower"
shall be made and calculated for Holdings and all of its Subsidiaries on a
consolidated basis in accordance with GAAP.

1.6. "SATISFACTORY TO LENDER"; "DISCRETION". Whenever herein a
document is required to be "satisfactory to Agent", "satisfactory to Lenders",
or "satisfactory to Majority Lenders", unless expressly stated otherwise such
document must be reasonably satisfactory to Agent or to Lenders, respectively,
in both form and substance. Whenever herein Agent, Lenders, or Majority Lenders
have the discretion to make a determination or to perform or not to perform any
act, such discretion shall be subject only to the requirement that it be
exercised in good faith.

2. COMMITMENTS. Subject to the terms and conditions hereof, and in
reliance upon the representations and warranties of Borrower herein:

2.1. REVOLVING LOAN FACILITY.

Page 2 of 50
<PAGE> 9

2.1.1. ADVANCES. Each of Lenders commits to make advances to
Borrower (each an "Advance") from time to time during the period
commencing on the Effective Date and ending at the close of business on
December 31, 1996 (the "Ultimate Revolving Maturity Date"), in the
amount of such Lender's "Prorata Share" of each Advance as listed on
Exhibit 2.1.1 hereto. (The from time to time outstanding principal
balance of all Advances from Lenders is referred to herein as the
"Aggregate Revolving Loan" and each Lender's share thereof is referred
to herein as a "Revolving Loan".) The obligation of Borrower to repay
each Lender's Prorata Share of the Aggregate Revolving Loan shall be
evidenced by a promissory note in substantially the form attached hereto
as Exhibit 2.1.1.A and payable to the order of such Lender in a maximum
principal amount equal to its Revolving Commitment (individually a
"Note" and collectively the "Notes"). Amounts applied to reduce the
Aggregate Revolving Loan may be reborrowed as Advances as provided
herein, but no Advance will be made on or after the Ultimate Revolving
Maturity Date. At any time after an Event of Default occurs that is not
waived in writing by Lenders, Lenders may cancel or suspend the
Aggregate Revolving Commitment as provided in Section 16.2.

2.1.2. LIMITATION ON ADVANCES. No Advance will be made which
would result in the Aggregate Revolving Loan exceeding the Maximum
Available Amount. Lenders may, however, in their discretion make such
Advances, but shall not be deemed by doing so to have increased the
Maximum Available Amount and shall not be obligated to make any such
Advances thereafter. The "Maximum Available Amount" on any date shall be
an amount equal to (i) $40,000,000 (the "Aggregate Revolving
Commitment") or such lesser amount to which it may be reduced as
provided in Section 5.2.2, minus (ii) the Letter of Credit Exposure.
Each Lender's "Revolving Commitment" is its Prorata Share of the
Aggregate Revolving Commitment and is listed on Exhibit 2.1.1 hereto.

2.2. LETTERS OF CREDIT. Agent commits to issue Dollar denominated
letters of credit (each a "Letter of Credit") upon the application of and for
the account of one or more of Industries, Holdings, and O'Sullivan - Virginia
(the "Letter of Credit Commitment"), as follows:

2.2.1. DOCUMENTARY (COMMERCIAL) AND STANDBY LETTERS OF CREDIT.
Agent has issued and hereby reaffirms its commitment to issue from time
to time Dollar denominated documentary (commercial) and standby letters
of credit, each satisfactory to Lenders, for the account of Borrower and
any other applicant therefor in connection with transactions that are in
the ordinary course of business of the applicant or applicants, but only
if Lenders' Letter of Credit Exposure with respect to such requested
Letter of Credit and all outstanding Letters of Credit (other than the
IRB Letter of Credit) will not as a result of such issuance exceed the
lesser of (i) $7,000,000 or (ii) any excess of the Aggregate Revolving
Commitment over the Aggregate Revolving Loan. The expiration date of
any Letter of Credit (other than the IRB Letter of Credit) will not be
more than one year after its issuance date, subject to being renewed as
provided herein one or more times for periods of not more than one year,
and in no event, including upon a renewal, will be later than the
Ultimate Revolving Maturity Date.

2.2.2. IRB LETTER OF CREDIT. Agent has issued and there is now
outstanding, and Agent hereby reaffirms its prior commitment so to
issue, a single Dollar denominated standby letter of credit for the
account of Industries, Holdings, and O'Sullivan - Virginia, jointly and
severally, in the initial face amount of $10,750,000 for the benefit of
Tandy Corporation ("Tandy") and having an expiry date of October 1, 1998
(as originally issued or subsequently renewed, the "IRB Letter of
Credit"). The IRB Letter of Credit shall be drawable by Tandy as therein
provided if Tandy has made payment under its Guaranty Agreement dated as
of October 1, 1988, with Texas American Bank/Fort Worth, N.A., Trustee
in connection with existing $10,000,000 Industrial Development Authority
of Halifax County, Virginia, Industrial Revenue Bonds (O'Sullivan
Industries-Virginia, Inc. Project) Series 1988 (the "Virginia Industrial
Revenue Bonds"). The original IRB Letter of Credit may be renewed one
or more times after October 1, 1998, upon the application of any of
Industries, Holdings, and O'Sullivan - Virginia if in each case such
renewal is approved by Lenders in their discretion. Each such renewal
IRB Letter of Credit shall be in substantially the same form as the

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original IRB Letter of Credit, but shall have an expiration date one
year after the expiration date of the prior IRB Letter of Credit that is
being renewed. Industries, Holdings, and O'Sullivan - Virginia
acknowledge that (i) Agent and Lenders do not have the obligation to
renew the IRB Letter of Credit and Industries, Holdings, and O'Sullivan
- Virginia fully bear the risk that it may not be renewed, (ii) October
1, 1998, is the first call date of the Virginia Industrial Revenue Bonds
with respect to which the IRB Letter of Credit has been issued, and
(iii) if the IRB Letter of Credit is not renewed, O'Sullivan - Virginia
may be required to call the Virginia Industrial Revenue Bonds on such
date if it has not provided Tandy or the bond trustee with an acceptable
replacement for the IRB Letter of Credit.

2.2.3. LENDERS' PARTICIPATIONS. Each of the Lenders shall be
deemed, as of the time of the issuance of each Letter of Credit, to have
purchased participations therein in proportion to their Prorata Shares.
If there is a draw on any Letter of Credit, each Lender shall make
available to Agent its Prorata Share of such draw as provided in Section
6.1.3 as if such draw were an Advance Request, and the failure of a
Lender to do so shall have the same consequence as a failure to make
funds available to Agent for an Advance Request as provided in Sections
6.1.3 through 6.1.5.

2.2.4. REPLACEMENT OF IRB LETTER OF CREDIT. Industries,
Holdings, and O'Sullivan - Virginia may replace the IRB Letter of Credit
at any time with either cash collateral or other collateral or security
acceptable to Tandy whose amount does not exceed, or a letter of credit
whose face amount does not exceed, the then undrawn amount of the IRB
Letter of Credit, provided that (i) they give five Business Days' prior
written notice to Agent of their intention to do so, (ii) they provide
to Lenders such documents, which may include but are not necessarily
limited to documents executed by Tandy, Industries, Holdings, O'Sullivan
- Virginia, and, if appropriate, the successor of Texas American
Bank/Fort Worth, N.A., as Trustee, with respect to the Virginia
Industrial Revenue Bonds, which evidence to the satisfaction of Lenders
that the IRB Letter of Credit will not be drawn upon as a consequence of
and will be irrevocably terminated upon such replacement. If an Event
of Default occurs that has not been waived by Lenders, Industries,
Holdings and O'Sullivan - Virginia shall use all reasonable efforts to
obtain a letter of credit from another financial institution to replace
the IRB Letter of Credit.

3. INTEREST.

3.1. RATES. Each Advance, and any portion of the Aggregate Revolving
Loan that is a minimum of $1,000,000 and an even multiple of $1,000,000, shall
constitute a "Tranche" and shall bear interest at a rate per annum that is
either the Alternate Base Rate or the Adjusted LIBO Rate, as designated by
Borrower as provided herein. Each reimbursement to Agent for a draw on a Letter
of Credit shall include interest at the Alternate Base Rate on the amount of the
draw from the time the draw is funded by Agent.

3.2. DEFINITION OF ALTERNATE BASE RATE. The "Alternate Base Rate"
shall be the "Corporate Base Rate" of Agent as in effect from time to time. The
Corporate Base Rate is a reference rate and does not necessarily represent the
lowest or best rate charged to any customer of Agent or any Lender.

3.3. DEFINITION OF ADJUSTED LIBO RATE. The "Adjusted LIBO Rate" shall
mean, with respect to a LIBOR Tranche for its Interest Period, a rate equal to
(a) the LIBO Rate for such Interest Period plus (b) the applicable LIBO
Increment from the following table:

If the ratio of Holdings' consolidated Then the "LIBO
Funded Debt to EBITDA (as defined in Increment" shall be:
Section 15.1) is:

1.8 to 1.0 or less 0.35%

Less than or equal to 2.0 to 1.0 and
more than 1.8 to 1.0 0.60%

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<PAGE> 11

Less than or equal to 2.5 to 1.0 and more than
2.0 to 1.0 1.05%

Greater than 2.5 to 1.0 1.40%

3.3.1. "LIBO Rate" shall mean, with respect to any LIBOR Tranche
for any Interest Period, an interest rate per annum equal to the
quotient (rounded to the nearest 0.001%) of

(i) the rate at which Dollar deposits in immediately available funds and
for a maturity equal to the applicable Interest Period are offered or
available in the London Interbank Market for Eurodollars as of 11:00
a.m. (St. Louis time) two Business Days before the applicable Advance
Date, as reported on Telerate Screen LIBO page 3750, or, if a rate is
not obtainable from Telerate on such date, the rate published in the
Wall Street Journal on such date,

divided by

(ii) a number equal to one minus the decimal equivalent of the aggregate
of the actual rates during the applicable Interest Period of all reserve
requirements (including, without limitation, marginal, emergency,
supplemental and special reserves), established by the FRB or any other
Governmental Authority to which any Lender is actually subject, in
respect of "Eurocurrency liabilities" as referred to in Regulation D,
including but not limited to those imposed under Regulation D. (The
amount of every LIBOR Tranche shall be deemed to constitute a
Eurocurrency liability and as such shall be deemed to be subject to such
reserve requirements.) The LIBO Rate shall be adjusted automatically on
and as of the effective date of any change in any such reserve
requirements. Lenders warrant that no such reserve requirement is in
effect on the Effective Date and agree to promptly notify Holdings of
the imposition of, or any change in, any such reserve requirement.

3.4. INTEREST PERIODS FOR LIBOR TRANCHES. For each Tranche that
Borrower designates to be a LIBOR Tranche, Borrower shall elect an interest
period (each, an "Interest Period") to be applicable to such Tranche. The
Interest Period for a LIBOR Tranche shall be either a one month, two month,
three month, or six month period; provided that:

(i) every such Interest Period for a Tranche shall commence on the date
of the Advance;

(ii) if any Interest Period would otherwise expire on a day of a
calendar month which is not a Business Day, then such Interest Period
shall expire on the next succeeding Business Day in that calendar month;
provided, however, that if the next succeeding Business Day would be in
the following calendar month, it shall expire on the first preceding
Business Day;

(iii) no Interest Period for a Tranche shall extend beyond the Ultimate
Revolving Maturity Date; and

(iv) no more than twelve LIBOR Tranches with different Interest Periods
may be outstanding at any one time.

3.5. CONVERSION OF TRANCHES. Provided that no Event of Default has
o ccurred that has not been waived in writing by Lenders, Borrower may at any
time (i) convert a Tranche of one type into a Tranche of another type, or (ii)
at the end of any Interest Period for a LIBOR Tranche, continue such LIBOR
Tranche for an additional Interest Period; provided, however, that if a LIBOR
Tranche is converted or continued on a day that is not the last day of its
Interest Period, Borrower shall pay to Agent, for the account of Lenders, an
amount calculated in accordance with Section 7.2. To cause a conversion or
continuation, Borrower shall give Agent, prior to 11:00 a.m., St. Louis time,
two (2) Business Days prior to the date the conversion or continuation is to be
effective, a written request (which may be mailed, personally delivered or
telecopied as provided in Section 19.2) (a "Notice of Conversion/Continuation")
(i) identifying the Tranche to be converted or continued, (ii) specifying
whether a conversion or continuation is

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<PAGE> 12
requested, (iii) in the case of a conversion, specifying whether the Tranche is
to be converted into an Alternate Base Rate Tranche or a LIBOR Tranche, and (iv)
in the case of conversion to or continuation of a LIBOR Tranche, specifying the
Interest Period therefor. If a Notice of Conversion/Continuation is not made by
11:00 a.m. St. Louis time on the last day of the Interest Period for a LIBOR
Tranche, then Borrower shall be deemed to have timely given a Notice of
Conversion/Continuation to Agent requesting to convert the Tranche to an
Alternate Base Rate Tranche.

3.6. RATE AFTER MATURITY. Interest shall be paid on the Revolving
Loans after their Maturity, and in the discretion of Lenders after the
occurrence of an Event of Default, on the Revolving Loans and on other Loan
Obligations, at a per annum rate equal to the Alternate Base Rate plus 2%. For
purposes of this Section, the Maturity of any obligation to reimburse Agent for
the account of Lenders for a draw on a Letter of Credit shall be deemed to occur
on the fifth day after Agent makes demand for reimbursement as provided in
Section 5.3.

3.7. TIME OF ACCRUAL. Interest shall accrue on all principal amounts
outstanding from and including the date when first outstanding to but excluding
the date when no longer outstanding. Amounts shall be deemed outstanding until
payments are applied thereto as provided herein.

3.8. COMPUTATION. Interest for Loans based on the Corporate Base Rate
shall be computed for the actual days elapsed over a year of 365 or 366 days, as
applicable. Interest rates that are based on the Corporate Base Rate shall
change simultaneously with any change in the Corporate Base Rate and such rates
shall be effective for the entire day on which the Corporate Base Rate change
becomes effective. Interest for Loans based on the LIBO Rate shall be computed
for the actual days elapsed over a year deemed to consist of 360 days.

3.9. USURY. Notwithstanding any provisions to the contrary in Section
3 or elsewhere in any of the Loan Documents, Borrower shall not be obligated to
pay interest at a rate which exceeds the maximum rate permitted by Law. If, but
for this Section 3.9, Borrower would be deemed obligated to pay interest at a
rate which exceeds the maximum rate permitted by Law, or if any of the Loan
Obligations is paid or becomes payable before its originally scheduled Maturity
and as a result Borrower has paid or would be obligated to pay interest at such
an excessive rate, then (i) Borrower shall not be obligated to pay interest to
the extent it exceeds the interest that would be payable at the maximum rate
permitted by Law; (ii) any such excess interest that has been paid by Borrower
shall be refunded; and (iii) the effective rate of interest shall be deemed
automatically reduced to the maximum rate permitted by Law.

4. FEES.

4.1. FACILITY FEE. Borrower shall pay to Agent for the account of
Lenders in accordance with their Prorata Shares a non-refundable "Facility Fee"
calculated by applying the daily equivalent of an annual rate of 0.15% to the
Aggregate Revolving Commitment as of each day. The Facility Fee shall be
payable quarterly in arrears on the first day of each calendar quarter until all
of the Loan Obligations have been fully paid and the Revolving Commitments have
been canceled.

4.2. STANDBY LC FEE. Borrower shall pay to Agent for the account of
Lenders in accordance with their Prorata Shares a "Standby LC Fee" for each
standby Letter of Credit issued by Agent (exclusive of the IRB Letter of Credit)
that shall be calculated by applying the quarterly equivalent of the then
applicable LIBO Increment to the aggregate undrawn amount of such Letter of
Credit. The Standby LC Fee for each such Letter of Credit shall be payable in
advance on its issuance date and on the first day of each calendar quarter
beginning thereafter while it is outstanding.

4.3. FEES FOR COMMERCIAL LC'S. Borrower shall pay to Agent for the
account of Lenders in accordance with their Prorata Shares a "Commercial LC Fee"
for each documentary (commercial) Letter of Credit issued by Agent that is equal
to 1/4% of the original face amount of such Letter of Credit. The Commercial LC
Fee for each such Letter of Credit shall be payable in advance on its issuance
date. In addition, Borrower shall pay on demand (i) to Agent for its sole
account, the sum of $50 for each negotiation of such a Letter of Credit, and
(ii) to Agent for

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<PAGE> 13
its sole account, Agent's other customary fees (excluding fees for negotiation
of Letters of Credit set forth in clause (i), above) charged in connection with
its issuance and administration of such Letters of Credit.

4.4. IRB LC FEE. Borrower shall pay to Agent for the account of
Lenders in accordance with their Prorata Shares an "IRB LC Fee" for the IRB
Letter of Credit issued by Agent that shall be calculated by applying the
quarterly equivalent of 1% per annum to the aggregate undrawn amount thereof;
provided, however, that for each day on which an Event of Default exists and is
continuing, the rate at which the IRB LC Fee shall accrue shall be the quarterly
equivalent of 3% per annum of the aggregate undrawn amount of the IRB Letter of
Credit. The IRB LC Fee shall be payable in advance on the Effective Date and on
the first day of each calendar quarter beginning thereafter while the IRB Letter
of Credit is outstanding.

4.5. CALCULATION OF FEES. All of the foregoing fees that are based on
an annual percentage shall be calculated on the basis of a year of 365 or 366
days, as applicable and for the actual number of days elapsed.

5. PAYMENTS.

5.1. SCHEDULED PAYMENTS ON REVOLVING LOANS.

5.1.1. INTEREST. Borrower shall pay interest accrued on each
Tranche of the Alternate Base Rate Loans in arrears on the first day of
each calendar quarter, on the last day of the Interest Period for the
Tranche if it is a LIBOR Tranche, and on the Ultimate Revolving Maturity
Date. Borrower shall pay interest accrued on the Revolving Loans after
their Maturity on demand.

5.1.2. PRINCIPAL. Borrower shall repay the entire amount of the
Revolving Loans on the Ultimate Revolving Maturity Date.

5.2. PREPAYMENTS ON REVOLVING LOANS AND REDUCTION OF REVOLVING
COMMITMENT.

5.2.1. VOLUNTARY. Borrower may wholly prepay any LIBOR Tranche
or any Alternate Base Rate Tranche at any time and may make partial
prepayments on any LIBOR Tranche or any Alternate Base Rate Tranche from
time to time, without penalty or premium, to all Lenders in accordance
with their Prorata Shares, but only if (i) Borrower gives Agent written
notice (which may be mailed, personally delivered or telecopied as
provided in Section 19.2) of Borrower's intention to make such
prepayments at least one Business Day prior to tendering the
prepayments, (ii) the total amount of the prepayments of any LIBOR
Tranche or any Alternate Base Rate Tranche is a whole multiple of
$500,000, (iii) Borrower pays any accrued interest on the amount prepaid
at the time of such prepayment and (iv) in the case of a LIBOR Tranche,
Borrower pays an amount calculated in accordance with Section 7.2 at the
time of such prepayment.

5.2.2. REDUCTION OF COMMITMENT. Borrower may reduce the
Aggregate Revolving Commitment at any time and from time to time in a
minimum amount of $5,000,000 and whole multiples of $1,000,000
thereafter, but only if (i) Borrower gives Agent written notice of
Borrower's intention to make such reduction at least five (5) Business
Days prior to the effective date of the reduction, and (ii) Borrower
makes on the effective date of the reduction any payment on the
Aggregate Revolving Loan required under Section 5.2.3 as a consequence
of the reduction. Any such reduction of the Aggregate Revolving
Commitment shall be permanent. Each reduction of the Aggregate
Revolving Commitment shall ratably reduce each Lender's Prorata Share of
the Aggregate Revolving Commitment.

5.2.3. MANDATORY PREPAYMENT FOR OVER ADVANCES. If at any time
the Aggregate Revolving Loan exceeds the Aggregate Revolving Commitment
at such time, whether as the result of optional Advances by Lenders as
contemplated in Section 2.1.2 or otherwise, Borrower shall repay such
optional Advances in

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<PAGE> 14

accordance with the terms thereof and shall, with respect to other
Advances, make on demand a payment to Agent for the account of Lenders
in the amount of the excess.

