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                                CREDIT AGREEMENT

                                   dated as of

                                December 19, 1997

                                     between

                            CANANDAIGUA BRANDS, INC.

                     The SUBSIDIARY GUARANTORS Party Hereto

                            The LENDERS Party Hereto

                                       and

                            THE CHASE MANHATTAN BANK,
                             as Administrative Agent

                               -------------------
                                  $325,000,000
                               -------------------





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                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
                                    ARTICLE I

                                   DEFINITIONS

          Section 1.01.  Defined Terms.......................................  1
          Section 1.02.  Classification Of Loans And Borrowings.............. 30
          Section 1.03.  Terms Generally..................................... 30
          Section 1.04.  Accounting Terms; Gaap.............................. 30

                       
                                   ARTICLE II

                                   THE CREDITS


          SECTION 2.01.  THE COMMITMENTS..................................... 31
          SECTION 2.03.  REQUESTS FOR SYNDICATED BORROWINGS.................. 34
          SECTION 2.04.  COMPETITIVE BID PROCEDURE........................... 35
          SECTION 2.05.  SWINGLINE LOANS..................................... 38
          SECTION 2.06.  LETTERS OF CREDIT................................... 40
          SECTION 2.07.  FUNDING OF BORROWINGS............................... 45
          SECTION 2.08.  INTEREST ELECTIONS.................................. 46
          SECTION 2.09.  TERMINATION AND REDUCTION OF THE COMMITMENTS........ 48
          SECTION 2.10.  REPAYMENT OF LOANS; EVIDENCE OF DEBT................ 49
          SECTION 2.11.  PREPAYMENT OF LOANS................................. 52
          SECTION 2.12.  FEES     ........................................... 57
          SECTION 2.13.  INTEREST ........................................... 58
          SECTION 2.14.  ALTERNATE RATE OF INTEREST.......................... 60
          SECTION 2.15.  INCREASED COSTS..................................... 61
          SECTION 2.16.  BREAK FUNDING PAYMENTS.............................. 62
          SECTION 2.17.  TAXES    ........................................... 63
          SECTION 2.18.  PAYMENTS  GENERALLY;  PRO RATA  TREATMENT;  SHARING  
                              OF SET-OFFS, ETC............................... 64
          SECTION 2.19.  MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS...... 67

                        
                                   ARTICLE III

                                    GUARANTEE


          SECTION 3.01  GUARANTEE ........................................... 68
          SECTION 3.02  OBLIGATIONS UNCONDITIONAL............................ 68
          SECTION 3.03  REINSTATEMENT........................................ 75
          SECTION 3.04  SUBROGATION.......................................... 75
          SECTION 3.05  REMEDIES  ........................................... 75
          SECTION 3.06  CONTINUING GUARANTEE................................. 76
          SECTION 3.07  LIMITATION ON GUARANTEE OBLIGATIONS.................. 76
                       
                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES


          SECTION 4.01.  ORGANIZATION; POWERS................................ 76
          SECTION 4.02.  AUTHORIZATION; ENFORCEABILITY....................... 76
          SECTION 4.03.  GOVERNMENTAL APPROVALS; NO CONFLICTS................ 77
          SECTION 4.04.  FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE..... 77
          SECTION 4.05.  PROPERTIES.......................................... 77
          SECTION 4.06.  LITIGATION ......................................... 78
          SECTION 4.07.  ENVIRONMENTAL MATTERS............................... 78
          SECTION 4.08.  COMPLIANCE WITH LAWS AND AGREEMENTS................. 80
          SECTION 4.09.  INVESTMENT AND HOLDING COMPANY STATUS............... 81
          SECTION 4.10.  TAXES    ........................................... 81
          SECTION 4.11.  ERISA    ........................................... 81
          SECTION 4.12.  DISCLOSURE.......................................... 81
          SECTION 4.13.  USE OF CREDIT....................................... 81
          SECTION 4.14.  MATERIAL AGREEMENTS AND LIENS....................... 82
          SECTION 4.15.  CAPITALIZATION...................................... 82
          SECTION 4.16.  SUBSIDIARIES AND INVESTMENTS, ETC................... 83
          SECTION 4.17.  REAL PROPERTY....................................... 84

                       
                                    ARTICLE V

                                   CONDITIONS


          SECTION 5.01.  EFFECTIVE DATE...................................... 84
          SECTION 5.02.  SPECIAL CONDITIONS FOR TRANCHE II TERM LOAN 
                              BORROWINGS..................................... 88
          SECTION 5.03.  EACH CREDIT EVENT................................... 89


                                   ARTICLE VI

                              AFFIRMATIVE COVENANTS


          SECTION 6.01.  FINANCIAL STATEMENTS AND OTHER INFORMATION.......... 89
          SECTION 6.02.  NOTICES OF MATERIAL EVENTS.......................... 91
          SECTION 6.03.  EXISTENCE; CONDUCT OF BUSINESS...................... 92
          SECTION 6.04.  PAYMENT OF OBLIGATIONS.............................. 92
          SECTION 6.05.  MAINTENANCE OF PROPERTIES; INSURANCE................ 92
          SECTION 6.06.  BOOKS AND RECORDS; INSPECTION RIGHTS................ 92
          SECTION 6.07.  COMPLIANCE WITH LAWS................................ 92
          SECTION 6.08.  USE OF PROCEEDS AND LETTERS OF CREDIT............... 93
          SECTION 6.09.  CERTAIN OBLIGATIONS RESPECTING SUBSIDIARIES......... 93


                                   ARTICLE VII

                               NEGATIVE COVENANTS


          SECTION 7.01.  INDEBTEDNESS........................................ 94
          SECTION 7.02.  LIENS    ........................................... 95
          SECTION 7.03.  FUNDAMENTAL CHANGES................................. 96
          SECTION 7.04.  INVESTMENTS......................................... 99
          SECTION 7.05.  RESTRICTED PAYMENTS.................................100
          SECTION 7.06.  TRANSACTIONS WITH AFFILIATES........................102
          SECTION 7.07.  CERTAIN RESTRICTIONS ON SUBSIDIARIES................102
          SECTION 7.08.  CERTAIN FINANCIAL COVENANTS.........................103
          SECTION 7.09.  SUBORDINATED INDEBTEDNESS...........................104
          SECTION 7.10.  MODIFICATIONS OF CERTIFICATE OF INCORPORATION.......106
          SECTION 7.11.  INVENTORY LOCATED IN OFF-PREMISES WAREHOUSES........106

 
                                  ARTICLE VIII

                                EVENTS OF DEFAULT............................106


                                   ARTICLE IX

                            THE ADMINISTRATIVE AGENT.........................110


                                    ARTICLE X

                                  MISCELLANEOUS


          SECTION 10.01. NOTICES ............................................113
          SECTION 10.02. WAIVERS; AMENDMENTS.................................113
          SECTION 10.03. EXPENSES; INDEMNITY; DAMAGE WAIVER..................115
          SECTION 10.04. SUCCESSORS AND ASSIGNS..............................116
          SECTION 10.05. SURVIVAL............................................119
          SECTION 10.06. COUNTERPARTS; INTEGRATION; EFFECTIVENESS............120
          SECTION 10.07. SEVERABILITY........................................120
          SECTION 10.08. RIGHT OF SETOFF.....................................120
          SECTION 10.09. GOVERNING LAW; JURISDICTION; CONSENT TO 
                              SERVICE OF PROCESS.............................121
          SECTION 10.10. WAIVER OF JURY TRIAL................................122
          SECTION 10.11. HEADINGS............................................122
          SECTION 10.12. TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY...122


SCHEDULE I   -    Commitments
SCHEDULE II  -    Material Agreements and Liens
SCHEDULE III -    Litigation and Environmental Matters
SCHEDULE IV  -    Subsidiaries and Investments
SCHEDULE V   -    Stock Options
SCHEDULE VI  -    Real Property
SCHEDULE VII -    Life Insurance Agreements

EXHIBIT A - Form of  Assignment  and  Acceptance  
EXHIBIT B - Form of  Security Agreement 
EXHIBIT C - Form of Guarantee  Assumption  Agreement 
EXHIBIT D - Forms of Opinions of Counsel to the Obligors
EXHIBIT E - Form of Opinion of Special New York Counsel to The Chase Manhattan
               Bank

<PAGE>


     CREDIT AGREEMENT dated as of December 19, 1997, between CANANDAIGUA BRANDS,
INC.  (formerly  known  as  Canandaigua  Wine  Company,  Inc.),  the  SUBSIDIARY
GUARANTORS party hereto, the LENDERS party hereto, and THE CHASE MANHATTAN BANK,
as Administrative Agent.

     The Borrower (as hereinafter defined) has requested that the Lenders (as so
defined)  extend  credit  (by means of loans and  letters of credit) to it in an
aggregate   principal  amount  not  exceeding   $325,000,000  at  any  one  time
outstanding (which amount may, in the circumstances herein provided be increased
to $525,000,000),  to refinance certain existing indebtedness and to finance the
ongoing  working  capital  requirements  and other  general  corporate  purposes
(including  certain  acquisitions)  of the  Borrower and its  subsidiaries.  The
Lenders are prepared to extend such credit upon the terms and conditions  hereof
and, accordingly, the parties hereto agree as follows:



                                    ARTICLE I

                                   DEFINITIONS

     SECTION 1.01. DEFINED TERMS. As used in this Agreement, the following terms
have the meanings specified below:

     "ABR",  when used in reference to any Loan or Borrowing,  refers to whether
such Loan, or the Loans  comprising  such Borrowing,  are bearing  interest at a
rate determined by reference to the Alternate Base Rate.

     "ACQUISITION"   means  an  acquisition  by  the  Borrower  or  any  of  its
Subsidiaries  of a business and the related assets of any Person (whether by way
of purchase of assets or stock,  including any tender for outstanding  shares of
stock,  by merger or  consolidation,  by acceptance of a contribution of capital
from another Person, or otherwise).

     "ADJUSTED CASH FLOW" means, for any period (the "CALCULATION  PERIOD"), the
sum,  for  the  Borrower  and its  Consolidated  Subsidiaries  (determined  on a
consolidated  basis  without  duplication  in  accordance  with  GAAP),  of  the
following:  (a) Operating Cash Flow for the calculation period MINUS (b) Capital
Expenditures made during the calculation period (excluding Capital  Expenditures
made from the proceeds of Indebtedness other than Indebtedness hereunder).

     "ADJUSTED LIBO RATE" means,  with respect to any  Eurodollar  Borrowing for
any Interest Period, an interest rate per annum (rounded upwards,  if necessary,
to the next  1/16 of 1%)  equal to (a) the LIBO  Rate for such  Interest  Period
MULTIPLIED BY (b) the Statutory Reserve Rate.

     "ADJUSTMENT  AMOUNT"  means,  for  any  period,  for the  Borrower  and its
Consolidated   Subsidiaries   (determined  on  a   consolidated   basis  without
duplication  in  accordance  with  GAAP),  the  amount of any  income or expense
included  in the  determination  of net  operating  income for such  period as a
result of changes in the LIFO Reserve.

     "ADMINISTRATIVE AGENT" means Chase, in its capacity as administrative agent
for the Lenders hereunder.

     "ADMINISTRATIVE  QUESTIONNAIRE" means an Administrative  Questionnaire in a
form supplied by the Administrative Agent.

     "AFFILIATE" means, with respect to a specified Person,  another Person that
directly,  or  indirectly  through  one or more  intermediaries,  Controls or is
Controlled by or is under common Control with the Person specified.

     "ALTERNATE  BASE RATE"  means,  for any day, a rate per annum  equal to the
greater  of (a) the Prime Rate in effect on such day and (b) the  Federal  Funds
Effective Rate in effect on such day PLUS 1/2 of 1%. Any change in the Alternate
Base Rate due to a change in the Prime Rate or the Federal Funds  Effective Rate
shall be effective  from and including the effective  date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.

     "APPLICABLE  PERCENTAGE"  means (a) with respect to any Tranche I Revolving
Lender for  purposes  of Sections  2.05 and 2.06,  the  percentage  of the total
Revolving   Commitments   represented  by  such  Lender's  Tranche  I  Revolving
Commitments, (b) with respect to any Tranche II Revolving Lender for purposes of
Sections  2.05 and  2.06,  the  percentage  of the total  Revolving  Commitments
represented by such Lender's Tranche II Revolving Commitments,  (c) with respect
to any Lender in respect of any indemnity claim under Section  10.03(c)  arising
out of an action or omission of the  Administrative  Agent under this  Agreement
relating to Letters of Credit or Swingline  Loans,  the  percentage of the total
Revolving  Commitments or Loans hereunder represented by the aggregate amount of
such Lender's  Revolving  Commitment or Loans  hereunder and (d) with respect to
any Lender in respect of any indemnity claim under Section  10.03(c) arising out
of an action or omission of the Administrative Agent under this Agreement (other
than one relating to Letters of Credit or Swingline  Loans),  the  percentage of
the total  Commitments  or Loans of all  Classes  hereunder  represented  by the
aggregate amount of such Lender's Commitments or Loans of all Classes hereunder.

     "APPLICABLE  RATE"  means,  for any  day,  with  respect  to any  ABR  Loan
(including any Swingline ABR Loan), Eurodollar Syndicated Loan or Swingline FFBR
Loan,  or with respect to the facility fees payable  hereunder,  as the case may
be, the applicable rate per annum set forth below under the caption "ABR Spread"
(in the  case of ABR  Loans),  "Fixed  Rate  Revolving  Spread"  (in the case of
Eurodollar Syndicated Revolving Loans or Swingline FFBR Loans), "Fixed Rate Term
Loan Spread" (in the case of Eurodollar  Syndicated Term Loans) or "Facility Fee
Rate",  respectively,   based  upon  the  Debt  Ratio  as  of  the  most  recent
determination date;  PROVIDED that until delivery of the consolidated  financial
statements  specified  below for the fiscal year of the Borrower ending February
28, 1998, the "Applicable Rate" shall be the applicable rate per annum set forth
below in Category 4:

================================================================================
                                      Fixed Rate        Fixed Rate
                       ABR            Revolving         Term Loan       Facility
   DEBT RATIO:         Spread          Spread            Spread         Fee Rate
--------------------------------------------------------------------------------
   CATEGORY 1
    > 4.25x             .000           .900              1.250           .350
--------------------------------------------------------------------------------
   CATEGORY 2
  <= 4.25x and          .000           .700              1.000           .300
    > 4.00x
--------------------------------------------------------------------------------
   CATEGORY 3
  <= 4.00x and          .000           .600               .875           .275
    > 3.50x
--------------------------------------------------------------------------------
   CATEGORY 4
  <= 3.50x and          .000           .500               .750           .250
    > 3.00x
--------------------------------------------------------------------------------
   CATEGORY 5
  <= 3.00x and          .000           .425               .625           .200
    > 2.50x
--------------------------------------------------------------------------------
   CATEGORY 6
  <= 2.50x and          .000           .325               .500           .175
    > 2.00x
--------------------------------------------------------------------------------
   CATEGORY 7
  <= 2.00x              .000           .250               .400           .150
================================================================================

For purposes of the foregoing,  (i) the Debt Ratio shall be determined as of the
end of each  fiscal  quarter  of the  Borrower's  fiscal  year  based  upon  the
Borrower's  consolidated  financial  statements  delivered  pursuant  to Section
6.01(a) or (b) and (ii) each  change in the  Applicable  Rate  resulting  from a
change in the Debt Ratio shall be effective during the period  commencing on and
including  the date three  Business  Days after  delivery to the  Administrative
Agent of such  consolidated  financial  statements  indicating  such  change and
ending on the date  immediately  preceding the  effective  date of the next such
change;  PROVIDED that the Debt Ratio shall be deemed to be in Category 1 (A) at
any time that an Event of Default has occurred and is continuing  and (B) if the
Borrower fails to deliver the consolidated  financial  statements required to be
delivered by it pursuant to Section  6.01(a) or (b),  during the period from the
expiration of the time for delivery  thereof until such  consolidated  financial
statements are delivered.

     Notwithstanding  the foregoing,  the  "Applicable  Rate" for any Tranche II
Term Loan of any Series shall be the respective  rates  specified in the Tranche
II Term Loan Agreement for such Series.

     "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into
by a Lender and an  assignee  (with the  consent of any party  whose  consent is
required by Section  10.04),  and accepted by the  Administrative  Agent, in the
form of Exhibit A or any other form approved by the Administrative Agent.

     "BOARD" means the Board of Governors of the Federal  Reserve  System of the
United States of America.

     "BORROWER" means Canandaigua  Brands,  Inc.  (formerly known as Canandaigua
Wine Company, Inc.), a Delaware corporation.

     "BORROWING"  means (a) Syndicated  Loans of the same Class and Type,  made,
converted or continued on the same date and, in the case of Eurodollar Loans, as
to which a single Interest Period is in effect,  (b) a Competitive Loan or group
of  Competitive  Loans of the same  Type made on the same date and as to which a
single Interest Period is in effect or (c) a Swingline Loan.

     "BORROWING  REQUEST"  means a  request  by the  Borrower  for a  Syndicated
Borrowing in accordance with Section 2.03.

     "BUSINESS DAY" means any day that is not a Saturday, Sunday or other day on
which  commercial  banks in New York City are  authorized  or required by law to
remain closed;  PROVIDED that, when used in connection  with a Eurodollar  Loan,
the term  "Business  Day" shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.

     "CAPITAL EXPENDITURES" means, for any period,  expenditures  (including the
aggregate amount of Capital Lease Obligations  incurred during such period) made
by the Borrower or any of its Consolidated  Subsidiaries to acquire or construct
fixed  assets,  plant  and  equipment  (including  renewals,   improvements  and
replacements,  but excluding  repairs) during such period computed in accordance
with GAAP.  Notwithstanding the foregoing,  no Acquisition permitted pursuant to
Section 7.03(d) shall be treated as a Capital Expenditure.

     "CAPITAL  LEASE" of any  Person  means  any lease of (or other  arrangement
conveying the right to use) real or personal Property, or a combination thereof,
which  obligations  are required to be classified and accounted for as a capital
lease on a balance sheet of such Person under GAAP.

     "CAPITAL  LEASE  OBLIGATIONS"  of any Person means the  obligations of such
Person to pay rent or other amounts under any Capital  Lease,  and the amount of
such  obligations  shall  be  the  capitalized   amount  thereof  determined  in
accordance with GAAP.

     "CASUALTY  EVENT"  means,  with respect to any Property of any Person,  any
loss of or damage to, or any  condemnation or other taking of, such Property for
which such Person or any of its Subsidiaries  receives  insurance  proceeds,  or
proceeds of a condemnation award or other compensation.

     "CHANGE IN LAW" means (a) the adoption of any law, rule or regulation after
the date of this Agreement,  (b) any change in any law, rule or regulation or in
the  interpretation or application  thereof by any Governmental  Authority after
the date of this  Agreement or (c)  compliance  by any Lender or either  Issuing
Lender (or,  for  purposes  of Section  2.15(b),  by any lending  office of such
Lender or by such Lender's or such Issuing  Lender's  holding  company,  if any)
with any request,  guideline  or  directive  (whether or not having the force of
law)  of any  Governmental  Authority  made or  issued  after  the  date of this
Agreement.

     "CHASE" means The Chase Manhattan Bank.

     "CLASS", when used in reference to any Loan or Borrowing, refers to whether
such Loan,  or the Loans  comprising  such  Borrowing,  are  Tranche I Revolving
Loans,  Tranche II Revolving Loans, Tranche I Term Loans, Tranche II Term Loans,
Competitive  Loans  or  Swingline  Loans  and,  when  used in  reference  to any
Commitment,  refers  to  whether  such  Commitment  is  a  Tranche  I  Revolving
Commitment,  Tranche II Revolving Commitment,  Tranche I Term Loan Commitment or
Tranche II Term Loan Commitment.

     "CODE"  means the Internal  Revenue  Code of 1986,  as amended from time to
time.

     "COLLATERAL  ACCOUNT" has the meaning assigned to such term in Section 4.01
of the Security Agreement.

     "COMMITMENT" means a Tranche I Revolving Commitment, a Tranche II Revolving
Commitment,  Tranche I Term Loan Commitment or Tranche II Term Loan  Commitment,
or any combination thereof (as the context requires).

     "COMPETITIVE  BID" means an offer by a Lender to make a Competitive Loan in
accordance with Section 2.04.

     "COMPETITIVE  BID RATE"  means,  with respect to any  Competitive  Bid, the
Margin or the Fixed  Rate,  as  applicable,  offered by the Lender  making  such
Competitive Bid.

     "COMPETITIVE  BID REQUEST" means a request by the Borrower for  Competitive
Bids in accordance with Section 2.04.

     "COMPETITIVE LOAN" means a Loan made pursuant to Section 2.04.

     "CONSOLIDATED  SUBSIDIARY"  means, for any Person,  each Subsidiary of such
Person  (whether now existing or hereafter  created or acquired)  the  financial
statements  of which  shall  be (or  should  have  been)  consolidated  with the
financial statements of such Person in accordance with GAAP.

     "CONSOLIDATED  TANGIBLE  ASSETS" means, as at any date, the total assets of
the Borrower and its  Consolidated  Subsidiaries  (determined  on a consolidated
basis  without  duplication  in  accordance  with  GAAP)  that would be shown as
tangible  assets  on a  consolidated  balance  sheet  of the  Borrower  and  its
Consolidated Subsidiaries after eliminating all amounts properly attributable to
minority  interests,  if any,  in the stock and  surplus  of  Subsidiaries.  For
purposes  hereof,  "TANGIBLE  ASSETS"  means all assets of the  Borrower and its
Consolidated  Subsidiaries  other  than  assets  that  should be  classified  as
intangibles  including goodwill,  minority  interests,  research and development
costs, trademarks, trade names, copyrights, patents and franchises,  unamortized
debt  discount and  expense,  all reserves and any write-up in the book value of
assets resulting from a revaluation thereof subsequent to December 31, 1996.

     "CONTROL"  means the  possession,  directly or indirectly,  of the power to
direct or cause the direction of the management or policies of a Person, whether
through  the  ability to  exercise  voting  power,  by  contract  or  otherwise.
"CONTROLLING" and "CONTROLLED" have meanings correlative thereto.

     "DEBT  INCURRENCE"  means  the  incurrence  by the  Borrower  or any of its
Subsidiaries after the Effective Date of any Subordinated Indebtedness.

     "DEBT  RATIO"  means,  as at the  last  day of any  fiscal  quarter  of the
Borrower  (the  "DAY OF  DETERMINATION"),  the ratio of (a) the  average  of the
aggregate   amounts  of  Indebtedness  of  the  Borrower  and  its  Consolidated
Subsidiaries  (determined  on a  consolidated  basis,  without  duplication,  in
accordance  with  GAAP) as at such  day and as at the  last  days of each of the
three  immediately  preceding fiscal quarters to (b) Operating Cash Flow for the
period of four consecutive  fiscal quarters ending on such day of determination.
Notwithstanding  the foregoing,  Indebtedness  as at the last day of each fiscal
quarter included in the determination of average Indebtedness pursuant to clause
(a) above shall be determined  under the assumption  that any prepayment of Term
Loans  hereunder from the proceeds of any Equity Issuance at any time during any
such fiscal quarter included in the calculation  thereof shall have been made in
the first such fiscal quarter.

     "DEFAULT"  means  any  event or  condition  which  constitutes  an Event of
Default or which  upon  notice,  lapse of time or both  would,  unless  cured or
waived, become an Event of Default.

     "DISCLOSED  MATTERS"  means  the  actions,  suits and  proceedings  and the
environmental matters disclosed in Schedule III.

     "DISPOSITION" means any sale, assignment,  transfer or other disposition of
any Property (whether now owned or hereafter acquired) by the Borrower or any of
its  Subsidiaries  to any  other  Person  excluding  (a) any  sale,  assignment,
transfer  or  other  disposition  of any  Property  sold or  disposed  of in the
ordinary course of business and on ordinary  business terms and (b) any Sale and
Leaseback Transaction.

     "DOLLARS" or "$" refers to lawful money of the United States of America.

     "EFFECTIVE  DATE"  means  the date on which  the  conditions  specified  in
Section 5.01 are satisfied (or waived in accordance with Section 10.02).