5.3. REIMBURSEMENT FOR DRAWS ON LETTERS OF CREDIT. Borrower shall on
demand by Agent reimburse to Agent for the account of Lenders the amount of any
draw made on a Letter of Credit as to which any Borrower was an applicant or
account party, together with interest as provided in Section 3.1. O'Sullivan -
Virginia shall on demand by Agent reimburse to Agent for the account of Lenders
the amount of any draw made on a Letter of Credit as to which O'Sullivan -
Virginia was the applicant and account party, together with interest as provided
in Sections 3.1 and 3.6.

5.4. MANNER OF PAYMENTS AND TIMING OF APPLICATION OF PAYMENTS.

5.4.1. PAYMENT REQUIREMENT. Unless expressly provided to the
contrary elsewhere herein, Borrower shall make each payment on the Loan
Obligations to Agent for the account of Lenders as required under the
Loan Documents in immediately available funds in Dollars at the
Applicable Lending Office before 12:00 noon St. Louis time on the date
when due, without deduction, set-off or counterclaim.

5.4.2. APPLICATION OF PAYMENTS. All payments received by Agent
in immediately available funds at or before 2:00 p.m., St. Louis time,
on a Business Day will be applied on the same day. Such payments
received on a day that is not a Business Day or after 2:00 p.m. on a
Business Day will be applied to the relevant Loan Obligation on the next
Business Day. Except as otherwise expressly provided in this Agreement,
and so long as no Event of Default exists, payments and prepayments of
principal shall be applied to the Loan Obligations in the order and
manner specified by Borrower.

5.4.3. RETURNED INSTRUMENTS. If a payment is made by check,
draft or other instrument and the check, draft or other instrument is
returned unpaid, the application of the payment to the Loan Obligation
will be reversed and will be treated as never having been made.

5.4.4. COMPELLED RETURN OF PAYMENTS OR PROCEEDS. If a Lender is
for any reason compelled to surrender any payment because such payment
or the application of such proceeds is for any reason invalidated,
declared fraudulent, set aside, or determined to be void or voidable as
a preference, an impermissible setoff, or a diversion of trust funds,
then this Agreement and the Loan Obligations to which such payment or
proceeds was applied or intended to be applied shall be revived as if
such application was never made; and Borrower shall be liable to pay to
such Lender, and shall indemnify such Lender for and hold such Lender
harmless from any loss with respect to, the amount of such payment or
proceeds surrendered. This Section shall be effective notwithstanding
any contrary action that such Lender may take in reliance upon its
receipt of any such payment or proceeds. Any such contrary action so
taken by such Lender shall be without prejudice to such Lender's rights
under this Agreement and shall be deemed to have been conditioned upon
the application of such payment or proceeds having become final and
irrevocable. The provisions of this Section shall survive termination
of the Commitments and the payment and satisfaction of all of the Loan
Obligations.

5.5. DUE DATES NOT ON BUSINESS DAYS. Except as specified in Section
3.4(ii), if any payment required hereunder becomes due on a date that is not a
Business Day, then such due date shall be deemed automatically extended to the
next Business Day.

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6. PROCEDURE FOR USE OF FACILITIES.

6.1. ADVANCES.

6.1.1. ADVANCE REQUESTS BY BORROWER. Borrower may request an
Advance by submitting an Advance Request to Agent. Only a written
request (which may be mailed, personally delivered or telecopied as
provided in Section 19.2) from a Borrowing Officer to Agent that
specifies the amount of the Advance to be made (which shall be an even
multiple of $1,000,000), the date the proceeds of the Advance are
requested to be made available to Borrower (which, in the case of a
request for an Advance that is to be a LIBOR Tranche, shall be not less
than two (2) Business Days after the Advance Request is furnished, and,
in the case of a request for an Advance that is to be an Alternate Base
Rate Advance may be on the same day as such Advance Request) (the
"Advance Date"), whether the Advance is to be a LIBOR Tranche or an
Alternate Base Rate Tranche, and the Interest Period to be applicable to
the Tranche if it is a LIBOR Tranche, shall be treated as a "Advance
Request". An Advance Request received by Agent on a day that is not a
Business Day or that is received by Agent after 2:00 p.m., St. Louis
time, on a Business Day shall be treated as having been received by
Agent at 9:00 a.m., St. Louis time, on the next Business Day. An
Advance Request shall become irrevocable at 2:00 p.m., St. Louis time,
on the Advance Date unless it is sooner funded by Lenders (and becomes
an Advance) or revoked by a Borrowing Officer. Neither Agent nor any
Lender shall incur any liability to Borrower for treating any such
request as an Advance Request or for treating a revocation thereof as
such if Agent believes in good faith that the Person making the request
or revocation is a Borrowing Officer. Neither Agent nor any Lender
shall incur any liability to Borrower for failing to treat any such
request as an Advance Request or for failing to treat a revocation
thereof as such if Agent believes in good faith that the Person making
the request or revocation is not a Borrowing Officer. Each Advance
Request by a Borrowing Officer shall constitute a certification by
Borrower that (i) no Default has occurred that is continuing and not
waived in writing by Agent and no Event of Default has occurred that is
not waived in writing by Agent and (ii) all conditions precedent
hereunder to the making of the requested Advance have been satisfied.
Provided that all conditions precedent herein to a requested Advance
have been satisfied, Agent will make the amount of such requested
Advance available to Borrower by 2:00 p.m. St. Louis time on the Advance
Date in immediately available funds in Dollars at the Applicable Lending
Office, and upon request by Borrower, Agent will use reasonable efforts
to make such Advance available as soon as possible, but in any event, no
later than 2:00 p.m. St. Louis time on the Advance Date.

6.1.2. LENDERS' RIGHT TO MAKE OTHER ADVANCES. With the prior
consent of Majority Lenders in each instance, Agent shall have the right
to make Advances at any time and from time to time to cause timely
payment of any of the Loan Obligations. Any such Advance shall be an
Alternate Base Rate Tranche. Agent will give notice to Borrower after
any such Advance is made.

6.1.3. AGENT'S NOTICE TO LENDERS; FUNDS DEPOSIT. Upon receipt of
an Advance Request or the making of an Advance under Section 6.1.2,
Agent shall promptly notify each Lender of the contents thereof and of
such Lender's Prorata Share of such Advance. Not later than 1:00 p.m.
(St. Louis time) on the Advance Date, each Lender shall make available
its Prorata Share of such Advance, in immediately available funds
consisting solely of Dollars, to Agent in accordance with such
remittance instructions as may be given by Agent to Lenders from time to
time.

6.1.4. ADVANCES RATABLE. All Advances shall be made by Lenders
as provided herein in accordance with their Prorata Shares. Except as
otherwise expressly provided herein, a Lender shall not be obligated to
make Advances in excess of its Revolving Commitment.

6.1.5. AGENT'S AVAILABILITY ASSUMPTION. Unless Agent has been
given written notice by a Lender prior to an Advance Date that such
Lender does not intend to make available to Agent such Lender's Prorata

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Share of the Advance which it will be obligated to make on the Advance
Date, Agent may assume that each Lender has made the required amount
available to Agent on the Advance Date and Agent may, in reliance upon
such assumption, make available to Borrower a corresponding amount. If
such corresponding amount is not in fact made available to Agent by such
Lender on the Advance Date, Agent shall be entitled to recover such
corresponding amount on demand from such Lender. If such Lender does
not pay such corresponding amount immediately upon Agent's demand
therefor, then Agent shall promptly notify Borrower and the other
Lenders and Borrower shall immediately pay such corresponding amount to
Agent. Agent shall also be entitled to recover, either from such
defaulting Lender or Borrower, interest on such corresponding amount for
each day from the date such corresponding amount was made available by
Agent to Borrower to the date such corresponding amount is recovered by
Agent, at a rate per annum equal to (i) if paid by such Lender, the cost
to Agent of funding such amount at the Federal Funds Rate, or (ii) if
paid by Borrower, the applicable rate for Advances determined from the
Advance Request to which such amount relates. Each Lender shall be
obligated only to fund its Prorata Share of an Advance subject to the
terms and conditions hereof, regardless of the failure of another Lender
to fund its Prorata Share thereof.

6.1.6. SUSPENSION OF OBLIGATION TO MAKE LIBOR TRANCHES. If (i)
on any date for determining the LIBO Rate for any Interest Period, by
reason of any changes arising after the Effective Date affecting the
London Interbank Market, or any Lender's position in such market,
adequate and fair means do not exist for ascertaining the applicable
interest rate on the basis provided for in the definition herein of LIBO
Rate, or, in the sole discretion of Lenders, on any other reasonable
basis or (ii) the making of any Advance which is to be a LIBOR Tranche
or the continuance of any LIBOR Tranche by a Lender has become unlawful
by compliance by such Lender in good faith with any Law or any
pronouncement (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) of a Governmental
Authority, then such Lender shall promptly give notice to Borrower of
such determination. Before giving such notice, such Lender shall
designate a different LIBOR lending office or take other reasonable
action if such designation or action will avoid the need for giving such
notice and will not be otherwise disadvantageous to any non-trivial
extent to such Lender (as determined in good faith by such Lender).
Until such Lender notifies Borrower that the circumstances giving rise
to the suspension described herein no longer exist, (a) the obligation
of such Lender to make Advances which are LIBOR Tranches shall be
suspended, (b) each outstanding LIBOR Tranche from such Lender shall be
automatically converted into an Alternate Base Rate Tranche on the
earlier of the last day of the Interest Period for such LIBOR Tranche or
the last date permitted by applicable law, and (c) all Advances from
such Lender shall be Alternate Base Rate Advances. Notwithstanding
anything to the contrary contained herein, if a LIBOR Tranche is
converted to an Alternate Base Rate Tranche pursuant to this Section
6.1.6, the per annum interest rate applicable thereto from and after the
effective date of such conversion shall be the Alternate Base Rate (but
otherwise calculated as provided in Section 3). If at any time it
appears, in the reasonable judgment of Lenders, that Lenders will be
unable to offer LIBO Rate loans to Borrower from such time through the
Ultimate Revolving Maturity Date, Lenders will enter into good faith
negotiations with Borrower in an attempt to replace the LIBO Rate loan
interest rate option with another interest rate option satisfactory to
Lenders and Borrower.

6.2. LETTERS OF CREDIT. Borrower may request the issuance or renewal
of a Letter of Credit by submitting a Letter of Credit Request to Boatmen's and
executing any reimbursement agreement required under Section 10.1. Only a
written request (which may be mailed, personally delivered or telecopied as
provided in Section 19.2) from a Borrowing Officer to Boatmen's that specifies
the amount and beneficiary of the requested Letter of Credit, and its
identifying number in the case of a renewal, and other information necessary for
its issuance or renewal shall be treated as a "Letter of Credit Request". Each
Letter of Credit Request by a Borrowing Officer shall constitute a certification
by Borrower that (i) no Default has occurred that is continuing and not waived
in writing by Lenders and no Event of Default has occurred that is not waived in
writing by Lenders and (ii) all conditions precedent hereunder to the issuance
of the requested Letter of Credit have been satisfied.

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<PAGE> 17
7. YIELD PROTECTION.

7.1. COMPENSATION FOR INCREASE IN LIBOR TRANCHE COSTS. If after the
Effective Date there is any change in any Law or in any rule, order, or
guideline (whether or not having the force of law and whether or not failure to
comply therewith would be unlawful, and including but not limited to any
imposition or increase of reserve requirements) of any Governmental Authority
and as a result thereof or as a result of compliance therewith by a Lender:

(i) such Lender is subject to any tax, duty or other charge with
respect to its LIBOR Tranches or its obligation to make Advances
that are LIBOR Tranches, or the basis of taxation of payments to
such Lender of the principal of or interest on its LIBOR
Tranches or its obligation to make the same change (except for
changes in the rate of tax on the overall net income of such
Lender imposed by the United States or other jurisdiction to
which such Lender is subject); or

(ii) any reserve (including, without limitation, any imposed by the
FRB), special deposit, compulsory loan, assessment, or similar
requirement against assets of, deposits with or for the account
of, or credit extended by, such Lender is imposed or deemed
applicable or any other condition affecting its LIBOR Tranches
or its obligation to make them is imposed on such Lender or the
London Interbank Market;

and as a result thereof there is any increase in the cost to such Lender of
agreeing to make or making an Advance that is a LIBOR Tranche or maintaining its
LIBOR Tranches (except to the extent already included in the determination of
the applicable LIBO Rate), or there is a reduction in the amount received or
receivable by such Lender, then Borrower shall from time to time, upon written
notice from and demand by such Lender (with a copy of such notice and demand to
Agent), pay to such Lender, within five Business Days after the date specified
in such notice and demand, additional amounts sufficient to compensate such
Lender in the amount of such increased cost. Before giving such notice, such
Lender shall designate a different LIBOR lending office or take other reasonable
action if such designation or action will avoid the need for giving such notice
and will not be otherwise disadvantageous to any non-trivial extent to such
Lender (as determined in good faith by such Lender). If such Lender claims
compensation under this Section, such Lender shall furnish to Borrower a
certificate providing in reasonable detail the calculation of such additional
costs and stating the additional amount or amounts to be paid to it hereunder.
Borrower shall have the burden of proving that any such certificate is not
correct.

7.2. FUNDING LOSSES. Borrower shall pay to each Lender upon its demand
an amount sufficient to compensate such Lender for all loss and expense suffered
by such Lender, including but not limited to loss of profit and the cost of
acquiring funds to make or carry a LIBOR Tranche, (i) if for any reason a
requested Advance is not taken by Borrower on the date specified therefor in an
Advance Request (unless such Advance Request has been withdrawn prior to
becoming irrevocable) or (ii) if any prepayment or repayment of a LIBOR Tranche
or conversion of a LIBOR Tranche to a Tranche of another type is made by
Borrower other than pursuant to Section 6.1.6 on a date which is not the last
day of the Interest Period therefor. Borrower shall be obligated to pay to such
Lender in any such event an amount equal to (x) the greater of zero or

[(B-C) x D]/360

wherein

"B" is the decimal equivalent of the LIBO Rate that is (or would be in
the case of Borrower's failure to borrow after giving an Advance
Request) payable by Borrower on such Advance;

"C" is the decimal equivalent of the LIBO Rate that would apply to a
hypothetical Advance in the Affected Principal Amount whose Advance Date
were on the last Business Day on or before the first day of the

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Remaining Interest Period and whose Interest Period were approximately
equal, as determined by Lender, to the Remaining Interest Period (it
being agreed that in the event the Remaining Interest Period is not a
30, 60, 90 or 180 day period, Agent shall determine the applicable LIBO
Rate in its sole, good faith discretion; and

"D" is the number of days from the first day of the Remaining Interest
Period to the last day of the Remaining Interest Period.

"Affected Principal Amount" shall mean, as applicable, (i) the principal amount
of an Advance that Borrower fails to take after having given an Advance Request
(unless such Advance Request has been withdrawn prior to becoming irrevocable)
or (ii) the amount of any prepayment or repayment on a LIBOR Tranche that
occurs, or the entire principal amount of a LIBOR Tranche that converts to an
Advance of another type on a date which is not the last day of the Interest
Period therefor.

"Remaining Interest Period" shall mean, as applicable, (i) the entire Interest
Period that would have been applicable to an Advance that Borrower fails to take
after having given an Advance Request (unless such Advance Request has been
withdrawn prior to becoming irrevocable) or (ii) if a prepayment or repayment on
a LIBOR Tranche occurs, or a LIBOR Tranche converts to an Advance of another
type, whether or not required hereby, prior to the last day of the Interest
Period therefor, the period from and including the date thereof to but excluding
the last day of such Interest Period.

If a Lender claims compensation under this Section, such Lender shall furnish a
certificate to Borrower (with a copy to Agent if it is not the Lender involved)
that provides a detailed calculation of the amount to be paid to such Lender and
certifies that such amount is correct. Borrower shall have the burden of
proving that any such certificate is not correct.

8. GUARANTY. O'Sullivan - Virginia shall execute and deliver to Agent for
the benefit of Lenders in accordance with their Prorata Shares an unconditional
guaranty of the Loan Obligations in substantially the form attached hereto as
Exhibit 8 (as the same may be amended, restated or replaced from time to time,
the "Guaranty").

9. CONDITIONS TO ADVANCES.

9.1. CONDITIONS TO INITIAL ADVANCES. As conditions precedent to
Lenders' obligation to make the initial Advances:

9.1.1. NO DEFAULT. No Default shall have occurred and be
continuing that is not waived in writing by Lenders, no Event of Default
shall have occurred that is not waived in writing by Lenders, and
neither will occur as a result of such Advance being requested or made
or the application of the proceeds thereof.

9.1.2. REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained in the Loan Documents shall be true and correct in
all material respects.

9.1.3. MATERIAL ADVERSE CHANGE. Since the date of the most
recent Financial Statements delivered to Lenders, there shall not have
been any change which would have a Material Adverse Effect.

9.1.4. PENDING MATERIAL PROCEEDINGS. There shall be no pending
Material Proceedings, except as set forth on Exhibit 11.

9.2. CONDITIONS TO SUBSEQUENT ADVANCES. As conditions precedent to
Lenders' obligation to make any subsequent Advances:

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<PAGE> 19
9.2.1. NO DEFAULT. No Default shall have occurred and be
continuing that is not waived in writing by Lenders, no Event of Default
shall have occurred that is not waived in writing by Lenders, and
neither will occur as a result of such Advance being requested or made
or the application of the proceeds thereof.

9.2.2. MATERIAL ADVERSE CHANGE. Since the date of the most
recent Financial Statements delivered to Lenders, there shall not have
been any change which would have a Material Adverse Effect which
Borrower or Lenders reasonably believe will ultimately result in a
Default under this Agreement.

10. CONDITIONS TO ISSUANCE OF LETTERS OF CREDIT. As conditions precedent to
the issuance of any Letter of Credit:

10.1. REIMBURSEMENT AGREEMENT. Each applicant and account party
therefor shall have executed and delivered to Agent a reimbursement agreement in
the appropriate form thereof previously negotiated by Borrower and Agent or in
such other form satisfactory to Agent and Borrower under which each applicant
and account party undertakes to reimburse to Agent on demand for the account of
Lenders the amount of each draw on such Letter of Credit, together with interest
from the date of the draw as provided herein.

10.2. OTHER CONDITIONS. All of the conditions in Section 9.2 shall
have been satisfied and shall remain satisfied as of the issuance date of any
Letter of Credit.

11. REPRESENTATIONS AND WARRANTIES.

Except as otherwise described in the disclosure schedule that is
attached hereto as Exhibit 11 (the "Disclosure Schedule"), Borrower represents
and warrants to Lenders, and by its execution hereof, O'Sullivan - Virginia also
represents and warrants to Lenders as follows:

11.1. ORGANIZATION AND EXISTENCE. Each Covered Person is duly
incorporated and existing in good standing under the laws of the jurisdiction of
its organization, is duly qualified to do business and is in good standing in
every state where the nature or extent of its business or properties require it
to be qualified to do business, except where the failure to so qualify will not
have a Material Adverse Effect. Each Covered Person has the corporate power and
authority to own its properties and carry on its business as now being
conducted.

11.2. AUTHORIZATION. Each Covered Person is duly authorized to execute
and perform every Loan Document to which such Covered Person is a party, and
Borrower is duly authorized to borrow hereunder, and this Agreement and the
other Loan Documents have been duly authorized by all requisite corporate action
of each Covered Person. No consent, approval or authorization of, or
declaration or filing with, any Governmental Authority, and no consent of any
other Person, is required in connection with Borrower's execution, delivery or
performance of this Agreement and the other Loan Documents, except for those
already duly obtained.

11.3. DUE EXECUTION. Every Loan Document to which a Covered Person is
a party has been executed on behalf of such Covered Person by a Person duly
authorized to do so.

11.4. ENFORCEABILITY OF OBLIGATIONS. Each of the Loan Documents to
which a Covered Person is a party constitutes the legal, valid and binding
obligation of such Covered Person, enforceable against such Covered Person in
accordance with its terms, except to the extent that the enforceability thereof
against such Covered Person may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
or by equitable principles of general application.

11.5. BURDENSOME OBLIGATIONS. To Borrower's knowledge after due
inquiry, no Covered Person is a party to or bound by or is subject to any
provision in any Contract for borrowed money or the Charter Documents of such
Covered Person which would, if performed by such Covered Person, result in a
Default or Event of Default either

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<PAGE> 20
immediately or upon the elapsing of time; and to Borrower's knowledge, no
Covered Person is a party to or bound by any other agreement which would, if
performed by such Covered Person, result in a Default or Event of Default either
immediately or upon the elapsing of time.

11.6. LEGAL RESTRAINTS. The execution of any Loan Document by a
Covered Person will not violate or constitute a default under the Charter
Documents of such Covered Person, any Material Agreement of such Covered Person,
or any Material Law, and will not, except as expressly contemplated or permitted
in this Agreement, result in any Security Interest being imposed on any of such
Covered Person's property. The performance by any Covered Person of its
obligations under any Loan Document to which it is a party will not violate or
constitute a default under the Charter Documents of such Covered Person, any
Material Agreement of such Covered Person, or any Material Law, and will not,
except as expressly contemplated or permitted in this Agreement, result in any
Security Interest being imposed on any of such Covered Person's property.

11.7. LABOR DISPUTES. There is no collective bargaining agreement or
other labor contract covering employees of a Covered Person. To Borrower's
knowledge, no union or other labor organization is seeking to organize, or to be
recognized as, a collective bargaining unit of employees of a Covered Person for
any similar purpose.

11.8. NO MATERIAL PROCEEDINGS. There are no Material Proceedings
pending or, to the best knowledge of Borrower, threatened.

11.9. COMPLIANCE WITH LAWS. To Borrower's knowledge, each Covered
Person is in substantial compliance with all Material Laws. Without limiting
the generality of the foregoing:

11.9.1. COMPLIANCE. To Borrower's knowledge, the operations of
every Covered Person comply in all material respects with all material
Environmental Laws and Employment Laws.

11.9.2. PROCEEDINGS. None of the operations of any Covered
Person is the subject of any judicial or administrative complaint, order
or proceeding alleging the violation of any applicable Environmental Law
or Employment Law.

11.9.3. INVESTIGATIONS. None of the operations of any Covered
Person is the subject of investigation by any Governmental Authority
regarding the improper transportation, storage, disposal, generation or
release into the environment of any Hazardous Material, the results of
which are reasonably expected to have a Material Adverse Effect.

11.9.4. HAZARDOUS MATERIAL. No Covered Person has caused or
allowed (i) any Hazardous Material to be present at any time on, in,
under or above the real property owned or operated by Borrower or any
Covered Person and (ii) the real property owned or operated by Borrower
or any Covered Person to be used at any time to manufacture, store, or
dispose of any Hazardous Material, except in a manner that is in
compliance in all material respects with all applicable Environmental
Laws and to an extent that will not have a Material Adverse Effect.

11.10. OTHER NAMES. No Covered Person has used any name other than the
full name which identifies such Covered Person in this Agreement.

11.11. FINANCIAL STATEMENTS. The latest Financial Statements provided
by Borrower to Lenders are complete and correct in all material respects, have
been prepared in accordance with GAAP, and fairly reflect, in all material
respects, the financial condition, results of operations and cash flows of the
Persons covered thereby as of the dates and for the periods stated therein.

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<PAGE> 21
11.12. NO CHANGE IN CONDITION. Since the date of the latest Financial
Statements provided by Borrower to Lenders, no event has occurred which would
have a Material Adverse Effect which Borrower reasonably believes will
ultimately result in a Default under this Agreement.

11.13. NO DEFAULTS. To Borrower's knowledge, no Covered Person has
breached or violated or has defaulted under any Contract for borrowed money in
excess of $2,500,000 to which such Covered Person is a party (other than the
Loan Documents), which default has continued unwaived beyond any applicable
grace period provided therein and will have a Material Adverse Effect. To
Borrower's knowledge, no Covered Person has breached or violated or has
defaulted under any other agreement to which such Covered Person is a party
(other than the Loan Documents), which default has continued unwaived beyond any
applicable grace period provided therein and will have a Material Adverse Effect
which Borrower reasonably believes will ultimately result in a Default under
this Agreement.

11.14. INVESTMENTS. No Covered Person has any Investments in other
Persons except existing Permitted Investments.

11.15. INDEBTEDNESS. No Covered Person has any Indebtedness except
existing Permitted Indebtedness.

11.16. INDIRECT OBLIGATIONS. No Covered Person has any Indirect
Obligations except existing Permitted Indirect Obligations.

11.17. OPERATING LEASES. No Covered Person has an interest as lessee
under any Operating Leases other than leases whose premature termination
(without securing an adequate replacement) would not have a Material Adverse
Effect.

11.18. TAX LIABILITIES; GOVERNMENTAL CHARGES. Except where the failure
to do so would not have a Material Adverse Effect, each Covered Person has filed
or caused to be filed all tax reports and returns required to be filed by it
with any Governmental Authority, except where extensions have been properly
obtained, and has paid or made adequate provision for payment of all taxes,
assessments, fees and other charges levied upon it or upon its income or
properties by any Governmental Authority which are due and payable, including
interest and penalties, except such taxes, assessments, fees and other charges,
if any, as are being diligently contested in good faith by appropriate
proceedings and as to which such Covered Person has established adequate
reserves in conformity with GAAP on the books of such Covered Person. No
Security Interests for any such taxes, assessments, fees or other charges have
been filed and no claims are being asserted with respect to any such taxes,
assessments, fees or other charges which, if adversely determined, would have a
Material Adverse Effect. There are no material unresolved issues concerning any
tax liability of a Covered Person which, if adversely determined, would have a
Material Adverse Effect.

11.19. PENSION BENEFIT PLANS. Except with respect to events or
occurrences which would not have a Material Adverse Effect, all Pension Benefit
Plans maintained by each Covered Person or an ERISA Affiliate qualify under
Section 401 of the Code and are in compliance with the provisions of ERISA, and

11.19.1. PROHIBITED TRANSACTIONS. None of such Pension Benefit
Plans has participated in, engaged in or been a party to any non-exempt
prohibited transaction as defined in ERISA or the Code, and no officer,
director or employee of a Covered Person or of an ERISA Affiliate has
committed a breach of any of the responsibilities or obligations imposed
upon fiduciaries by Title I of ERISA.

11.19.2. CLAIMS. There are no claims, pending or threatened,
involving any such Pension Benefit Plan by a current or former employee
(or beneficiary thereof) of such Covered Person or ERISA Affiliate, nor
is there any reasonable basis to anticipate any claims involving any
such Pension Benefit Plan which would likely be successfully maintained
against such Covered Person or ERISA Affiliate.

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<PAGE> 22
11.19.3. REPORTING AND DISCLOSURE REQUIREMENTS. There are no
violations of any reporting or disclosure requirements with respect to
any such Pension Benefit Plan and none of such Pension Benefit Plans has
violated any applicable Law, including but not limited to ERISA and the
Code.

11.19.4. ACCUMULATED FUNDING DEFICIENCY. No such Pension
Benefit Plan has (i) incurred an accumulated funding deficiency (within
the meaning of Section 412(a) of the Code), whether or not waived; (ii)
been a Pension Benefit Plan with respect to which a Reportable Event (to
the extent that the reporting of such events to the PBGC within thirty
days of the occurrence has not been waived) has occurred and is
continuing; or (iii) been a Pension Benefit Plan with respect to which
there exist conditions or events which have occurred that present a
significant risk of termination of such Pension Benefit Plan by the
PBGC.

11.19.5. MULTI-EMPLOYER PLAN. No Covered Person or ERISA
Affiliate has received notice that any Multi-employer Plan to which such
Covered Person or ERISA Affiliate contributes is in reorganization or
has been terminated within the meaning of Title IV of ERISA, and no
Multi-employer Plan to which such Covered Person or ERISA Affiliate
contributes is reasonably expected to be in reorganization or to be
terminated within the meaning of Title IV of ERISA.

11.20. WELFARE BENEFIT PLANS. No Covered Person or ERISA Affiliate
maintains a Welfare Benefit Plan that has a liability which, if enforced or
collected, would have a Material Adverse Effect. Each Covered Person and ERISA
Affiliate has complied in all material respects with the applicable requirements
of Section 4980B of the Code pertaining to continuation coverage as mandated by
COBRA.

11.21. RETIREE BENEFITS. No Covered Person or ERISA Affiliate has an
obligation to provide any Person with any medical, life insurance, or similar
benefit following such Person's retirement or termination of employment (or to
such Person's beneficiary subsequent to such Person's death) other than (i) such
benefits provided to Persons at such Person's sole expense and (ii) obligations
under COBRA.

11.22. STATE OF PROPERTY. Each Covered Person has good and marketable
or merchantable title to all real and personal property purported to be owned by
it or reflected in the latest Financial Statements provided to Lenders by
Borrower except for any defects in title which would not have a Material Adverse
Effect and except for personal property sold in the ordinary course of business
after the date of the Initial Financial Statements. There are no Security
Interests on any of the property purported to be owned by any Covered Person
except existing Permitted Security Interests.

11.23. MARGIN STOCK. Borrower is not engaged and will not engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U), and not more than $5,000,000 (plus any amounts used to
reacquire common stock of Holdings) of the proceeds of the Aggregate Revolving
Commitment will be used to purchase or carry any such margin stock (to be used
solely in connection with the acquisition or acquisitions of other entities) or
to extend credit to others for the purpose of purchasing or carrying any such
margin stock (to be used solely in connection with the acquisition or
acquisitions of other entities) or for any purpose which violates, or which
would be inconsistent with, the provisions of Regulation U or Regulation G.

11.24. SECURITIES MATTERS. Except as permitted by Section 14.1.5, no
proceeds of any Advance will be used to acquire any security in any transaction
which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as
amended.

11.25. INVESTMENT COMPANY ACT, ETC. Borrower is not an investment
company registered or required to be registered under the Investment Company Act
of 1940, as amended, or a company controlled (within the meaning of such
Investment Company Act) by such an investment company or an affiliated person
of, or promoter or principal underwriter for, an investment company, as such
terms are defined in the Investment Company Act of 1940, as

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<PAGE> 23
amended. Borrower is not subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or any
other similar Law limiting or regulating its ability to incur Indebtedness for
money borrowed.

11.26. NO MATERIAL MISSTATEMENTS OR OMISSIONS. To Borrower's
knowledge, neither the Loan Documents, any of the Financial Statements nor any
statement, list, certificate or other information furnished or to be furnished
by Borrower to Lenders in connection with the Loan Documents or any of the
transactions contemplated thereby contains any untrue statement of a material
fact, or omits to state a material fact necessary to make the statements therein
not misleading. Borrower has disclosed to Lenders everything regarding the
business, operations, property, financial condition, or business prospects of
itself and every Covered Person that would have a Material Adverse Effect which
Borrower reasonably believes will ultimately result in a Default under this
Agreement.

11.27. FILINGS. All registration statements, reports, proxy statements
and other documents, if any, required to be filed by Borrower with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, have been filed,
and such filings are complete and accurate in all material respects and contain
no untrue statements of material fact or omit to state any material facts
required to be stated therein or necessary, in light of the circumstances in
which they were made, in order to make the statements therein not misleading.

11.28. BROKER'S FEES. Borrower has not engaged a broker or finder in
connection with this Agreement.

12. SURVIVAL OF REPRESENTATIONS. All representations and warranties in
Section 11, and all representations and warranties in any certificate delivered
by Borrower pursuant hereto, shall survive execution of each of the Loan
Documents and the making of every Advance, and may be relied upon by Lenders as
being true and correct when made until all of the Loan Obligations are fully and
irrevocably paid as contemplated in Section 5.4.4.

13. AFFIRMATIVE COVENANTS.

Borrower covenants and agrees that, so long as any of the Commitments
remains in effect or any of the Loan Obligations are owing to a Lender by
Borrower, Borrower shall do, or cause to be done, the following:

13.1. USE OF PROCEEDS. Advances shall be used solely for working
capital, plant expansion and other expenditures that are not prohibited herein
and as the source for payment of Borrower's reimbursement obligations with
respect to draws on Letters of Credit.

13.2. CORPORATE EXISTENCE. Each Covered Person shall maintain its
existence in good standing and its right to transact business in those states in
which it is now or hereafter doing business. Each Covered Person shall obtain
and maintain all Material Licenses for such Covered Person. Notwithstanding
anything in this Section to the contrary, any Covered Person may merge,
consolidate, acquire the assets of, or an equity interest in, any other Covered
Person; provided that, in the event any Borrower is involved in any such
transaction, a Borrower is the surviving corporation.

13.3. MAINTENANCE OF PROPERTY AND LEASES. Each Covered Person shall
maintain in good condition and working order, ordinary wear and tear excepted,
and repair and replace as required, all buildings, equipment, machinery,
fixtures and other real and personal property whose useful economic life has not
elapsed and which is necessary for the ordinary conduct of the business of such
Covered Person. Each Covered Person shall maintain in good standing and free of
material defaults all of its leases of buildings, equipment, machinery, fixtures
and other real and personal property whose useful economic life has not elapsed
and which is necessary for the ordinary conduct of the business of such Covered
Person.

13.4. INSURANCE. Each Covered Person shall maintain workers'
compensation (or appropriate alternative provision for workers' compensation
claims under applicable state law), liability insurance, business interruption

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insurance, and property and casualty insurance on its assets, against such risks
and contingencies and in such types and amounts as are customary for other
Persons engaged in similar businesses. Borrower shall upon request of Agent at
any time furnish to Agent evidence satisfactory to Agent that such insurance
exists and that all premiums due therefor have been paid.

13.5. PAYMENT OF TAXES AND OTHER OBLIGATIONS. Except where the failure
to do so would not have a Material Adverse Effect, each Covered Person shall
promptly pay and discharge or cause to be paid and discharged, as and when due,
any and all income taxes, federal or otherwise, lawfully assessed and imposed
upon it, and any and all lawful taxes, rates, levies, and assessments whatsoever
upon its properties and every part thereof, or upon the income or profits
therefrom and all claims of materialmen, mechanics, carriers, warehousemen,
landlords and other like Persons for labor, materials, supplies, storage or
other items or services which if unpaid might be or become a material Security
Interest or charge upon any of its property; provided, however, that nothing
herein contained shall be construed as prohibiting a Covered Person from
diligently contesting in good faith by appropriate proceedings the validity of
any such taxes, rates, levies, or assessments, provided such Covered Person has
established adequate reserves therefor in conformity with GAAP on the books of
such Covered Person, and no Security Interest, other than a Permitted Security
Interest, results from such non-payment. Each Covered Person shall make all Tax
Benefit Payments when due under the Tax Sharing Agreement.

13.6. COMPLIANCE WITH LAWS. Each Covered Person shall comply with all
Material Laws. Without limiting the generality of the foregoing:

13.6.1. ENVIRONMENTAL LAWS. Each Covered Person shall comply
in all material respects and shall use commercially reasonable efforts
to ensure compliance by all tenants, subtenants and other occupants, if
any, with all material Environmental Laws.

13.6.2. PENSION BENEFIT PLANS. Except where the failure to do
so would not result in a Material Adverse Effect, each Covered Person
and each ERISA Affiliate shall at all times make prompt payments or
contributions to meet the minimum funding standards under ERISA and the
Code with respect to any Pension Benefit Plan maintained by such Covered
Person or ERISA Affiliate, and shall comply with all reporting and
disclosure requirements and all provisions of the Code and ERISA
applicable to any Pension Benefit Plan maintained by such Covered Person
or ERISA Affiliate.

13.6.3. EMPLOYMENT LAWS. Except where the failure to do so
would not result in a Material Adverse Effect, each Covered Person shall
comply with all requirements of all Employment Laws applicable to such
Covered Person.

13.7. DISCOVERY AND CLEAN-UP OF HAZARDOUS MATERIAL.

13.7.1. IN GENERAL. Upon any Covered Person receiving notice of
any violation of Environmental Laws or any similar notice described in
Section 13.9.4, or upon any Covered Person otherwise discovering a
release of Hazardous Material on any property owned by any Covered
Person which is in violation of, or which would result in liability
under, any Environmental Law, Borrower shall: (i) promptly take such
acts as may be required to prevent danger or harm to the property or any
person therein as a result of such Hazardous Material; (ii) at the
request of Agent, and at Borrower's sole cost and expense, obtain and
deliver to Agent promptly, but in no event later than 90 days after such
request, a then currently dated environmental assessment of the property
certified to Agent and any future holder of the Loan Obligations and
(iii) take all necessary steps to initiate and expeditiously complete
removal, remedial, response, corrective and other action to address any
such environmental problems, and keep Agent informed of such actions and
the results thereof.

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13.8. TERMINATION OF PENSION BENEFIT PLAN. A Covered Person or ERISA
Affiliate shall not terminate or amend any Pension Benefit Plan maintained by
such Covered Person or ERISA Affiliate if such termination or amendment would
result in any liability of such Covered Person or ERISA Affiliate under ERISA,
or any increase in current liability for the plan year for which such Covered
Person or ERISA Affiliate is required to provide security to such Pension
Benefit Plan under the Code, in excess of 5% of the Net Worth of such Covered
Person or ERISA Affiliate.

13.9. NOTICE TO AGENT OF MATERIAL EVENTS. Borrower shall, promptly
upon any Responsible Officer of Borrower obtaining knowledge or notice thereof,
give notice to Agent of any (i) breach of any of the covenants in Section 13 or
14; (ii) Default or Event of Default; (iii) the commencement of any Material
Proceeding; and (iv) any loss of or damage to any assets of a Covered Person or
institution of any proceeding for the condemnation or other taking of any of the
assets of a Covered Person, to the extent that such loss, damage or proceeding
is likely to have a Material Adverse Effect. In addition,

13.9.1. Borrower shall furnish to Agent from time to time all
information (other than attorney work product and information protected
by the attorney-client privilege) which Agent reasonably requests with
respect to the status of any Material Proceeding.

13.9.2. Borrower shall furnish to Agent from time to time all
information which Agent reasonably requests with respect to any Pension
Benefit Plan established by a Covered Person or ERISA Affiliate.

13.9.3. Borrower shall deliver notice to Agent of the
establishment by a Covered Person or an ERISA Affiliate of any Pension
Benefit Plan.

13.9.4. To the extent that a Material Adverse Effect is
reasonably likely to result, Borrower shall within five days inform
Agent of its receipt of, and deliver to Agent a copy of, any (a) notice
that any judicial complaint or order has been filed against any Covered
Person alleging violations of any Environmental Law or Employment Law or
requiring such Covered Person to take any action in connection with the
release of any Hazardous Material into the environment, (b) notice from
a federal, state, or local governmental agency or private party alleging
that a Covered Person may be liable or responsible for costs associated
with a response to or cleanup of a release of Hazardous Material into
the environment or any damages caused thereby, (c) notice that a Covered
Person is subject to federal, state or local investigation regarding the
improper transportation, storage, disposal, generation or release into
the environment of any Hazardous Material, or (d) notice that any
properties or assets of a Covered Person are subject to a Security
Interest in favor of any Governmental Authority for any liability under
any Environmental Law or damages arising from or costs incurred by such
Governmental Authority in response to a release of Hazardous Material
into the environment.