     "EMPLOYEE  STOCK PURCHASE  PLAN" means the  Canandaigua  Brands,  Inc. 1989
Employee Stock Purchase Plan.

     "ENVIRONMENTAL CLAIM" means, with respect to any Person, (a) any written or
oral notice, claim, demand or other communication  (collectively,  a "CLAIM") by
any other Person alleging or asserting such Person's liability for investigatory
costs, cleanup costs,  governmental response costs, damages to natural resources
or other Property,  personal injuries,  fines or penalties arising out of, based
on or resulting from (i) the presence,  or Release into the environment,  of any
Hazardous Material at any location, whether or not owned by such Person, or (ii)
circumstances forming the basis of any violation,  or alleged violation,  of any
Environmental  Law.  The  term  "Environmental  Claim"  shall  include,  without
limitation,  any claim by any governmental  authority for enforcement,  cleanup,
removal,  response,  remedial  or  other  actions  or  damages  pursuant  to any
applicable  Environmental Law, and any claim by any third party seeking damages,
contribution,  indemnification, cost recovery, compensation or injunctive relief
resulting  from the  presence of  Hazardous  Materials  or arising  from alleged
injury or threat of injury to health, safety or the environment.

     "ENVIRONMENTAL LAWS" means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments,  injunctions,  notices or binding agreements issued,
promulgated or entered into by any Governmental  Authority,  relating in any way
to the  environment,  preservation  or  reclamation  of natural  resources,  the
management, release or threatened release of any Hazardous Material or to health
and safety matters.

     "ENVIRONMENTAL  LIABILITY"  means any  liability,  contingent  or otherwise
(including any liability for damages, costs of environmental remediation, fines,
penalties  or  indemnities),  of the  Borrower  or any  Subsidiary  directly  or
indirectly  resulting from or based upon (a) violation of any Environmental Law,
(b)  the  generation,  use,  handling,  transportation,  storage,  treatment  or
disposal of any Hazardous  Materials,  (c) exposure to any Hazardous  Materials,
(d) the  release or  threatened  release  of any  Hazardous  Materials  into the
environment  or (e) any  contract,  agreement  or other  consensual  arrangement
pursuant to which  liability  is assumed or imposed  with  respect to any of the
foregoing.

     "EQUITY  ISSUANCE" means (a) any issuance or sale by the Borrower or any of
its Subsidiaries  after the Effective Date of (i) any of its capital stock, (ii)
any warrants or options exercisable in respect of its capital stock or (iii) any
other security or instrument  representing  an equity  interest (or the right to
obtain any equity  interest) in the Borrower or any of its  Subsidiaries  or (b)
the receipt by the Borrower or any of its Subsidiaries  after the Effective Date
of any capital  contribution  (whether or not  evidenced by any equity  security
issued by the recipient of such  contribution);  PROVIDED  that Equity  Issuance
shall  not  include  (x) any  such  issuance  or sale by any  Subsidiary  of the
Borrower to the Borrower or any Wholly- Owned  Subsidiary of the Borrower or (y)
any capital  contribution by the Borrower or any Wholly-Owned  Subsidiary of the
Borrower to any Subsidiary of the Borrower.

     "EQUITY  RIGHTS"  means,  with  respect to any Person,  any  subscriptions,
options, warrants, commitments,  preemptive rights or agreements of any kind for
the  issuance or sale by such Person of, or  securities  convertible  into,  any
additional  shares of capital stock of any class of such Person,  or partnership
or other ownership interests of any type in such Person.

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

     "ERISA AFFILIATE" means any trade or business (whether or not incorporated)
that, together with the Borrower,  is treated as a single employer under Section
414(b) or (c) of the Code,  or,  solely for purposes of Section 302 of ERISA and
Section 412 of the Code,  is treated as a single  employer  under Section 414 of
the Code.

     "ERISA EVENT" means (a) any "reportable  event", as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other than
an event for which the 30-day notice period is waived);  (b) the existence  with
respect  to any Plan of an  "accumulated  funding  deficiency"  (as  defined  in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing  pursuant to Section  412(d) of the Code or Section 303(d) of ERISA of an
application  for a waiver of the minimum  funding  standard  with respect to any
Plan; (d) the  incurrence by the Borrower or any of its ERISA  Affiliates of any
liability  under Title IV of ERISA with respect to the  termination of any Plan;
(e) the receipt by the Borrower or any ERISA  Affiliate  from the PBGC or a plan
administrator  of any notice  relating to an intention to terminate  any Plan or
Plans or to appoint a trustee to administer  any Plan; (f) the incurrence by the
Borrower or any of its ERISA  Affiliates  of any  liability  with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice,  or the receipt by
any  Multiemployer  Plan from the Borrower or any ERISA Affiliate of any notice,
concerning  the  imposition of Withdrawal  Liability or a  determination  that a
Multiemployer  Plan is, or is expected to be,  insolvent  or in  reorganization,
within the meaning of Title IV of ERISA.

     "EURODOLLAR",  when used in reference to any Loan or  Borrowing,  refers to
whether such Loan, or the Loans comprising such Borrowing,  are bearing interest
at a rate  determined by reference to the Adjusted LIBO Rate (or, in the case of
a Competitive Loan, the LIBO Rate).

     "EVENT OF DEFAULT" has the meaning assigned to such term in Article VIII.

     "EXCESS CASH FLOW" means, for any fiscal year, the sum of (a) Adjusted Cash
Flow for such fiscal year (determined  without regard to the Adjustment  Amount)
MINUS (b) Fixed Charges for such fiscal year PLUS (c) the sum (if positive),  or
MINUS the sum (if  negative),  of the  aggregate  amount of "change in operating
assets and  liabilities,  net of effects from  purchases of  businesses"  as set
forth on the  consolidated  statements  of cash flows for the  Borrower  and its
Subsidiaries  for such  fiscal  year,  excluding,  however,  any portion of such
amount attributable to non-cash adjustments (other than any non-cash adjustments
related to Acquisitions)  PLUS (d) the aggregate amount (if positive),  or MINUS
the  aggregate  amount (if  negative),  of  "(repayment  of) proceeds from notes
payable,  short-term borrowings" as set forth on the consolidated  statements of
cash flows for the Borrower and its Subsidiaries for such fiscal year (excluding
the repayment of short-term  borrowings  from the proceeds of an Equity Issuance
or Debt Incurrence).

     "EXCLUDED  ENTITIES"  means,  collectively,  Inactive  Subsidiaries,  Joint
Venture Entities and Foreign Subsidiaries.

     "EXCLUDED  TAXES"  means,  with respect to the  Administrative  Agent,  any
Lender,  either Issuing Lender or any other  recipient of any payment to be made
by or on account of any  obligation  of the  Borrower  hereunder,  (a) income or
franchise  taxes imposed on (or measured by) its net income by the United States
of America,  or by the  jurisdiction  under the laws of which such  recipient is
organized  or in which its  principal  office is located  or, in the case of any
Lender,  in which its  applicable  lending  office is  located,  (b) any  branch
profits taxes imposed by the United States of America or any similar tax imposed
by any other  jurisdiction  in which the Borrower is located and (c) in the case
of a Foreign  Lender  (other  than an  assignee  pursuant  to a  request  by the
Borrower under Section 2.19(b)),  any withholding tax that is imposed on amounts
payable to such Foreign  Lender at the time such Foreign  Lender becomes a party
to this  Agreement  or is  attributable  to such  Foreign  Lender's  failure  or
inability to comply with Section 2.17(e), except to the extent that such Foreign
Lender's assignor (if any) was entitled,  at the time of assignment,  to receive
additional  amounts  from the  Borrower  with  respect to such  withholding  tax
pursuant to Section 2.17(a).

     "EXISTING  CREDIT  AGREEMENT"  means the Third Amended and Restated  Credit
Agreement  dated as of September 1, 1995 between the  Borrower,  the Banks party
thereto and Chase, as Administrative Agent, as in effect on the date hereof.

     "FFBR",  when used in reference to any  Swingline  Loan,  refers to whether
such Loan bears interest at a rate  determined by reference to the Federal Funds
Base Rate.

     "FEDERAL FUNDS BASE RATE" means,  for any Interest Period for any Swingline
Loan, the rate per annum (rounded upwards,  if necessary to the nearest 1/100 of
1%)  determined by the  Swingline  Lender to be equal to the rate charged to the
Swingline  Lender on Federal funds  transactions  for such Interest  Period with
members of the Federal  Reserve System arranged by Federal funds brokers on such
day.

     "FEDERAL FUNDS  EFFECTIVE  RATE" means,  for any day, the weighted  average
(rounded  upwards,  if  necessary,  to the  next  1/100  of 1%) of the  rates on
overnight Federal funds  transactions with members of the Federal Reserve System
arranged by Federal funds brokers,  as published on the next succeeding Business
Day by the  Federal  Reserve  Bank  of New  York,  or,  if  such  rate is not so
published for any day that is a Business Day, the average (rounded  upwards,  if
necessary,  to the  next  1/100 of 1%) of the  quotations  for such day for such
transactions  received  by the  Administrative  Agent from three  Federal  funds
brokers of recognized standing selected by it.

     "FINANCIAL OFFICER" means the chief financial officer, principal accounting
officer, treasurer or controller of the Borrower.

     "FIRST CHICAGO" means The First National Bank of Chicago.

     "FIXED  CHARGES" means,  for any period,  the sum, for the Borrower and its
Consolidated   Subsidiaries   (determined  on  a   consolidated   basis  without
duplication  in accordance  with GAAP),  of the  following:  (a) all payments of
principal of  Indebtedness  scheduled to be made during such period PLUS (b) all
Interest  Expense for such period PLUS (c) the  aggregate  amount of federal and
state taxes paid during such period to the extent that net operating  income for
such period pursuant to clause (a) of the definition of "Operating Cash Flow" in
this Section has been calculated before giving effect to such taxes PLUS (d) the
aggregate  amount of  Restricted  Payments  made pursuant to Section 7.05 (other
than pursuant to clause (a)(i) thereof) during such period.

     "FIXED CHARGES RATIO" means, as at any date, the ratio of (a) Adjusted Cash
Flow for the  period  of four  consecutive  fiscal  quarters  ending  on or most
recently ended prior to such date to (b) Fixed Charges for such period.

     "FIXED RATE"  means,  with  respect to any  Competitive  Loan (other than a
Eurodollar  Competitive Loan), the fixed rate of interest per annum specified by
the Lender making such Competitive Loan in its related Competitive Bid.

     "FIXED  RATE LOAN" means a  Competitive  Loan  bearing  interest at a Fixed
Rate.

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

     "FOREIGN SUBSIDIARIES" means any Subsidiary organized under the laws of any
country other than the United States of America,  or a State thereof,  which (if
such  Subsidiary were to become a Subsidiary  Guarantor  hereunder) the Borrower
and the  Administrative  Agent  have  determined  would  result in  adverse  tax
consequences  under Section 956 of the Code. For purposes  hereof,  it is agreed
that as of the date  hereof  each of  Canandaigua  World  Sales  Limited  and BB
Servicios, S.A. de C.V. are "Foreign Subsidiaries".

     "GAAP" means generally accepted accounting  principles in the United States
of America.

     "GOVERNMENTAL  AUTHORITY"  means the  government  of the  United  States of
America, any other nation or any political subdivision thereof, whether state or
local,  and any agency,  authority,  instrumentality,  regulatory  body,  court,
central  bank or  other  entity  exercising  executive,  legislative,  judicial,
taxing,  regulatory  or  administrative  powers or functions of or pertaining to
government.

     "GUARANTEE"  of or by any Person (the  "GUARANTOR")  means any  obligation,
contingent or otherwise,  of the guarantor  guaranteeing  or having the economic
effect of guaranteeing  any Indebtedness or other obligation of any other Person
(the  "PRIMARY  OBLIGOR") in any manner,  whether  directly or  indirectly,  and
including any obligation of the guarantor,  direct or indirect,  (a) to purchase
or pay (or  advance  or  supply  funds  for the  purchase  or  payment  of) such
Indebtedness  or other  obligation or to purchase (or to advance or supply funds
for the purchase of) any  security for the payment  thereof,  (b) to purchase or
lease Property,  securities or services for the purpose of assuring the owner of
such  Indebtedness or other obligation of the payment  thereof,  (c) to maintain
working capital,  equity capital or any other financial  statement  condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness  or other  obligation  or (d) as an account party in respect of any
letter of credit or letter of guaranty  issued to support such  Indebtedness  or
obligation; PROVIDED, that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business.

     "GUARANTEE  ASSUMPTION  AGREEMENT" means a Guarantee  Assumption  Agreement
substantially  in the form of Exhibit C by an entity  that,  pursuant to Section
6.09(a) is required to become a "Subsidiary Guarantor" hereunder in favor of the
Administrative Agent.

     "HAZARDOUS  MATERIALS"  means all  explosive or  radioactive  substances or
wastes  and all  hazardous  or toxic  substances,  wastes  or other  pollutants,
including  petroleum or petroleum  distillates,  asbestos or asbestos containing
materials,  polychlorinated  biphenyls,  radon gas, infectious or medical wastes
and all other  substances  or wastes of any  nature  regulated  pursuant  to any
Environmental Law.

     "HEDGING AGREEMENT" means any interest rate protection  agreement,  foreign
currency  exchange  agreement,  commodity  price  protection  agreement or other
interest or currency exchange rate or commodity price hedging arrangement.

     "INACTIVE SUBSIDIARY" means, as at any date, any Subsidiary of the Borrower
that, as at the end of and for the quarterly accounting period ending on or most
recently  ended prior to such date,  shall have less than $100,000 in assets and
less than $100,000 in gross revenues.

     "INCENTIVE STOCK OPTION PLAN" means the Canandaigua  Brands, Inc. Incentive
Stock Option Plan dated June 23, 1997.

     "INDEBTEDNESS"  of  any  Person  means,   without   duplication,   (a)  all
obligations  of such Person for  borrowed  money or with  respect to deposits or
advances of any kind,  (b) all  obligations  of such Person  evidenced by bonds,
debentures,  notes or similar  instruments,  (c) all  obligations of such Person
upon which interest  charges are  customarily  paid, (d) all obligations of such
Person under  conditional sale or other title retention  agreements  relating to
Property acquired by such Person,  (e) all obligations of such Person in respect
of the  deferred  purchase  price of  Property or  services  (excluding  current
accounts  payable  incurred  in  the  ordinary  course  of  business),  (f)  all
Indebtedness of others secured by (or for which the holder of such  Indebtedness
has an existing  right,  contingent or otherwise,  to be secured by) any Lien on
Property  owned or  acquired  by such  Person,  whether or not the  Indebtedness
secured  thereby  has  been  assumed,  (g)  all  Guarantees  by such  Person  of
Indebtedness of others,  (h) all Capital Lease  Obligations of such Person,  (i)
all obligations,  contingent or otherwise, of such Person as an account party in
respect of letters of credit and  letters of guaranty  and (j) all  obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances.  The
Indebtedness  of any Person shall include the  Indebtedness  of any other entity
(including  any  partnership  in which such Person is a general  partner) to the
extent such Person is liable  therefor  as a result of such  Person's  ownership
interest in or other  relationship  with such  entity,  except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.

     "INDEMNIFIED TAXES" means Taxes other than Excluded Taxes.

     "INTEREST  COVERAGE RATIO" means, as at any date of determination  thereof,
the ratio of (a)  Operating  Cash Flow for the  period of four  fiscal  quarters
ending on or most recently ended prior to such date to (b) Interest  Expense for
such period.

     "INTEREST  ELECTION  REQUEST" means a request by the Borrower to convert or
continue a Syndicated Borrowing in accordance with Section 2.08.

     "INTEREST EXPENSE" means, for any period, the sum, for the Borrower and its
Consolidated   Subsidiaries   (determined  on  a   consolidated   basis  without
duplication  in accordance  with GAAP),  of the  following:  (a) all interest in
respect of  Indebtedness  (including  the interest  component of any payments in
respect of Capital Lease Obligations)  accrued or capitalized during such period
(whether  or not  actually  paid during  such  period)  PLUS (b) the net amounts
payable (or MINUS the net amounts  receivable)  under  Interest Rate  Protection
Agreements  accrued during such period (whether or not actually paid or received
during such period) MINUS (c) all interest income during such period.

     "INTEREST  PAYMENT DATE" means (a) with respect to any ABR Syndicated Loan,
each Quarterly  Date,  (b) with respect to any Eurodollar  Loan, the last day of
the Interest  Period  applicable  to the  Borrowing of which such Loan is a part
and, in the case of a Eurodollar  Borrowing with an Interest Period of more than
three months'  duration,  each day prior to the last day of such Interest Period
that occurs at intervals of three months'  duration  after the first day of such
Interest  Period,  (c) with respect to any Fixed Rate Loan,  the last day of the
Interest Period applicable to the Borrowing of which such Loan is a part and any
other dates that are  specified  in the  applicable  Competitive  Bid Request as
Interest  Payment  Dates with respect to such  Borrowing and (d) with respect to
any Swingline Loan, the day that such Loan is required to be repaid.

     "INTEREST  PERIOD"  means (a) with  respect  to any  Eurodollar  Syndicated
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically  corresponding  day in the calendar month that is one, two, three or
six  months  thereafter,  as the  Borrower  may elect,  (b) with  respect to any
Eurodollar  Competitive  Borrowing,  the period  commencing  on the date of such
Borrowing and ending on the numerically  corresponding day in the calendar month
that is one, two, three or six months thereafter, as specified in the applicable
Competitive  Bid  Request,  (c) with  respect to any Fixed Rate  Borrowing,  the
period  (which  shall not be more than 90 days)  commencing  on the date of such
Borrowing and ending on the date  specified in the  applicable  Competitive  Bid
Request,  and (d) with  respect  to any  Swingline  FFBR  Borrowing,  the period
commencing  on the date of such  Borrowing  and  ending  on the date that is not
earlier than one day and not later than fifteen days after such  Swingline  Loan
is made, as the Borrower may elect; PROVIDED, that

               (i) if any  Interest  Period  would  end  on a day  other  than a
          Business  Day,  such  Interest  Period  shall be  extended to the next
          succeeding Business Day unless, in the case of a Eurodollar  Borrowing
          only,  such  next  succeeding  Business  Day  would  fall in the  next
          calendar  month,  in which case such Interest  Period shall end on the
          next preceding Business Day and

               (ii) any Interest  Period  pertaining  to a Eurodollar  Borrowing
          that  commences on the last Business Day of a calendar  month (or on a
          day for which there is no  numerically  corresponding  day in the last
          calendar month of such Interest Period) shall end on the last Business
          Day of the last calendar month of such Interest Period.

For  purposes  hereof,  the date of a Borrowing  initially  shall be the date on
which  such  Borrowing  is made  and,  in the  case of a  Syndicated  Borrowing,
thereafter  shall  be the  effective  date  of the  most  recent  conversion  or
continuation of such Borrowing.

     "INTEREST  RATE  PROTECTION  AGREEMENT"  means any Hedging  Agreement  that
consists of an interest rate protection agreement or other interest rate hedging
arrangement  providing for the transfer or  mitigation of interest  risks either
generally or under specific contingencies.

     "INVESTMENT" means, for any Person: (a) the acquisition  (whether for cash,
Property,  services or securities or otherwise) of capital stock,  bonds, notes,
debentures,  partnership or other ownership interests or other securities of any
other Person or any agreement to make any such acquisition (including any "short
sale" or any sale of any securities at a time when such securities are not owned
by the Person  entering into such sale);  (b) the making of any deposit with, or
advance,  loan or other extension of credit to, any other Person  (including the
purchase  of  Property  from  another  Person  subject  to an  understanding  or
agreement, contingent or otherwise, to resell such Property to such Person), but
excluding  any such  advance,  loan or  extension  of  credit  having a term not
exceeding 120 days arising in connection  with the sale of inventory or supplies
by such Person in the ordinary course of business;  (c) the entering into of any
Guarantee of, or other  contingent  obligation with respect to,  Indebtedness or
other  liability  of any other  Person  and  (without  duplication)  any  amount
committed to be advanced,  lent or extended to such Person;  or (d) the entering
into of any Hedging Agreement.

     "ISSUING  LENDER" means (i) Chase, in its capacity as the issuer of Letters
of Credit  (other then the Qingdao  Letter of Credit)  hereunder  and (ii) First
Chicago,  in its  capacity  as  the  issuer  of the  Qingdao  Letter  of  Credit
hereunder,  and their  respective  successors  in such  capacity  as provided in
Section 2.06(j).

     "JOINT  VENTURE  ENTITY"  means,  collectively,  (i) any  Subsidiary of the
Borrower that is not a  Wholly-Owned  Subsidiary  and (ii) any Subsidiary of any
Joint Venture Entity described in the foregoing clause (i), PROVIDED that in any
event,  until such time (if ever) as it shall become a Wholly-Owned  Subsidiary,
Polyphenolics, LLC shall be deemed to be a "Joint Venture Entity".

     "LC  DISBURSEMENT"  means a payment made by an Issuing Lender pursuant to a
Letter of Credit.

     "LC EXPOSURE"  means,  at any time,  the sum of (a) the  aggregate  undrawn
amount of all outstanding  Letters of Credit at such time PLUS (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on behalf
of the Borrower at such time.  The LC Exposure of any Lender of any Class at any
time shall be its  Applicable  Percentage of such Class of the total LC Exposure
at such time.

     "LENDERS"  means the Persons listed on Schedule I and any other Person that
shall have become a party hereto pursuant to an Assignment and Acceptance, other
than any such Person that ceases to be a party hereto  pursuant to an Assignment
and  Acceptance.  Unless the  context  otherwise  requires,  the term  "Lenders"
includes the Swingline Lender.

     "LETTER  OF  CREDIT"  means any letter of credit  issued  pursuant  to this
Agreement.

     "LETTER OF CREDIT  DOCUMENTS"  means, with respect to any Letter of Credit,
collectively,  any application  therefor and any other agreements,  instruments,
guarantees or other documents (whether general in application or applicable only
to such  Letter  of  Credit)  governing  or  providing  for (a) the  rights  and
obligations  of the parties  concerned or at risk with respect to such Letter of
Credit or (b) any collateral security for any of such obligations.

     "LIBO  RATE"  means,  with  respect  to any  Eurodollar  Borrowing  for any
Interest  Period,  the rate  appearing  on Page  3750 of the Dow  Jones  Markets
Service  (or on any  successor  or  substitute  page  of  such  Service,  or any
successor  to  or  substitute  for  such  Service,   providing  rate  quotations
comparable  to  those  currently  provided  on such  page of  such  Service,  as
determined  by the  Administrative  Agent  from  time to time  for  purposes  of
providing  quotations of interest  rates  applicable  to dollar  deposits in the
London interbank market) at approximately  11:00 a.m., London time, two Business
Days prior to the commencement of such Interest  Period,  as the rate for dollar
deposits with a maturity comparable to such Interest Period.

     In the event that such rate is not  available  at such time for any reason,
then the LIBO Rate with respect to such  Eurodollar  Borrowing for such Interest
Period shall be the rate (rounded upwards, if necessary, to the next 1/16 of 1%)
at which dollar  deposits of  $5,000,000  and for a maturity  comparable to such
Interest  Period  are  offered  by the  principal  London  office  of  Chase  in
immediately  available  funds in the London  interbank  market at  approximately
11:00 a.m.,  London time,  two Business Days prior to the  commencement  of such
Interest Period.

     "LIEN" means,  with respect to any asset, (a) any mortgage,  deed of trust,
lien, pledge, hypothecation,  encumbrance, charge or security interest in, on or
of such asset,  (b) the interest of a vendor or a lessor  under any  conditional
sale  agreement,  Capital Lease or title  retention  agreement (or any financing
lease having  substantially  the same economic  effect as any of the  foregoing)
relating to such asset and (c) in the case of securities,  any purchase  option,
call or similar right of a third party with respect to such securities.

     "LIFO RESERVE" means, for any period, for the Borrower and its Subsidiaries
(determined  on a  consolidated  basis without  duplication  in accordance  with
GAAP),  the reserve  established as at the end of such period by the Borrower to
reflect the  difference,  if any,  between (a) the cost of  inventory  using the
last-in  first-out  method of accounting  therefor and (b) the cost of inventory
using the first-in first-out method of accounting therefor.

     "LOAN DOCUMENTS" means, collectively,  this Agreement, the Letter of Credit
Documents, the Security Documents and the Tranche II Agreements.

     "LOANS"  means the loans made by the  Lenders to the  Borrower  pursuant to
this Agreement.

     "LONG-TERM STOCK INCENTIVE PLAN" means the Canandaigua  Brands,  Inc. Long-
Term Stock Incentive Plan dated June 23, 1997.

     "MARGIN" means,  with respect to any Competitive Loan bearing interest at a
rate based on the LIBO Rate, the marginal rate of interest,  if any, to be added
to or subtracted from the LIBO Rate to determine the rate of interest applicable
to such  Loan,  as  specified  by the  Lender  making  such Loan in its  related
Competitive Bid.

     "MARGIN STOCK" means "margin stock" within the meaning of Regulations G, T,
U and X of the Board.

     "MATERIAL  ADVERSE  EFFECT"  means a  material  adverse  effect  on (a) the
business, assets, operations, prospects or condition, financial or otherwise, of
the Borrower and its  Subsidiaries  taken as a whole,  (b) the legal  ability or
financial  capacity of any Obligor to perform any of its obligations  under this
Agreement  or any of the other Loan  Documents to which it is a party or (c) the
rights of or benefits  available to the Lenders  under this  Agreement or any of
the other Loan  Documents.  Material  Adverse  Effect  shall also  include,  for
purposes of Section 4.07, any material  adverse effect upon the operation of any
of the  facilities  owned,  operated  or  leased by the  Borrower  or any of its
Subsidiaries.

     "MATERIAL  INDEBTEDNESS"  means  Indebtedness  (other  than the  Loans  and
Letters of Credit), or obligations in respect of one or more Hedging Agreements,
of any  one or  more  of the  Borrower  and  its  Subsidiaries  in an  aggregate
principal  amount  exceeding  $500,000.  For  purposes of  determining  Material
Indebtedness, the "PRINCIPAL AMOUNT" of the obligations of any Person in respect
of any  Hedging  Agreement  at any time shall be the  maximum  aggregate  amount
(giving effect to any netting  agreements) that such Person would be required to
pay if such Hedging Agreement were terminated at such time.

     "MATURITY  DATE" means the Quarterly  Date falling on or nearest to June 1,
2003.

     "MORTGAGES"  means,  collectively,   the  respective  Deeds  of  Trust  and
Mortgages  executed and delivered by the Borrower and its Subsidiaries  pursuant
to the Existing Credit Agreement (or pursuant to earlier restatements thereof or
pursuant to the  original  Credit  Agreement  dated as of September  30,  1991),
covering the properties of the respective  Obligors  identified in Parts A and B
of  Schedule  VI, in each case as such  Deeds of Trust and  Mortgages  have been
heretofore  modified,  as such Deeds of Trust and  Mortgages  shall be  modified
pursuant to instruments of Modification and Confirmation  executed and delivered
pursuant to Section  5.01(g),  and as such Deeds of Trust and Mortgages shall be
further modified and supplemented and in effect from time to time.

     "MULTIEMPLOYER  PLAN"  means a  multiemployer  plan as  defined  in Section
4001(a)(3) of ERISA.

     "NET AVAILABLE PROCEEDS" means:

               (i) in the  case  of any  Disposition,  the  amount  of Net  Cash
          Payments received in connection with such Disposition;

               (ii) in the case of any Casualty Event,  the aggregate  amount of
          proceeds  of  insurance,  condemnation  awards and other  compensation
          received  by the  Borrower  and its  Subsidiaries  in  respect of such
          Casualty Event net of (A) reasonable expenses incurred by the Borrower
          and its  Subsidiaries  in connection  therewith and (B)  contractually
          required  repayments of Indebtedness  (other than  Indebtedness to the
          Lenders  hereunder)  to the extent  secured by a Lien on such Property
          and any income and  transfer  taxes  payable by the Borrower or any of
          its Subsidiaries in respect of such Casualty Event;

               (iii) in the case of any Equity Issuance, the aggregate amount of
          all cash received by the Borrower and its  Subsidiaries  in respect of
          such  Equity  Issuance  (net of  reasonable  expenses  incurred by the
          Borrower and its Subsidiaries in connection therewith); and

               (iv) in the case of any Debt Incurrence,  the aggregate amount of
          all cash received by the Borrower and its  Subsidiaries  in respect of
          such Debt Incurrence (net of (x) reasonable  expenses  incurred by the
          Borrower and its  Subsidiaries  in  connection  therewith and (y) cash
          proceeds  so  received  and applied to  refinance  other  Subordinated
          Indebtedness as contemplated by Section 7.09).

     "NET CASH PAYMENTS" means,  with respect to any Disposition,  the aggregate
amount  of all cash  payments  received  by the  Borrower  and its  Subsidiaries
directly or indirectly in connection  with such  Disposition;  PROVIDED that (a)
Net Cash  Payments  shall  be net of (i) the  amount  of any  legal,  title  and
recording  tax  expenses,  commissions  and other fees and expenses  paid by the
Borrower and its  Subsidiaries in connection with such  Disposition and (ii) any
Federal,  state and local  income or other taxes  estimated to be payable by the
Borrower and its  Subsidiaries as a result of such  Disposition (but only to the
extent that such estimated taxes are in fact paid to the relevant Federal, state
or  local  governmental  authority  within  three  months  of the  date  of such
Disposition)  and (b) Net Cash  Payments  shall be net of any  repayments by the
Borrower or any of its  Subsidiaries of Indebtedness to the extent that (i) such
Indebtedness  is secured by a Lien on the  Property  that is the subject of such
Disposition  and (ii) the  transferee  of (or holder of a Lien on) such Property
requires that such Indebtedness be repaid as a condition to the purchase of such
Property.

     "NOTES"  means  promissory  notes from time to time  executed and delivered
pursuant to Section 2.10(f).

     "OBLIGOR" means the Borrower and each Subsidiary Guarantor.

     "OFF-PREMISES   WAREHOUSES"   means  all   warehouses  and  other  bailment
facilities  owned and  operated by Persons  other than any Obligor  that are not
located on Property  owned or leased by any Obligor  and in which  inventory  is
maintained from time to time.

     "OPERATING CASH FLOW" means, for any period,  the sum, for the Borrower and
its  Consolidated  Subsidiaries  (determined  on a  consolidated  basis  without
duplication in accordance with GAAP), of the following: (a) net operating income
(calculated   before   income  taxes,   interest   income,   Interest   Expense,
extraordinary  and unusual  items and income or loss  attributable  to equity in
Affiliates)  for such  period PLUS (b)  depreciation  and  amortization  (to the
extent  deducted in determining  net operating  income) for such period PLUS (c)
the Adjustment  Amount for such period, if such Adjustment Amount is expense (or
MINUS the  Adjustment  Amount  for such  period,  if such  Adjustment  Amount is
income).

     Notwithstanding  the  foregoing,  if during any period for which  Operating
Cash Flow is being determined the Borrower or any of its Subsidiaries shall have
consummated  any  Acquisition  or  Disposition  then,  for all  purposes of this
Agreement (other than for purposes of determining  Excess Cash Flow),  Operating
Cash Flow shall be  determined  on a PRO FORMA basis as if such  Acquisition  or
Disposition had been made or consummated on the first day of such period.

     "OTHER  TAXES"  means any and all  present or future  stamp or  documentary
taxes or any other excise or Property  taxes,  charges or similar levies arising
from any payment made under any Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, any Loan Document.

     "PBGC"  means the  Pension  Benefit  Guaranty  Corporation  referred to and
defined in ERISA and any successor entity performing similar functions.

     "PERMITTED ENCUMBRANCES" means:

          (a) Liens  imposed  by law for taxes that are not yet due or are being
     contested in compliance with Section 6.04;

          (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
     bankers'  and other like  Liens  imposed  by law,  arising in the  ordinary
     course of business  and securing  obligations  that are not overdue by more
     than 30 days or are being contested in compliance with Section 6.04;

          (c) pledges and deposits  made in the  ordinary  course of business in
     compliance  with workers'  compensation,  unemployment  insurance and other
     social security laws or regulations;

          (d)  deposits  to secure the  performance  of bids,  trade  contracts,
     leases,  statutory obligations,  surety and appeal bonds, performance bonds
     and other obligations of a like nature, in each case in the ordinary course
     of business;

          (e) judgment  liens in respect of judgments  that do not constitute an
     Event of Default under clause (k) of Article VIII; and

          (f)  easements,   zoning   restrictions,   rights-of-way  and  similar
     encumbrances  on real  Property  imposed by law or arising in the  ordinary
     course of business that do not secure any monetary  obligations  and do not
     materially  detract  from the value of the  affected  Property or interfere
     with the ordinary conduct of business of the Borrower or any Subsidiary;

PROVIDED  that the term  "Permitted  Encumbrances"  shall not  include  any Lien
securing Indebtedness.

     "PERMITTED INVESTMENTS" means:

          (a)  direct  obligations  of,  or  obligations  the  principal  of and
     interest on which are  unconditionally  guaranteed by, the United States of
     America (or by any agency thereof to the extent such obligations are backed
     by the full faith and credit of the United States of America), in each case
     maturing within one year from the date of acquisition thereof;

          (b) investments in commercial  paper maturing within 270 days from the
     date of acquisition  thereof and having,  at such date of acquisition,  the
     highest  credit rating  obtainable  from Standard & Poor's Ratings Group or
     from Moody's Investors Services, Inc.;

          (c) investments in certificates of deposit,  banker's  acceptances and
     time deposits maturing within 180 days from the date of acquisition thereof
     issued or guaranteed by or placed with, and money market  deposit  accounts
     issued or  offered  by,  any  domestic  office of (x) any  commercial  bank
     organized  under  the laws of the  United  States of  America  or any State
     thereof which has a combined  capital and surplus and undivided  profits of
     not less than $500,000,000 or (y) any Lender hereunder; and

          (d) fully collateralized repurchase agreements with a term of not more
     than 30 days for securities  described in clause (a) of this definition and
     entered into with a financial institution satisfying the criteria described
     in clause (c) of this definition.

     "PERSON" means any natural person, corporation,  limited liability company,
trust, joint venture, association, company, partnership,  Governmental Authority
or other entity.

     "PLAN" means any employee  pension benefit plan (other than a Multiemployer
Plan) subject to the  provisions of Title IV of ERISA or Section 412 of the Code
or  Section  302 of ERISA,  and in respect  of which the  Borrower  or any ERISA
Affiliate  is (or, if such plan were  terminated,  would under  Section  4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.

     "PRIME RATE" means the rate of interest per annum  publicly  announced from
time to time by Chase as its prime rate in effect at its principal office in New
York City;  each change in the Prime Rate shall be effective  from and including
the date such change is publicly announced as being effective.

     "PROPERTY"  means  any  right or  interest  in or to  property  of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.

     "QINGDAO  LETTER OF CREDIT" means Letter of Credit No.  04021104  issued by
First Chicago to Qingdao Brewery, 56 Dengzhou Road,  Qingdao,  People's Republic
of China, as such Letter of Credit shall,  subject to the provisions of Sections
2.06(b) and 2.06(l), be modified, renewed and reissued from time to time.

     "QINGDAO  LETTER  OF CREDIT  LIMIT"  means  (i) as of the  Effective  Date,
$553,407,  and (ii) as of the date of any  modification or renewal or reissuance
of the Qingdao Letter of Credit,  the amount  specified by First Chicago,  as an
Issuing Lender, to the Administrative Agent and the Borrower at the time of such
modification,  renewal or reissuance as the new "Qingdao Letter of Credit Limit"
for purposes of this Agreement.

     "QUARTERLY DATES" means the 1st day of March, June,  September and December
in each  year,  the first of which  shall be the  first  such day after the date
hereof; PROVIDED that if any such day is not a Business Day, then such Quarterly
Date shall be the next succeeding Business Day.

     "REGISTER" has the meaning set forth in Section 10.04.

     "RELATED  PARTIES"  means,  with  respect  to any  specified  Person,  such
Person's Affiliates and the respective directors,  officers,  employees,  agents
and advisors of such Person and such Person's Affiliates.

     "RELEASE" means any release, spill, emission,  leaking, pumping, injection,
deposit, disposal,  discharge,  dispersal, leaching or migration into the indoor
or outdoor  environment,  including the movement of Hazardous  Materials through
ambient air, soil,  surface water,  ground water,  wetlands,  land or subsurface
strata.

     "REQUIRED LENDERS" means, at any time, Lenders having Revolving  Exposures,
Term Loans and unused  Commitments  representing  at least 66-2/3% of the sum of
the total Revolving Exposures,  outstanding Term Loans and unused Commitments at
such time;  PROVIDED  that,  for purposes of  declaring  the Loans to be due and
payable  pursuant to Article VIII,  and for all purposes  after the Loans become
due and payable pursuant to Article VIII or the Revolving  Commitments expire or
terminate, the outstanding Competitive Loans of the Lenders shall be included in
their respective  Revolving  Exposures in determining the Required Lenders.  The
"Required Lenders" of a particular Class of Loans means Lenders having Revolving
Exposures, Term Loans and unused Commitments of such Class representing at least
66-2/3%  of the sum of the total  Revolving  Exposures,  Term  Loans and  unused
Commitments of such Class at such time.

     "RESTRICTED  PAYMENT" means any dividend or other distribution  (whether in
cash,  securities or other  Property) with respect to any shares of any class of
capital  stock  of the  Borrower  or any of  its  Subsidiaries,  or any  payment
(whether in cash,  securities or other Property),  including any sinking fund or
similar   deposit,   on  account  of  the  purchase,   redemption,   retirement,
acquisition,  cancellation or termination of any such shares of capital stock of
the Borrower or any option, warrant or other right to acquire any such shares of
capital stock of the Borrower.

     "REVOLVING  AVAILABILITY  PERIOD"  means the period from and  including the
Effective Date to but excluding the earlier of the Maturity Date and the date of
termination of the Revolving Commitments.

     "REVOLVING  COMMITMENTS"  means,  collectively,  the  Tranche  I  Revolving
Commitments and the Tranche II Revolving Commitments.

     "REVOLVING EXPOSURE" means, collectively,  the Tranche I Revolving Exposure
and the Tranche II Revolving Exposure.

     "REVOLVING  LENDERS" means,  collectively,  the Tranche I Revolving Lenders
and the Tranche II Revolving Lenders.

     "REVOLVING  LOANS" means,  collectively,  the Tranche I Revolving Loans and
the Tranche II Revolving Loans.

     "SALE  AND  LEASEBACK   TRANSACTION"  means  a  transaction  or  series  of
transactions  pursuant  to which the  Borrower or any  Subsidiary  shall sell or
transfer to any Person (other than the Borrower or a  Subsidiary)  any Property,
whether now owned or hereafter acquired, and, as part of the same transaction or
series of  transactions,  the Borrower or any Subsidiary  shall rent or lease as
lessee, or similarly acquire the right to possession or use of, such Property or
one or more Properties  which it intends to use for the same purpose or purposes
as such  Property,  and in  circumstances  that  give  rise to a  Capital  Lease
Obligation of the Borrower or one or more of its Subsidiaries.

     "SECURITY  AGREEMENT" means a Security Agreement  substantially in the form
of  Exhibit  B  between  the  Borrower,   the  Subsidiary   Guarantors  and  the
Administrative Agent.

     "SECURITY  DOCUMENTS"  means,  collectively,  the Security  Agreement,  the
Mortgages and all Uniform Commercial Code financing  statements  required by the
Security  Agreement  or the  Mortgages  to be filed with respect to the security
interests in personal  Property and  fixtures  created  pursuant to the Security
Agreement or the Mortgages.

     "SENIOR DEBT RATIO" means,  as at the last day of any fiscal quarter of the
Borrower  (the  "DAY OF  DETERMINATION"),  the ratio of (a) the  average  of the
aggregate amounts of Indebtedness (other than any Subordinated  Indebtedness) of
the Borrower and its  Consolidated  Subsidiaries  (determined  on a consolidated
basis,  without  duplication,  in accordance with GAAP) as at such day and as at
the last days of each of the three immediately  preceding fiscal quarters to (b)
Operating Cash Flow for the period of four consecutive fiscal quarters ending on
such day of determination. Notwithstanding the foregoing, Indebtedness as at the
last  day of each  fiscal  quarter  included  in the  determination  of  average
Indebtedness  pursuant  to  clause  (a)  above  shall be  determined  under  the
assumption  that any prepayment of Term Loans hereunder from the proceeds of any
Equity  Issuance or Debt  Incurrence at any time during any such fiscal  quarter
included  in the  calculation  thereof  shall  have been made in the first  such
fiscal quarter.

     "SENIOR SUBORDINATED NOTE GUARANTEES" means, collectively,  the Guarantees,
pursuant  to  Section  1014  or  Article  14 of  the  Senior  Subordinated  Note
Indenture,  by each Subsidiary Guarantor of the punctual payment and performance
when due of all of the  Borrower's  Indenture  Obligations  (as  defined  in the
Senior Subordinated Note Indenture).

     "SENIOR  SUBORDINATED NOTES" means the Borrower's Senior Subordinated Notes
due 2003 issued pursuant to the Senior Subordinated Note Indenture.

     "SENIOR SUBORDINATED NOTE INDENTURE" means, collectively, (a) the Indenture
dated as of December 27, 1993 between the Borrower,  the  Subsidiary  Guarantors
and Chase (as  successor by merger to Chemical  Bank),  as trustee,  and (b) the
Indenture  dated as of October 29, 1996  between the  Borrower,  the  Subsidiary
Guarantors and Harris Trust and Savings Bank, as trustee.

     "SERIES" has the meaning set forth in Section 2.01(c).

     "STATUTORY  RESERVE RATE" means a fraction  (expressed  as a decimal),  the
numerator of which is the number one and the  denominator of which is the number
one MINUS the  aggregate  of the  maximum  reserve  percentages  (including  any
marginal,  special,  emergency or supplemental  reserves) expressed as a decimal
established  by the  Board to which  the  Administrative  Agent is  subject  for
eurocurrency  funding  (currently  referred to as "Eurocurrency  Liabilities" in
Regulation D of the Board). Such reserve percentages shall include those imposed
pursuant to such  Regulation D.  Eurodollar  Loans shall be deemed to constitute
eurocurrency  funding  and to be subject to such  reserve  requirements  without
benefit of or credit for proration,  exemptions or offsets that may be available
from  time to time to any  Lender  under  such  Regulation  D or any  comparable
regulation. The Statutory Reserve Rate shall be adjusted automatically on and as
of the effective date of any change in any reserve percentage.

     "SUBORDINATED  INDEBTEDNESS" means,  collectively,  (a) Indebtedness of the
Borrower in respect of the Senior  Subordinated Notes and (b) other Indebtedness
incurred in accordance with the provisions of Section 7.09.

     "SUBSIDIARY"  means, with respect to any Person (the "PARENT") at any date,
any corporation,  limited liability company,  partnership,  association or other
entity the accounts of which would be  consolidated  with those of the parent in
the parent's consolidated financial statements if such financial statements were
prepared  in  accordance  with  GAAP as of  such  date,  as  well  as any  other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests  representing more than 50%
of the equity or more than 50% of the ordinary voting power or, in the case of a
partnership,  more than 50% of the general partnership interests are, as of such
date,  owned,  controlled  or held,  or (b) that is, as of such date,  otherwise
Controlled,  by the parent or one or more  subsidiaries  of the parent or by the
parent and one or more subsidiaries of the parent.  Unless otherwise  specified,
"Subsidiary" means a Subsidiary of the Borrower.

     "SUBSIDIARY  GUARANTOR"  means  each of the  Subsidiaries  of the  Borrower
identified  under the caption  "SUBSIDIARY  GUARANTORS"  on the signature  pages
hereto and each Subsidiary of the Borrower that becomes a "Subsidiary Guarantor"
after the date hereof pursuant to Section 6.09(a).

     "SWINGLINE  EXPOSURE" means, at any time, the aggregate principal amount of
all Swingline  Loans  outstanding  at such time.  The Swingline  Exposure of any
Lender of any Class at any time shall be its Applicable Percentage of such Class
of the total Swingline Exposure at such time.

     "SWINGLINE  LENDER"  means  Chase,  in its  capacity as Lender of Swingline
Loans  hereunder,  or such other  Lender as the  Borrower  may from time to time
select as the Swingline Lender hereunder pursuant to Section 2.05(e).

     "SWINGLINE LOAN" means a Loan made pursuant to Section 2.05.

     "SYNDICATED  LOANS"  means,  collectively,  the Tranche I Revolving  Loans,
Tranche II Revolving Loans, Tranche I Term Loans and Tranche II Term Loans.

     "TAXES" means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.

     "TERM  LOAN  COMMITMENTS"  means,  collectively,  the  Tranche  I Term Loan
Commitments and Tranche II Term Loan Commitments.

     "TERM LOAN LENDERS"  means,  collectively,  the Tranche I Term Loan Lenders
and Tranche II Term Loan Lenders.

     "TERM LOAN PRINCIPAL PAYMENT DATES" means, collectively, the Tranche I Term
Loan Principal  Payment Dates and Tranche II Term Loan Principal  Payment Dates,
as applicable.

     "TERM LOANS" means, collectively,  the Tranche I Term Loans and the Tranche
II Term Loans.

     "TRANCHE I REVOLVING  COMMITMENT"  means, with respect to each Lender,  the
commitment,  if any,  of such Lender to make  Tranche I  Revolving  Loans and to
acquire  participations  in  Letters of Credit and  Swingline  Loans  hereunder,
expressed  as an  amount  representing  the  maximum  aggregate  amount  of such
Lender's Tranche I Revolving Exposure  hereunder,  as such commitment may be (a)
reduced  from time to time  pursuant to Section  2.09 or 2.11 and (b) reduced or
increased  from  time to  time  pursuant  to  assignments  by or to such  Lender
pursuant  to  Section  10.04.  The  initial  amount of each  Lender's  Tranche I
Revolving  Commitment  is set  forth on  Schedule  I, or in the  Assignment  and
Acceptance  pursuant  to which such  Lender  shall have  assumed  its  Tranche I
Revolving  Commitment,  as  applicable.  The  initial  aggregate  amount  of the
Lenders' Tranche I Revolving Commitments is $185,000,000.

     "TRANCHE I REVOLVING  EXPOSURE"  means,  with  respect to any Lender at any
time, the sum of the  outstanding  principal  amount of such Lender's  Tranche I
Revolving  Loans and its Tranche I Revolving LC Exposure and Tranche I Revolving
Swingline Exposure at such time.

     "TRANCHE I  REVOLVING  LENDERS"  means a Lender  with a Tranche I Revolving
Commitment  or, if the  Tranche  I  Revolving  Commitments  have  terminated  or
expired, a Lender with Tranche I Revolving Exposure.

     "TRANCHE I REVOLVING  LOAN" means a Loan made pursuant to Section  2.01(a),
which may be ABR Loans and/or Eurodollar Loans.

     "TRANCHE I TERM LOAN COMMITMENT"  means,  with respect to each Lender,  the
commitment,  if any, of such Lender to make a Tranche I Term Loan  hereunder  on
the Effective Date,  expressed as an amount  representing the maximum  principal
amount of the Tranche I Term Loan to be made by such Lender  hereunder,  as such
commitment may be (a) reduced from time to time pursuant to Section 2.09 or 2.11
and (b) reduced or increased  from time to time pursuant to assignments by or to
such Lender  pursuant to Section  10.04.  The  initial  amount of each  Lender's
Tranche I Term Loan  Commitment is set forth on Schedule I, or in the Assignment
and  Acceptance  pursuant to which such Lender  shall have assumed its Tranche I
Term  Loan  Commitment,  as  applicable.  The  initial  aggregate  amount of the
Lenders' Tranche I Term Loan Commitments is $140,000,000.

     "TRANCHE  I TERM  LOAN  LENDER"  means a Lender  with a Tranche I Term Loan
Commitment or an outstanding Tranche I Term Loan.

     "TRANCHE I TERM LOAN  PRINCIPAL  PAYMENT  DATES" means the Quarterly  Dates
falling  on or nearest to March 1, June 1,  September  1 and  December 1 of each
year, commencing with March 1, 1998, through and including June 1, 2003.