13.9.5. Borrower shall within 30 days after they occur deliver
to Agent notice of the following events: (i) the failure of any Covered
Person or ERISA Affiliate to make any required installment or any other
required payment to any Pension Benefit Plan in sufficient amount to
comply with ERISA and the Code on or before the due date for such
installment or payment; (ii) the occurrence of any Reportable Event, or
a prohibited transaction or accumulated funding deficiency (as those
terms are defined in ERISA), with respect to any Pension Benefit Plan
maintained or contributed to by a Covered Person or ERISA Affiliate;
(iii) receipt by a Covered Person or ERISA Affiliate of any notice from
a Multi-employer Plan regarding the imposition of withdrawal liability;
and (iv) receipt by a Covered Person or ERISA Affiliate of any notice of
the institution, or a Covered Person's expectancy of the institution, of
any proceeding, or receipt by such Covered Person or ERISA Affiliate of
any notice of the taking, or such Covered Person's expectancy of the
taking, of any other action, which may result in the termination of any
Pension Benefit Plan maintained or contributed to by such Covered Person
or ERISA Affiliate, or the withdrawal or partial withdrawal by a Covered
Person or ERISA Affiliate from any Pension Benefit Plan, and the filing
or receipt by a Covered

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Person or ERISA Affiliate of any such notice, and filing or receipt of
all subsequent reports or notices under ERISA with or from the Internal
Revenue Service, the PBGC, or the DOL relating to the same; and, in
addition to such notice, deliver to Agent a certificate of the President
or Chief Financial Officer of Borrower, which describes in detail such
events and the action that the affected Covered Person or ERISA
Affiliate proposes to take with respect thereto.

13.9.6. Borrower shall, within three days after it occurs,
deliver to Agent notice of any default or event of default, or the
occurrence of any event which would with the passage of time, giving of
notice or otherwise, constitute a default or event of default with
respect to any of the Permitted Indebtedness.

13.9.7. Borrower shall, within three days after it occurs,
deliver notice to Agent of the assertion by the holder of any capital
stock of Borrower or any Indebtedness in the outstanding principal
amount in excess of $2,500,000 that a default exists with respect
thereto or that Borrower is not in compliance with the terms thereof, or
of the threat or commencement by such holder of any enforcement action
because of such asserted default or noncompliance.

13.9.8. Borrower shall, promptly after becoming aware thereof,
deliver notice to Agent of any pending strike, work stoppage, material
unfair labor practice claim or other material labor dispute affecting
Borrower.

13.9.9. Borrower shall deliver notice to Agent of any change in
Borrower's name, state of incorporation, form of organization, trade
names or styles under which Borrower will conduct business at least 30
days prior to such change.

13.9.10. Borrower shall, promptly after becoming aware thereof,
deliver notice to Agent of any material adverse change in Borrower's
property, business, operations or condition (financial or otherwise).

13.9.11. Borrower shall, promptly after becoming aware thereof,
deliver notice to Agent of any violation of any Law applicable to
Borrower or its properties which would have a Material Adverse Effect.

13.10. BORROWING OFFICER. Borrower shall keep on file with Agent at
all times an appropriate instrument naming each Borrowing Officer.

13.11. ACCOUNTING SYSTEM. Each Covered Person shall maintain a system
of accounting established and administered in accordance with GAAP.

13.12. FINANCIAL STATEMENTS AND CERTIFICATE OF COMPLIANCE. Borrower
shall deliver to each Lender:

13.12.1. ANNUAL FINANCIAL STATEMENTS. Within 90 days after the
close of each Fiscal Year, year-end consolidated Financial Statements of
Holdings and its Subsidiaries, containing an audit report without
qualification by an independent certified public accounting firm
selected by Borrower and satisfactory to Agent, and accompanied by (a)
year-end unaudited consolidating Financial Statements of Holdings and
its Subsidiaries in the respective forms thereof normally prepared by
Borrowers and in substantially the forms historically prepared by
Borrowers (b) a Compliance Certificate of the Chief Financial Officer of
Borrower, (c) a certificate of the independent certified public
accounting firm that examined such Financial Statements to the effect
that they have reviewed and are familiar with this Agreement and that,
in examining such Financial Statements, they did not become aware of any
breach or violation of the covenants set forth in Sections 14.1 through
14.5 (but, as to the covenants set forth in Sections 14.1 through 14.5,
without an expansion of its audit scope beyond that normally required to
give an opinion on the consolidated financial statements) and in Section
15, except for those, if any, described in reasonable detail in such
certificate and

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<PAGE> 27
(d) when issued, the management letter delivered by such independent
certified public accounting firm to Holdings' Audit Committee in
connection with their audit.

13.12.2. QUARTERLY FINANCIAL STATEMENTS. Within 45 days after
the end of each of the first three fiscal quarters of Borrower,
unaudited consolidated Financial Statements of Holdings and its
Subsidiaries for the quarters not covered by the latest year-end
Financial Statements, in each case accompanied by a Compliance
Certificate of the Chief Financial Officer of Borrower.

Each Compliance Certificate shall be in substantially the form attached hereto
as Exhibit 13.12, shall contain detailed calculations of the financial
measurements referred to in Sections 14.2.2 and 15 for the relevant periods, and
shall contain statements by the signing officer to the effect that, except as
explained in reasonable detail in such Compliance Certificate, (i) the attached
Financial Statements are complete and correct in all material respects (subject,
in the case of Financial Statements other than annual, to normal year-end audit
adjustments) and have been prepared in accordance with GAAP applied consistently
throughout the periods covered thereby and with prior periods (except as
disclosed therein), (ii) all of the representations and warranties of Borrower
contained in this Agreement and other Loan Documents are true and correct in all
material respects as of the date such certification is given as if made on such
date, and (iii) there exists no Default which is continuing that has not been
waived in writing by Lenders and no Event of Default has occurred that has not
been waived in writing by Majority Lenders. If any Compliance Certificate
delivered to Lenders discloses that a representation or warranty is not true and
correct in all material respects, or that a Default or Event of Default has
occurred that has not been waived in writing by Majority Lenders, such
Compliance Certificate shall set forth what action Borrower has taken or
proposes to take with respect thereto.

13.13. STOCKHOLDER AND SEC REPORTS. Borrower shall deliver to Agent,
promptly after their preparation, copies of any and all (i) proxy statements,
financial statements and reports which Borrower makes available to its
stockholders, and (ii) reports, registration statements and prospectuses, if
any, filed by Borrower with any securities exchange or the Securities and
Exchange Commission or any Governmental Authority succeeding to any of its
functions.

13.14. OTHER INFORMATION. Upon the written request of Agent, Borrower
shall promptly deliver to Agent such other information about the business,
operations, revenues, financial condition, property, or business prospects of
Borrower as Agent may, from time to time, reasonably request. Agent shall have
the right at any time, without restriction, to communicate with Borrower's
independent auditors regarding the financial condition of Borrower and the audit
tests conducted by the independent accountants.

13.15. AUDITS BY AGENT AND LENDERS. Agent and Lenders or Persons
authorized by and acting on behalf of Agent and Lenders may at any time during
normal business hours audit the books and records of each Covered Person from
time to time upon reasonable notice to such Covered Person, and in the course
thereof may make copies or abstracts of such books and records and discuss the
affairs, finances and books and records of such Covered Person with its
officers. Each Covered Person shall cooperate with Agent and such Persons in
the conduct of such audits and shall deliver to Agent any instrument necessary
for Agent to obtain records from any service bureau maintaining records for such
Covered Person. Borrower shall reimburse Agent for all costs and expenses
incurred by it in conducting each audit; provided, however, that if a Default or
Event of Default does not exist, such reimbursement shall not exceed $3,500 in
the aggregate for any twelve month period.

13.16. ACCESS TO OFFICERS. Each Covered Person shall permit Persons
authorized by Agent to discuss the affairs, finances and accounts of such
Covered Person with its officers as often as Agent may reasonably request, in
its discretion and such Covered Person shall direct such officers to cooperate
with Agent and make full disclosure to Agent of those matters that they may deem
relevant to the continuing ability of Borrower to pay and perform the Loan
Obligations timely; provided, however, that no disclosure of attorney work
product or information protected by the attorney-client privilege shall be
required.

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14. NEGATIVE COVENANTS.

Borrower covenants and agrees that, while any of the Commitments remains
in effect or any of the Loan Obligations are owing to Lenders by Borrower,
Borrower shall not, directly or indirectly, do any of the following, or permit
any Covered Person to do any of the following, without the prior written consent
of Lenders:

14.1. INVESTMENTS. Make any Investments in other Persons except the
following ("Permitted Investments"):

14.1.1. Any Investments to the extent they do not exceed
$5,000,000 in the aggregate for all Covered Persons.

14.1.2. Investments in Subsidiaries.

14.1.3. Investments in (i) open market investment grade
commercial paper maturing 270 days or less from the date of issuance and
rated not less than P-2 by Moody's Investors Service, Inc., or not less
than A-2 by Standard & Poors Corporation; (ii) marketable obligations,
maturing within 180 days after acquisition thereof, issued or
unconditionally guaranteed by the United States of America or an
instrumentality or agency thereof and entitled to the full faith and
credit of the United States of America; (iii) money market funds that
invest solely in the types of Investments permitted under clauses (i)
and (ii); (iv) bankers acceptances and repurchase agreements of domestic
offices of any of Banks or any other banks which fall within the
descriptions of clause (v), provided that each such repurchase agreement
shall be fully secured by securities described in clause (ii); (v)
certificates of deposit and time deposits (including Eurodollar
deposits) maturing within 180 days from the date of deposit thereof,
with a domestic office of any of Banks or any other bank which is a
national bank organized under the laws of the United States of America
and (a) having capital, surplus and undivided profits of at least
$100,000,000 or (b) so long as all such deposits are federally insured;
(vi) readily marketable tax-free municipal bonds of a domestic issuer
maturing in two years or less from the date of acquisition thereof which
are rated Aa3 or better by Moody's Investors Services, Inc., or AA- or
better by Standard & Poors Corporation and (vii) interest rate exchange,
collar, cap or similar agreements, not in excess of $30,000,000 notional
amount in the aggregate at any one time outstanding, for the purpose of
protecting Borrower against interest rate fluctuations (and not for
speculative purposes).

14.1.4. Accounts arising in the ordinary course of business and
payable in accordance with Borrower's customary trade terms.

14.1.5. Equity securities of Holdings with a purchase price not
in excess of $20,000,000 in the aggregate.

14.1.6. Notes or securities received by Borrower in settlement
of Indebtedness of other Persons to Borrower that was incurred in the
ordinary course of Borrower's business and secured notes representing
the sales of assets permitted by Section 14.5.

14.1.7. Amounts which may be due under the Tax Sharing
Agreement.

14.1.8. Such other Investments that are cash equivalents and are
approved by the Majority Lenders in their discretion.

14.2. INDEBTEDNESS. Create, incur, assume or allow to exist any
Indebtedness except the following (the "Permitted Indebtedness"):

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<PAGE> 29
14.2.1. All unsecured Indebtedness of Borrower to the extent
that (i) its incurrence will not result in a failure to comply with any
of the covenants in Section 15 and (ii) it would be classified as a
current liability under GAAP.

14.2.2. All consolidated Funded Debt of Holdings to the extent
the ratio of Funded Debt to Total Capitalization does not exceed 40%.
For purposes of this Section, "Total Capitalization" means Stockholders'
Equity plus all Funded Debt of Borrower.

14.2.3. Indebtedness to trade creditors incurred in the ordinary
course of business, to the extent such Indebtedness is fully paid in
accordance with customary trade terms.

14.2.4. The Loan Obligations.

14.2.5. Indebtedness secured by Permitted Security Interests.

14.2.6. Indebtedness of O'Sullivan - Virginia with respect to
industrial revenue bonds previously issued by the Industrial Development
Authority of Halifax County, Virginia, and renewals and extension (but
not increases) thereof.

14.2.7. Indebtedness with respect to a private placement of debt
or industrial revenue bonds issued in connection with, or to refinance
indebtedness incurred to finance the construction of, the New
Manufacturing Facility.

14.2.8. Indebtedness under interest rate contracts protecting
Borrower or a Covered Person against interest rate increases on other
Indebtedness, or under foreign currency exchange hedging and protection
contracts.

14.2.9. Indebtedness of one Covered Person to another.

14.2.10. Any reimbursement obligation of Borrower or O'Sullivan
- Virginia in connection with a letter of credit that replaces the IRB
Letter of Credit as contemplated in Section 2.2.4.

14.2.11. Amounts which may be due under the Tax Sharing
Agreement.

14.2.12. Guaranties and indirect obligations by a Covered Person
of any Permitted Indebtedness ("Permitted Guaranties").

14.3. INDIRECT OBLIGATIONS. Create, incur, assume or allow to exist any
Indirect Obligations except guaranties by a Covered Person of Permitted
Indebtedness of another Covered Person and Permitted Guaranties ("Permitted
Indirect Obligations").

14.4. SECURITY INTERESTS. Create, incur, assume or allow to exist any
Security Interest upon all or any part of its property, real or personal, now
owned or hereafter acquired, except the following (the "Permitted Security
Interests"):

14.4.1. Security Interests for taxes, assessments or
governmental charges not delinquent or being diligently contested in
good faith and by appropriate proceedings and for which adequate book
reserves in accordance with GAAP are maintained.

14.4.2. Security Interests arising out of deposits in connection
with workers' compensation insurance, unemployment insurance, old age
pensions, or other social security or retirement benefits legislation.

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<PAGE> 30

14.4.3. Deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds, and other obligations of like
nature arising in the ordinary course of business.

14.4.4. Security Interests imposed by any Law, such as
mechanics', workmen's, materialmen's, landlords', carriers', or other
like Security Interests arising in the ordinary course of business which
secure payment of obligations which are not past due or which are being
diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP are maintained on
Borrower's books.

14.4.5. Purchase money Security Interests securing payment of
the purchase price of capital assets acquired by Borrower after the date
of the Original Loan Agreement, or any arrangement with any Person
providing for Borrower to lease or rent property that Borrower has or
will sell or otherwise transfer to such person, in an aggregate amount
not to exceed $15,000,000 at any one time outstanding.

14.4.6. Security Interests granted to secure the Indebtedness of
O'Sullivan - Virginia with respect to industrial revenue bonds
previously issued by the Industrial Development Authority of Halifax
County, Virginia, and renewals and extension (but not increases)
thereof.

14.4.7. Security Interests existing on the Effective Date that
were permitted under the Original Loan Agreement.

14.5. DISPOSAL OF PROPERTY. Sell, transfer, exchange, lease or
otherwise dispose of any of its property except (i) sales in the ordinary course
of business and in accordance with customary trade terms, (ii) sales, transfers
and disposals of obsolete or unusable equipment for a fair consideration, and
(iii) other sales, transfers and disposals that do not exceed in the aggregate
10% of Holdings' Tangible Net Worth in any fiscal year.

14.6. CAPITAL CHANGE. Make any change in its capital structure which
could have a Material Adverse Effect, except as permitted by Section 14.1.5.

14.7. CHANGE OF BUSINESS. Engage in any line of business other than
substantially as conducted on the Effective Date or discontinue any significant
line of business.

14.8. TRANSACTIONS WITH AFFILIATES. Enter into or be a party to any
transaction or arrangement, including without limitation, the purchase, sale or
exchange of property of any kind or the rendering of any service, with any
Affiliate, or make any loans or advances to any Affiliate; provided, however,
that if no Event of Default has occurred and is continuing, Borrower may engage
in the foregoing transactions in the ordinary course of business and pursuant to
the reasonable requirements of its business and on fair and reasonable terms
substantially as favorable to it as those which it could obtain in a comparable
arm's-length transaction with a non-Affiliate.

14.9. DEBT PAYMENTS. Default upon or fail to pay any Indebtedness for
money borrowed as the same matures.

14.10. CONFLICTING AGREEMENTS. Enter into any agreement that, to
Borrower's knowledge at the time of execution thereof, would, if fully complied
with by it, result in a Default or Event of Default either immediately or upon
the elapsing of time.

14.11. NEW SUBSIDIARIES. Organize, create or acquire any Subsidiary
unless such Subsidiary executes and delivers to Agent for the benefit of the
Lenders a guaranty of the Loan Obligations satisfactory to Lenders.

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<PAGE> 31
14.12. ACQUISITIONS. Purchase, lease or otherwise acquire all or
substantially all of the assets of another Person for a purchase price in excess
of $10,000,000.

15. FINANCIAL COVENANTS.

15.1. SPECIAL DEFINITIONS. As used in this Section 15 and elsewhere in
this Agreement, the following capitalized terms have the following meanings:

"EBITDA" means, with respect to any fiscal period of Borrower, the net
income of Borrower for such fiscal period, as determined in accordance
with GAAP and reported on the Financial Statements for such period,
minus any extraordinary gains, plus any extraordinary losses, plus all
of the following that were deducted in calculating such net income: (a)
interest expense; (b) provisions for taxes; and (c) depreciation,
amortization and other non-cash charges.

"Funded Debt" as of the end of any period with respect to any Person
means the sum of the debt of such Person for borrowed money as it
appears on such Person's balance sheet (prepared in accordance with
GAAP) as of the end of such Period.

"Tangible Assets" means all of the assets of Borrower as determined in
accordance with GAAP and reported on the Financial Statements except:
(a) patents, copyrights, trademarks, trade names, franchises, goodwill,
and other similar intangibles; (b) unamortized debt discount and
expense; and (c) fixed assets to the extent of any write-up in the book
value thereof resulting from a revaluation effective after the date of
the Original Loan Agreement.

"Tangible Net Worth" means, at any date: (a) the book value (net of
depreciation, obsolescence, amortization, valuation and other proper
reserves determined in accordance with GAAP) at which Tangible Assets
would be shown on a balance sheet of Borrower at such date prepared in
accordance with GAAP; less (b) the amount at which the liabilities of
Borrower would be shown on such balance sheet, including as liabilities
all reserves for contingencies and other potential liabilities which
would be shown on such balance sheet or disclosed in the notes thereto.

15.2. MAXIMUM INDEBTEDNESS. The ratio of Holdings' consolidated
Indebtedness for borrowed money to its EBITDA shall at no time exceed 2.75 to
1.0.

15.3. MINIMUM CURRENT RATIO. The ratio of Borrower's Current Assets to
its Current Liabilities shall at no time be less than 2.0 to 1.0.

15.4. TANGIBLE NET WORTH. Borrower's Tangible Net Worth shall at no
time be less than $75,000,000 plus (i) 50% of Borrower's cumulative Net Income
(exclusive of any Net Loss) after June 30, 1994, and (ii) 100% of the net
proceeds to Borrower from issuance of any equity securities, minus all amounts
expended by Borrower to repurchase equity securities to the extent the aggregate
thereof does not exceed $20,000,000.

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16. DEFAULT.

16.1. EVENTS OF DEFAULT. Any one or more of the following shall
constitute an "Event of Default" under this Agreement:

16.1.1. FAILURE TO PAY PRINCIPAL OR INTEREST. Failure of
Borrower to pay any principal of the Revolving Loans when due or
interest accrued thereon within 5 days after the date when due.

16.1.2. FAILURE TO PAY OTHER AMOUNTS OWED TO LENDERS. Failure
of Borrower to pay any of the Loan Obligations (other than principal of
the Revolving Loans or interest accrued thereon) within 5 days after the
due date specified on a written notice from Agent.

16.1.3. FAILURE TO PAY AMOUNTS OWED TO OTHER PERSONS. Failure
of any Covered Person to pay any Indebtedness for borrowed money of such
Covered Person over $2,500,000 to Persons other than Lenders which
continues unwaived beyond any applicable grace period specified in the
documents evidencing or governing such Indebtedness.

16.1.4. REPRESENTATIONS OR WARRANTIES. Any representation or
warranty made by Borrower in this Agreement, or any statement or
representation made in any certificate, report, opinion or other
document delivered pursuant to this Agreement, is discovered to have
been false in any material respect when made.

16.1.5. COVENANTS. Failure of any Covered Person to comply in
any material respect with of any of the terms or provisions of any of
the Loan Documents applicable to it (other than a failure which
constitutes an Event of Default under any of Sections 16.1.1 through
16.1.4) which is not remedied or waived in writing by Lenders within 30
days after Borrower becomes aware of such failure; provided, however,
that if such failure is not susceptible of cure within such 30 day
period and a plan to cure such failure has been approved in writing by
Lenders (such approval not to be unreasonably withheld) and such Covered
Person has commenced action according to such plan within the 30 day
period and is prosecuting such plan diligently, then no Event of Default
shall occur hereunder until the later of 60 days after Borrower becomes
aware of such failure or such other date agreed to by Borrower and
Lenders, provided, however, that no such grace period shall apply, and
an Event of Default shall exist promptly upon such failure to comply, if
such failure may not, in Lenders' reasonable determination, be cured by
Borrower during such 30 day period or within a reasonable time
thereafter according to any plan provided to Lenders.