     "TRANCHE I TERM LOANS" means a Loan made pursuant to Section 2.01(b), which
may be ABR Loans and/or Eurodollar Loans.

     "TRANCHE II  AGREEMENTS"  means,  collectively,  the  Tranche II  Revolving
Agreements and the Tranche II Term Loan Agreements.

     "TRANCHE II  COMMITMENTS"  means,  collectively,  the Tranche II  Revolving
Commitments and the Tranche II Term Loan Commitments.

     "TRANCHE II LOANS" means, collectively,  the Tranche II Revolving Loans and
the Tranche II Term Loans.

     "TRANCHE  II  REVOLVING  AGREEMENT"  means,  with  respect to any Series of
Tranche II Revolving  Loans,  an agreement  between the Borrower and one or more
Lenders  pursuant  to which  each such  Lenders  agrees to become  obligated  in
respect of a Tranche II Revolving Commitment of such Series hereunder.

     "TRANCHE II REVOLVING  COMMITMENT"  means, with respect to each Lender, the
commitment,  if any, of such Lender to make  Tranche II  Revolving  Loans and to
acquire  participations  in  Letters of Credit and  Swingline  Loans  hereunder,
expressed  as an  amount  representing  the  maximum  aggregate  amount  of such
Lender's Tranche II Revolving Exposure hereunder,  as such commitment may be (a)
reduced  from time to time  pursuant to Section  2.09 or 2.11 and (b) reduced or
increased  from  time to  time  pursuant  to  assignments  by or to such  Lender
pursuant  to Section  10.04.  The  initial  amount of each  Lender's  Tranche II
Revolving  Commitment  shall be determined in accordance  with the provisions of
Section 2.01(c).

     "TRANCHE II REVOLVING  EXPOSURE"  means,  with respect to any Lender at any
time, the sum of the outstanding  principal  amount of such Lender's  Tranche II
Revolving  Loans and its  Tranche  II  Revolving  LC  Exposure  and  Tranche  II
Revolving Swingline Exposure at such time.

     "TRANCHE II REVOLVING  LENDERS"  means a Lender with a Tranche II Revolving
Commitment  or, if the  Tranche II  Revolving  Commitments  have  terminated  or
expired, a Lender with Tranche II Revolving Exposure.

     "TRANCHE II REVOLVING  LOAN" means a "Tranche II Revolving  Loan"  provided
for by Section 2.01(c), which may be ABR Loans and/or Eurodollar Loans.

     "TRANCHE  II TERM LOAN  AGREEMENT"  means,  with  respect  to any Series of
Tranche II Term Loans, an agreement between the Borrower and one or more Lenders
pursuant to which each such Lenders  agrees to become  obligated in respect of a
Tranche II Term Loan Commitment of such Series hereunder.

     "TRANCHE  II TERM  LOAN  AVAILABILITY  PERIOD"  means the  period  from and
including  the  Effective  Date  to and  including  the  Tranche  II  Term  Loan
Commitment Termination Date.

     "TRANCHE II TERM LOAN COMMITMENT" of any Series means, with respect to each
Lender,  the  commitment,  if any, of such Lender to make one or more Tranche II
Term Loans of such Series,  as such  commitment  may be (a) reduced from time to
time pursuant to Section 2.09 or 2.11 and (b) reduced or increased  from time to
time pursuant to assignments by or to such Lender pursuant to Section 10.04. The
initial  amount of each Lender's  Tranche II Term Loan  Commitment of any Series
will be specified in the Tranche II Term Loan Agreement for such Series, or will
be set forth in the  Assignment  and  Acceptance  pursuant  to which such Lender
shall have  assumed  its  Tranche II Term Loan  Commitment  of such  Series,  as
applicable.

     "TRANCHE II TERM LOAN COMMITMENT TERMINATION DATE" means, December 29, 2000
or, if such day is not a Business Day, the next preceding Business Day.

     "TRANCHE II TERM LOAN LENDER" means, in respect of any Series of Tranche II
Term Loans,  a Lender with a Tranche II Term Loan  Commitment of such Series or,
if the  Tranche II Term Loan  Commitments  of such  Series  have  terminated  or
expired, a Lender with outstanding Tranche II Term Loans of such Series.

     "TRANCHE II TERM LOAN  PRINCIPAL  PAYMENT  DATES" means,  for any Series of
Tranche II Term Loans, the dates specified in the Tranche II Term Loan Agreement
for such Series as the dates upon which  payments of principal in respect of the
Tranche II Term Loans of such Series are to be made.

     "TRANCHE II TERM LOANS" means the  "Tranche II Term Loans"  provided for by
Section 2.01(c), which may be ABR Loans and/or Eurodollar Loans.

     "TRANSACTIONS"  means  the  execution,  delivery  and  performance  by each
Obligor of this  Agreement and the other Loan Documents to which such Obligor is
intended to be a party,  the borrowing of Loans, the use of the proceeds thereof
and the issuance of Letters of Credit hereunder.

     "TYPE", when used in reference to any Loan or Borrowing,  refers to whether
the rate of interest on such Loan, or on the Loans comprising such Borrowing, is
determined by reference to the Adjusted LIBO Rate,  the Alternate  Base Rate or,
in the case of a Competitive Loan or Borrowing, the LIBO Rate or a Fixed Rate.

     "WHOLLY-OWNED   SUBSIDIARY"   means,  with  respect  to  any  Person,   any
corporation,  partnership or other entity of which all of the equity  securities
or  other  ownership  interests  (other  than,  in the  case  of a  corporation,
directors'  qualifying shares) are directly or indirectly owned or controlled by
such Person or one or more  Wholly-Owned  Subsidiaries of such Person or by such
Person and one or more  Subsidiaries  of such Person.  For purposes  hereof,  BB
Servicios,  S.A. de C.V. shall be deemed to be a Wholly-Owned Subsidiary so long
as the direct or indirect  ownership  interest of the Borrower therein shall not
fall below that indicated on Schedule IV.

     "WITHDRAWAL  LIABILITY" means liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer  Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.

     SECTION 1.02. CLASSIFICATION OF LOANS AND BORROWINGS.  For purposes of this
Agreement,  Loans may be classified and referred to by Class (e.g., a "Tranche I
Revolving  Loan") or by Type (e.g.,  a  "Eurodollar  Loan") or by Class and Type
(e.g., a "Eurodollar  Tranche I Revolving Loan"); each Series of Tranche II Term
Loans shall be deemed a separate Class of Loans  hereunder.  Borrowings also may
be classified and referred to by Class (e.g., a "Tranche I Revolving Borrowing")
or by Type  (e.g.,  a  "Eurodollar  Borrowing")  or by Class and Type  (e.g.,  a
"Eurodollar Tranche I Revolving Borrowing");  and each Series of Tranche II Term
Loan Borrowings and Tranche II Term Loan Commitments  shall be deemed a separate
Borrowing and Commitment hereunder. Swingline ABR Loans and Swingline FFBC Loans
shall be deemed to be Loans of the same Class but different Types.

     SECTION 1.03. TERMS GENERALLY.  The definitions of terms herein shall apply
equally to the  singular  and plural  forms of the terms  defined.  Whenever the
context may require,  any pronoun  shall  include the  corresponding  masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed  by the phrase  "without  limitation".  The word "will"
shall be  construed  to have the same  meaning  and effect as the word  "shall".
Unless the context requires  otherwise (a) any definition of or reference to any
agreement,  instrument or other document  herein shall be construed as referring
to such  agreement,  instrument or other  document as from time to time amended,
supplemented  or  otherwise  modified  (subject  to  any  restrictions  on  such
amendments,  supplements or modifications  set forth herein),  (b) any reference
herein to any Person shall be construed to include such Person's  successors and
assigns, (c) the words "herein", "hereof" and "hereunder",  and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any  particular  provision  hereof,  (d)  all  references  herein  to  Articles,
Sections,  Exhibits  and  Schedules  shall be construed to refer to Articles and
Sections of, and Exhibits and  Schedules  to, this  Agreement  and (e) the words
"asset" and  "Property"  shall be  construed to have the same meaning and effect
and to refer to any and all  tangible  and  intangible  assets  and  properties,
including cash, securities, accounts and contract rights.

     SECTION  1.04.  ACCOUNTING  TERMS;  GAAP.  Except  as  otherwise  expressly
provided  herein,  all  terms of an  accounting  or  financial  nature  shall be
construed  in  accordance  with GAAP,  as in effect from time to time;  PROVIDED
that,  if the  Borrower  notifies  the  Administrative  Agent that the  Borrower
requests an amendment  to any  provision  hereof to eliminate  the effect of any
change occurring after the date hereof in GAAP or in the application  thereof on
the operation of such  provision (or if the  Administrative  Agent  notifies the
Borrower that the Required  Lenders request an amendment to any provision hereof
for such  purpose),  regardless  of whether any such  notice is given  before or
after such change in GAAP or in the  application  thereof,  then such  provision
shall be interpreted  on the basis of GAAP as in effect and applied  immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.


                                   ARTICLE II

                                   THE CREDITS

     SECTION 2.01. THE COMMITMENTS.

     (a)  TRANCHE I REVOLVING  LOANS.  Subject to the terms and  conditions  set
forth  herein,  each  Lender  agrees to make  Tranche I  Revolving  Loans to the
Borrower  from  time to time  during  the  Revolving  Availability  Period in an
aggregate  principal  amount that will not result in (i) such Lender's Tranche I
Revolving  Exposure  exceeding such Lender's  Tranche I Revolving  Commitment or
(ii) the sum of the  total  Tranche I  Revolving  Exposures  PLUS the  aggregate
principal amount of outstanding  Competitive Loans exceeding the total Tranche I
Revolving Commitments.  Within the foregoing limits and subject to the terms and
conditions  set forth  herein,  the  Borrower  may borrow,  prepay and  reborrow
Tranche I Revolving Loans.

     (b) TRANCHE I TERM  LOANS.  Subject to the terms and  conditions  set forth
herein,  each  Lender  agrees to make one or more  Tranche  I Term  Loans to the
Borrower on the Effective Date in a principal amount equal to its Tranche I Term
Loan  Commitment.  Amounts  repaid in respect of Tranche I Term Loans may not be
reborrowed.

     (c)  TRANCHE II LOANS.  In addition  to  borrowings  of Tranche I Revolving
Loans and Tranche I Term  Loans,  at any time and from time to time on or before
the Tranche II Term Loan Commitment  Termination  Date, the Borrower may request
that the Lenders offer to enter into  commitments to make  additional  revolving
loans  (which shall be "Tranche II Revolving  Loans") or  additional  term loans
(which  shall be "Tranche II Term Loans") to the  Borrower  hereunder  (it being
understood that such offer may be made by any financial  institution  that is to
become a Lender hereunder in connection with the making of such offer under this
paragraph (c), so long as the Administrative  Agent shall have consented to such
financial  institution being a Lender  hereunder,  it being understood that such
consent shall not be  unreasonably  withheld).  In the event that one or more of
the Lenders offer, in their sole discretion, to enter into such commitments, and
such Lenders and the Borrower  agree as to the amount of such  commitments  that
shall be allocated to the respective  Lenders making such offers, as to the fees
(if  any)  to be  payable  by the  Borrower  in  connection  therewith  and  the
Applicable  Rate and (in the case of  Tranche II Term  Loans)  the  amortization
relating thereto, the Borrower,  the Administrative Agent and such Lenders shall
execute and deliver a Tranche II  Revolving  Loan  Agreement  or Tranche II Term
Loan Agreement,  as applicable,  and such Lenders shall become obligated to make
Tranche II Revolving Loans or Tranche II Term Loans,  as applicable,  under this
Agreement  in an amount  equal to the  amount  of their  respective  Tranche  II
Revolving  Commitments and Tranche II Term Loan Commitments,  as applicable,  as
specified  in such  Agreement.  The Tranche II Loans to be made  pursuant to any
Tranche II Agreement  in response to any such  request by the Borrower  shall be
deemed to be a separate  "SERIES"  of Tranche II  Revolving  Loans or Tranche II
Term Loans, as applicable, for all purposes of this Agreement.

     Anything herein to the contrary notwithstanding,  (i) the minimum aggregate
principal  amount of Tranche II  Commitments  entered into  pursuant to any such
request (and, accordingly,  the minimum aggregate principal amount of any Series
of  Tranche  II Loans)  shall be  $50,000,000,  (ii) the  aggregate  outstanding
principal amount of Tranche II Loans of all Series,  together with the aggregate
unutilized Tranche II Commitments of all Series,  shall not exceed  $200,000,000
at any time,  PROVIDED that the Borrower may not make any request for Tranche II
Commitments  hereunder after December 31, 1999 to the extent that,  after giving
effect to any Tranche II  Commitments  issued in response to such  request,  the
aggregate  outstanding  principal  amount of  Tranche  II Loans  and  unutilized
Tranche II Commitments  would exceed  $100,000,000,  (iii) no single Lender (and
its  Affiliates)  may  have   Commitments  and  Loans   (including   Incremental
Commitments  and  Incremental  Loans)  aggregating  more  than 20% of the  total
outstanding Commitments and Loans of all Classes (other than Competitive Loans),
(iv) the Tranche II Term Loan  Commitments of any Series shall  terminate on the
earlier of the  Tranche II Term Loan  Commitment  Termination  Date and the date
three months after the date of the respective Tranche II Term Loan Agreement for
such Series and (v) in no event shall the Tranche II Term Loan Agreement for any
Series of Tranche II Term Loans provide for the final maturity of the Tranche II
Term  Loans of such  Series  to be later  than  June 1,  2003,  nor  shall  such
Agreement  provide for  amortization of the Tranche II Term Loans of such Series
at a rate faster (i.e.  earlier) than the rate of  amortization of the Tranche I
Term Loans (the  determination of whether or not such  amortization is faster to
be made by the Administrative Agent).

     Following  agreement  by the  Borrower  and one or more of the  Lenders  as
provided above, subject to the terms and conditions set forth herein:

          (x) each  Tranche II  Revolving  Lender of any  Series  agrees to make
     Tranche II Revolving Loans of such Series to the Borrower from time to time
     during the Revolving  Availability Period, in an aggregate principal amount
     up to but not exceeding  the amount of the Tranche II Revolving  Commitment
     of such Series of such Tranche II Revolving  Lender;  within the  foregoing
     limits  and  subject  to the terms and  conditions  set forth  herein,  the
     Borrower may borrow,  prepay and reborrow Tranche II Revolving Loans of any
     Series as the Borrower shall from time to time select; and

          (y) each  Tranche  II Term Loan  Lender of any  Series  agrees to make
     Tranche  II Term  Loans of such  Series to the  Borrower  from time to time
     during the period  from and  including  the  earlier of the Tranche II Term
     Loan Commitment  Termination  Date and the date three months after the date
     of the  respective  Tranche II Term Loan  Agreement for such Series,  in an
     aggregate  principal  amount  up to but not  exceeding  the  amount  of the
     Tranche II Term Loan Commitment of such Series of such Tranche II Term Loan
     Lender.

     SECTION 2.02. LOANS AND BORROWINGS.

     (a) OBLIGATION OF LENDERS.  Each Syndicated Loan shall be made as part of a
Borrowing  consisting  of Loans of the same  Class and Type made by the  Lenders
ratably in accordance with their respective Commitments of the applicable Class.
Each  Competitive Loan shall be made in accordance with the procedures set forth
in Section 2.04.  The failure of any Lender to make any Loan required to be made
by it shall not relieve any other Lender of its obligations hereunder;  PROVIDED
that the  Commitments  and  Competitive  Bids of the  Lenders are several and no
Lender  shall be  responsible  for any other  Lender's  failure to make Loans as
required.

     (b) TYPE OF LOANS.  Subject to Section 2.14, (i) each Syndicated  Borrowing
shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may
request in accordance  herewith,  and (ii) each  Competitive  Borrowing shall be
comprised  entirely of Eurodollar  Loans or Fixed Rate Loans as the Borrower may
request  in  accordance  herewith.  Each  Lender  at its  option  may  make  any
Eurodollar  Loan by causing any domestic or foreign  branch or Affiliate of such
Lender to make such Loan;  PROVIDED  that any  exercise of such option shall not
affect the obligation of the Borrower to repay such Loan in accordance  with the
terms of this Agreement.

     (c) MINIMUM  AMOUNTS.  At the  commencement of each Interest Period for any
Eurodollar Syndicated Borrowing,  such Borrowing shall be in an aggregate amount
of  $3,000,000  or a larger  multiple  of  $100,000.  At the time  that each ABR
Syndicated  Borrowing is made,  such Borrowing  shall be in an aggregate  amount
equal to  $3,000,000  or a larger  multiple of  $100,000;  PROVIDED  that an ABR
Syndicated  Borrowing may be in an aggregate  amount that is equal to the entire
unused  balance  of the total  Commitments  of the  applicable  Class or that is
required to finance the  reimbursement  of an LC Disbursement as contemplated by
Section  2.06(f).  Each Tranche II Term Loan Borrowing  shall be in an aggregate
amount equal to  $50,000,000 or a larger  multiple of $100,000  (PROVIDED that a
Tranche II Term Loan  Borrowing  may be in an aggregate  amount that is equal to
the entire unused balance of the total Tranche II Term Loan  Commitments).  Each
Competitive  Borrowing shall be in an aggregate amount equal to $10,000,000 or a
larger  multiple of $5,000,000.  Each Swingline Loan shall be in an amount equal
to $500,000 or a larger  multiple of $100,000.  Borrowings of more than one Type
and Class may be outstanding at the same time;  PROVIDED that there shall not at
any time be more than a total of twenty (20) Eurodollar  Syndicated  Borrowings,
Competitive Borrowings and Swingline Borrowings outstanding.

     (d) CONVERSION OR CONTINUATION  OF EURODOLLAR  LOANS.  Notwithstanding  any
other  provision  of this  Agreement,  the  Borrower  shall not be  entitled  to
request,  or to elect to  convert  to or  continue  as a  Syndicated  Eurodollar
Borrowing:  (i) any Revolving Borrowing or Competitive Borrowing if the Interest
Period  requested with respect  thereto would end after the Maturity Date;  (ii)
any Term Loan  Borrowing  of any Class if the  Interest  Period  requested  with
respect  thereto  would end after the  Maturity  Date for the Term Loans of such
Class; or (iii) any Term Loan of any Class if the Interest Period therefor would
commence  before  and end after any Term Loan  Principal  Payment  Date for such
Class unless, after giving effect thereto, the aggregate principal amount of the
Term Loans of such Class having  Interest  Periods that end after such Term Loan
Principal  Payment Date shall be equal to or less than the  aggregate  principal
amount of the Term Loans of such Class permitted to be outstanding  after giving
effect  to the  payments  of  principal  required  to be made on such  Term Loan
Principal Payment Date.

     SECTION 2.03. REQUESTS FOR SYNDICATED  BORROWINGS.  To request a Syndicated
Borrowing, the Borrower shall notify the Administrative Agent of such request by
telephone (a) in the case of a Eurodollar Syndicated  Borrowing,  not later than
11:00  a.m.,  New York City time,  three  Business  Days  before the date of the
proposed Borrowing or (b) in the case of an ABR Syndicated Borrowing,  not later
than 11:00 a.m.,  New York City time,  one  Business  Day before the date of the
proposed Borrowing;  PROVIDED that any such notice of an ABR Revolving Borrowing
to finance the  reimbursement  of an LC  Disbursement as contemplated by Section
2.06(f) may be given not later than 10:00 a.m.,  New York City time, on the date
of the proposed  Borrowing.  Each such  telephonic  Borrowing  Request  shall be
irrevocable and shall be confirmed  promptly by hand delivery or telecopy to the
Administrative  Agent of a written  Borrowing  Request in a form approved by the
Administrative  Agent and  signed by the  Borrower.  Each  such  telephonic  and
written Borrowing Request shall specify the following  information in compliance
with Section 2.02:

          (i) whether  the  requested  Borrowing  is to be a Tranche I Revolving
     Borrowing, Tranche II Revolving Borrowing, Tranche I Term Loan Borrowing or
     Tranche II Term Loan Borrowing  (including,  if applicable,  the respective
     Series of Tranche II Term Loans to which such Borrowing relates);

          (ii) the aggregate amount of the requested Borrowing;

          (iii) the date of such Borrowing, which shall be a Business Day;

          (iv) whether such  Borrowing is to be an ABR Borrowing or a Eurodollar
     Borrowing;

          (v) in the case of a Eurodollar Borrowing, the initial Interest Period
     to be  applicable  thereto,  which  shall be a period  contemplated  by the
     definition of the term "Interest Period"; and

          (vi) the location and number of the Borrower's  account to which funds
     are to be disbursed,  which shall comply with the  requirements  of Section
     2.07.

If no election as to the Type of  Syndicated  Borrowing is  specified,  then the
requested Syndicated Borrowing shall be an ABR Borrowing.  If no Interest Period
is specified with respect to any requested Eurodollar Syndicated Borrowing, then
the Borrower shall be deemed to have selected an Interest  Period of one month's
duration.  Promptly  following receipt of a Borrowing Request in accordance with
this Section,  the Administrative  Agent shall advise each Lender of the details
thereof  and of the  amount  of  such  Lender's  Loan  to be made as part of the
requested Borrowing.

     SECTION 2.04. COMPETITIVE BID PROCEDURE.

     (a) REQUESTS FOR BIDS BY BORROWER.  Subject to the terms and conditions set
forth  herein,  from time to time during the Revolving  Availability  Period the
Borrower may request Competitive Bids and may (but shall not have any obligation
to) accept Competitive Bids and borrow Competitive Loans;  PROVIDED that the sum
of the  total  Revolving  Exposures  PLUS  the  aggregate  principal  amount  of
outstanding  Competitive  Loans at any time shall not exceed the total Revolving
Commitments.  To  request  Competitive  Bids,  the  Borrower  shall  notify  the
Administrative  Agent of such request by telephone,  in the case of a Eurodollar
Borrowing,  not later than 11:00 a.m.,  New York City time,  four  Business Days
before  the date of the  proposed  Borrowing  and,  in the case of a Fixed  Rate
Borrowing,  not later than 10:00  a.m.,  New York City time,  one  Business  Day
before the date of the proposed Borrowing; PROVIDED that the Borrower may submit
up to (but not more than) three  Competitive Bid Requests on the same day, but a
Competitive  Bid Request  shall not be made within five  Business Days after the
date of any previous  Competitive Bid Request,  unless any and all such previous
Competitive  Bid  Requests  shall have been  withdrawn or all  Competitive  Bids
received in response  thereto  rejected.  Each such  telephonic  Competitive Bid
Request  shall  be  confirmed  promptly  by hand  delivery  or  telecopy  to the
Administrative  Agent of a written Competitive Bid Request in a form approved by
the  Administrative  Agent and signed by the Borrower.  Each such telephonic and
written  Competitive  Bid Request  shall specify the  following  information  in
compliance with Section 2.02:

          (i) the aggregate amount of the requested Borrowing;

          (ii) the date of such Borrowing, which shall be a Business Day;

          (iii)  whether such  Borrowing  is to be a  Eurodollar  Borrowing or a
     Fixed Rate Borrowing;

          (iv) the Interest  Period to be  applicable to such  Borrowing,  which
     shall be a period  contemplated  by the  definition  of the term  "Interest
     Period"; and

          (v) the location and number of the  Borrower's  account to which funds
     are to be disbursed,  which shall comply with the  requirements  of Section
     2.07.

Promptly  following receipt of a Competitive Bid Request in accordance with this
Section,  the  Administrative  Agent shall notify the  Revolving  Lenders of the
details  thereof  by  telecopy,   inviting  the  Revolving   Lenders  to  submit
Competitive Bids.