16.1.6. ACCELERATION OF OTHER INDEBTEDNESS. Any Obligation of a
Covered Person in an amount in excess of $2,500,000 (other than the Loan
Obligations) for the payment of borrowed money becomes or is declared to
be due and payable or required to be prepaid (other than by a regularly
scheduled prepayment) prior to the original maturity thereof.

16.1.7. DEFAULT UNDER OTHER AGREEMENTS. The occurrence of any
default or event of default under any Contract for borrowed money in
excess of $2,500,000 to which a Covered Person is a party (other than
the Loan Documents), which default continues unwaived beyond any
applicable grace period provided therein and will have a Material
Adverse Effect. The occurrence of any default or event of default under
any other agreement to which a Covered Person is a party (other than the
Loan Documents), which default continues unwaived beyond any applicable
grace period provided therein and will have a Material Adverse Effect
which Lenders reasonably believe will ultimately result in a Default
under this Agreement .

16.1.8. BANKRUPTCY; INSOLVENCY; ETC. A Covered Person (i) fails
to pay, or admits in writing its inability to pay, its debts as they
become due, or otherwise becomes insolvent (however evidenced); (ii)
makes an assignment for the benefit of creditors; (iii) files a petition
in bankruptcy, is adjudicated insolvent

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or bankrupt, petitions or applies to any tribunal for any receiver or
any trustee of such Covered Person or any substantial part of its
property; (iv) commences any proceeding relating to such Covered Person
under any reorganization, arrangement, readjustment of debt, dissolution
or liquidation law or statute of any jurisdiction, whether now or
hereafter in effect; (v) has commenced against it any such proceeding
which remains undismissed for a period of 60 days, or by any act
indicates its consent to, approval of, or acquiescence in any such
proceeding or the appointment of any receiver of or any trustee for it
or of any substantial part of its property, or allows any such
receivership or trusteeship to continue undischarged for a period of 60
days; or (vi) takes any corporate action to authorize any of the
foregoing.

16.1.9. JUDGMENTS; ATTACHMENT; ETC. Any one or more judgments
or orders is entered against a Covered Person or any attachment or other
levy is made against the property of a Covered Person with respect to a
claim or claims involving in the aggregate liabilities (not paid or
fully covered by insurance, less the amount of reasonable deductibles)
in excess of $2,500,000, becomes final and non-appealable or if timely
appealed, collection thereof is not stayed pending the appeal.

16.1.10. PENSION BENEFIT PLAN TERMINATION, ETC. Any Pension
Benefit Plan termination by the PBGC or the appointment by the
appropriate United States District Court of a trustee to administer any
Pension Benefit Plan or to liquidate any Pension Benefit Plan; or any
event which constitutes grounds either for the termination of any
Pension Benefit Plan by PBGC or for the appointment by the appropriate
United States District Court of a trustee to administer or liquidate any
Pension Benefit Plan shall have occurred and be continuing for thirty
(30) days after Borrower has notice of any such event; or any voluntary
termination of any Pension Benefit Plan which is a defined benefit
pension plan as defined in Section 3(35) of ERISA while such defined
benefit pension plan has an accumulated funding deficiency, unless Agent
has been notified of such intent to voluntarily terminate such plan and
Lenders have given their consent and agreed that such event shall not
constitute a Default; or the plan administrator of any Pension Benefit
Plan applies under Section 412(d) of the Code for a waiver of the
minimum funding standards of Section 412(1) of the Code and Lenders
believe that the substantial business hardship upon which the
application for such waiver is based could subject any Covered Person or
ERISA Affiliate to a liability in excess of 5% of such Covered Person's
Net Worth.

16.1.11. LIQUIDATION OR DISSOLUTION. Except as permitted under
Section 13.2, a Covered Person files a certificate of dissolution under
applicable state law or is liquidated or dissolved or suspends or
terminates the operation of its business, or has commenced against it
any action or proceeding for its liquidation or dissolution or the
winding up of its business, or takes any corporate action in furtherance
thereof.

16.1.12. SEIZURE OF ASSETS. All or any part of the property of
Borrower is nationalized, expropriated or condemned, seized or otherwise
appropriated, or custody or control of such property or of Borrower is
assumed by any Governmental Authority or any court of competent
jurisdiction at the instance of any Governmental Authority, and such
action has a Material Adverse Effect.

16.1.13. CHANGE OF CONTROL. Holdings merges or consolidates
with or into another Person (including a Covered Person) and is not the
surviving corporation of such merger or consolidation, or permits any
Person or Group to become the record or beneficial owner, directly or
indirectly, of securities representing thirty percent (30%) or more of
the voting power of Holdings' then outstanding securities having the
power to vote, or acquiring the power to elect a majority of the Board
of Directors of Holdings.

16.1.14. LOAN DOCUMENTS. Any of the Loan Documents ceases to be
in full force and effect.

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16.2. RIGHTS AND REMEDIES IN THE EVENT OF DEFAULT.

16.2.1. TERMINATION OR SUSPENSION OF COMMITMENTS. Upon an Event
of Default described in Section 16.1.8, the Commitments shall be deemed
canceled. Upon any other Event of Default, and at any time thereafter,
Agent (if Majority Lenders concur) may cancel or suspend the
Commitments. Such cancellation or suspension may be without demand or
notice of any kind, which Borrower expressly waives.

16.2.2. ACCELERATION. Upon an Event of Default described in
Section 16.1.8, all of the outstanding Loan Obligations shall
automatically become immediately due and payable. Upon any other Event
of Default, and at any time thereafter, Agent (if Majority Lenders
concur) may declare all of the outstanding Loan Obligations immediately
due and payable. Such acceleration may be without demand or notice of
any kind, which Borrower expressly waives.

16.2.3. RIGHT OF SETOFF. Upon the occurrence of any Event of
Default and at any time and from time to time thereafter, each Lender is
hereby authorized, without notice to Borrower (any such notice being
expressly waived by Borrower), to setoff against the Loan Obligations
any and all deposits (general or special, time or demand, provisional or
final) at any time held, or any other Indebtedness at any time owing by
such Lender to or for the credit or the account of Borrower,
irrespective of whether or not such Lender shall have made any demand
under this Agreement or the Notes and although such Loan Obligations may
be unmatured. The rights of each Lender under this Section are in
addition to other rights and remedies (including, without limitation,
other rights of set-off) which such Lender may otherwise have. A Lender
that exercises its rights under this Section will notify Borrower
promptly after such exercise.

16.2.4. MISCELLANEOUS. Upon the occurrence of an Event of
Default and at any time thereafter, Agent and Lenders (if Majority
Lenders concur) may exercise any other rights and remedies available to
them under the Loan Documents or otherwise available to Lenders at law
or in equity.

16.2.5. APPLICATION OF FUNDS. Any funds received by Lenders or
Agent for the benefit of Lenders with respect to the Loan Obligations
after any acceleration shall be applied as follows: (i) first, to
reimburse each of the Lenders prorata for any amounts due to Lenders
under Section 18.6; (ii) second, to reimburse to Lenders prorata all
unreimbursed costs and expenses paid or incurred by Lenders that are
payable or reimbursable by Borrower hereunder; and (iii) third, to the
payment to each of the Lenders prorata of accrued and unpaid fees due
hereunder and all other amounts due hereunder (other than the Revolving
Loans and interest accrued thereon); (iv) fourth, to the payment of
interest accrued on the Revolving Loans prorata to each of the Lenders;
(v) fifth, to the prorata payment of the Revolving Loans of each of the
Lenders; and (vi) sixth, to the payment to each of the Lender's prorata
of the other Loan Obligations. Any remaining amounts shall be paid to
Borrower or such other Persons as shall be legally entitled thereto.

16.3. NOTICE. Any notice of intended action required to be
given by Agent or Lenders, if given as provided in Section 19.2 at least
10 days prior to such proposed action, shall be effective and constitute
reasonable and fair notice to Borrower.

17. AGENT AND LENDERS.

17.1. APPOINTMENT OF AGENT. Boatmen's is hereby appointed Agent
hereunder and under each of the other Loan Documents. Each Lender irrevocably
authorizes Boatmen's to act as the Agent for such Lender hereunder. Agent shall
not have any duties or responsibilities except those expressly stated in the
Loan Documents, nor any fiduciary relationship with any Lender, and no implied
covenants, functions, duties, responsibilities, obligations or liabilities shall
be read into the Loan Documents or otherwise exist against Agent by reason of
this Agreement.

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17.2. POWERS. Agent shall have and may exercise such powers hereunder
as are specifically delegated to Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. Agent shall have no implied duties
to Lenders, or any obligation to Lenders to take any action hereunder except
action specifically provided by this Agreement to be taken by Agent.

17.3. GENERAL IMMUNITY OF AGENT. Neither Agent nor any of its
directors, officers, agents, or employees shall be liable to any Lender for any
act or failure to act with respect to their respective duties hereunder that
does not constitute gross negligence or willful misconduct.

17.4. NO RESPONSIBILITY FOR REVOLVING LOANS, RECITALS, ETC. Agent and
its directors, officers, agents, and employees shall not be responsible to
Lenders for any recitals, reports, statements, warranties or representations
herein or in any Loan Document or be bound to ascertain or inquire as to the
performance or observance of any of the terms of this Agreement.

17.5. ACTION ON INSTRUCTIONS OF MAJORITY LENDERS. Agent and its
directors, officers, agents, and employees shall in all cases be fully protected
in acting, or in refraining from acting, hereunder in accordance with written
instructions of Majority Lenders, and such instructions and any act or failure
to act pursuant thereto shall be binding on all of Lenders and on all holders of
Notes.

17.6. EMPLOYMENT OF AGENTS AND COUNSEL. Agent may execute any of its
duties hereunder by or through employees, agents, and attorneys-in-fact and
shall not be answerable to Lenders, except as to money or securities received by
it or its authorized agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.

17.7. RELIANCE ON DOCUMENTS; COUNSEL. Agent shall be entitled to rely
upon any notice, consent, certificate, affidavit, letter, telegram, statement,
paper or document reasonably believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by it, which counsel may be
its employees.

17.8. AGENT'S REIMBURSEMENT AND INDEMNIFICATION. Lenders agree to
reimburse and indemnify Agent according to their Prorata Shares (i) for any
amounts not reimbursed by the Borrower for which Agent is entitled to
reimbursement by the Borrower under the Loan Documents, (ii) for any expenses
incurred by Agent on behalf of Lenders in connection with the enforcement of the
Loan Documents, including but not limited to attorneys' fees and court costs,
and (iii) for any 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 Agent in any
way relating to or arising out of this Agreement or any other document delivered
in connection with this Agreement or the transactions contemplated hereby or the
enforcement of any of the terms hereof or of any such other documents; provided,
however, that no Lender shall be liable for any of the foregoing to the extent
arising from any act or failure to act of Agent that constitutes gross
negligence or willful misconduct with respect to its duties as Agent.

17.9. RIGHTS AS A LENDER. With respect to its Commitments, Advances
made by it and the Notes issued to it, Agent shall have the same rights and
powers hereunder as any Lender and may exercise the same as though it were not
Agent, and the term "Lender" or "Lenders" shall, unless the context otherwise
indicates, include Agent in its individual capacity as a lender hereunder. Agent
may accept deposits from, lend money to, and generally engage in any kind of
banking or trust business with Borrower or any Subsidiary or Affiliate of
Borrower as if it were not Agent.

17.10. INDEPENDENT CREDIT DECISIONS. EACH LENDER ACKNOWLEDGES THAT IT
HAS, INDEPENDENTLY AND WITHOUT RELIANCE UPON AGENT OR ANY OTHER LENDER AND BASED
ON THE LATEST FINANCIAL STATEMENTS FURNISHED BY BORROWER AND SUCH OTHER
DOCUMENTS AND INFORMATION AS IT HAS DEEMED APPROPRIATE, MADE ITS OWN CREDIT

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ANALYSIS AND DECISION TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
EACH LENDER ALSO ACKNOWLEDGES THAT IT WILL, INDEPENDENTLY AND WITHOUT RELIANCE
UPON AGENT OR ANY OTHER LENDER AND BASED ON SUCH DOCUMENTS AND INFORMATION AS IT
SHALL DEEM APPROPRIATE AT THE TIME, CONTINUE TO MAKE ITS OWN CREDIT DECISIONS IN
TAKING OR NOT TAKING ACTION UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

17.11. SUCCESSOR AGENT. Agent may resign at any time by giving written
notice thereof to Lenders and Borrower. At the time of such resignation, Agent
shall have the right to assign its rights and delegate its associated
obligations as Agent under the Loan Documents to one or more other financial
institutions. In the event that Agent decides to make any such assignment, so
long as no Default or Event of Default exists, Agent will use its best efforts
to make such assignment to a financial institution acceptable to Borrower;
otherwise, Agent will send written notification to Borrower of the assignment.
If Agent resigns without assigning its rights and delegating its associated
obligations as Agent under the Loan Documents, then Majority Lenders and
Borrower (if no Event of Default then exists) shall have the right to appoint,
on behalf of the Borrower and Lenders, a successor Agent. If no successor Agent
has been so appointed by Majority Lenders and Borrower and accepted such
appointment within 30 days after the resigning Agent's giving notice of
resignation, then the resigning Agent may appoint, on behalf of Borrower and
Lenders, a successor Agent. Such successor Agent shall be a commercial bank
having capital and retained earnings of at least $250,000,000. Agent's
resignation shall not be effective until a successor Agent has been appointed
and accepts such appointment. Upon a successor Agent's acceptance of its
appointment, such successor Agent shall succeed to and become vested with all
the rights, powers, privileges and duties of the resigning Agent as such, and
the resigning Agent shall be discharged from its duties and obligations as Agent
hereunder. After the resignation of Agent, the provisions of this Section 17.11
shall continue in effect for the resigning Agent's benefit in respect of any act
or failure to act while it was Agent hereunder.

17.12. NOTIFICATION OF LENDERS. Each Lender agrees to use its good
faith efforts, upon becoming aware of anything which would have a Material
Adverse Effect, to promptly notify the other Lenders thereof. Agent shall use
its good faith efforts to promptly deliver to each Lender copies of every
written notice, demand, report (including any financial report), or other
writing which Agent gives to or receives from Borrower and which itself
constitutes, or which contains information about, something that would have a
Material Adverse Effect with respect to Borrower's Loan Obligations to such
Lender. Agent and its directors, officers, agents, and employees shall have no
liability to any Lender for failure to deliver any such item to such Lender
unless the failure constitutes gross negligence or willful misconduct.

17.13. NO KNOWLEDGE OF DEFAULT. Agent shall not be deemed to have
knowledge of any Default or Event of Default unless Agent has received written
notice thereof from a Lender or the Borrower referring to this Agreement and
describing such Default or Event of Default, or Agent otherwise has actual
knowledge thereof. If Agent receives such notice or otherwise acquires such
actual knowledge, Agent shall notify Lenders of the same, solicit advice from
Lenders as to the appropriate course of action, and take such action (including
but not limited to actions contemplated by Section 16.2) as is directed by
Majority Lenders; provided, however, that unless and until Agent has received
such directions, Agent may at its option take such actions as it deems
appropriate without the direction of Majority Lenders in circumstances where the
ability of Lenders to recover the Loan Obligations may otherwise be materially
impaired.

17.14. COLLECTIONS AND DISTRIBUTIONS TO LENDERS BY AGENT; SETOFFS. All
interest, fees, and payments of principal received by Agent for the account of
Lenders shall be distributed by Agent to Lenders in accordance with their
Prorata Shares thereof at the time of such distribution on the same Business Day
when received, unless received after 2:00 p.m., St. Louis time, in which case
they shall be so distributed on the next Business Day. All amounts received by
any Lender on account of the Loan Obligations that are in excess of its Prorata
Share thereof, including amounts received by way of setoff by such Lender, shall
be accounted for and remitted promptly to Agent for distribution to the other
Lenders in accordance with their Prorata Shares thereof at the time of such
distribution. All such distributions shall be made according to instructions
that each Lender may give to Agent from time to time.

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18. GENERAL.

18.1. AGENT AND LENDERS' RIGHT TO CURE. For Borrower's account and at
Borrower's expense, Agent (with the concurrence of Majority Lenders) may from
time to time, but is not obligated to, pay (or make an Advance to pay) any
amount or do any act required of Borrower hereunder or requested by Agent or
Lenders to preserve, protect, maintain or enforce the Loan Obligations and which
Borrower fails to pay or do. Borrower shall reimburse to Agent on demand the
amount of all payments that Agent makes pursuant to this Section and all
out-of-pocket costs and expenses that Agent pays or incurs in connection with
any such action, and such reimbursement obligation shall be a Loan Obligation.
Any payment made or other action taken by Agent pursuant to this Section shall
be without prejudice to any right to assert an Event of Default hereunder and to
pursue Agent's and Lenders' other rights and remedies with respect thereto.

18.2. RIGHTS NOT EXCLUSIVE. Every right granted to Agent and Lenders
hereunder or under any other Loan Document or allowed to it at law or in equity
shall be deemed cumulative and may be exercised from time to time.

18.3. SURVIVAL OF AGREEMENTS. All covenants and agreements made herein
and in the other Loan Documents shall survive the execution and delivery of this
Agreement, the Notes and other Loan Documents and the making of every Advance.
All agreements, obligations and liabilities of Borrower under this Agreement
concerning the payment of money to Agent and Lenders, including but not limited
to Borrower's obligations under Sections 18.5 and 18.6, but excluding the
obligation to repay the Revolving Loans and interest accrued thereon, shall
survive the repayment in full of the Revolving Loans and interest accrued
thereon, the return of the Notes to Borrower and the termination of the
Commitments.

18.4. PARTICIPATIONS. A Lender may in the ordinary course of its
commercial banking business and in accordance with applicable law grant
participations to one or more banks or other financial institutions in its
Revolving Loan. For this purpose, such Lender may disclose to a potential or
actual participant any information supplied to such Lender by or on behalf of
Borrower or Agent; provided that such participant has agreed in writing to the
confidentiality obligations contained in Section 19.3. Borrower hereby
acknowledges and agrees that every such participant has the same right of setoff
as does such Lender under Section 16.2.3.

18.5. PAYMENT OF EXPENSES. Borrower agrees to pay or reimburse to each
Lender all of such Lender's out-of-pocket costs (to the extent they do no
exceed $5000 in the aggregate) incurred in connection with such Lender's due
diligence review before execution of the Loan Documents; the negotiation and
preparation of the Loan Documents; the interpretation of any of the Loan
Documents; the enforcement of such Lender's rights and remedies under the Loan
Documents after a Default or Event of Default; any amendment of or
supplementation to any of the Loan Documents; and any waiver, consent or
forbearance with respect to any Default or Event of Default. A Lender's
out-of-pocket costs may include but are not limited to the following, to the
extent they are reasonable and are actually paid or incurred by such Lender: the
cost of searches for Security Interests existing against Covered Persons;
appraisal fees; environmental consultant fees; litigation costs; and all
attorneys' and paralegals' expenses and reasonable fees. Attorneys' and
paralegals' expenses may include but are not limited to filing charges;
telephone, data transmission, facsimile and other communication costs; courier
and other delivery charges; and photocopying charges. Litigation costs may
include but are not limited to filing fees, deposition costs, expert witness
fees, expenses of service of process, and other such costs paid or incurred in
any administrative, arbitration, or court proceedings involving a Lender and any
Covered Person, including but not limited to proceedings under the Federal
Bankruptcy Code. All costs which Borrower is obligated to pay or reimburse to a
Lender are Loan Obligations payable to such Lender and are payable on demand by
Agent or such Lender.

18.6. GENERAL INDEMNITY. Borrower shall pay, indemnify and hold
harmless Agent and each Lender and their respective directors, officers,
employees, agents, and representatives (the "Indemnified Parties") for, from and
against, and promptly to reimburse the Indemnified Parties for, any and all
claims, damages, liabilities, losses, costs

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and expenses (including, without limitations, reasonable attorneys' fees and
expenses and amounts paid in settlement) (the "Indemnified Liabilities")
incurred, paid or sustained by the Indemnified Parties in connection with,
arising out of, based upon or otherwise involving or resulting from any
threatened, pending or completed action, suit, investigation or other proceeding
by, against or otherwise involving the Indemnified Parties and in any way
dealing with, relating to or otherwise involving this Agreement, any of the
other Loan Documents, or any transaction contemplated hereby or thereby (each a
"Triggering Event"); provided, however, that Borrower shall have no obligation
to indemnify the Indemnified parties hereunder with respect to any Indemnified
Liabilities arising from the gross negligence, bad faith or willful misconduct
of any of the Indemnified Parties. Borrower shall pay, indemnify and hold
harmless the Indemnified Parties for, from and against, and promptly reimburse
the Indemnified Parties for, any and all claims, damages, liabilities, losses,
costs and expenses (including, without limitations, reasonable attorneys' and
consultant fees and expenses, investigation and laboratory fees, removal,
remedial, response and corrective action costs, and amounts paid in settlement)
incurred, paid or sustained by the Indemnified Parties as a result of the
manufacture, storage, transportation, release or disposal of any Hazardous
Material on, from, over or affecting any of the assets, properties, or
operations of any Covered Person or any predecessor in interest, directly or
indirectly. An Indemnified Party shall provide reasonably prompt notification
to Borrower in the event such Indemnified Party anticipates making a claim under
this Section and shall keep Borrower reasonably informed of the status of any
action, suit, investigation or other proceeding hereunder. Borrower shall have
the right to approve (which approval shall not be unreasonably withheld) any
settlement agreement in connection with such action, suit, investigation or
proceeding. The obligations of Borrower under this Section 18.6 shall survive
the termination of the Commitments, the expiration of the Letters of Credit and
the payment and satisfaction of all of the Loan Obligations. To the extent that
any of the indemnities set forth in this Section may be unenforceable because it
is violative of any law or public policy, Borrower shall pay the maximum portion
which it is permitted to pay under applicable law.

18.7. LETTERS OF CREDIT. Agent shall inspect all documents presented
to it in connection with a draw on a Letter of Credit and notify Borrower of any
material acts, omissions or nonconformities manifest on the face of such
documents in connection therewith. Borrower assumes all risks of the acts or
omissions of any beneficiary of any of the Letters of Credit. Neither Agent nor
any of its directors, officers, employees, agents, or representatives shall be
liable or responsible for: (a) the use which may be made of any of the Letters
of Credit or for any acts or omissions of beneficiary in connection therewith;
(b) assuming Agent has fulfilled its obligations under the first sentence of
this Section, the validity, sufficiency or genuineness of documents, or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, insufficient, fraudulent or forged; (c) payment by
Agent against presentation of documents which, on their face, appear to comply
with the terms of any Letter of Credit, even though such documents may fail to
bear any reference or adequate reference to any such Letter of Credit; (d)
payment by Agent against presentation of documents which, on their face, do not
appear to comply with the terms of any Letter of Credit, if Borrower, after
receipt from Agent of notice of such nonconformity, instructs Agent to make
payment on such Letter of Credit or (e) any other circumstances whatsoever in
making or failing to make payment under any Letter of Credit in connection with
which Agent would, pursuant to the Uniform Customs and Practices for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No. 500
(as amended from time to time), be absolved from liability. In furtherance and
not in limitation of the foregoing, Agent may accept documents that reasonably
appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary.

18.8. CHANGES IN ACCOUNTING PRINCIPLES. If Borrower, at the end of its
Fiscal Year and with the concurrence of its independent certified public
accountants, changes the method of valuing its Inventory, or if any other
changes in accounting principles from those used in the preparation of any of
the Financial Statements are required by or result from the promulgation of
principles, rules, regulations, guidelines, pronouncements or opinions by the
Financial Accounting Standards Board or the American Institute of Certified
Public Accountants (or successors thereto or bodies with similar functions), and
any of such changes result in a change in the method of calculation of, or
affect the results of such calculation of, any of the financial covenants,
standards or terms found herein, then the parties hereto agree to enter into and
diligently pursue negotiations in order to amend such financial covenants,
standards or terms so as to equitably reflect such changes, with the desired
result that the criteria for evaluating the

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financial condition and results of operations of Borrower shall be the same
after such changes as if such changes had not been made; provided, however, that
until such changes are made, all financial covenants herein and all the
provisions hereof which contemplate financial calculation hereunder shall remain
in full force and effect.

18.9. LOAN RECORDS. The date and amount of all Advances to Borrower
and payments of amounts due from Borrower under the Loan Documents by a Lender
will be recorded in the records that Agent and such Lender normally maintains
for such types of transactions. The failure to record, or any error in
recording, any of the foregoing shall not, however, affect the obligation of
Borrower to repay the Revolving Loans and other amounts payable under the Loan
Documents. Each Lender will provide to Borrower a monthly statement of Advances,
payments, and other transactions pursuant to this Agreement. Such statement
shall be deemed correct, accurate and binding on Borrower and such Lender and an
account stated (except for reversals and reapplications of payments as provided
in Section 5.4.4 and corrections of errors discovered by such Lender), unless
Borrower notifies such Lender in writing to the contrary within sixty (60) days
after such statement is rendered. In the event a timely written notice of
objections is given by Borrower, only the items to which exception is expressly
made will be considered to be disputed by Borrower.

18.10. CHOICE OF FORUM. SUBJECT ONLY TO THE EXCEPTION IN THE NEXT
SENTENCE, BORROWER, AGENT, AND LENDERS HEREBY AGREE TO THE EXCLUSIVE
JURISDICTION OF THE FEDERAL COURT OF THE EASTERN DISTRICT OF MISSOURI AND THE
STATE COURTS OF MISSOURI LOCATED IN ST. LOUIS COUNTY OR THE CITY OF ST. LOUIS,
MISSOURI, AND WAIVE ANY OBJECTION BASED ON VENUE OR FORUM NON CONVENIENS WITH
RESPECT TO ANY ACTION INSTITUTED THEREIN, AND AGREE THAT ANY DISPUTE CONCERNING
THE RELATIONSHIP BETWEEN AGENT, LENDERS, AND BORROWER OR THE CONDUCT OF ANY OF
THEM IN CONNECTION WITH THIS AGREEMENT OR OTHERWISE SHALL BE HEARD ONLY IN THE
COURTS DESCRIBED ABOVE. NOTWITHSTANDING THE FOREGOING, EACH OF THE PARTIES
HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THE COURTS DESCRIBED IN THE
IMMEDIATELY PRECEDING SENTENCE MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE
THOSE JURISDICTIONS.

18.11. SERVICE OF PROCESS. BORROWER, LENDERS AND AGENT EACH HEREBY
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS MAY BE MADE BY REGISTERED MAIL (RETURN RECEIPT
REQUESTED) DIRECTED TO IT AT ITS ADDRESS SET FORTH ON THE SIGNATURE PAGES
HEREOF, AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER
THE SAME SHALL HAVE BEEN SO DEPOSITED IN THE U.S. MAILS. NOTHING IN THIS
SECTION SHALL AFFECT THE RIGHT OF BORROWER, AGENT OR LENDERS TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

19. MISCELLANEOUS.

19.1. COMPUTATION OF TIME PERIODS. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" shall mean "from and including" and the words "to" and "until"
shall each mean "to but excluding." Periods of days referred to in this
Agreement shall be counted in calendar days unless Business Days are expressly
prescribed, and references in this Agreement to months and years shall mean
calendar months and calendar years, respectively, unless otherwise specified.

19.2. NOTICES. All notices, consents, requests and demands to or upon
the respective parties hereto shall be in writing, and shall be deemed to have
been given or made when delivered in person to those Persons listed on the
signature pages hereof or when deposited in the United States mail, postage
prepaid, or, in the case of telegraphic notice, or the overnight courier
services, when delivered to the telegraph company or overnight courier service,
or in the case of telex or telecopy notice, when sent, verification received, in
each case addressed as set forth on the signature pages hereof, or such other
address as either party may designate by notice to the other in accordance with

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the terms of this paragraph. Except as otherwise provided in this Agreement, no
notice given to or demand made on Borrower by Agent or Lenders in any instance
shall entitle Borrower to notice or demand in any other instance.

19.3. CONFIDENTIALITY. Agent and Lenders each agree to use reasonable
precautions to keep confidential, in accordance with its customary procedures
for handling confidential information and in accordance with safe and sound
banking practices, any non-public information, including, without limitation,
any environmental reports, supplied to it by any Covered Person pursuant to this
Agreement, provided that nothing herein shall limit the disclosure of any such
information (i) to Agent or any other Lender, (ii) to the extent required by
applicable Law, (iii) to counsel to Agent or any Lender, (iv) to bank examiners,
auditors or accountants and appropriate government examining authorities, (v) to
the extent necessary or appropriate in connection with any litigation to which
Agent or any Lender is a party, (vi) to the extent necessary or appropriate for
the purposes of protecting, preserving or exercising any rights under the Loan
Documents, or (vii) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee or
participant) has agreed in writing to comply with the restrictions contained in
this Section the same as if it were a Lender.

19.4. AMENDMENTS, WAIVERS AND CONSENTS. No waiver of any Default or
Event of Default or waiver, or departure from, full compliance with any
provision of this Agreement, or of any of the other Loan Documents, or consent
to any departure by Borrower herefrom or therefrom, shall be effective unless it
is in writing and signed by authorized officers of Borrower, Agent and Majority
Lenders; provided, however, that no amendment or waiver shall be effective,
unless in writing and signed by each Lender affected thereby, to the extent it
(i) changes the amount of such Lender's Commitments (ii) changes the principal
of or the rate of interest on such Lender's Commitments, (iii) postpones any
date fixed for any payment of principal of or interest on any amount owed to
such Lender or the fees payable to such Lender hereunder, (iv) changes the
definition of "Majority Lenders", (v) amends any of the provisions of Section 14
or (vi) amends this Section 19.4; and no amendment of this Agreement or of any
of the Loan Documents shall be effective unless it is in writing and signed by
authorized officers of Borrower, Agent and all Lenders; provided, however, that
any such waiver or consent shall be effective only in the specific instance and
for the purpose for which given. No failure by Borrower, Agent or Lenders to
exercise, and no delay by Borrower, Agent or Lenders in exercising, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise by Borrower, Agent or Lenders of any right,
remedy, power or privilege hereunder preclude any other exercise thereof, or the
exercise of any other right, remedy, power or privilege.

19.5. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and all future holders of the Notes
and their respective successors and assigns, except that Borrower may not
assign, delegate or transfer any of its rights or obligations under this
Agreement without the prior written consent of Agent and Lenders. With respect
to Borrower's successors and assigns, such successors and assigns shall include,
without limitation, any receiver, trustee or debtor-in-possession of or for
Borrower. Each Lender shall have the right to assign its rights and to delegate
its obligations under the Loan Documents.

19.6. SEVERABILITY. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or lack of authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction unless the ineffectiveness of such provision
would result in such a material change as to cause completion of the
transactions contemplated hereby to be unreasonable.

19.7. GOVERNING LAW; NO THIRD PARTY RIGHTS. This Agreement, the other
Loan Documents and the Notes and the rights and obligations of the parties
hereunder and thereunder shall be governed by and construed and interpreted in
accordance with the internal laws of the State of Missouri applicable to
contracts made and to be performed wholly within such state. This Agreement is
solely for the benefit of the parties hereto and their respective successors and
assigns, and no other Person shall have any right, benefit, priority or interest
under, or because of the existence of, this Agreement.

Page 34 of 50
<PAGE> 41
19.8. CAPTIONS. Section captions and the Table of Contents are for
convenience only and shall not affect the interpretation or construction of this
Agreement or the other Loan Documents.

19.9. COUNTERPART AND FACSIMILE EXECUTION. This Agreement may be
executed by the parties hereto on any number of separate counterparts, and all
such counterparts taken together shall constitute one and the same instrument.
It shall not be necessary in making proof of this Agreement to produce or
account for more than one counterpart signed by the party to be charged. A
counterpart of this Agreement or a signature page to this Agreement transmitted
by facsimile machine or telecopier and showing a signature shall have the same
binding effect as an original bearing an original signature. At the request of
any party, the original page or document transmitted by facsimile or telecopy
shall be delivered to the requesting party, or the individuals whose signatures
were shown thereon shall execute another original counterpart thereof. No party
may raise the use of a facsimile machine or telecopier or the fact that any
signature was transmitted through the use of a facsimile or telecopier machine
as a defense to the enforcement of the document.

19.10. SINGULAR AND PLURAL FORMS. All definitions herein shall be
equally applicable to both the singular and the plural forms of the terms
defined.

19.11. REFERENCES. The words hereof, herein, hereby, hereunder, and
words of similar import refer to this Agreement as a whole, including its
Exhibits and Appendices, and not to any particular provision of this Agreement.
The word Section or section and Page or page refer to a section or page,
respectively, of this Agreement unless it expressly refers to something else.

19.12. NO OTHER AGREEMENTS. There are no other agreements between
Agent, Lenders, Borrower and Guarantor, oral or written, concerning the subject
matter of the Loan Documents, and all prior agreements concerning the same
subject matter, including the Commitment Letter, are merged into the Loan
Documents and thereby extinguished.

19.13. INCORPORATION BY REFERENCE. All of the terms of the other Loan
Documents are incorporated in and made a part of this Agreement by this
reference.

19.14. STATUTORY NOTICE. The following notice is given pursuant to
Section 432.045 of the Missouri Revised Statutes; nothing contained in such
notice shall be deemed to limit or modify the terms of the Loan Documents:

ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND
OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER) AND
US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE
REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE
COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS
WE MAY LATER AGREE IN WRITING TO MODIFY IT.

[REMAINDER OF PAGE INTENTIONALLY BLANK]

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<PAGE> 42

IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by appropriate duly authorized officers as of November 22, 1994.

"BORROWERS":

O'SULLIVAN INDUSTRIES, INC. O'SULLIVAN INDUSTRIES HOLDINGS, INC.

By: /s/ G. C. Kowert By: /s/ G. C. Kowert
Vice President-Finance Vice President-Finance

Notice Address: Notice Address:
O'Sullivan Industries, Inc. O'Sullivan Industries Holdings, Inc.
1900 Gulf Street 1900 Gulf Street
Lamar, MO 64759-1899 Lamar, MO 64759-1899
Attention: Chief Financial Officer Attention: Chief Financial Officer
FAX # 417-682-6778 FAX # 417-682-6778
TEL # 417-682-3322 TEL # 417-682-3322

with a copy to with a copy to:

O'Sullivan Industries, Inc. O'Sullivan Industries Holdings, Inc.
1900 Gulf Street 1900 Gulf Street
Lamar, MO 64759-1899 Lamar, MO 64759-1899
Attention: General Counsel Attention: General Counsel
FAX # 417-682-3177 FAX # 417-682-3177
TEL # 417-682-3322 TEL # 417-682-3322

"GUARANTOR"

O'SULLIVAN INDUSTRIES-VIRGINIA, INC.

By: /s/ G. C. Kowert
Vice President-Finance

Notice Address:
O'Sullivan Industries - Virginia, Inc.
1900 Gulf Street
Lamar, MO 64759-1899
FAX # 417-682-6778
TEL # 417-682-3322

with a copy to

O'Sullivan Industries - Virginia, Inc.
1900 Gulf Street
Lamar, MO 64759-1899
Attention: General Counsel
FAX # 417-682-3177
TEL # 417-682-3322

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<PAGE> 43

"AGENT" and a "LENDER"

THE BOATMEN'S NATIONAL BANK OF ST. LOUIS

By: /s/ Dwight D. Erdbruegger
Vice President

Notice Address:
The Boatmen's National Bank of St. Louis
One Boatmen's Plaza
800 Market Street
P.O. Box 236
St. Louis, MO 63166-0236
FAX # 314-466-6499
TEL # 314-466-7651
Attention: Douglas W. Thornsberry

Other "LENDERS"

WACHOVIA BANK OF GEORGIA, N.A.

By: /s/ Terry L. Akins
Senior Vice President

Notice Address:
191 Peachtree Street, N.E.
U.S. Corporate, 28th Floor
Atlanta, GA 30303
Attention: Mark L. Thomas
FAX # 404-332-6898
TEL # 404-332-6450

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<PAGE> 44
APPENDIX 1.1

GLOSSARY AND INDEX OF DEFINED TERMS

"Account": as to any Person, the right of such Person to payment for goods sold
or leased or for services rendered by such Person.

"Adjusted LIBO Rate" is defined in Section 3.3.

"Advance Request" is defined in Section 6.1.1.

"Advance Date" is defined in Section 6.1.1.

"Advance" is defined in Section 2.1.1.

"Affiliate": with respect to any Person, (a) any other Person who is a partner,
director, officer or stockholder of such Person; and (b) any other Person which,
directly or indirectly, is in control of, is controlled by or is under common
control with such Person, and any partner, director, officer or stockholder of
such other Person described. For purposes of this Agreement, control of a
Person by another Person shall be deemed to exist if such other Person has the
power, directly or indirectly, either to (i) vote thirty percent (30%) or more
of the securities having the power to vote in an election of directors of such
Person, or (ii) direct the management of such Person, whether by contract or
otherwise and whether alone or in combination with others.

"Agent": The Boatmen's National Bank of St. Louis in its capacity as agent for
the Lenders.

"Aggregate Revolving Loan" is defined in Section 2.1.1.

"Aggregate Revolving Commitment" is defined in Section 2.1.2.

"Agreement" is defined on page 1.

"Alternate Base Rate" is defined in Section 3.2.

"Alternate Base Rate Advance": any Advance bearing interest at the Alternate
Base Rate.

"Alternate Base Rate Tranche": any Tranche that bears interest at the
Alternate Base Rate.

"Applicable Lending Office" is defined in Section 1.3.

"Boatmen's" is defined on page 1.

"Borrower" is defined in Section 1.2.

"Borrowing Officer" means an officer of Borrower duly authorized on behalf of
Borrower to request Advances under this Agreement.

"Business Day": a day other than a Saturday, Sunday or other day on which
commercial banks are authorized or required to close under the laws of either
the United States or the State of Missouri.

"Capital Lease": any lease that has been or should be capitalized under GAAP.

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"Charter Documents": the articles or certificate of incorporation and bylaws of
a corporation; the certificate of limited partnership and partnership agreement
of a limited partnership; the partnership agreement of a general partnership; or
the indenture of a trust.

"Code": the Internal Revenue Code of 1986, as amended from time to time, and all
regulations thereunder of the IRS.

"Commercial LC Fee" is defined in 4.3.

"Commitments": the Aggregate Revolving Commitment and the Letter of Credit
Commitment.

"Contract": any contract, note, bond, indenture, deed, mortgage, deed of trust,
security agreement, pledge hypothecation agreement, assignment, or other
agreement or undertaking or any security.

"Corporate Base Rate" is defined in Section 3.2.

"Covered Person" is defined in Section 1.4.

"Default": any of the events listed in Section 16.1 of this Agreement, without
giving effect to any requirement for the giving of notice, for the lapse of
time, or both, or for the happening of any other condition, event or act.

"Disclosure Schedule" is defined in Section 11.

"Discretion" is defined in Section 1.6.

"DOL": the United States Department of Labor.

"Dollars" and the sign "$": lawful money of the United States.

"EBITDA" is defined in Section 15.1.

"Effective Date" is defined on page 1.

"Employment Law": ERISA, the Occupational Safety and Health Act, the Fair Labor
Standards Act, or any other Material Law pertaining to the terms or conditions
of labor or safety in the workplace.

"Encumbrance": as to any item of real or personal property, any easement,
right-of-way, license, condition, or restrictive covenant, or zoning or similar
restriction, that is not a Security Interest but is enforceable by any Person
other than the record owner of such property.

"Environmental Law": the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the Clean
Water Act, the Clean Air Act, or any other Material Law pertaining to
environmental quality or remediation of Hazardous Material.

"EPA": the United States Environmental Protection Agency.