     (b) MAKING OF BIDS BY  LENDERS.  Each  Revolving  Lender may (but shall not
have any  obligation  to) make one or more  Competitive  Bids to the Borrower in
response to a  Competitive  Bid  Request.  Each  Competitive  Bid by a Revolving
Lender  must be in a form  approved  by the  Administrative  Agent  and  must be
received by the  Administrative  Agent by telecopy,  in the case of a Eurodollar
Competitive  Borrowing,  not later  than 9:30 a.m.,  New York City  time,  three
Business Days before the proposed date of such Competitive Borrowing, and in the
case of a Fixed Rate Borrowing, not later than 9:30 a.m., New York City time, on
the proposed date of such  Competitive  Borrowing.  Competitive Bids that do not
conform  substantially to the form approved by the  Administrative  Agent may be
rejected by the Administrative  Agent, and the Administrative Agent shall notify
the applicable  Lender as promptly as  practicable.  Each  Competitive Bid shall
specify (i) the principal amount (which shall be $5,000,000 or a larger multiple
of $1,000,000 and which may equal the entire principal amount of the Competitive
Borrowing  requested by the Borrower) of the Competitive  Loan or Loans that the
Lender is willing to make,  (ii) the  Competitive Bid Rate or Rates at which the
Lender is prepared to make such Loan or Loans  (expressed  as a percentage  rate
per annum in the form of a decimal  to no more than  four  decimal  places)  and
(iii) the Interest Period applicable to each such Loan and the last day thereof.

     (c) NOTIFICATION OF BIDS BY ADMINISTRATIVE  AGENT. The Administrative Agent
shall promptly  notify the Borrower by telecopy of the  Competitive Bid Rate and
the principal  amount  specified in each Competitive Bid and the identity of the
Lender that shall have made such Competitive Bid.

     (d) ACCEPTANCE OF BIDS BY BORROWER.  Subject only to the provisions of this
paragraph,  the Borrower may accept or reject any Competitive  Bid. The Borrower
shall notify the Administrative  Agent by telephone,  confirmed by telecopy in a
form  approved by the  Administrative  Agent,  whether and to what extent it has
decided to accept or reject each  Competitive  Bid, in the case of a  Eurodollar
Competitive  Borrowing,  not later than 10:30  a.m.,  New York City time,  three
Business Days before the date of the proposed Competitive Borrowing,  and in the
case of a Fixed Rate  Borrowing,  not later than 10:30 a.m., New York City time,
on the  proposed  date of the  Competitive  Borrowing;  PROVIDED,  that  (i) the
failure of the Borrower to give such notice shall be deemed to be a rejection of
each  Competitive Bid, (ii) the Borrower shall not accept a Competitive Bid made
at a particular  Competitive Bid Rate if the Borrower  rejects a Competitive Bid
made  at a lower  Competitive  Bid  Rate,  (iii)  the  aggregate  amount  of the
Competitive  Bids accepted by the Borrower shall not exceed the aggregate amount
of the requested  Competitive Borrowing specified in the related Competitive Bid
Request,  (iv) to the  extent  necessary  to comply  with  clause  (iii) of this
proviso,  the Borrower may accept  Competitive  Bids at the same Competitive Bid
Rate in part, which acceptance, in the case of multiple Competitive Bids at such
Competitive  Bid Rate,  shall be made pro rata in accordance  with the amount of
each such  Competitive  Bid,  and (v)  except  pursuant  to clause  (iv) of this
proviso, no Competitive Bid shall be accepted for a Competitive Loan unless such
Competitive  Loan is in a principal amount of $5,000,000 or a larger multiple of
$1,000,000;  PROVIDED  FURTHER that if a  Competitive  Loan must be in an amount
less than  $5,000,000  because  of the  provisions  of clause  (iv) of the first
proviso  of  this  paragraph,  such  Competitive  Loan  may be in an  amount  of
$1,000,000 or any multiple  thereof,  and in calculating the pro rata allocation
of  acceptances  of  portions  of  multiple  Competitive  Bids  at a  particular
Competitive  Bid Rate  pursuant to such clause (iv) the amounts shall be rounded
to multiples of  $1,000,000 in a manner  determined  by the  Borrower.  A notice
given by the Borrower pursuant to this paragraph shall be irrevocable.

     (e) NOTIFICATION OF ACCEPTANCES BY ADMINISTRATIVE AGENT. The Administrative
Agent shall promptly  notify each bidding Lender by telecopy  whether or not its
Competitive  Bid has been accepted (and, if so, the amount and  Competitive  Bid
Rate so  accepted),  and each  successful  bidder will  thereupon  become bound,
subject to the terms and  conditions  hereof,  to make the  Competitive  Loan in
respect of which its Competitive Bid has been accepted.

     (f) BIDS BY ADMINISTRATIVE  AGENT. If the Administrative  Agent shall elect
to submit a  Competitive  Bid in its capacity as a Lender,  it shall submit such
Competitive Bid directly to the Borrower at least one quarter of an hour earlier
than  the  time by  which  the  other  Lenders  are  required  to  submit  their
Competitive Bids to the  Administrative  Agent pursuant to paragraph (b) of this
Section.

     SECTION 2.05. SWINGLINE LOANS.

     (a) AGREEMENT TO MAKE SWINGLINE LOANS.  Subject to the terms and conditions
set forth herein,  the Swingline  Lender agrees to make  Swingline  Loans to the
Borrower  from time to time  during the  Revolving  Availability  Period,  in an
aggregate  principal  amount at any time outstanding that will not result in (i)
the  aggregate  principal  amount  of  outstanding   Swingline  Loans  exceeding
$20,000,000 or (ii) total Revolving Exposure PLUS the aggregate principal amount
of outstanding  Competitive  Loans  exceeding the total  Revolving  Commitments;
PROVIDED  that the  Swingline  Lender  shall not be required to make a Swingline
Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and
subject to the terms and conditions  set forth herein,  the Borrower may borrow,
prepay and reborrow Swingline Loans.

     (b) INTEREST  RATES.  Swingline  Loans shall be ABR Loans or FFBR Loans, as
selected by the Borrower,  except that the Swingline Lender and the Borrower may
agree  that the  interest  rate in  respect  of a  Swingline  Loan  made by such
Swingline  Lender,  for a period ending on the date that is not earlier than one
day and not later than fifteen days after such  Swingline Loan is made, be at an
alternative  rate of interest (and with such  applicable  margins and prepayment
premiums)  as may from time to time be  offered by the  Swingline  Lender to the
Borrower in its sole discretion; PROVIDED that upon any sale pursuant to Section
2.05(d)  of  participations  in any  Swingline  Loan  the  interest  on which is
determined by reference to the Federal  Funds Base Rate or any such  alternative
rate, such Swingline Loans shall automatically be converted into an ABR Loan.

     (c) NOTICE OF SWINGLINE LOANS BY BORROWER. To request a Swingline Loan, the
Borrower  shall  notify the  Administrative  Agent of such  request by telephone
(confirmed by telecopy),  not later than 12:00 noon,  New York City time, on the
day of a proposed  Swingline  Loan.  Each such notice shall be  irrevocable  and
shall specify the  requested  date (which shall be a Business  Day),  amount and
type of the requested  Swingline  Loan. The  Administrative  Agent will promptly
advise the Swingline  Lender of any such notice received from the Borrower.  The
Swingline  Lender shall make each  Swingline  Loan  available to the Borrower by
means of a credit  to the  general  deposit  account  of the  Borrower  with the
Swingline  Lender  (or,  in the case of a  Swingline  Loan made to  finance  the
reimbursement  of  an  LC  Disbursement  as  provided  in  Section  2.06(f),  by
remittance to the respective  Issuing  Lender) by 3:00 p.m., New York City time,
on the requested date of such Swingline Loan.

     (d)  PARTICIPATIONS BY LENDERS IN SWINGLINE LOANS. The Swingline Lender may
by written notice given to the  Administrative  Agent not later than 10:00 a.m.,
New York  City  time,  on any  Business  Day  require  the  Lenders  to  acquire
participations  on such Business Day in all or a portion of the Swingline  Loans
outstanding. Such notice to the Administrative Agent shall specify the aggregate
amount of Swingline  Loans in which  Lenders  will  participate.  Promptly  upon
receipt of such notice,  the  Administrative  Agent will give notice  thereof to
each Lender,  specifying in such notice such Lender's  Applicable  Percentage of
such Swingline Loan or Loans. Each Lender hereby absolutely and  unconditionally
agrees,  upon receipt of notice as provided above in this  paragraph,  to pay to
the Administrative Agent, for the account of the Swingline Lender, such Lender's
Applicable  Percentage of such Swingline Loan or Loans. Each Lender acknowledges
and agrees that its  obligation  to acquire  participations  in Swingline  Loans
pursuant  to this  paragraph  is  absolute  and  unconditional  and shall not be
affected  by  any   circumstance   whatsoever,   including  the  occurrence  and
continuance  of a Default or reduction or termination  of the  Commitments,  and
that each such payment shall be made without any offset, abatement,  withholding
or reduction whatsoever. Each Lender shall comply with its obligation under this
paragraph by wire transfer of immediately available funds, in the same manner as
provided in Section  2.07 with respect to Loans made by such Lender (and Section
2.07 shall apply, MUTATIS MUTANDIS,  to the payment obligations of the Lenders),
and the  Administrative  Agent shall  promptly pay to the  Swingline  Lender the
amounts so  received  by it from the  Lenders.  The  Administrative  Agent shall
notify  the  Borrower  of any  participations  in any  Swingline  Loan  acquired
pursuant to this paragraph, and thereafter payments in respect of such Swingline
Loan shall be made to the Administrative  Agent and not to the Swingline Lender.
Any amounts  received by the Swingline  Lender from the Borrower (or other party
on behalf of the  Borrower) in respect of a Swingline  Loan after receipt by the
Swingline  Lender of the proceeds of a sale of  participations  therein shall be
promptly remitted to the Administrative  Agent; any such amounts received by the
Administrative  Agent shall be promptly remitted by the Administrative  Agent to
the Lenders that shall have made their  payments  pursuant to this paragraph and
to the  Swingline  Lender,  as their  interests  may  appear.  The  purchase  of
participations  in a Swingline Loan pursuant to this paragraph shall not relieve
the Borrower of any default in the payment thereof.

     (e) REPLACEMENT OF SWINGLINE LENDER. The Borrower may at any time, and from
time to time,  request that the  then-current  Swingline Lender be replaced with
another  Lender  hereunder  designated by the Borrower and  satisfactory  to the
Administrative  Agent.  Any such  replacement  shall be  effected  pursuant to a
written  instrument,  in form and substance  satisfactory to the  Administrative
Agent,  under  which such new Lender  agrees to become  the  "Swingline  Lender"
hereunder,  and the  predecessor  Swingline  Lender  is  relieved  of all of its
obligations hereunder as the "Swingline Lender", PROVIDED that in no event shall
any such  replacement  occur unless the  principal of and interest on all of the
Swingline  Loans of the  predecessor  Swingline  Lender  shall have been paid in
full.

     SECTION 2.06. LETTERS OF CREDIT.

     (a)  GENERAL.  Subject to the terms and  conditions  set forth  herein,  in
addition to the Loans  provided  for in Section  2.01,  the Borrower may request
Chase, as an Issuing Lender,  to issue, at any time and from time to time during
the Revolving Availability Period, Letters of Credit for its own account in such
form as is acceptable to such Issuing Lender in its reasonable determination. In
addition,  First Chicago, as an Issuing Lender, has issued the Qingdao Letter of
Credit for the account of the Borrower. Letters of Credit issued hereunder shall
constitute utilization of the Revolving Commitments.

     (b) NOTICE OF ISSUANCE,  AMENDMENT,  RENEWAL OR  EXTENSION.  To request the
issuance of a Letter of Credit (or the  amendment,  renewal or  extension  of an
outstanding  Letter of Credit),  the Borrower shall hand deliver or telecopy (or
transmit by electronic  communication,  if  arrangements  for doing so have been
approved by the respective  Issuing Lender) to the applicable Issuing Lender and
the  Administrative  Agent  (reasonably  in  advance  of the  requested  date of
issuance, amendment, renewal or extension) a notice requesting the issuance of a
Letter of Credit, or identifying the Letter of Credit to be amended,  renewed or
extended, and specifying the date of issuance,  amendment,  renewal or extension
(which shall be a Business  Day),  the date on which such Letter of Credit is to
expire (which shall comply with  paragraph (d) of this  Section),  the amount of
such Letter of Credit, the name and address of the beneficiary  thereof and such
other information as shall be necessary to prepare,  amend, renew or extend such
Letter of Credit.  If requested by the respective  Issuing Lender,  the Borrower
also  shall  submit a letter  of credit  application  on such  Issuing  Lender's
standard  form in  connection  with any request  for a Letter of Credit.  In the
event of any  inconsistency  between the terms and  conditions of this Agreement
and the terms and  conditions  of any form of  letter of credit  application  or
other  agreement  submitted  by the Borrower to, or entered into by the Borrower
with,  an  Issuing  Lender  relating  to any  Letter  of  Credit,  the terms and
conditions of this Agreement shall control.  Upon any modification or renewal or
reissuance by First  Chicago,  as an Issuing  Lender,  of the Qingdao  Letter of
Credit,  First Chicago shall forthwith notify the  Administrative  Agent and the
Borrower  of the new  Qingdao  Letter  of  Credit  Limit  for  purposes  of this
Agreement.

     (c)  LIMITATIONS ON AMOUNTS.  A Letter of Credit shall be issued,  amended,
renewed or extended only if (and upon issuance,  amendment, renewal or extension
of each Letter of Credit the Borrower  shall be deemed to represent  and warrant
that), after giving effect to such issuance, amendment, renewal or extension (i)
the aggregate LC Exposure of Chase,  as an Issuing Lender  (determined for these
purposes  without giving effect to the  participations  therein of the Revolving
Lenders   pursuant  to  paragraph  (e)  of  this  Section),   shall  not  exceed
$20,000,000,  (ii) the  aggregate  LC Exposure of First  Chicago,  as an Issuing
Lender   (determined   for  these   purposes   without   giving  effect  to  the
participations  therein of the  Revolving  Lenders  pursuant to paragraph (e) of
this Section), shall not exceed the Qingdao Letter of Credit Limit and (iii) the
sum of the total  Revolving  Exposures  PLUS the aggregate  principal  amount of
outstanding Competitive Loans shall not exceed the total Revolving Commitments.

     (d) EXPIRATION  DATE. Each Letter of Credit shall expire at or prior to the
close of business on the earlier of (i) the date twelve months after the date of
the  issuance  of such  Letter  of Credit  (or,  in the case of any  renewal  or
extension thereof,  twelve months after the then-current expiration date of such
Letter of Credit,  so long as such  renewal or  extension  occurs  within  three
months  of such  then-current  expiration  date)  and (ii) the date that is five
Business Days prior to the Maturity Date.

     (e) PARTICIPATIONS.  By the issuance of a Letter of Credit (or an amendment
to a Letter of Credit  increasing the amount  thereof) by either Issuing Lender,
and  without  any  further  action  on the part of such  Issuing  Lender  or the
Lenders,  such Issuing  Lender  hereby  grants to each  Lender,  and each Lender
hereby  acquires from such Issuing  Lender,  a  participation  in such Letter of
Credit equal to such Lender's  Applicable  Percentage  of the  aggregate  amount
available to be drawn under such Letter of Credit.  Each Lender acknowledges and
agrees that its obligation to acquire participations  pursuant to this paragraph
in respect of Letters of Credit is absolute and  unconditional  and shall not be
affected by any  circumstance  whatsoever,  including any amendment,  renewal or
extension of any Letter of Credit or the occurrence and continuance of a Default
or reduction or termination of the Commitments, and that each such payment shall
be made without any offset, abatement, withholding or reduction whatsoever.

     In  consideration  and in furtherance of the foregoing,  each Lender hereby
absolutely and  unconditionally  agrees to pay to the Administrative  Agent, for
the  account  of  the  respective  Issuing  Lender,   such  Lender's  Applicable
Percentage of each LC  Disbursement  made by an Issuing Lender promptly upon the
request of such Issuing Lender at any time from the time of such LC Disbursement
until such LC  Disbursement  is  reimbursed by the Borrower or at any time after
any  reimbursement  payment is required to be refunded to the  Borrower  for any
reason.  Each  such  payment  shall be made in the same  manner as  provided  in
Section  2.07 with  respect to Loans made by such Lender (and Section 2.07 shall
apply,  MUTATIS MUTANDIS,  to the payment  obligations of the Lenders),  and the
Administrative  Agent shall  promptly pay to the  respective  Issuing Lender the
amounts so received by it from the Lenders.  Promptly  following  receipt by the
Administrative  Agent of any  payment  from the  Borrower  pursuant  to the next
following  paragraph,  the Administrative Agent shall distribute such payment to
respective  Issuing Lender or, to the extent that the Lenders have made payments
pursuant to this  paragraph  to  reimburse  such  Issuing  Lender,  then to such
Lenders and such Issuing Lender as their interests may appear.  Any payment made
by a Lender pursuant to this paragraph to reimburse an Issuing Lender for any LC
Disbursement  shall not  constitute a Loan and shall not relieve the Borrower of
its obligation to reimburse such LC Disbursement.

     (f)  REIMBURSEMENT.  If an Issuing Lender shall make any LC Disbursement in
respect of a Letter of Credit,  the Borrower shall reimburse such Issuing Lender
in  respect of such LC  Disbursement  by paying to the  Administrative  Agent an
amount equal to such LC  Disbursement  not later than 12:00 noon,  New York City
time,  on (i) the  Business  Day that the  Borrower  receives  notice of such LC
Disbursement,  if such  notice is received  prior to 10:00  a.m.,  New York City
time, or (ii) the Business Day  immediately  following the day that the Borrower
receives  such  notice,  if such  notice  is not  received  prior to such  time,
PROVIDED that, if such LC Disbursement  is not less than $100,000,  the Borrower
may,  subject  to the  conditions  to  borrowing  set forth  herein,  request in
accordance  with Section 2.03 or 2.05 that such payment be financed  with an ABR
Revolving Borrowing or Swingline Loan in an equivalent amount and, to the extent
so financed,  the Borrower's obligation to make such payment shall be discharged
and replaced by the resulting ABR Revolving Borrowing or Swingline Loan.

     If the Borrower  fails to make such  payment  when due, the  Administrative
Agent shall notify each Revolving Lender of the applicable LC Disbursement,  the
payment  then  due  from the  Borrower  in  respect  thereof  and such  Lender's
Applicable Percentage thereof.

     (g)  OBLIGATIONS  ABSOLUTE.  The  Borrower's  obligation  to  reimburse  LC
Disbursements  as provided in paragraph  (f) of this Section  shall be absolute,
unconditional  and  irrevocable,  and shall be performed  strictly in accordance
with the terms of this Agreement under any and all circumstances  whatsoever and
irrespective  of (i) any lack of  validity  or  enforceability  of any Letter of
Credit,  or any term or  provision  therein,  (ii) any  draft or other  document
presented  under a Letter of Credit proving to be forged,  fraudulent or invalid
in any  respect or any  statement  therein  being  untrue or  inaccurate  in any
respect, (iii) payment by the respective Issuing Lender under a Letter of Credit
against  presentation of a draft or other document that does not comply strictly
with  the  terms  of such  Letter  of  Credit,  and  (iv)  any  other  event  or
circumstance  whatsoever,  whether or not similar to any of the foregoing,  that
might,  but for the provisions of this Section,  constitute a legal or equitable
discharge of the Borrower's obligations hereunder.

     Neither the  Administrative  Agent,  the Lenders nor either Issuing Lender,
nor any of their Related Parties,  shall have any liability or responsibility by
reason of or in connection with the issuance or transfer of any Letter of Credit
by the  respective  Issuing Lender or any payment or failure to make any payment
thereunder  (irrespective  of  any  of  the  circumstances  referred  to in  the
preceding  sentence),  or any error,  omission,  interruption,  loss or delay in
transmission or delivery of any draft,  notice or other  communication  under or
relating  to any Letter of Credit  (including  any  document  required to make a
drawing  thereunder),  any error in  interpretation  of  technical  terms or any
consequence  arising from causes  beyond the control of the  respective  Issuing
Lender;  PROVIDED that the foregoing shall not be construed to excuse an Issuing
Lender from  liability to the  Borrower to the extent of any direct  damages (as
opposed to consequential  damages,  claims in respect of which are hereby waived
by the  Borrower to the extent  permitted  by  applicable  law)  suffered by the
Borrower  that  are  caused  by  such  Issuing  Lender's  negligence  or  wilful
misconduct when determining whether drafts and other documents presented under a
Letter of Credit comply with the terms  thereof.  The parties  hereto  expressly
agree that:

          (i) an Issuing  Lender may accept  documents that appear on their face
     to be in  substantial  compliance  with the  terms of a  Letter  of  Credit
     without responsibility for further investigation,  regardless of any notice
     or information to the contrary,  and may make payment upon  presentation of
     documents  that appear on their face to be in substantial  compliance  with
     the terms of such Letter of Credit;

          (ii) an Issuing Lender shall have the right,  in its sole  discretion,
     to  decline  to accept  such  documents  and to make such  payment  if such
     documents  are not in strict  compliance  with the terms of such  Letter of
     Credit; and

          (iii)  this  sentence  shall  establish  the  standard  of  care to be
     exercised by an Issuing  Lender when  determining  whether drafts and other
     documents  presented under a Letter of Credit comply with the terms thereof
     (and the parties hereto hereby waive, to the extent permitted by applicable
     law, any standard of care inconsistent with the foregoing).

     (h)  DISBURSEMENT  PROCEDURES.  The Issuing Lender for any Letter of Credit
shall,  within a reasonable  time  following  its receipt  thereof,  examine all
documents  purporting  to  represent a demand for  payment  under such Letter of
Credit.  Such Issuing Lender shall promptly  after such  examination  notify the
Administrative  Agent and the Borrower by telephone  (confirmed  by telecopy) of
such demand for payment and whether such Issuing Lender has made or will make an
LC Disbursement thereunder; PROVIDED that any failure to give or delay in giving
such notice shall not relieve the Borrower of its  obligation to reimburse  such
Issuing Lender and the Lenders with respect to any such LC Disbursement.

     (i) INTERIM INTEREST.  If the Issuing Lender for any Letter of Credit shall
make any LC  Disbursement,  then,  unless the Borrower  shall  reimburse such LC
Disbursement in full on the date such LC Disbursement is made, the unpaid amount
thereof  shall bear  interest,  for each day from and including the date such LC
Disbursement is made to but excluding the date that the Borrower reimburses such
LC Disbursement,  at the rate per annum then applicable to ABR Syndicated Loans;
PROVIDED that, if the Borrower fails to reimburse such LC Disbursement  when due
pursuant to paragraph  (f) of this  Section,  then Section  2.13(e) shall apply.
Interest  accrued  pursuant to this  paragraph  shall be for the account of such
Issuing Lender, except that interest accrued on and after the date of payment by
any Lender  pursuant to paragraph (f) of this Section to reimburse  such Issuing
Lender shall be for the account of such Lender to the extent of such payment.

     (j) REPLACEMENT OF AN ISSUING LENDER. Either Issuing Lender may be replaced
at any time by written agreement among the Borrower,  the Administrative  Agent,
the replaced Issuing Lender and the successor Issuing Lender. The Administrative
Agent shall notify the Lenders of any such replacement of an Issuing Lender.  At
the time any such replacement shall become effective, the Borrower shall pay all
unpaid fees accrued for the account of the replaced  Issuing Lender  pursuant to
Section 2.12(b). From and after the effective date of any such replacement,  (i)
the successor  Issuing  Lender shall have all the rights and  obligations of the
replaced  Issuing  Lender under this Agreement with respect to Letters of Credit
to be issued by it thereafter  and (ii)  references  herein to the term "Issuing
Lender"  shall be deemed to  include  such  successor  or any  previous  Issuing
Lender, or such successor and all previous Issuing Lenders, as the context shall
require.  After the  replacement  of an Issuing Lender  hereunder,  the replaced
Issuing  Lender shall  remain a party hereto and shall  continue to have all the
rights and obligations of an Issuing Lender under this Agreement with respect to
Letters  of  Credit  issued  by it prior to such  replacement,  but shall not be
required to issue additional Letters of Credit.

     (k) CASH  COLLATERALIZATION.  If either (i) an Event of Default shall occur
and be continuing and the Borrower receives notice from the Administrative Agent
or the Required Lenders (or, if the maturity of the Loans has been  accelerated,
Lenders with LC Exposure representing at least 66-2/3% of the total LC Exposure)
demanding the deposit of cash collateral pursuant to this paragraph, or (ii) the
Borrower shall be required to provide cover for LC Exposure  pursuant to Section
2.11(d),  the Borrower shall immediately  deposit into the Collateral Account an
amount in cash equal to, in the case of an Event of Default,  the LC Exposure as
of such date PLUS any accrued and unpaid  interest  thereon  and, in the case of
cover pursuant to Section  2.11(d),  the amount required under Section  2.11(d);
PROVIDED  that the  obligation  to deposit  such cash  collateral  shall  become
effective  immediately,  and  such  deposit  shall  become  immediately  due and
payable,  without demand or other notice of any kind, upon the occurrence of any
Event of Default with respect to the Borrower  described in clause (h) or (i) of
Article  VIII.  Such  deposit  shall  be held  by the  Administrative  Agent  as
collateral in the first  instance for the LC Exposure  under this  Agreement and
thereafter for the payment of the "Secured  Obligations" under and as defined in
the Security Agreement.

     (l)   QINGDAO   LETTER  OF  CREDIT.   Anything   herein  to  the   contrary
notwithstanding,  the amount of the Qingdao Letter of Credit for all purposes of
this Agreement and the other Loan Documents (including,  without limitation, the
usage of the Revolving  Commitments  hereunder,  the  calculation  of fees under
Section 2.12 and the  obligation  of the  Revolving  Lenders to  participate  in
Letters of Credit arising upon drawings  thereunder) shall be deemed to be equal
to the Qingdao Letter of Credit Limit and any LC Exposure  arising in respect of
the  Qingdao  Letter of Credit in excess of the Qingdao  Letter of Credit  Limit
shall be solely for the account of First Chicago,  as an Issuing Lender,  and no
other Lender shall be obligated to participate in such excess amount,  nor shall
such excess amount be entitled to the benefits of the Security Documents.

     (m)  EXISTING  LETTERS OF CREDIT.  Pursuant to Section 2.04 of the Existing
Credit  Agreement,  Chase, as an "Issuing Bank"  thereunder,  has issued various
"Revolving  Letters of  Credit"  under and as  defined  in the  Existing  Credit
Agreement and First  Chicago,  as an "Issuing Bank"  thereunder,  has issued the
"Qingdao  Letter  of  Credit"  under  and  as  defined  in the  Existing  Credit
Agreement.  On the Effective Date, subject to the satisfaction of the conditions
to  effectiveness  of the  obligations  of the  Lenders  hereunder  set forth in
Article V, each of such "Revolving Letters of Credit" and the "Qingdao Letter of
Credit" under the Existing Credit Agreement shall automatically, and without any
action on the part of any Person, become a Letter of Credit hereunder.

     SECTION 2.07. FUNDING OF BORROWINGS.

     (a) FUNDING BY LENDERS.  Each Lender  shall make each Loan to be made by it
hereunder on the proposed date thereof by wire transfer of immediately available
funds by 12:00 noon,  New York City time,  to the account of the  Administrative
Agent most recently  designated by it for such purpose by notice to the Lenders;
PROVIDED that  Swingline  Loans shall be made as provided in Section  2.05.  The
Administrative  Agent will make such Loans available to the Borrower by promptly
remitting the amounts so received,  in like funds, to an account of the Borrower
designated by the Borrower in the  applicable  Borrowing  Request or Competitive
Bid  Request;  PROVIDED  that  ABR  Revolving  Borrowings  made to  finance  the
reimbursement  of an LC  Disbursement  as provided in Section  2.06(f)  shall be
remitted by the Administrative Agent to the respective Issuing Lender.

     (b) PRESUMPTION BY ADMINISTRATIVE  AGENT.  Unless the Administrative  Agent
shall have  received  notice  from a Lender  prior to the  proposed  date of any
Borrowing that such Lender will not make available to the  Administrative  Agent
such Lender's share of such Borrowing,  the Administrative Agent may assume that
such  Lender  has made such  share  available  on such date in  accordance  with
paragraph  (a) of this Section and may, in reliance upon such  assumption,  make
available to the Borrower a corresponding amount. In such event, if a Lender has
not in  fact  made  its  share  of the  applicable  Borrowing  available  to the
Administrative  Agent,  then the  applicable  Lender and the Borrower  severally
agree to pay to the Administrative  Agent forthwith on demand such corresponding
amount with  interest  thereon,  for each day from and  including  the date such
amount is made available to the Borrower to but excluding the date of payment to
the  Administrative  Agent, at (i) in the case of such Lender, the Federal Funds
Effective Rate or (ii) in the case of the Borrower, the interest rate applicable
to ABR Loans. If such Lender pays such amount to the Administrative  Agent, then
such amount shall constitute such Lender's Loan included in such Borrowing.

     SECTION 2.08. INTEREST ELECTIONS.

     (a)  ELECTIONS  BY BORROWER  FOR  SYNDICATED  BORROWINGS.  Each  Syndicated
Borrowing  initially shall be of the Type specified in the applicable  Borrowing
Request and, in the case of a  Eurodollar  Syndicated  Borrowing,  shall have an
initial Interest Period as specified in such Borrowing Request.  Thereafter, the
Borrower may elect to convert such  Borrowing to a different Type or to continue
such Borrowing and, in the case of a Eurodollar Syndicated Borrowing,  may elect
Interest  Periods  therefor,  all as provided in this Section.  The Borrower may
elect  different  options  with  respect to  different  portions of the affected
Borrowing,  in which case each such portion shall be allocated ratably among the
Lenders holding the Loans  comprising such Borrowing,  and the Loans  comprising
each such portion shall be considered a separate  Borrowing.  This Section shall
not apply to Competitive  Borrowings or Swingline  Borrowings,  which may not be
converted or continued.

     (b) NOTICE OF ELECTIONS.  To make an election pursuant to this Section, the
Borrower shall notify the Administrative  Agent of such election by telephone by
the time that a Borrowing  Request  would be required  under Section 2.03 if the
Borrower were requesting a Syndicated  Borrowing of the Type resulting from such
election to be made on the effective date of such election. Each such telephonic
Interest  Election Request shall be irrevocable and shall be confirmed  promptly
by hand delivery or telecopy to the  Administrative  Agent of a written Interest
Election  Request in a form approved by the  Administrative  Agent and signed by
the Borrower.

     (c) INFORMATION IN ELECTION  NOTICES.  Each telephonic and written Interest
Election  Request  shall specify the following  information  in compliance  with
Section 2.02:

          (i) the  Borrowing to which such  Interest  Election  Request  applies
     (including,  if applicable,  the respective Series of Tranche II Term Loans
     to which such Interest  Election Request relates) and, if different options
     are being elected with respect to different portions thereof,  the portions
     thereof to be  allocated  to each  resulting  Borrowing  (in which case the
     information  to be  specified  pursuant  to clauses  (iii) and (iv) of this
     paragraph shall be specified for each resulting Borrowing);

          (ii) the effective date of the election made pursuant to such Interest
     Election Request, which shall be a Business Day;

          (iii) whether the  resulting  Borrowing is to be an ABR Borrowing or a
     Eurodollar Borrowing; and

          (iv)  if  the  resulting  Borrowing  is a  Eurodollar  Borrowing,  the
     Interest  Period  to be  applicable  thereto  after  giving  effect to such
     election,  which shall be a period  contemplated  by the  definition of the
     term "Interest Period".

If any such Interest  Election Request requests a Eurodollar  Borrowing but does
not  specify  an  Interest  Period,  then the  Borrower  shall be deemed to have
selected an Interest Period of one month's duration.

     (d) NOTICE BY ADMINISTRATIVE  AGENT TO LENDERS.  Promptly following receipt
of an Interest  Election  Request,  the  Administrative  Agent shall advise each
Lender of the details  thereof and of such  Lender's  portion of each  resulting
Borrowing.

     (e)  PRESUMPTION  IF NO NOTICE.  If the Borrower  fails to deliver a timely
Interest  Election  Request with respect to a  Eurodollar  Syndicated  Borrowing
prior to the end of the Interest Period  applicable  thereto,  then, unless such
Borrowing is repaid as provided herein,  at the end of such Interest Period such
Borrowing shall be converted to an ABR Syndicated Borrowing. Notwithstanding any
contrary provision hereof, if an Event of Default has occurred and is continuing
and the  Administrative  Agent,  at the  request  of the  Required  Lenders,  so
notifies the Borrower, then, so long as an Event of Default is continuing (i) no
outstanding  Syndicated  Borrowing  may  be  converted  to  or  continued  as  a
Eurodollar   Syndicated  Borrowing  and  (ii)  unless  repaid,  each  Eurodollar
Syndicated  Borrowing  shall be converted to an ABR Syndicated  Borrowing at the
end of the Interest Period applicable thereto.

     SECTION 2.09. TERMINATION AND REDUCTION OF THE COMMITMENTS.

     (a) SCHEDULED TERMINATION.  Unless previously terminated, (i) the Tranche I
Term Loan Commitments  shall terminate on the close of business on the Effective
Date,  (ii) the Tranche II Term Loan  Commitments of each Series shall terminate
on the Tranche II Term Loan Commitment  Termination Date and (iii) the Revolving
Commitments shall terminate on the Maturity Date.

     (b)  VOLUNTARY  TERMINATION  OR  REDUCTION.  The  Borrower  may at any time
terminate,  or from time to time reduce, the Commitments of any Class (including
the Commitments of any Series of Tranche II Term Loans);  PROVIDED that (i) each
reduction of the  Commitments  of any Class pursuant to this Section shall be in
an amount that is  $3,000,000  or a larger  multiple  of  $100,000  and (ii) the
Borrower  shall not terminate or reduce the Revolving  Commitments  of any Class
if, after giving effect to any concurrent  prepayment of the Loans in accordance
with Section 2.11, the sum of the total  Revolving  Exposures of such Class PLUS
the aggregate  principal amount of outstanding  Competitive  Loans of such Class
would exceed the total Revolving Commitments of such Class.

     (c) NOTICE OF  TERMINATION  OR  REDUCTION.  The  Borrower  shall notify the
Administrative  Agent of any election to terminate or reduce the  Commitments of
any Class under paragraph (b) of this Section at least three Business Days prior
to the effective date of such termination or reduction, specifying such election
and the effective date thereof.  Promptly  following receipt of any notice,  the
Administrative  Agent shall  advise the Lenders of the  contents  thereof.  Each
notice delivered by the Borrower  pursuant to this Section shall be irrevocable;
PROVIDED that a notice of termination of the Revolving  Commitments of any Class
delivered  by the Borrower  may state that such notice is  conditioned  upon the
effectiveness  of other  credit  facilities,  in which  case such  notice may be
revoked by the  Borrower (by notice to the  Administrative  Agent on or prior to
the specified effective date) if such condition is not satisfied.

     (d) EFFECT OF TERMINATION OR REDUCTION. Any termination or reduction of the
Commitments of any Class shall be permanent.  Each reduction of the  Commitments
of any Class shall be made ratably  among the Lenders in  accordance  with their
respective Commitments of such Class.

     SECTION 2.10. REPAYMENT OF LOANS; EVIDENCE OF DEBT.

     (a)  REPAYMENT.  The Borrower  hereby  unconditionally  promises to pay the
Loans outstanding hereunder as follows:

          (i) to the  Administrative  Agent for the  account of each  Lender the
     outstanding  principal  amount of each Revolving Loan of such Lender on the
     Maturity Date,

          (ii) to the  Administrative  Agent for the  account of each Lender the
     outstanding  principal amount of each Tranche I Term Loan of such Lender on
     each Tranche I Principal Payment Date set forth below in an amount equal to
     the principal  amount set forth  opposite such Tranche I Principal  Payment
     Date:

             PRINCIPAL PAYMENT DATE                 PRINCIPAL AMOUNT

               March 1, 1998                           $6,000,000
               June 1, 1998                            $6,000,000
               September 1, 1998                       $6,000,000
               December 1, 1998                        $6,000,000

               March 1, 1999                           $6,000,000
               June 1, 1999                            $6,000,000
               September 1, 1999                       $6,000,000
               December 1, 1999                        $6,000,000

               March 1, 2000                           $6,000,000
               June 1, 2000                            $6,000,000
               September 1, 2000                       $6,000,000
               December 1, 2000                        $6,000,000

               March 1, 2001                           $6,000,000
               June 1, 2001                            $6,000,000
               September 1, 2001                       $6,000,000
               December 1, 2001                        $6,000,000

               March 1, 2002                           $6,000,000
               June 1, 2002                            $6,000,000
               September 1, 2002                       $6,000,000
               December 1, 2002                        $6,000,000

               March 1, 2003                          $10,000,000
               June 1, 2003                           $10,000,000

          (iii) to the  Administrative  Agent for the account of each Tranche II
     Term Loan  Lender of any Series the  outstanding  principal  amount of each
     Tranche  II Term  Loan of such  Lender  of such  Series  on the  respective
     Tranche II Term Loan Principal Payments Dates for the Tranche II Term Loans
     of such Series,

          (iv) to the  Administrative  Agent for the  account of the  respective
     Lender the then unpaid  principal  amount of each  Competitive Loan of such
     Lender on the last day of the Interest Period applicable to such Loan, and

          (v) to the Swingline  Lender the then unpaid  principal amount of each
     Swingline  Loan on the earliest of (A) the Maturity Date, (B) the fifteenth
     day after such Loan is made (but not earlier  than one  Business  Day after
     such  Swingline  Loan is made)  and (C) in the case of any  Swingline  FFBR
     Loan, the last day of the Interest Period for such Loan;  PROVIDED that (i)
     if any such day is not a Business  Day,  then the  Borrower  shall pay such
     Swingline  Loan on the next  preceding  Business  Day and (ii) on each date
     that a Revolving  Borrowing or Competitive  Borrowing is made, the Borrower
     shall repay all Swingline ABR Loans then outstanding.

     (b)  MANNER  OF  PAYMENT.  Prior  to any  repayment  or  prepayment  of any
Borrowings of any Class  hereunder,  the Borrower  shall select the Borrowing or
Borrowings of such Class to be paid and shall notify the Administrative Agent by
telephone  (confirmed by telecopy) of such  selection not later than 11:00 a.m.,
New York City  time,  three  Business  Days  before the  scheduled  date of such
payment;  PROVIDED that each payment of Borrowings of any Class shall be applied
to pay any outstanding ABR Borrowings of such Class before any other  Borrowings
of such Class. If the Borrower fails to make a timely selection of the Borrowing
or Borrowings to be repaid or prepaid, such payment shall be applied,  first, to
pay any outstanding ABR Borrowings of the applicable Class and, second, to other
Borrowings  of such  Class  in the  order  of the  remaining  duration  of their
respective  Interest Periods (the Borrowing with the shortest remaining Interest
Period to be paid first), and for these purposes, Competitive Bid Loans shall be
deemed to be in the same Class as Tranche I Revolving  Loans.  Each payment of a
Borrowing shall be applied ratably to the Loans included in such Borrowing.

     (c) MAINTENANCE OF LOAN ACCOUNTS BY LENDERS.  Each Lender shall maintain in
accordance  with its usual  practice  an  account  or  accounts  evidencing  the
indebtedness  of the  Borrower to such Lender  resulting  from each Loan made by
such Lender, including the amounts of principal and interest payable and paid to
such Lender from time to time hereunder.

     Anything herein to the contrary  notwithstanding,  the Tranche I Term Loans
made by each Lender shall be divided into two portions  which shall be accounted
for  separately  on the books of such Lender.  The first of such  portions  (the
"MORTGAGE  PORTION") shall be in a principal amount equal to 2/140 of the amount
of such Lender's  Tranche I Term Loan  Commitment and shall be secured by all of
the  collateral  security  provided  for  pursuant  to  the  Security  Documents
(including,  without  limitation,  the  Mortgages  covering real property of the
Obligors  in New  York)  and the  second  of such  portions  (the  "NON-MORTGAGE
PORTION") shall be in a principal  amount equal to 138/140 of the amount of such
Lender's  Tranche I Term Loan  Commitment  and  shall be  secured  by all of the
collateral security provided for pursuant to the Security Documents  (excluding,
however,  the  Mortgages  covering  real  property of the Obligors in New York).
Anything in this  Agreement  to the contrary  notwithstanding,  all payments and
prepayments of the Tranche I Term Loans  hereunder shall be deemed to be applied
first to Non-Mortgage  Portion (until the same shall have been paid in full) and
last to the Mortgage Portion.

     (d)   MAINTENANCE   OF  LOAN   ACCOUNTS  BY   ADMINISTRATIVE   AGENT.   The
Administrative  Agent shall  maintain  accounts in which it shall record (i) the
amount of each Loan made hereunder,  the Class and Type thereof  (including,  in
the case of Incremental  Facility Loans, the respective  Series thereof) and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and  payable or to become due and payable  from the  Borrower to each Lender
hereunder and (iii) the amount of any sum received by the  Administrative  Agent
hereunder for the account of the Lenders and each Lender's  share  thereof.  The
Administrative  Agent shall account for the Mortgage  Portions and Non- Mortgage
Portions of the Tranche I Term Loans, as described in paragraph (c) above.

     (e) EFFECT OF LOAN  ACCOUNTS.  The entries made in the accounts  maintained
pursuant to paragraph (c) or (d) of this Section  shall be PRIMA FACIE  evidence
of the existence and amounts of the obligations recorded therein;  PROVIDED that
the failure of any Lender or the Administrative  Agent to maintain such accounts
or any error  therein  shall not in any  manner  affect  the  obligation  of the
Borrower to repay the Loans in accordance with the terms of this Agreement.

     (f) PROMISSORY  NOTES.  Any Lender may request that Loans of any Class made
by it be evidenced  by a  promissory  note.  In such event,  the Borrower  shall
prepare,  execute and deliver to such Lender a  promissory  note  payable to the
order of such Lender (or, if requested  by such  Lender,  to such Lender and its
registered  assigns)  and  in a  form  approved  by  the  Administrative  Agent.
Thereafter,  the Loans evidenced by such  promissory  note and interest  thereon
shall at all times  (including  after  assignment  pursuant to Section 10.04) be
represented by one or more promissory notes in such form payable to the order of
the payee named therein (or, if such  promissory  note is a registered  note, to
such payee and its registered assigns).

     SECTION 2.11. PREPAYMENT OF LOANS.

     (a) OPTIONAL PREPAYMENTS. The Borrower shall have the right at any time and
from time to time to prepay any  Borrowing  in whole or in part,  subject to the
requirements of this Section,  PROVIDED that (i) the aggregate  principal amount
of any prepayment on any date pursuant to this paragraph shall be at least equal
to  $5,000,000  and (ii) the  Borrower  shall not have the  right to prepay  any
Competitive Loan without the prior consent of the Lender thereof. Any prepayment
of a Term  Loan  Borrowing  of any Class  pursuant  to this  paragraph  shall be
applied to reduce the scheduled  repayments of the Term Loan  Borrowings of such
Class in reverse chronological order.

     (b) MANDATORY  PREPAYMENTS -- REVOLVING  LOANS. The Borrower will from time
to time prior to the Maturity Date prepay the Revolving Loans in such amounts as
shall be necessary so that, for a period of at least 30 consecutive  days at any
time during the two fiscal  quarters of the Borrower ending on May 31 and August
31 of  each  fiscal  year,  the  total  Revolving  Exposures  shall  not  exceed
$60,000,000.

     (c) MANDATORY  PREPAYMENTS -- ALL LOANS. The Borrower will make prepayments
of the Loans hereunder as follows:

          (i) CASUALTY  EVENTS.  Upon the date 180 days following the receipt by
     the  Borrower of the  proceeds of  insurance,  condemnation  award or other
     compensation in respect of any Casualty Event affecting any Property of the
     Borrower  or any of its  Subsidiaries  (or upon  such  earlier  date as the
     Borrower or such Subsidiary,  as the case may be, shall have determined not
     to repair or replace the Property  affected by such  Casualty  Event),  the
     Borrower  shall prepay the Loans in an aggregate  amount,  if any, equal to
     100% of the Net Available  Proceeds of such Casualty Event not  theretofore
     applied to the repair or replacement of such Property,  such  prepayment to
     be effected in the manner and to the extent specified in clause (vi) below.
     Notwithstanding  the  foregoing,  in the event that a Casualty  Event shall
     occur with respect to Property covered by any Mortgage, the Borrower shall,
     if required by the terms of such  Mortgage,  prepay the Loans on the dates,
     and in the amounts,  of the required  prepayments  specified in  accordance
     with such Mortgage.  Nothing in this paragraph shall be deemed to limit any
     obligation  of the Borrower or any of its  Subsidiaries  pursuant to any of
     the  Security  Documents  to  remit  to a  collateral  or  similar  account
     maintained  by the  Administrative  Agent  pursuant to any of the  Security
     Documents   the  proceeds  of  insurance,   condemnation   award  or  other
     compensation received in respect of any Casualty Event.

          (ii) EQUITY ISSUANCE. On or prior to the date 90 days after any Equity
     Issuance,  the Borrower shall prepay the Loans in an aggregate amount equal
     to 50%  of the  Net  Available  Proceeds  thereof,  such  prepayment  to be
     effected  in the manner and to the extent  specified  in clause (vi) below,
     PROVIDED that,  notwithstanding  the  foregoing,  the Borrower shall not be
     required  to make a  prepayment  under this  clause (ii) (x) from the first
     $1,500,000 Net Available  Proceeds during any fiscal year received from the
     issuance or sale of capital  stock in  connection  with the Employee  Stock
     Purchase Plan, the Long-Term  Stock  Incentive Plan or the Incentive  Stock
     Option Plan or (y) to the extent that

               (A) the Borrower advises the Administrative  Agent at the time of
          the relevant Equity Issuance that it intends to use such Net Available
          Proceeds  to  finance  one or more  Acquisitions  pursuant  to Section
          7.03(d),

               (B) such Net  Available  Proceeds  are held by the  Borrower in a
          segregated investment or other account (or, alternatively,  applied to
          the  prepayment of Revolving  Loans),  until so used to finance one or
          more Acquisitions as contemplated above, and

               (C) such Net  Available  Proceeds  are in fact so applied to such
          Acquisition(s)  within  90 days  of such  Equity  Issuance  (it  being
          understood  that, in the event Net  Available  Proceeds from more than
          one Equity Issuance are held by the Borrower,  or have been applied to
          the prepayment of Revolving Loans,  such Net Available  Proceeds shall
          be  deemed  to be  utilized  in the same  order in which  such  Equity
          Issuances occurred and,  accordingly,  any such Net Available Proceeds
          so held or applied to the prepayment of Revolving  Loans for more than
          90 days  shall be  forthwith  applied  to the  prepayment  of Loans as
          provided above),

     it  being  understood  that,  if  the  Borrower  does  not  so  advise  the
     Administrative  Agent that it intends to use such Net Available Proceeds to
     finance  one or more  Acquisitions,  or does  not in fact  apply  such  Net
     Available  Proceeds  to one or more  Acquisitions  within the time  periods
     specified  above,  the Borrower  shall  immediately  prepay the Loans in an
     amount equal to the amount specified above.

          (iii) EXCESS CASH FLOW.  Not later than the date 90 days after the end
     of each fiscal year of the  Borrower  ending on or after  February 28, 1999
     (unless  the Debt  Ratio is less  than or equal to 3.00 to 1 as of the last
     day thereof),  the Borrower  shall prepay the Loans in an aggregate  amount
     equal to (A) 50% of Excess  Cash Flow for such  fiscal  year  MINUS (B) the
     aggregate  amount of prepayments of Term Loans made during such fiscal year
     pursuant  to Section  2.11(a)  and,  after the  payment in full of the Term
     Loans,  the  aggregate  amount of  voluntary  reductions  of the  Revolving
     Commitments made during such fiscal year pursuant to Section 2.09(b),  such
     prepayment  to be  effected  in the manner and to the extent  specified  in
     clause (vi) of this Section.