"ERISA": the Employee Retirement Income Security Act of 1974, as amended from
time to time.

"Event of Default": any of the events listed in Section 16.1 of this Agreement
as to which any requirement for the giving of notice, for the lapse of time, or
both, or for the happening of any further condition, event or act has been
satisfied.

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"Facility Fee" is defined in Section 4.1.

"Financial Statements": financial statements of Borrower that are furnished to
Lender as required in Section 13.12 of this Agreement.

"FRB": the Board of Governors of the Federal Reserve System and any successor
thereto or to the functions thereof.

"Funded Debt" is defined in Section 15.1.

"GAAP": those generally accepted accounting principles set forth in Statements
of the Financial Accounting Standards Board and in Opinions of the Accounting
Principles Board of the American Institute of Certified Public Accountants or
which have other substantial authoritative support in the United States and are
applicable in the circumstances, as applied on a consistent basis.

"Governmental Authority": the federal government of the United States; the
government of any foreign country that is recognized by the United States or is
a member of the United Nations; any state of the United States; any local
government or municipality within the territory or under the jurisdiction of
any of the foregoing; any department, agency, division, or instrumentality of
any of the foregoing; and any court whose orders or judgements are enforceable
by or within the territory of any of the foregoing.

"Guaranty" is defined in Section 8.

"Hazardous Material": any hazardous substance as defined in the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Sections 9601 et seq.

"Holdings" is defined on page 1.

"Indebtedness": as to any Person at any particular date, any contractual
obligation enforceable against such Person (i) to repay borrowed money; (ii) to
pay the deferred purchase price of property or services; (iii) to make payments
or reimbursements with respect to bank acceptances or to a factor; (iv) to make
payments or reimbursements with respect to letters of credit or drawings
thereunder; (v) with respect to which there is any Security Interest in any
property of such Person; (vi) to make any payment or contribution to a
Multi-Employer Plan; (vii) that is evidenced by a note, bond, debenture or
similar instrument; (viii) under any conditional sale agreement or title
retention agreement; or (ix) to pay interest or fees with respect to any of the
foregoing.

"Indemnified Parties" is defined in Section 18.6.

"Indemnified Liabilities" is defined in Section 18.6.

"Indirect Obligation": as to any Person, (a) any guaranty by such Person of any
Obligation of another Person; (b) any Security Interest in any property of such
Person that secures any Obligation of another Person, (b) any enforceable
contractual requirement that such Person (i) purchase an Obligation of another
Person or any property that is security for such Obligation, (ii) advance or
contribute funds to another Person for the payment of an Obligation of such
other Person or to maintain the working capital, net worth or solvency of such
other Person as required in any documents evidencing an Obligation of such other
Person, (iii) purchase property, securities or services from another Person for
the purpose of assuring the beneficiary of any Obligation of such other Person
that such other Person has the ability to timely pay or discharge such
Obligation, or (iv) grant a Security Interest in any property of such Person to
secure any Obligation of another Person; and (c) any other contractual
requirement enforceable against such Person that has the same substantive effect
as any of the foregoing. The term "Indirect Obligation" does not, however,
include the indorsement by a Person of instruments for deposit or collection in
the ordinary course of business or the liability of a general partner of a
partnership for Obligations of such partnership. The amount of any Indirect
Obligation of a

Page iii of 50
<PAGE> 47
Person shall be deemed to be the stated or determinable amount of the Obligation
in respect of which such Indirect Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith.

"Industries" is defined on page 1.

"Insurance/Condemnation Proceeds": insurance proceeds payable as a consequence
of damage to or destruction of any of the Collateral and proceeds payable as a
consequence of condemnation or sale in lieu of condemnation of any of the
Collateral.

"Interest Period" is defined in Section 3.4.

"Investment": (a) a loan or advance of money or property to a Person, (b) stock
or other equity interest in a Person, (c) a debt instrument issued by a Person,
whether or not convertible to stock or other equity interest in such Person, or
(d) any other interest in or rights with respect to a Person which include, in
whole or in part, a right to share, with or without conditions or restrictions,
some or all of the revenues or net income of such Person.

"IRB Letter of Credit" is defined in Section 2.2.2.

"IRB LC Fee" is defined in Section 4.4.

"Law": any statute, rule, regulation, order, judgment, award or decree of any
Governmental Authority.

"Lender": either of The Boatmen's National Bank of St. Louis or Wachovia Bank
of Georgia, N.A.

"Lenders" is defined on page 1.

"Letter of Credit" is defined in Section 2.2.

"Letter of Credit Commitment" is defined in Section 2.2.

"Letter of Credit Exposure": the undrawn amount of all outstanding Letters of
Credit plus all amounts drawn on such Letters of Credit and not yet reimbursed
to Agent for the account of Lenders.

"LIBO Rate" is defined in Section 3.3.1.

"LIBO Increment" is defined in Section 3.3.

"LIBOR Tranche": any Tranche that bears interest at the Adjusted LIBO Rate.

"Loan Documents": this Agreement, the Notes, the Guaranty and all other
agreements, certificates, documents, instruments and other writings executed in
connection herewith.

"Loan Obligations": all of Borrower's Indebtedness owing to Lenders arising out
of this Agreement, the Notes or the Guaranty and the other Loan Documents,
whether as principal, interest, fees or otherwise, all reimbursement obligations
of Borrower to Lenders with respect to Letter of Credit Exposure, and all other
obligations (including but not limited to obligations for the payment of money)
and liabilities of Borrower to Lenders arising out of this Agreement, the Notes
or the Guaranty (including but not limited to all extensions, renewals,
modifications, rearrangements, restructures, replacements and refinancings of
the foregoing, whether or not the same involve modifications to interest rates
or other payment terms), whether now existing or hereafter created, including
but not

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limited to the obligation of Borrower to repay future advances by Lenders,
whether or not made pursuant to commitment and whether or not presently
contemplated by Borrower and Lenders in the Loan Documents.

"Majority Lenders": any Lenders holding in the aggregate at least 51% of the sum
of the Commitments.

"Material Agreement": as to any Person, any Contract to which such Person is a
party or by which such Person is bound which, if violated or breached, would
have a Material Adverse Effect.

"Material Obligation": as to any Person, an Obligation of such Person which if
not fully and timely paid or performed would have a Material Adverse Effect.

"Material Adverse Effect": with respect to any event or occurrence of whatever
nature (including any adverse determination in any litigation, arbitration,
investigation or proceeding), a material adverse effect on the business,
operations, revenues, financial condition or property of Holdings and its
Subsidiaries taken as a whole, or the ability of Holdings and its Subsidiaries
to timely pay or perform their Obligations generally, or the ability of Holdings
and its Subsidiaries to pay or perform any of their Obligations to Lenders.

"Material License": (i) as to any Covered Person, any license, permit or consent
from a Governmental Authority or other Person and any registration and filing
with a Governmental Authority or other Person which if not obtained, held or
made by such Covered Person would have a Material Adverse Effect and (ii) as to
any Person who is a party to this Agreement or any of the other Loan Documents,
any license, permit or consent from a Governmental Authority or other Person and
any registration or filing with a Governmental Authority or other Person that is
necessary for the execution or performance by such party, or the validity or
enforceability against such party, of this Agreement or such other Loan
Document.

"Material Law": any Law whose violation by a Person would have a Material
Adverse Effect.

"Material Proceeding": any litigation, investigation or other proceeding by or
before any Governmental Authority which, if adversely determined, would be
reasonably likely to have a Material Adverse Effect.

"Maturity": as to any Indebtedness, the time when it becomes payable in full,
whether at a regularly scheduled time, because of acceleration or otherwise.

"Maximum Available Amount" is defined in Section 2.1.2.

"Multi-employer Plan": a Pension Benefit Plan which is a multi-employer plan as
defined in Section 4001(a)(3) of ERISA.

"New Manufacturing Facility": the proposed third manufacturing facility
currently under construction in or near Cedar City, Utah.

"Note" is defined in Section 2.1.1.

"Notes" is defined in Section 2.1.1.

"Notice of Conversion/Continuation" is defined in Section 3.5.

"O'Sullivan - Virginia" is defined on page 1.

"Obligation": as to any Person, any Indebtedness of such Person, any guaranty by
such Person of any Indebtedness of another Person, and any contractual
requirement enforceable against such Person that does not constitute

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<PAGE> 49
Indebtedness of such Person or a guaranty by such Person but which would involve
the expenditure of money by such Person if complied with or enforced.

"Operating Lease": any lease that is not a Capital Lease.

"Original Loan Agreement" is defined on page 1.

"PBGC": the Pension Benefit Guaranty Association.

"Pension Benefit Plan": any pension or profit-sharing plan which is covered by
Title I of ERISA and all other benefit plans and in respect of which a Covered
Person or a Commonly Controlled Entity of such Covered Person is an "employer"
as defined in Section 3(5) of ERISA.

"Permitted Guaranties" is defined in Section 14.2.12.

"Permitted Indebtedness" is defined in Section 14.2.

"Permitted Indirect Obligations" is defined in Section 14.3.

"Permitted Investments" is defined in Section 14.1.

"Permitted Security Interests" is defined in Section 14.4.

"Person": any individual, partnership, corporation, trust, unincorporated
association, joint venture, limited liability company, Governmental Authority,
or other organization in any form that has the legal capacity to sue or be sued.
If the context so implies or requires, the term Person includes Borrower.

"Prorata Share": each Lender's percentage share of each Advance and of the
Aggregate Revolving Commitment, as applicable.

"Regulation D", "Regulation G", and Regulation U": respectively, Regulation D
issued by the FRB, Regulation G issued by the FRB, and Regulation U issued by
the FRB.

"Reportable Event": a reportable event as defined in Title IV of ERISA or the
regulations thereunder.

"Responsible Officer": as to any Person that is not an individual, partnership
or trust, the Chairman of the Board of Directors, the President, the chief
executive officer, the chief operating officer, the chief financial officer, the
Treasurer, any Assistant to the Treasurer, or any Vice President in charge of a
principal business unit; as to any partnership, any individual who is a general
partner thereof or any individual who has general management or administrative
authority over all or any principal unit of the partnership's business; and as
to any trust, any individual who is a trustee.

"Revolving Loan" is defined in Section 2.1.1.

"Revolving Commitment" is defined in Section 2.1.2.

"Security Interest": as to any item of tangible or intangible property, any
interest therein or right with respect thereto that secures an Obligation or
Indirect Obligation, whether such interest or right is created under a Contract,
or by operation of law or statute (such as but not limited to a statutory lien
for work or materials), or as a result of a judgment, or which arises under any
form of preferential or title retention agreement or arrangement (including but

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not limited to a conditional sale agreement or a lease) that has substantially
the same economic effect as any of the foregoing.

"Subsidiary": as to any Person, a corporation with respect to which more than
50% of the outstanding shares of stock of each class having ordinary voting
power (other than stock having such power only by reason of the happening of a
contingency) is at the time owned by such Person or by one or more Subsidiaries
of such Person.

"Tandy" is defined in Section 2.2.2.

"Tangible Assets" is defined in Section 15.1.

"Tangible Net Worth" is defined in Section 15.1.

"Tax Sharing Agreement": the Tax Sharing and Tax Benefit Reimbursement Agreement
dated February 1, 1994 among Tandy Corporation, TE Electronics Inc. and
Holdings, as described in the prospectus dated January 26, 1994 for the initial
public offering by TE Electronics Inc. of all of its shares of common stock in
Holdings, a copy of which has been previously furnished to Lenders.

"Texas Commerce" is defined on page 1.

"this Agreement": this document (including every document that is stated herein
to be an appendix, exhibit or schedule hereto, whether or not physically
attached to this document), as amended from time to time.

"Total Capitalization" is defined in Section 14.2.2.

"Tranche" is defined in Section 3.1.

"Triggering Event" is defined in Section 18.6.

"UCC": the Uniform Commercial Code as in effect from time to time in the State
of Missouri or such other similar statute as in effect from time to time in
Missouri or any other appropriate jurisdiction.

"Ultimate Revolving Maturity Date" is defined in Section 2.1.1.

"United States": when used in a geographical sense, all the states of the United
States of America and the District of Columbia; and when used in a legal
jurisdictional sense, the government of the country that is the United States of
America.

"Virginia Industrial Revenue Bonds" is defined in Section 2.2.2.

"Wachovia" is defined on page 1.

"Welfare Benefit Plan": any plan described by Section 3(1) of ERISA.

Page vii of 50

<PAGE> 1

EXHIBIT 10.12a
FIRST AMENDMENT
TO
AMENDED AND RESTATED CREDIT AGREEMENT

This First Amendment to Amended and Restated Credit Agreement (this
"Amendment"), made and entered into effective as of the 15th day of May, 1995,
by and among O'Sullivan Industries, Inc., a Delaware corporation
("Industries"), O'Sullivan Industries Holdings, Inc., a Delaware corporation
("Holdings"), The Boatmen's National Bank of St. Louis, a national banking
association and Wachovia Bank of Georgia, N.A., a national banking association
(each a "Lender" and together, "Lenders"), and The Boatmen's National Bank of
St. Louis, as agent ("Agent").

Recitals:

A. Borrower and Lenders have entered into that certain Amended and
Restated Credit Agreement dated as of November 22, 1994 (the "Loan
Agreement") pursuant to which Lenders have extended certain credit
facilities to Borrower.

B. Borrower and Lenders desire, upon the terms and conditions set forth
herein, to amend the Loan Agreement to provide for the exclusion of
certain amounts related to the securities litigation referred to on
Borrower's Disclosure Schedule to the Loan Agreement.

In consideration of the mutual covenants and promises contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Borrower and Lenders hereby agree as follows:

1. DEFINITIONS. All capitalized terms used and not otherwise defined
herein shall have the meanings given them in the Loan Agreement.

2. AMENDMENT TO LOAN AGREEMENT. The definition of "EBITDA" in Section
15.1 of the Loan Agreement is hereby deleted in its entirety and the following
is substituted in lieu thereof:

"'EBITDA' means, with respect to any fiscal period of
Borrower, the net income of Borrower for such fiscal period,
as determined in accordance with GAAP and reported on the
Financial Statements for such period, minus any extraordinary
gains, plus any extraordinary losses; provided, however, that
regardless of GAAP, any amounts paid in settlement of, or
pursuant to a judgment rendered in, the securities litigation
described on the Disclosure Schedule shall be treated as
extraordinary items, and provided further, that the aggregate
of all such amounts shall not exceed the lesser of (i) the
amount of any judgment rendered in such litigation or (ii)
five percent (5%) of Borrower's Tangible Net Worth as of
December 31, 1994, plus all of the following that were
deducted in calculating such net income: (a) interest expense;
(b) provisions for taxes; and (c) depreciation, amortization
and other non-cash charges."

Page 1 of 3
<PAGE> 2

reorganization, moratorium or similar laws affecting the enforceability of
creditors' rights generally or by equitable principles of general application
(whether considered in an action at law or in equity), (iii) except as
disclosed on the disclosure schedule attached to the Loan Agreement, all of the
representations and warranties contained in Section 11 of the Loan Agreement,
as amended by this Amendment, are true and correct in all material respects
with the same force and effect as if made on and as of the date of this
Amendment, and (iv) there exists no Default or Event of Default under the Loan
Agreement, as amended by this Amendment.

4. EFFECT ON LOAN DOCUMENTS. Except as specifically amended hereby, the
Loan Documents shall remain in full force and effect and are hereby ratified
and confirmed in all respects. The execution, delivery and effectiveness of
this Amendment shall not operate as a waiver of any right, power or remedy of
Lenders under the Loan Documents, nor constitute a waiver of any provision of
the Loan Documents except as specifically set forth herein. Upon the
effectiveness of this Amendment, each reference in the Loan Agreement to "the
Agreement", "hereunder", "hereof", "herein", or words of like import, shall
mean and be a reference to the Loan Agreement, as amended hereby.

5. REAFFIRMATION. Borrower hereby ratifies, affirms, acknowledges, and
agrees that the Loan Agreement (as amended by this Amendment) represents the
valid, enforceable and collectible obligations of Borrower, except to the
extent that the enforceability thereof against Borrower may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
similar laws affecting the enforceability of creditors' rights generally or by
equitable principles of general application (whether considered in an action at
law or in equity), and Borrower further acknowledges that there are no existing
claims, defenses, personal or otherwise, or rights of setoff whatsoever known
to Borrower with respect to any of the Loan Documents.

6. GOVERNING LAW. This Amendment has been delivered in St. Louis,
Missouri and shall be governed by and construed in accordance with the laws and
decisions of the State of Missouri without giving effect to the choice or
conflicts of law principles thereunder.

7. SECTION TITLES. The section titles contained in this Amendment are and
shall be without substance, meaning or content of any kind whatsoever and are
not a part of the agreement between the parties hereto.

8. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, and on separate counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.

[rest of page is intentionally blank]

Page 2 of 3

<PAGE> 3

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and
year first above written.

O'SULLIVAN INDUSTRIES, INC.

By: /s/ Gregory C. Kowert
Vice President-Finance and
Chief Financial Officer

O'SULLIVAN INDUSTRIES HOLDINGS, INC.

By: /s/ Gregory C. Kowert
Vice President-Finance and
Chief Financial Officer

THE BOATMEN'S NATIONAL BANK OF ST. LOUIS, AS
AGENT AND A LENDER

By: /s/ Douglas W. Thornsberry
Assistant Vice President

WACHOVIA BANK OF GEORGIA, N.A., AS A LENDER

By: /s/ Terry L. Akins
Senior Vice President

Page 3 of 3

<PAGE> 1
EXHIBIT 10.12b

SECOND AMENDMENT
TO
AMENDED AND RESTATED CREDIT AGREEMENT

This Second Amendment to Amended and Restated Credit Agreement (this
"Amendment"), made and entered into effective as of December 29, 1995, by and
among O'Sullivan Industries, Inc., a Delaware corporation ("Industries"),
O'Sullivan Industries Holdings, Inc., a Delaware corporation ("Holdings"), The
Boatmen's National Bank of St. Louis, a national banking association and
Wachovia Bank of Georgia, N.A., a national banking association (each a "Lender"
and together, "Lenders"), and The Boatmen's National Bank of St. Louis, as
agent ("Agent").

Recitals:

A. Borrower and Lenders have entered into that certain Amended and Restated
Credit Agreement dated as of November 22, 1994, as amended by that First
Amendment thereto dated as of May 15, 1995 (as it may be further amended,
restated, extended, renewed, replaced, or otherwise modified from time to
time, the "Loan Agreement") pursuant to which Lenders have extended
certain credit facilities to Borrower.

B. Borrower and Lenders desire, upon the terms and conditions set forth
herein, to amend the Loan Agreement as provided herein.

In consideration of the mutual covenants and promises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Borrower and Lenders hereby agree as follows:

1. DEFINITIONS. All capitalized terms used and not otherwise defined herein
shall have the meanings given them in the Loan Agreement.

2. AMENDMENT TO LOAN AGREEMENT.

2.1. ULTIMATE REVOLVING MATURITY DATE. The words "December 31, 1996"
in the first sentence of Section 2.1.1 of the Loan Agreement are hereby deleted
and the following is substituted in lieu thereof: "December 31, 1997".

2.2. DEFINITION OF ADJUSTED LIBO RATE. Section 3.3 of the Loan
Agreement is hereby amended by deleting the last row of the table and
substituting the following two rows in lieu thereof (the column on the left
refers to the ratio of Holdings' consolidated Funded Debt to EBITDA and the
column on the right refers to the LIBO Increment):

"Less than or equal to 2.75 to 1.0 and more than 2.5 to 1.0 1.40%

Greater than 2.75 to 1.0 1.75%"

Page 1 of 4

<PAGE> 2

2.3. IRB LC FEE. Section 4.4 of the Loan Agreement is hereby amended
by deleting the first sentence thereof in its entirety and substituting in lieu
thereof the following:

"Borrower shall pay to Agent for the account of Lenders in accordance
with their Prorata Shares an "IRB LC Fee" for the IRB Letter of Credit
issued by Agent that shall be calculated by applying the quarterly
equivalent of 1% per annum to the aggregate undrawn amount thereof;
provided however, that for each day on which the ratio of Holdings'
consolidated Funded Debt to EBITDA is greater than 2.75 to 1.00, the rate
at which the IRB LC Fee shall accrue shall be the quarterly equivalent of
1.75% per annum of the aggregate undrawn amount of the IRB Letter of
Credit; and provided further, that for each day on which an Event of
Default exists and is continuing, the rate at which the IRB LC Fee shall
accrue shall be the quarterly equivalent of 3% per annum of the aggregate
undrawn amount of the IRB Letter of Credit."