          (iv) SALE OF ASSETS.  Without  limiting the obligation of the Borrower
     to obtain  the  consent of the  Required  Lenders  to any  Disposition  not
     otherwise permitted hereunder, in the event that the Net Available Proceeds
     of any Disposition  (herein, the "CURRENT  DISPOSITION"),  and of all prior
     Dispositions  as to which a  prepayment  has not yet been made  under  this
     paragraph,  shall exceed $15,000,000 then, no later than 180 days after the
     occurrence  of the Current  Disposition,  the Borrower  will deliver to the
     Lenders a statement,  certified by a Financial Officer of the Borrower,  in
     form and detail satisfactory to the Administrative  Agent, of the amount of
     the Net Available Proceeds of the Current Disposition and of all such prior
     Dispositions and will prepay the Loans in an aggregate amount equal to 100%
     of the Net  Available  Proceeds of the Current  Disposition  and such prior
     Dispositions,  such  prepayment  to be  effected  in the  manner and to the
     extent specified in clause (vi) below,  PROVIDED that,  notwithstanding the
     foregoing,  the Borrower  shall not be required to make a prepayment  under
     this clause (iv) to the extent that

               (A) the Borrower advises the Administrative  Agent at the time of
          the  relevant  Disposition  that it intends to use such Net  Available
          Proceeds  to  finance  one or more  Acquisitions  pursuant  to Section
          7.03(d),  or  otherwise  to reinvest  the  proceeds  thereof  into the
          business of the Borrower and its Subsidiaries,

               (B) such Net  Available  Proceeds  are held by the  Borrower in a
          segregated investment or other account (or, alternatively,  applied to
          the  prepayment of Revolving  Loans),  until so used to finance one or
          more Acquisitions or to make such reinvestment as contemplated  above,
          and

               (C) such Net  Available  Proceeds  are in fact so applied to such
          Acquisition(s) or reinvestment within 180 days of such Disposition (it
          being understood  that, in the event Net Available  Proceeds from more
          than one Disposition are held by the Borrower, or have been applied to
          the prepayment of Revolving Loans,  such Net Available  Proceeds shall
          be deemed to be utilized in the same order in which such  Dispositions
          occurred and, accordingly,  any such Net Available Proceeds so held or
          applied to the  prepayment  of Revolving  Loans for more than 180 days
          shall be  forthwith  applied to the  prepayment  of Loans as  provided
          above),

     it  being  understood  that,  if  the  Borrower  does  not  so  advise  the
     Administrative  Agent that it intends to use such Net Available Proceeds to
     finance one or more Acquisitions or make such reinvestment,  or does not in
     fact apply  such Net  Available  Proceeds  to one or more  Acquisitions  or
     reinvestments  within the time periods  specified above, the Borrower shall
     immediately  prepay the Loans in an amount  equal to the  amount  specified
     above.

          Notwithstanding  the  foregoing,  to the extent that the amount of the
     required  prepayment  on any  date is not  greater  than  $10,000,000,  the
     Borrower  shall not be required to make any  prepayment  of a Eurodollar or
     Competitive  Borrowing until the expiration(s) of the then-current Interest
     Periods.

          (v) DEBT  INCURRENCE.  Without limiting the obligation of the Borrower
     to obtain the consent of the Required  Lenders to any Debt  Incurrence  not
     permitted hereunder,  on or prior to the date 90 days after the date of any
     Debt Incurrence, the Borrower shall prepay the Loans in an aggregate amount
     equal to the portion of the Net Available Proceeds thereof that exceeds (in
     the aggregate for all Debt Incurrences after the date hereof)  $50,000,000,
     such prepayment to be effected in the manner and to the extent specified in
     clause  (vi) below,  PROVIDED  that,  notwithstanding  the  foregoing,  the
     Borrower  shall not be required to make a prepayment  under this clause (v)
     to the extent that

               (A) the Borrower advises the Administrative  Agent at the time of
          the relevant Debt Incurrence that it intends to use such Net Available
          Proceeds  to  finance  one or more  Acquisitions  pursuant  to Section
          7.03(d),

               (B) such Net  Available  Proceeds  are held by the  Borrower in a
          segregated investment or other account (or, alternatively,  applied to
          the  prepayment of Revolving  Loans),  until so used to finance one or
          more Acquisitions as contemplated above, and

               (C) such Net  Available  Proceeds  are in fact so applied to such
          Acquisition(s)  within  90 days  of such  Debt  Incurrence  (it  being
          understood  that, in the event Net  Available  Proceeds from more than
          one Debt Incurrence are held by the Borrower,  or have been applied to
          the prepayment of Revolving Loans,  such Net Available  Proceeds shall
          be  deemed  to be  utilized  in the  same  order in  which  such  Debt
          Incurrence occurred and, accordingly,  any such Net Available Proceeds
          so held or applied to the prepayment of Revolving  Loans for more than
          90 days  shall be  forthwith  applied  to the  prepayment  of Loans as
          provided above),

     it  being  understood  that,  if  the  Borrower  does  not  so  advise  the
     Administrative  Agent that it intends to use such Net Available Proceeds to
     finance  one or more  Acquisitions,  or does  not in fact  apply  such  Net
     Available  Proceeds  to one or more  Acquisitions  within the time  periods
     specified  above,  the Borrower  shall  immediately  prepay the Loans in an
     amount equal to the amount specified above.

          (vi) APPLICATION.  Prepayments described in this Section 2.11(c) shall
     be applied as follows:

               FIRST,  the amount of any such prepayment shall be applied to the
          Term  Loans  allocated  ratably  among the  Classes  of Term  Loans in
          accordance with the respective  outstanding principal amounts thereof,
          each such  prepayment  of the Term Loans of any Class to be applied to
          reduce the scheduled  repayments  of the Term Loan  Borrowings of such
          Class in reverse chronological order, and

               SECOND,  after the payment in full of the Term  Loans,  to prepay
          Revolving   Loans  (without   reduction  of  Revolving   Commitments),
          allocated  ratably  between  Classes of Revolving  Loans (and,  to the
          extent  that  there are at the time any  unused  Tranche  II Term Loan
          Commitments  of any Series,  such  Commitments  shall be  concurrently
          reduced in an amount equal to such prepayment of Revolving Loans).

     (d)  MANDATORY  PREPAYMENTS  -- CHANGE OF  CONTROL.  In the event  that the
Borrower  shall  be  required  pursuant  to the  provisions  of  any  instrument
evidencing  or governing any  Subordinated  Indebtedness  to redeem,  or make an
offer  to  redeem  or  repurchase,  all  or any  portion  of  such  Subordinated
Indebtedness  as a result  of a  change  of  control  (however  defined),  then,
concurrently  with the  occurrence  of the event  giving  rise to such change of
control,  the  Borrower  shall  prepay the Loans  (and/or  provide  cover for LC
Exposure as specified in Section 2.06(k)) in full, and the Commitments  shall be
automatically reduced to zero.

     (e) NOTICES,  ETC. The Borrower shall notify the Administrative Agent (and,
in the  case of  prepayment  of a  Swingline  Loan,  the  Swingline  Lender)  by
telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of
prepayment of a Eurodollar  Syndicated Borrowing or a Competitive Bid Borrowing,
not later than 11:00 a.m.,  New York City time,  three  Business Days before the
date  of  prepayment,  (ii)  in the  case  of  prepayment  of an ABR  Syndicated
Borrowing,  not later than 11:00  a.m.,  New York City time,  one  Business  Day
before the date of  prepayment or (iii) in the case of prepayment of a Swingline
Loan,  not later than 12:00 noon, New York City time, on the date of prepayment.
Each such notice shall be irrevocable  and shall specify the prepayment date and
the  principal  amount of each  Borrowing  or  portion  thereof  to be  prepaid;
PROVIDED  that,  if a  notice  of  prepayment  is  given  in  connection  with a
conditional  notice of termination of the Revolving  Commitments as contemplated
by Section 2.09, then such notice of prepayment may be revoked if such notice of
termination  is revoked in  accordance  with Section  2.09.  Promptly  following
receipt  of  any  such  notice   relating  to  a   Syndicated   Borrowing,   the
Administrative  Agent shall  advise the Lenders of the  contents  thereof.  Each
partial prepayment of any Borrowing shall be in an aggregate principal amount at
least equal to  $5,000,000,  except as  necessary  to apply  fully the  required
amount of a mandatory  prepayments.  Each  prepayment of a Syndicated  Borrowing
shall be  applied  ratably  to the  Loans  included  in the  prepaid  Borrowing.
Prepayments  shall be accompanied by accrued  interest to the extent required by
Section 2.13.

     SECTION 2.12. FEES.

     (a) FACILITY FEES. The Borrower agrees to pay to the  Administrative  Agent
for the account of each  Revolving  Lender a facility fee, which shall accrue at
the  Applicable  Rate on the  greater  of (i) the  daily  average  amount of the
Revolving  Commitment of each Class of such Lender  (whether used or unused) and
(ii) such  Lender's  aggregate  Revolving  Exposure of such  Class,  such fee to
accrue during the period from and including the date hereof to but excluding the
date such Revolving  Commitment shall have terminated and the date the Revolving
Exposure shall have been reduced to zero.

     Accrued  facility fees shall be payable on each  Quarterly  Date and on the
date  the  relevant  Commitments  have  terminated  and the  relevant  Revolving
Exposure  reduced to zero,  commencing on the first such date to occur after the
date hereof;  PROVIDED that any facility  fees accruing  after the date on which
interest  on Loans of the  respective  Class  shall be payable  on demand  shall
similarly be payable on demand. All facility fees shall be computed on the basis
of a year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).

     (b)  LETTER  OF  CREDIT  FEES.  The  Borrower  agrees  to  pay  (i)  to the
Administrative  Agent for the account of each Revolving  Lender a  participation
fee with respect to its participations in Letters of Credit,  which shall accrue
at a rate per annum  equal to the  Applicable  Rate  applicable  to  interest on
Eurodollar  Revolving  Loans on the  average  daily  amount of such  Lender's LC
Exposure  (excluding  any  portion  thereof   attributable  to  unreimbursed  LC
Disbursements)  during the period from and including  the Effective  Date to but
excluding  the later of the date on which  such  Lender's  respective  Revolving
Commitments  terminate  and the date on which such Lender  ceases to have any LC
Exposure,  and (ii) to Chase, as an Issuing Lender,  a fronting fee, which shall
accrue at the rate of 0.125%  per annum on the  average  daily  amount of the LC
Exposure  (excluding  any  portion  thereof   attributable  to  unreimbursed  LC
Disbursements  and to the Qingdao  Letter of Credit)  during the period from and
including the Effective  Date to but excluding the date on which there ceases to
be any LC Exposure,  and to each Issuing Lender,  such Issuing Lender's standard
fees with respect to the issuance, amendment, renewal or extension of any Letter
of Credit or processing of drawings thereunder.  Participation fees and fronting
fees accrued  through and including  each Quarterly Date shall be payable on the
third Business Day following such Quarterly  Date,  commencing on the first such
date to occur after the  Effective  Date;  PROVIDED  that all such fees shall be
payable on the date on which the respective Revolving  Commitments terminate and
any  such  fees  accruing  after  the  date on which  the  respective  Revolving
Commitments  terminate  shall be payable on  demand.  Any other fees  payable to
either Issuing Lender pursuant to this paragraph shall be payable within 10 days
after demand.  All participation fees and fronting fees shall be computed on the
basis of a year of 360 days and shall be payable  for the actual  number of days
elapsed (including the first day but excluding the last day).

     (c)  ADMINISTRATIVE   AGENT  FEES.  The  Borrower  agrees  to  pay  to  the
Administrative  Agent,  for its own account,  fees payable in the amounts and at
the times  separately  agreed upon between the  Borrower and the  Administrative
Agent.

     (d) PAYMENT OF FEES. All fees payable  hereunder shall be paid on the dates
due, in immediately  available  funds,  to the  Administrative  Agent (or to the
respective  Issuing Lender, in the case of fees payable to it) for distribution,
in the case of facility fees and  participation  fees,  to the Lenders  entitled
thereto. Fees paid shall not be refundable under any circumstances.

     SECTION 2.13. INTEREST.

     (a) ABR BORROWINGS.  The Loans comprising each ABR Borrowing (other than in
respect of Swingline  Loans,  as to which paragraph (d) below shall apply) shall
bear  interest  at a rate per annum  equal to the  Alternate  Base Rate PLUS the
Applicable Rate.

     (b) EURODOLLAR  BORROWINGS.  The Loans comprising each Eurodollar Borrowing
shall bear interest at a rate per annum equal to (i) in the case of a Eurodollar
Syndicated  Loan,  the Adjusted LIBO Rate for the Interest  Period in effect for
such  Borrowing  PLUS the  Applicable  Rate, or (ii) in the case of a Eurodollar
Competitive  Loan,  the LIBO Rate for the  Interest  Period  in effect  for such
Borrowing PLUS (or MINUS, as applicable) the Margin applicable to such Loan.

     (c) FIXED RATE  BORROWINGS.  Each Fixed Rate Loan shall bear  interest at a
rate per annum equal to the Fixed Rate applicable to such Loan.

     (d) SWINGLINE BORROWINGS.  Each ABR Borrowing constituting a Swingline Loan
shall bear  interest at a rate per annum equal to the  Alternate  Base Rate PLUS
the  Applicable  Rate.  Each  Swingline  Borrowing  the  interest  on  which  is
determined by reference to the Federal  Funds Base Rate for any Interest  Period
therefor  shall  bear  interest  at a rate per annum,  for each day during  such
Interest  Period,  equal to the Federal Funds Base Rate for such period PLUS the
then-applicable  "Facility Fee Rate"  specified in the definition of "Applicable
Rate" in  Section  1.01 PLUS the  Applicable  Rate  PLUS  .50%.  Each  Swingline
Borrowing the interest on which is  determined at an alternate  rate of interest
as  contemplated  in Section  2.05(b),  shall bear  interest  at the  respective
alternate rate of interest so agreed for the period so  contemplated  by Section
2.05(b).

     (e) DEFAULT INTEREST. Notwithstanding the foregoing, if any principal of or
interest  on any  Loan  or any  fee or  other  amount  payable  by the  Borrower
hereunder is not paid when due, whether at stated maturity,  upon  acceleration,
by mandatory  prepayment or otherwise,  such overdue amount shall bear interest,
after as well as before  judgment,  at a rate per annum equal to (i) in the case
of overdue principal of any Loan, 2% PLUS the rate otherwise  applicable to such
Loan as provided above or (ii) in the case of any other amount, 2% PLUS the rate
applicable to ABR Loans as provided in paragraph (a) of this Section.

     (f) PAYMENT OF INTEREST.  Accrued interest on each Loan shall be payable in
arrears  on each  Interest  Payment  Date  for  such  Loan  and,  in the case of
Revolving Loans of any Class,  upon termination of the Revolving  Commitments of
such Class; PROVIDED that (i) interest accrued pursuant to paragraph (e) of this
Section  shall be  payable  on  demand,  (ii) in the event of any  repayment  or
prepayment of any Loan (other than a prepayment  of an ABR Revolving  Loan prior
to the  Maturity  Date),  accrued  interest on the  principal  amount  repaid or
prepaid shall be payable on the date of such  repayment or prepayment  and (iii)
in the event of any conversion of any Eurodollar  Syndicated  Borrowing prior to
the end of the  current  Interest  Period  therefor,  accrued  interest  on such
Borrowing shall be payable on the effective date of such conversion.

     (g) COMPUTATION. All interest hereunder shall be computed on the basis of a
year of 360 days,  except that  interest  computed by reference to the Alternate
Base Rate at times when the Alternate Base Rate is based on the Prime Rate shall
be computed on the basis of a year of 365 days (or 366 days in a leap year), and
in each case shall be payable for the actual  number of days elapsed  (including
the first day but excluding the last day). The  applicable  Alternate Base Rate,
Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent,
and such determination shall be conclusive absent manifest error.

     SECTION 2.14.  ALTERNATE RATE OF INTEREST.  If prior to the commencement of
any Interest Period for a Eurodollar Borrowing:

          (a) the Administrative  Agent determines (which determination shall be
     conclusive absent manifest error) that adequate and reasonable means do not
     exist  for  ascertaining  the  Adjusted  LIBO  Rate or the  LIBO  Rate,  as
     applicable, for such Interest Period; or

          (b) if such Borrowing is of a particular  Class of Loans (including of
     a particular Series of Tranche II Term Loans), the Administrative  Agent is
     advised  by the  Required  Lenders  of such  Class  (or,  in the  case of a
     Eurodollar Competitive Loan, the Lender that is required to make such Loan)
     that the  Adjusted  LIBO Rate or the LIBO  Rate,  as  applicable,  for such
     Interest  Period will not  adequately  and fairly  reflect the cost to such
     Lenders  (or  Lender) of making or  maintaining  their  Loans (or its Loan)
     included in such Borrowing for such Interest Period;

then the Administrative  Agent shall give notice thereof to the Borrower and the
Lenders by  telephone  or telecopy as promptly as  practicable  thereafter  and,
until the  Administrative  Agent  notifies the Borrower and the Lenders that the
circumstances  giving  rise to such  notice no longer  exist,  (i) any  Interest
Election Request that requests the conversion of any Syndicated Borrowing to, or
continuation of any Syndicated  Borrowing as, a Eurodollar  Syndicated Borrowing
shall be  ineffective,  (ii) if any  Borrowing  Request  requests  a  Eurodollar
Syndicated  Borrowing,  such  Borrowing  shall  be  made  as an  ABR  Syndicated
Borrowing  and (iii) any request by the Borrower  for a  Eurodollar  Competitive
Borrowing shall be ineffective;  PROVIDED that if the circumstances  giving rise
to such notice do not affect all the Lenders,  then requests by the Borrower for
Eurodollar  Competitive  Borrowings may be made to Lenders that are not affected
thereby.

     SECTION 2.15. INCREASED COSTS.

     (a) INCREASED COSTS GENERALLY. If any Change in Law shall:

          (i) impose, modify or deem applicable any reserve,  special deposit or
     similar requirement against assets of, deposits with or for the account of,
     or credit  extended  by, any Lender  (except any such  reserve  requirement
     reflected in the Adjusted LIBO Rate) or either Issuing Lender; or

          (ii)  impose  on any  Lender or either  Issuing  Lender or the  London
     interbank market any other condition affecting this Agreement or Eurodollar
     Loans or Fixed Rate  Loans  made by such  Lender or any Letter of Credit or
     participation therein;

and the result of any of the  foregoing  shall be to  increase  the cost to such
Lenders of making or maintaining  any Eurodollar  Loan or Fixed Rate Loan (or of
maintaining  its  obligation  to make any such Loan) or to increase  the cost to
such Lender or such Issuing Lender of  participating  in, issuing or maintaining
any Letter of Credit or to reduce the amount of any sum  received or  receivable
by such Lender or such Issuing Lender hereunder (whether of principal,  interest
or otherwise), then the Borrower will pay to such Lender or such Issuing Lender,
as the case may be, such  additional  amount or amounts as will  compensate such
Lender or such Issuing  Lender,  as the case may be, for such  additional  costs
incurred or reduction suffered.

     (b) CAPITAL REQUIREMENTS. If any Lender or either Issuing Lender determines
that any  Change in Law  regarding  capital  requirements  has or would have the
effect of reducing the rate of return on such Lender's or such Issuing  Lender's
capital or on the capital of such  Lender's  or such  Issuing  Lender's  holding
company,  if any, as a  consequence  of this  Agreement or the Loans made by, or
participations  in Letters of Credit  held by,  such  Lender,  or the Letters of
Credit issued by such Issuing Lender, to a level below that which such Lender or
such Issuing Lender or such Lender's or such Issuing  Lender's  holding  company
could have achieved but for such Change in Law (taking into  consideration  such
Lender's or such Issuing Lender's  policies and the policies of such Lender's or
such Issuing  Lender's holding company with respect to capital  adequacy),  then
from time to time the Borrower  will pay to such Lender or such Issuing  Lender,
as the case may be, such  additional  amount or amounts as will  compensate such
Lender or such Issuing Lender or such Lender's or such Issuing  Lender's holding
company for any such reduction suffered.

     (c) CERTIFICATES FROM LENDERS.  A certificate of a Lender or either Issuing
Lender setting forth the amount or amounts  necessary to compensate  such Lender
or such Issuing Lender or its holding company,  as the case may be, as specified
in paragraph  (a) or (b) of this Section  shall be delivered to the Borrower and
shall be conclusive absent manifest error. The Borrower shall pay such Lender or
such  Issuing  Lender,  as the case may be, the amount  shown as due on any such
certificate within 10 days after receipt thereof.

     (d) DELAY IN REQUESTS. Failure or delay on the part of any Lender or either
Issuing  Lender  to  demand  compensation  pursuant  to this  Section  shall not
constitute a waiver of such  Lender's or such Issuing  Lender's  right to demand
such  compensation;  PROVIDED  that  the  Borrower  shall  not  be  required  to
compensate  a Lender or an  Issuing  Lender  pursuant  to this  Section  for any
increased  costs or  reductions  incurred more than six months prior to the date
that such  Lender  or such  Issuing  Lender,  as the case may be,  notifies  the
Borrower of the Change in Law giving rise to such increased  costs or reductions
and of such Lender's or such Issuing  Lender's  intention to claim  compensation
therefor;  PROVIDED  FURTHER  that,  if the  Change in Law  giving  rise to such
increased costs or reductions is retroactive, then the six-month period referred
to above shall be extended to include the period of retroactive effect thereof.

     (e) COMPETITIVE BID LOANS. Notwithstanding the foregoing provisions of this
Section, a Lender shall not be entitled to compensation pursuant to this Section
in respect  of any  Competitive  Loan if the Change in Law that would  otherwise
entitle it to such  compensation  shall have been  publicly  announced  prior to
submission of the Competitive Bid pursuant to which such Loan was made.

     SECTION 2.16.  BREAK FUNDING  PAYMENTS.  In the event of (a) the payment of
any principal of any  Eurodollar  Loan,  Fixed Rate Loan or Swingline  FFBR Loan
other than on the last day of an Interest Period applicable  thereto  (including
as a result of an Event of Default),  (b) the conversion of any Eurodollar  Loan
other than on the last day of the Interest Period  applicable  thereto,  (c) the
failure to borrow,  convert,  continue or prepay any Syndicated Loan on the date
specified in any notice  delivered  pursuant hereto  (regardless of whether such
notice is  permitted  to be revocable  under  Section  2.11(e) and is revoked in
accordance  herewith),  (d) the  failure  to borrow any  Competitive  Loan after
accepting the  Competitive  Bid to make such Loan, or (e) the  assignment of any
Eurodollar  Loan or Fixed Rate Loan  other than on the last day of the  Interest
Period  applicable  thereto as a result of a request by the Borrower pursuant to
Section 2.19, then, in any such event, the Borrower shall compensate each Lender
for the loss, cost and expense attributable to such event.

     In the case of a Eurodollar  Loan, the loss to any Lender  attributable  to
any such event shall be deemed to include an amount determined by such Lender to
be equal to the excess,  if any, of (i) the amount of interest  that such Lender
would  pay for a  deposit  equal to the  principal  amount  of such Loan for the
period from the date of such payment,  conversion,  failure or assignment to the
last day of the then current Interest Period for such Loan (or, in the case of a
failure to borrow, convert or continue, the duration of the Interest Period that
would have resulted from such  borrowing,  conversion  or  continuation)  if the
interest  rate payable on such deposit were equal to the Adjusted  LIBO Rate for
such  Interest  Period,  OVER (ii) the amount of interest that such Lender would
earn on such principal amount for such period if such Lender were to invest such
principal  amount for such period at the interest rate that would be bid by such
Lender (or an affiliate of such Lender) for dollar  deposits from other banks in
the eurodollar market at the commencement of such period.

     In the case of a  Swingline  FFBR Loan,  the loss to the  Swingline  Lender
attributable  to any such event shall be deemed to include an amount  determined
by the  Swingline  Lender to be equal to the excess,  if any, of (i) the Federal
Funds Base Rate for the period commencing on the date of such payment to but not
including the last day of the Interest Period for such Swingline FFBR Loan, OVER
(ii) the Federal Funds Base Rate for such Interest Period.

     A certificate  of any Lender  setting forth any amount or amounts that such
Lender is entitled to receive pursuant to this Section shall be delivered to the
Borrower and shall be conclusive  absent manifest error.  The Borrower shall pay
such Lender the amount shown as due on any such certificate within 10 days after
receipt thereof.

     SECTION 2.17. TAXES.

     (a)  PAYMENTS  FREE OF TAXES.  Any and all payments by or on account of any
obligation of the Borrower  hereunder or under any other Loan Document  shall be
made free and clear of and without  deduction for any Indemnified Taxes or Other
Taxes; PROVIDED that if the Borrower shall be required to deduct any Indemnified
Taxes or Other  Taxes  from such  payments,  then (i) the sum  payable  shall be
increased as necessary so that after making all required  deductions  (including
deductions  applicable  to  additional  sums  payable  under this  Section)  the
Administrative  Agent, Lender or Issuing Lender (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrower  shall make such  deductions  and (iii) the Borrower shall pay
the full amount  deducted to the relevant  Governmental  Authority in accordance
with applicable law.