2.4. FINANCIAL COVENANTS. Section 15.2 of the Loan Agreement is
hereby deleted in its entirety and replaced by the Section 15.2 set forth
below. If, however, the two Note Purchase Agreements dated as of May 15, 1995
between Borrower and each of New York Life Insurance Company and New York Life
Insurance and Annuity Corporation respectively have not been amended prior to
March 30, 1996 to change the financial covenant sections therein which are the
equivalent of the financial covenant in Section 15.2 of the Loan Agreement,
such that the ratios therein are equal to or higher than the ratios in the
amended covenant herein, then this amendment to Section 15.2 shall be
retroactively void and of no effect as if such amendment had never occurred.

"15.2 MAXIMUM INDEBTEDNESS. The ratio of Holdings' consolidated
Indebtedness for borrowed money to its EBITDA, calculated on the dates
specified in the table below on the basis of the twelve fiscal months
then ended, shall not exceed the ratio set forth opposite such date:

<TABLE>
<S> <C>
December 31, 1995 3.50 to 1.0

March 31, 1996 3.50 to 1.0

June 30, 1996 3.00 to 1.0

Each date thereafter 2.75 to 1.0"
</TABLE>

2.5. DISCLOSURE SCHEDULE. Exhibit 11 to the Loan Agreement is hereby
deleted in its entirety and Exhibit 11, attached hereto and incorporated herein
by this reference, is substituted in lieu thereof.

3. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower hereby represents
and warrants to Lenders that (i) no consents are necessary from any third
parties for Borrower's execution, delivery or performance of this Amendment,
(ii) this Amendment constitutes the legal, valid and binding obligation of
Borrower, enforceable against Borrower in accordance with its terms, except to
the extent that the enforceability thereof against Borrower may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
similar laws affecting the enforceability of creditors' rights generally or by
equitable principles of general application (whether considered in an action at
law or in equity), (iii) except as disclosed on the disclosure schedule
attached to this Amendment as Exhibit 11, all of the representations and
warranties contained in Section 11 of the Loan Agreement, as amended by this
Amendment, are true and correct in all material respects with the same force
and effect as if made on and as of the date of this

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<PAGE> 3

Amendment, and (iv) there exists no Default or Event of Default under the Loan
Agreement, as amended by this Amendment.

4. EFFECT ON LOAN DOCUMENTS. Except as specifically amended hereby, the Loan
Documents shall remain in full force and effect and are hereby ratified and
confirmed in all respects. The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of
Lenders under the Loan Documents, nor constitute a waiver of any provision of
the Loan Documents except as specifically set forth herein. Upon the
effectiveness of this Amendment, each reference in the Loan Agreement to "the
Agreement", "hereunder", "hereof", "herein", or words of like import, shall
mean and be a reference to the Loan Agreement, as amended hereby.

6. GOVERNING LAW. This Amendment has been delivered in St. Louis, Missouri
and shall be governed by and construed in accordance with the laws and
decisions of the State of Missouri without giving effect to the choice or
conflicts of law principles thereunder.

8. COUNTERPARTS; FACSIMILE TRANSMISSIONS. This Amendment may be executed
in one or more counterparts and on separate counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument. Signatures to this Amendment may be given by facsimile or
other electronic transmission, and such signatures shall be fully binding on
the party sending the same.

[REST OF PAGE IS INTENTIONALLY BLANK]

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<PAGE> 4

IN WITNESS WHEREOF, THIS AMENDMENT HAS BEEN DULY EXECUTED AS OF THE DAY
AND YEAR FIRST ABOVE WRITTEN.

O'SULLIVAN INDUSTRIES, INC.

By: /s/ Daniel F. O'Sullivan
Chairman of the Board,
Chief Executive Officer and
President

O'SULLIVAN INDUSTRIES HOLDINGS, INC.

By: /s/ Daniel F. O'Sullivan
Chairman of the Board,
Chief Executive Officer and
President

THE BOATMEN'S NATIONAL BANK OF ST. LOUIS, AS
AGENT AND A LENDER

By: /s/ Douglas W. Thornsberry
Assistant Vice President

WACHOVIA BANK OF GEORGIA, N.A., AS A LENDER

By: /s/ Terry L. Akins
Senior Vice President

Page 4 of 4

<PAGE> 1

EXHIBIT 10.12c

THIRD AMENDMENT
TO
AMENDED AND RESTATED CREDIT AGREEMENT

This Third Amendment to Amended and Restated Credit Agreement (this
"Amendment"), made and entered into as of June 13, 1997, by and among
O'Sullivan Industries, Inc., a Delaware corporation ("Industries"), O'Sullivan
Industries Holdings, Inc., a Delaware corporation ("Holdings"; Industries and
Holdings are sometimes referred to hereinafter individually and collectively as
"Borrower"), O'Sullivan Industries - Virginia, Inc., a Virginia corporation and
wholly-owned subsidiary of Industries, as a guarantor and a letter of credit
account party ("O'Sullivan - Virginia"), O'Sullivan Industries International,
Ltd., a Barbados corporation ("O'Sullivan International"; O'Sullivan - Virginia
and O'Sullivan International are sometimes referred to hereinafter individually
and collectively as "Guarantor"), The Boatmen's National Bank of St. Louis, a
national banking association, as a lender ("Lender") and The Boatmen's National
Bank of St. Louis, as agent ("Agent").

Recitals:

A. Borrower, O'Sullivan - Virginia, Agent and Lender are the current
parties to that certain Amended and Restated Credit Agreement by and
among Borrower, O'Sullivan - Virginia, Agent, Lender and Wachovia Bank
of Georgia, N.A. ("Wachovia"), a national banking association, as a
lender, effective November 22, 1994, as amended by that First
Amendment thereto, dated as of May 15, 1995, that Second Amendment
thereto, dated as of December 29, 1995, and that certain letter from
Borrower to Lenders, dated June 24, 1996 (as it may be further
amended, restated, extended, renewed, replaced, or otherwise modified
from time to time, the "Loan Agreement") pursuant to which certain
credit facilities were extended to Borrower.

B. This Amendment is being entered into contemporaneously with that
certain Assignment and Acceptance (the "Assignment") among Wachovia
and Lender.

C. Borrower, Guarantor, Agent and Lender desire, upon the terms and
conditions set forth herein, to amend the Loan Agreement as provided
herein.

1. DEFINITIONS. All capitalized terms used and not otherwise defined
herein shall have the meanings given them in the Loan Agreement. Section and
Exhibit references are to Sections and Exhibits of the Loan Agreement unless
otherwise indicated.

2. EFFECTIVE DATE OF THIS AMENDMENT. This Amendment is effective upon
the satisfaction of the conditions in Section 4 of this Amendment.

3. AMENDMENT TO LOAN AGREEMENT.

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<PAGE> 2

3.1. AGGREGATE REVOLVING COMMITMENT; EXHIBIT 2.1.1. The
"Aggregate Revolving Commitment" set forth in Section 2.1.2, is reduced from
$30,000,000 to $25,000,000. Exhibit 2.1.1 is replaced with Exhibit 2.1.1.
attached hereto.

3.2. ULTIMATE REVOLVING MATURITY DATE. The words "December 31,
1997" in the first sentence of Section 2.1.1 are deleted and replaced with the
following: "February 28, 2000".

3.3. STANDBY LC FEE. Section 4.2 is deleted and replaced with
the following:

4.2. STANDBY LC FEE. Borrower shall pay to Agent for the
account of Lenders in accordance with their Prorata Shares a "Standby
LC Fee" for each standby Letter of Credit issued by Agent (exclusive
of the IRB Letter of Credit) that shall be calculated by applying the
quarterly equivalent of .75% to the aggregate undrawn amount of such
Letter of Credit. The Standby LC Fee for each such Letter of Credit
shall be payable in advance on its issuance date and on the first day
of each calendar quarter beginning thereafter while it is outstanding.

3.4. IRB LC FEE. Section 4.4 is deleted and replaced with the
following:

4.4. IRB LC FEE. Borrower shall pay to Agent for the
account of Lenders in accordance with their Prorata Shares an "IRB LC
Fee" for the IRB Letter of Credit issued by Agent that shall be
calculated by applying the quarterly equivalent of .75% per annum to
the aggregate undrawn amount thereof; provided however, that for each
day on which an Event of Default exists and is continuing, the rate at
which the IRB LC Fee shall accrue shall be the quarterly equivalent of
3% per annum of the aggregate undrawn amount of the IRB Letter of
Credit. The IRB LC Fee for the IRB Letter of Credit shall be payable
on the first day of each calendar quarter while it is outstanding.

3.5. USE OF PROCEEDS. Section 13.1 is deleted and replaced with
the following:

13.1. USE OF PROCEEDS. Advances shall be used solely for
working capital, plant expansion, purchases of outstanding equity
securities of Holdings as permitted in Section 14.1.5. and other
expenditures that are not prohibited herein and as the source for
payment of Borrower's reimbursement obligations with respect to draws
on Letters of Credit.

3.6. INVESTMENTS. Section 14.1.5 is deleted and replaced with the
following:

14.1.5. Equity securities of Holdings which are purchased
for a Dollar amount not in excess of (i) during calendar year 1997,
$15,000,000, and (ii) during calendar year 1998, $5,000,000 plus the
unexpended amount allowed for calendar year 1997; in determining the
Dollar amount expended for such securities, the Dollar amount expended
to purchase such securities which have been reissued to employees of
Holdings or its Subsidiaries pursuant to the O'Sullivan Industries
Holdings, Inc. Stock Purchase Program and the O'Sullivan Industries
Holdings, Inc. Profit Sharing Plan, shall not be considered.

3.7. DEFINED TERMS.

13.1. INTEREST HEDGE OBLIGATIONS. The following definition
is added, in alphabetical order, to the Glossary and Index of Defined
Terms which is attached to the Loan Agreement as Appendix 1.1:

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<PAGE> 3

"Interest Hedge Obligations": any obligations of
Borrower to Agent or any Lender under any ISDA interest rate
and currency exchange agreement, master agreement, or similar
agreement between Borrower and Agent or any Lender under which
the exposure of Borrower to fluctuations in interest rates is
effectively limited, whether in the form of one or more
interest rate cap, collar, or corridor agreements, interest
rate swaps, currency or equity swaps, forward contracts,
foreign exchange contracts or the like, or options therefor.

13.1. LOAN OBLIGATIONS. The definition of "Loan
Obligations" in the Glossary and Index of Defined Terms which is
attached to the Loan Agreement as Appendix 1.1 is deleted and replaced
with the following definition:

"Loan Obligations": all of Borrower's Indebtedness owing to
Agent or Lenders under the Loan Documents, whether as
principal, interest, fees or otherwise, all reimbursement
obligations of Borrower to Agent or Lenders with respect to
Letter of Credit Exposure, and all other obligations
(including but not limited to obligations for the payment of
money) and liabilities of Borrower to Agent or Lenders under
the Loan Documents and all Interest Hedge Obligations (in each
case including all extensions, renewals, modifications,
rearrangements, restructures, replacements and refinancings of
the foregoing, whether or not the same involve modifications
to interest rates or other payment terms), whether now
existing or hereafter created, absolute or contingent, direct
or indirect, joint or several, secured or unsecured, due or
not due, contractual or tortious, liquidated or unliquidated,
arising by operation of law or otherwise, including but not
limited to the obligation of Borrower to repay future advances
by Agent or Lenders, whether or not made pursuant to
commitment and whether or not presently contemplated by
Borrower, Agent or Lenders in the Loan Documents.

4. CONDITIONS TO EFFECTIVENESS OF THIS AMENDMENT. As conditions
precedent to the effectiveness of this Amendment, Borrower or Guarantor, as the
case may be, shall, unless waived in writing by Agent, furnish or cause to be
furnished to Agent the following (in the case of documents to be delivered, all
in form and substance satisfactory to Agent):

4.1. AMENDMENT. This Amendment, duly executed on behalf of
Borrower and Guarantor.

4.2. ASSIGNMENT. The Assignment, duly executed on behalf of
Wachovia, Borrower and O'Sullivan - Virginia.

4.3. NOTE. An amended and restated Note of Borrower, of even date
herewith, in the principal amount of $25,000,000, payable to the order of the
Boatmen's and otherwise in form acceptable to Boatmen's and Agent.

4.4. GUARANTY OF O'SULLIVAN INTERNATIONAL. An unlimited,
unconditional guaranty of the Loan Obligations, duly executed on behalf of
O'Sullivan International.

4.5. CERTIFICATE OF SECRETARY. A Certificate of the Secretary of
each Borrower and each Guarantor certifying (i) that the copies of its articles
or certificate of incorporation and bylaws, with all amendments thereto,
delivered to Agent in connection with the initial loan closing are accurate and
complete and there have been no further amendments thereto, (ii) the
resolutions adopted by its Board of Directors authorizing the execution,
delivery and performance of this Amendment, the Assignment, the amended and
restated Note and related documents (collectively, the "Amendment Documents")
by it, and

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<PAGE> 4

(iii) the names, titles, incumbency and true signatures of the corporate
officers who are authorized to sign the Amendment Documents on its behalf.

4.6. AMENDMENT FEE. Borrower shall pay to Agent, for the ratable
benefit of Lenders, a non-refundable amendment fee of $28,600.

5. GOOD STANDING CERTIFICATES. Borrower agrees that Borrower shall
deliver or cause to be delivered to Agent, within 30 days of the date of this
Amendment, certificates of good standing of each Borrower and each Guarantor in
the states of incorporation and qualification of each Borrower and each
Guarantor, respectively, issued by the Secretary of State of such states and
that Borrower's failure to deliver cause to be delivered such good standing
certificates by such date shall constitute an Event of Default.

6. REPRESENTATIONS AND WARRANTIES OF BORROWER AND GUARANTOR. Each
Borrower and each Guarantor each hereby represents and warrants to Agent and
Lender that (i) no consents are necessary from any third parties in connection
with its execution, delivery or performance of the Amendment Documents to which
it is a party, (ii) the Amendment Documents to which it is a party constitute
the legal, valid and binding obligations of it, enforceable against it in
accordance with their terms, except to the extent that the enforceability
thereof against it may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally or by equitable principles of
general application (whether considered in an action at law or in equity),
(iii) except as disclosed on the disclosure schedule attached to the Loan
Agreement as Exhibit 11 and the disclosure schedule attached to this Amendment
as Exhibit 4, all of the representations and warranties contained in Section
11, as amended by this Amendment, are true and correct in all material respects
with the same force and effect as if made on and as of the date of this
Amendment, except that with respect to the representations and warranties made
regarding financial data in Section 11.11, such representations and warranties
are hereby made with respect to the most recent Financial Statements and other
financial data (in the form required by the Loan Agreement) delivered by
Borrower as required by the Loan Agreement, and (iv) there exists no Default or
Event of Default under the Loan Agreement, as amended by this Amendment.

7. EFFECT ON LOAN DOCUMENTS. Except as specifically amended by the
Amendment Documents, the Loan Documents shall remain in full force and effect
and are hereby ratified and confirmed in all respects. The execution, delivery
and effectiveness of the Amendment Documents shall not operate as a waiver of
any right, power or remedy of Lenders or Agent under the Loan Documents, nor
constitute a waiver of any provision of the Loan Documents except as
specifically set forth herein. Upon the effectiveness of this Amendment, each
reference in the Loan Agreement to "the Agreement", "hereunder", "hereof",
"herein", or words of like import, shall mean and be a reference to the Loan
Agreement, as amended hereby.

8. REAFFIRMATION. Each Borrower and each Guarantor each hereby ratifies,
affirms, acknowledges, and agrees that the Loan Agreement (as amended by this
Amendment) represents its valid, enforceable and collectible obligation, except
to the extent that the enforceability thereof against it may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
similar laws affecting the enforceability of creditors' rights generally or by
equitable principles of general application (whether considered in an action at
law or in equity), and it further acknowledges that there are no existing
claims, defenses, personal or otherwise, or rights of setoff whatsoever known
to it with respect to any of the Loan Documents.

9. GOVERNING LAW. The Amendment Documents shall be governed by and
construed in accordance with the laws and decisions of the State of Missouri
without giving effect to the choice or conflicts of law principles thereunder.

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<PAGE> 5

10. SECTION TITLES. The section titles contained in this Amendment are
and shall be without substance, meaning or content of any kind whatsoever and
are not a part of the agreement between the parties hereto.

11. COUNTERPARTS; FACSIMILE TRANSMISSIONS. This Amendment may be executed
in one or more counterparts and on separate counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument. Signatures to this Amendment may be given by facsimile or
other electronic transmission, and such signatures shall be fully binding on
the party sending the same.

12. INCORPORATION BY REFERENCE. Agent, Lender, Borrower and Guarantor
hereby agree that all of the terms of the Loan Documents are incorporated in
and made a part of this Amendment by this reference.

13. STATUTORY NOTICE. The following notice is given pursuant to Section
432.045 of the Missouri Revised Statutes; nothing contained in such notice will
be deemed to limit or modify the terms of the Loan Documents or this Amendment:

ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO
FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO
EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU
(BORROWER(S) AND GUARANTOR(S) AND US (CREDITOR) FROM MISUNDERSTANDING
OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE
CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN
WRITING TO MODIFY IT.

BORROWER, GUARANTOR, AGENT AND LENDER HEREBY AFFIRM THAT THERE IS NO UNWRITTEN
ORAL CREDIT AGREEMENT BETWEEN ANY OF THEM WITH RESPECT TO THE SUBJECT MATTER OF
THIS AMENDMENT.

[REST OF PAGE IS INTENTIONALLY BLANK]

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<PAGE> 6

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day
and year first above written.

O'SULLIVAN INDUSTRIES, INC.

By: /s/Terry L. Crump
Chief Financial Officer

O'SULLIVAN INDUSTRIES HOLDINGS, INC.

By: /s/Terry L. Crump
Chief Financial Officer

O'SULLIVAN INDUSTRIES - VIRGINIA, INC.

By: /s/Terry L. Crump
Chief Financial Officer

O'SULLIVAN INDUSTRIES INTERNATIONAL, LTD.

By: /s/ Daniel F. O'Sullivan
Chairman

THE BOATMEN'S NATIONAL BANK OF ST. LOUIS, AS AGENT

By: /s/Mary E. Garrity
Vice President

Page 6 of 6

<PAGE> 1
EXHIBIT NO. 23

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Registration Nos. 33-75556, 33-75438, 33-92904,
333-21609, 333-27635 and 333-28559) of O'Sullivan Industries Holdings, Inc. of
our report dated August 15, 1997 appearing on page 16 of this Form 10-K.

PRICE WATERHOUSE LLP
Kansas City, Missouri
September 16, 1997

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF O'SULLIVAN INDUSTRIES HOLDINGS, INC. FOR THE PERIOD
ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 6,975
<SECURITIES> 0
<RECEIVABLES> 61,819
<ALLOWANCES> 3,158
<INVENTORY> 44,158
<CURRENT-ASSETS> 112,928
<PP&E> 119,566
<DEPRECIATION> 44,643
<TOTAL-ASSETS> 232,607
<CURRENT-LIABILITIES> 30,883
<BONDS> 30,000
0
0
<COMMON> 16,820
<OTHER-SE> 139,970
<TOTAL-LIABILITY-AND-EQUITY> 232,607
<SALES> 321,490
<TOTAL-REVENUES> 321,490
<CGS> 230,578
<TOTAL-COSTS> 230,578
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,327
<INCOME-PRETAX> 26,448
<INCOME-TAX> 10,050
<INCOME-CONTINUING> 16,398
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,398
<EPS-PRIMARY> 0.96
<EPS-DILUTED> 0.95

</TABLE>