     (b) PAYMENT OF OTHER TAXES BY BORROWER. In addition, the Borrower shall pay
any Other  Taxes to the  relevant  Governmental  Authority  in  accordance  with
applicable law.

     (c)   INDEMNIFICATION  BY  BORROWER.   The  Borrower  shall  indemnify  the
Administrative  Agent, each Lender and each Issuing Lender, within 10 days after
written demand therefor,  for the full amount of any Indemnified  Taxes or Other
Taxes  (including  Indemnified  Taxes or Other  Taxes  imposed or asserted on or
attributable to amounts  payable under this Section) paid by the  Administrative
Agent,  such  Lender  or such  Issuing  Lender,  as the  case  may  be,  and any
penalties,  interest and reasonable  expenses arising  therefrom or with respect
thereto,  whether or not such Indemnified Taxes or Other Taxes were correctly or
legally  imposed  or  asserted  by  the  relevant  Governmental   Authority.   A
certificate  as to the amount of such  payment  or  liability  delivered  to the
Borrower by a Lender or an Issuing Lender, or by the Administrative Agent on its
own behalf or on behalf of a Lender or an Issuing  Lender,  shall be  conclusive
absent manifest error.

     (d)  RECEIPT  FOR  PAYMENTS.  As soon as  practicable  after any payment of
Indemnified  Taxes or Other Taxes by the Borrower to a  Governmental  Authority,
the  Borrower  shall  deliver  to the  Administrative  Agent the  original  or a
certified copy of a receipt  issued by such  Governmental  Authority  evidencing
such payment,  a copy of the return  reporting such payment or other evidence of
such payment reasonably satisfactory to the Administrative Agent.

     (e) FOREIGN  LENDERS.  Any Foreign  Lender that is entitled to an exemption
from or reduction of withholding tax under the law of the  jurisdiction in which
the Borrower is located,  or any treaty to which such  jurisdiction  is a party,
with  respect to payments  under this  Agreement  shall  deliver to the Borrower
(with a copy to the  Administrative  Agent),  at the time or times prescribed by
applicable law or reasonably requested by the Borrower,  such properly completed
and executed  documentation  prescribed  by  applicable  law as will permit such
payments to be made without withholding or at a reduced rate.

     SECTION 2.18. PAYMENTS GENERALLY; PRO RATA TREATMENT;  SHARING OF SET-OFFS,
ETC.

     (a) PAYMENTS BY OBLIGORS.  Each Obligor shall make each payment required to
be made by it hereunder (whether of principal,  interest,  fees or reimbursement
of LC Disbursements, or under Section 2.15, 2.16 or 2.17, or otherwise) or under
any other Loan Document (except to the extent otherwise  provided therein) prior
to 12:00  noon,  New York  City  time,  on the date  when  due,  in  immediately
available  funds,  without set-off or  counterclaim.  Any amounts received after
such time on any date may, in the  discretion of the  Administrative  Agent,  be
deemed to have been received on the next succeeding Business Day for purposes of
calculating   interest  thereon.   All  such  payments  shall  be  made  to  the
Administrative  Agent at its  offices at 270 Park  Avenue,  New York,  New York,
except as otherwise expressly provided in the relevant Loan Document, and except
payments to be made  directly to an Issuing  Lender or the  Swingline  Lender as
expressly  provided  herein and except that payments  pursuant to Sections 2.15,
2.16, 2.17 and 10.03 shall be made directly to the Persons entitled thereto. The
Administrative  Agent shall distribute any such payments  received by it for the
account of any other  Person to the  appropriate  recipient  promptly  following
receipt  thereof.  If any payment  hereunder shall be due on a day that is not a
Business  Day,  the date for payment  shall be  extended to the next  succeeding
Business Day and, in the case of any payment accruing interest, interest thereon
shall be payable for the period of such  extension.  All  payments  hereunder or
under any other Loan Document (except to the extent otherwise  provided therein)
shall be made in dollars.

     (b) APPLICATION IF PAYMENTS INSUFFICIENT. If at any time insufficient funds
are  received  by and  available  to the  Administrative  Agent to pay fully all
amounts of principal, unreimbursed LC Disbursements,  interest and fees then due
hereunder,  such funds shall be applied (i) first, to pay interest and fees then
due hereunder, ratably among the parties entitled thereto in accordance with the
amounts of interest and fees then due to such parties,  and (ii) second,  to pay
principal and  unreimbursed LC Disbursements  then due hereunder,  ratably among
the parties  entitled  thereto in  accordance  with the amounts of principal and
unreimbursed LC Disbursements then due to such parties.

     (c) PRO RATA TREATMENT. Except to the extent otherwise provided herein: (i)
each Syndicated  Borrowing of a particular Class shall be made from the relevant
Lenders,  each  payment of  facility  fee under  Section  2.12 shall be made for
account of the relevant Lenders, and each termination or reduction of the amount
of the Commitments of a particular  Class under Section 2.09 shall be applied to
the  respective  Commitments  of such Class of the  relevant  Lenders,  pro rata
according to the amounts of their  respective  Commitments  of such Class;  (ii)
Syndicated  Borrowings  of any  Class  shall be  allocated  pro rata  among  the
relevant  Lenders  according to the amounts of their  respective  Commitments of
such Class (in the case of the making of Syndicated  Loans) or their  respective
Loans of such Class;  (iii) Syndicated  Eurodollar Loans of any Class having the
same  Interest  Period  shall be allocated  pro rata among the relevant  Lenders
according to the amounts of their  Commitments or such Class (in the case of the
making  of  Loans)  or  their  respective  Loans of such  Class  (in the case of
conversions  and  continuations  of Loans);  (iv) each payment or  prepayment of
principal of Revolving Loans or Term Loans of a particular Class by the Borrower
shall be made for account of the relevant  Lenders pro rata in  accordance  with
the respective  unpaid  principal  amounts of the Syndicated Loans of such Class
held by them;  and (v) each  payment  of  interest  on Loans of any Class by the
Borrower  shall  be  made  for  account  of the  relevant  Lenders  pro  rata in
accordance  with the  amounts of  interest on such Loans then due and payable to
the respective Lenders.

     (d) SHARING OF PAYMENTS BY LENDERS.  If any Lender shall, by exercising any
right of set-off or counterclaim or otherwise,  obtain payment in respect of any
principal of or interest on any of its Syndicated Loans or  participations in LC
Disbursements or Swingline Loans resulting in such Lender receiving payment of a
greater  proportion  of  the  aggregate  amount  of  its  Syndicated  Loans  and
participations  in LC  Disbursements  and Swingline  Loans and accrued  interest
thereon  then due than the  proportion  received by any other  Lender,  then the
Lender receiving such greater proportion shall purchase (for cash at face value)
participations  in the Syndicated Loans and  participations  in LC Disbursements
and Swingline Loans of other Lenders to the extent necessary so that the benefit
of all such payments shall be shared by the Lenders  ratably in accordance  with
the aggregate  amount of principal of and accrued  interest on their  respective
Syndicated Loans and  participations  in LC  Disbursements  and Swingline Loans;
PROVIDED  that  (i) if any  such  participations  are  purchased  and all or any
portion of the payment  giving rise thereto is  recovered,  such  participations
shall be  rescinded  and the  purchase  price  restored  to the  extent  of such
recovery,  without interest, and (ii) the provisions of this paragraph shall not
be  construed  to apply to any payment  made by any  Obligor  pursuant to and in
accordance with the express terms of this Agreement or any payment obtained by a
Lender as consideration  for the assignment of or sale of a participation in any
of  its  Loans  or  participations  in  LC  Disbursements  to  any  assignee  or
participant,  other than to the Borrower or any Subsidiary or Affiliate  thereof
(as to which  the  provisions  of this  paragraph  shall  apply).  Each  Obligor
consents to the foregoing  and agrees,  to the extent it may  effectively  do so
under applicable law, that any Lender acquiring a participation  pursuant to the
foregoing  arrangements  may exercise against such Obligor rights of set-off and
counterclaim with respect to such  participation as fully as if such Lender were
a direct creditor of such Obligor in the amount of such participation.

     (e)  PRESUMPTIONS OF PAYMENT.  Unless the  Administrative  Agent shall have
received  notice from the Borrower prior to the date on which any payment is due
to the Administrative  Agent for the account of the Lenders or an Issuing Lender
hereunder that the Borrower will not make such payment, the Administrative Agent
may assume that the Borrower  has made such  payment on such date in  accordance
herewith and may, in reliance upon such assumption, distribute to the Lenders or
such Issuing  Lender,  as the case may be, the amount due. In such event, if the
Borrower  has not in fact made such  payment,  then each of the  Lenders or such
Issuing  Lender,  as  the  case  may  be,  severally  agrees  to  repay  to  the
Administrative  Agent  forthwith  on demand  the amount so  distributed  to such
Lender or such  Issuing  Lender  with  interest  thereon,  for each day from and
including the date such amount is distributed to it to but excluding the date of
payment to the Administrative Agent, at the Federal Funds Effective Rate.

     (f) CERTAIN DEDUCTIONS BY ADMINISTRATIVE AGENT. If any Lender shall fail to
make any payment required to be made by it pursuant to Section 2.05(c),  2.06(e)
or (f), 2.07(b) or 2.18(e), then the Administrative Agent may, in its discretion
(notwithstanding  any contrary provision  hereof),  apply any amounts thereafter
received by the  Administrative  Agent for the account of such Lender to satisfy
such  Lender's  obligations  under  such  Sections  until  all such  unsatisfied
obligations are fully paid.

     (g)  EXERCISES  OF REMEDIES BY LENDERS.  Anything in this  Agreement to the
contrary  notwithstanding  (including Section 10.08),  each Lender hereby agrees
with each  other  Lender  that no Lender  shall  take any  action to  protect or
enforce its rights arising out of this Agreement (including, without limitation,
exercising  any rights of off-set)  without  first  obtaining  the prior written
consent of the Administrative Agent or the Required Lenders, it being the intent
of the  Lenders  that any such  action to protect or enforce  rights  under this
Agreement  shall be taken in concert and at the direction or with the consent of
the  Administrative  Agent or the  Required  Lenders and not  individually  by a
single Lender.


     SECTION 2.19. MITIGATION OBLIGATIONS; REPLACEMENT OF LENDERS.

     (a)  DESIGNATION  OF  DIFFERENT  LENDING  OFFICE.  If any  Lender  requests
compensation  under  Section  2.15,  or if the  Borrower  is required to pay any
additional amount to any Lender or any Governmental Authority for the account of
any Lender  pursuant  to Section  2.17,  then such Lender  shall use  reasonable
efforts to designate a different lending office for funding or booking its Loans
hereunder  or to assign its rights and  obligations  hereunder to another of its
offices,  branches  or  affiliates,  if, in the  judgment of such  Lender,  such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to  Section  2.15 or 2.17,  as the case may be, in the future and (ii) would not
subject such Lender to any unreimbursed  cost or expense and would not otherwise
be  disadvantageous  to such  Lender.  The  Borrower  hereby  agrees  to pay all
reasonable costs and expenses incurred by any Lender in connection with any such
designation or assignment.

     (b)  REPLACEMENT  OF LENDERS.  If any Lender  requests  compensation  under
Section 2.15, or if the Borrower is required to pay any additional amount to any
Lender or any  Governmental  Authority for the account of any Lender pursuant to
Section  2.17,  or if any  Lender  defaults  in its  obligation  to  fund  Loans
hereunder, then the Borrower may, at its sole expense and effort, upon notice to
such  Lender and the  Administrative  Agent,  require  such Lender to assign and
delegate,  without  recourse (in accordance with and subject to the restrictions
contained in Section 10.04),  all its interests,  rights and  obligations  under
this Agreement (other than any outstanding  Competitive  Loans held by it) to an
assignee  that shall  assume such  obligations  (which  assignee  may be another
Lender,  if a Lender  accepts such  assignment);  PROVIDED that (i) the Borrower
shall have received the prior written consent of the Administrative  Agent (and,
if a  Revolving  Commitment  is being  assigned,  each  Issuing  Lender  and the
Swingline Lender),  which consent shall not unreasonably be withheld,  (ii) such
Lender  shall  have  received  payment  of an  amount  equal to the  outstanding
principal of its Loans (other than Competitive  Loans) and  participations in LC
Disbursements and Swingline Loans,  accrued interest  thereon,  accrued fees and
all other amounts  payable to it hereunder,  from the assignee (to the extent of
such  outstanding  principal and accrued  interest and fees) or the Borrower (in
the case of all  other  amounts)  and  (iii) in the case of any such  assignment
resulting from a claim for compensation  under Section 2.15 or payments required
to be made pursuant to Section 2.17,  such assignment will result in a reduction
in such  compensation  or  payments.  A Lender shall not be required to make any
such  assignment and  delegation  if, prior thereto,  as a result of a waiver by
such Lender or otherwise,  the  circumstances  entitling the Borrower to require
such assignment and delegation cease to apply.


                                   ARTICLE III

                                    GUARANTEE

     SECTION  3.01  GUARANTEE.  The  Subsidiary  Guarantors  hereby  jointly and
severally  guarantee  to each  Lender  and the  Administrative  Agent  and their
respective  successors  and assigns the prompt payment in full when due (whether
at stated  maturity,  by  acceleration  or  otherwise)  of the  principal of and
interest on the Loans made by the Lenders to the Borrower,  all  indebtedness of
the  Borrower  to any of the Lenders  (or any  affiliate  thereof) in respect of
Hedging Agreements, and all other amounts from time to time owing to the Lenders
or the  Administrative  Agent by the Borrower  under this  Agreement  and by any
Obligor  under  any of the  other  Loan  Documents,  in each  case  strictly  in
accordance  with the terms  hereof and thereof  (such  obligations  being herein
collectively  called the "GUARANTEED  OBLIGATIONS").  The Subsidiary  Guarantors
hereby  further  jointly and severally  agree that if the Borrower shall fail to
pay in full when due (whether at stated maturity,  by acceleration or otherwise)
any of the Guaranteed  Obligations,  the Subsidiary Guarantors will promptly pay
the same, without any demand or notice  whatsoever,  and that in the case of any
extension  of time of payment or renewal of any of the  Guaranteed  Obligations,
the same will be promptly  paid in full when due (whether at extended  maturity,
by  acceleration or otherwise) in accordance with the terms of such extension or
renewal.

     SECTION 3.02 OBLIGATIONS  UNCONDITIONAL.  The obligations of the Subsidiary
Guarantors under Section 3.01 are absolute and unconditional, joint and several,
irrespective of the value, genuineness,  validity,  regularity or enforceability
of the  obligations of the Borrower under this Agreement or any other  agreement
or instrument  referred to herein or therein,  or any  substitution,  release or
exchange  of any  other  guarantee  of or  security  for  any of the  Guaranteed
Obligations,   and,  to  the  fullest  extent   permitted  by  applicable   law,
irrespective  of  any  other  circumstance   whatsoever  which  might  otherwise
constitute a legal or equitable  discharge or defense of a surety or  guarantor,
it being the  intent of this  Section  that the  obligations  of the  Subsidiary
Guarantors  hereunder  shall be absolute and  unconditional,  joint and several,
under any and all  circumstances.  In full recognition and in furtherance of the
foregoing, each Subsidiary Guarantor agrees that:

          (a) Without  affecting the  enforceability or effectiveness of Section
     3.01  in  accordance  with  its  terms  and  without  affecting,  limiting,
     reducing,  discharging  or  terminating  the  liability of such  Subsidiary
     Guarantor,  or  the  rights,   remedies,   powers  and  privileges  of  the
     Administrative  Agent and the  Lenders  under this  Agreement  or any other
     agreement or instrument  referred to herein or therein,  the Administrative
     Agent and the  Lenders  may,  at any time and from time to time and without
     notice or demand of any kind or nature whatsoever:

               (i) amend,  supplement,  modify, extend, renew, waive, accelerate
          or  otherwise  change the time for payment or  performance  of, or the
          terms of, all or any part of the Guaranteed Obligations (including any
          increase  or  decrease  in the rate or rates of interest on all or any
          part of the Guaranteed Obligations);

               (ii) amend, supplement, modify, extend, renew, waive or otherwise
          change,  or enter into or give,  any Loan  Document or any  agreement,
          security document,  guarantee,  approval,  consent or other instrument
          with  respect to all or any part of the  Guaranteed  Obligations,  any
          Loan Document or any such other instrument or any term or provision of
          the foregoing (it being  understood that this clause (ii) shall not be
          deemed to constitute a consent by any Subsidiary Guarantor to any such
          amendment with respect to any Loan Document to which it is a party);

               (iii) accept or enter into new or additional agreements, security
          documents,   guarantees   (including   letters  of  credit)  or  other
          instruments  in addition  to, in exchange  for or relative to any Loan
          Document,  all  or  any  part  of the  Guaranteed  Obligations  or any
          collateral now or in the future serving as security for the Guaranteed
          Obligations;

               (iv)  accept or  receive  (including  from any  other  Subsidiary
          Guarantor)   partial   payments  or   performance  on  the  Guaranteed
          Obligations (whether as a result of the exercise of any right, remedy,
          power or privilege or otherwise);

               (v) accept, receive and hold any additional collateral for all or
          any part of the  Guaranteed  Obligations  (including  from  any  other
          Guarantor);

               (vi) release, reconvey, terminate, waive, abandon, allow to lapse
          or  expire,  fail  to  perfect,  subordinate,   exchange,  substitute,
          transfer, foreclose upon or enforce any collateral, security documents
          or guarantees  (including  Letters of Credit or the obligations of any
          other Subsidiary  Guarantor) for or relative to all or any part of the
          Guaranteed Obligations;

               (vii) apply any  collateral or the proceeds of any  collateral or
          guarantee  (including  any Letter of Credit or the  obligations of any
          other  Subsidiary  Guarantor)  to all or any  part  of the  Guaranteed
          Obligations in such manner and extent as the  Administrative  Agent or
          any Lender may in its discretion determine;

               (viii)  release  any  Person   (including  any  other  Subsidiary
          Guarantor) from any personal liability with respect to all or any part
          of the Guaranteed Obligations;

               (ix) settle, compromise,  release, liquidate or enforce upon such
          terms and in such  manner as the  Administrative  Agent or the Lenders
          may determine or as applicable  law may dictate all or any part of the
          Guaranteed  Obligations or any  collateral on or guarantee  (including
          any Letter of Credit issued with respect to) of all or any part of the
          Guaranteed Obligations;

               (x)  consent  to the  merger  or  consolidation  of,  the sale of
          substantial  assets by, or other  restructuring  or termination of the
          corporate existence of the Borrower or any other Person (including any
          other Subsidiary Guarantor);

               (xi) proceed against the Borrower,  such or any other  Subsidiary
          Guarantor  or any other  guarantor  of  (including  any  issuer of any
          letter  of  credit  issued  with  respect  to) all or any  part of the
          Guaranteed  Obligations or any  collateral  provided by any Person and
          exercise  the  right,   remedies,   powers  and   privileges   of  the
          Administrative Agent and the Lenders under this Agreement or any other
          agreement or instrument referred to herein or therein, or otherwise in
          such order and such manner as the  Administrative  Agent or any Lender
          may, in its  discretion,  determine,  without any necessity to proceed
          upon or against or exhaust any  collateral,  right,  remedy,  power or
          privilege before  proceeding to call upon or otherwise enforce Section
          3.01 as to any Subsidiary Guarantor;

               (xii)  foreclose  upon  any  deed of  trust,  mortgage  or  other
          instrument creating or granting liens on any interest in real property
          by judicial or nonjudicial sale or by deed in lieu of foreclosure, bid
          any  amount or make no bid in any  foreclosure  sale or make any other
          election of remedies  with respect to such liens or exercise any right
          of set-off;

               (xiii) obtain the  appointment  of a receiver with respect to any
          collateral for all or any part of the Guaranteed Obligations and apply
          the proceeds of such receivership as the  Administrative  Agent or any
          Lender may in its  discretion  determine (it being agreed that nothing
          in this clause (xiii) shall be deemed to make the Administrative Agent
          or any Lender a party in possession in contemplation of law, except at
          its option);

               (xiv) enter into such other  transactions  or  business  dealings
          with any other Subsidiary Guarantor,  the Borrower,  any Subsidiary or
          Affiliate of the Borrower or any other guarantor of all or any part of
          the Guaranteed  Obligations as the Administrative  Agent or any Lender
          may desire; and

               (xv) do all or any  combination  of the actions set forth in this
          Section.

          (b) The  enforceability  and  effectiveness  of this  Article  and the
     liability of the Subsidiary Guarantors, and the rights remedies, powers and
     privileges  of  the  Administrative  Agent  and  the  Lenders,  under  this
     Agreement  or any  other  agreement  or  instrument  referred  to herein or
     therein, shall not be affected, limited, reduced, discharged or terminated,
     and each Subsidiary Guarantor hereby expressly waives any defense now or in
     the future arising, by reason of:

               (i) the illegality,  invalidity,  irregularity,  authenticity, or
          unenforceability  of all or any  part of the  Guaranteed  Obligations,
          this Agreement or any other agreement or instrument referred to herein
          or therein,  or any agreement,  security document,  guarantee or other
          instrument relative to all or any part of the Guaranteed Obligations;

               (ii) any disability or other defense of the Borrower or any other
          Subsidiary Guarantor with respect to all or any part of the Guaranteed
          Obligations  or  any  other  guarantor  of  all  or  any  part  of the
          Guaranteed  Obligations  (including  any  issuer  of  any  letters  of
          credit),  including the effect of any statute of limitations  that may
          bar the  enforcement of all or any part of the Guaranteed  Obligations
          or the obligations of any such other guarantor;

               (iii) the illegality, invalidity,  irregularity,  authenticity or
          unenforceability of any security or guarantee (including any letter of
          credit) for all or any part of the Guaranteed  Obligations or the lack
          of perfection  or continuing  perfection or failure of the priority of
          any  lien  on any  collateral  for all or any  part of the  Guaranteed
          Obligations;

               (iv) the cessation, for any cause whatsoever, of the liability of
          the Borrower or any other Subsidiary  Guarantor (other than subject to
          Section  3.05,  by reason of the full payment and  performance  of all
          Guaranteed Obligations);

               (v) any  failure  of the  Administrative  Agent or any  Lender to
          marshall  assets  in  favor  of  the  Borrower  or  any  other  Person
          (including any other Subsidiary Guarantor),  to exhaust any collateral
          for all or any  part  of the  Guaranteed  Obligations,  to  pursue  or
          exhaust any right,  remedy, power or privilege it may have against any
          other Subsidiary Guarantor,  the Borrower, any other guarantor, all or
          any  part of the  Guaranteed  Obligations  (including  either  Issuing
          Lender in respect of Letters of Credit) or any other Person or to take
          any  action  whatsoever  to  mitigate  or  reduce  such  or any  other
          Subsidiary  Guarantor's  liability  under this  Article,  neither  the
          Administrative Agent nor any Lender being under any obligation to take
          any such action  notwithstanding  the fact that all or any part of the
          Guaranteed  Obligations  may be due and payable and that the  Borrower
          may be in default of its obligations under this Agreement or any other
          agreement or instrument referred to herein or therein;

               (vi) any  failure  of the  Administrative  Agent or any Lender to
          give  notice  after any  Default of sale or other  disposition  of any
          collateral  (including  any  notice  of any  judicial  or  nonjudicial
          foreclosure  or  sale of any  interest  in real  property  serving  as
          collateral for all or any part of the Guaranteed  Obligations) for all
          or any  part  of the  Guaranteed  Obligations  to  the  Borrower,  any
          Subsidiary  Guarantor  or any other  Person or any  defect  in, or any
          failure by any  Subsidiary  Guarantor  or any other Person to receive,
          any  notice  that  may  be  given  in  connection  with  any  sale  or
          disposition of any collateral;

               (vii) any  failure of the  Administrative  Agent or any Lender to
          comply  with  applicable  laws in  connection  with  the sale or other
          disposition  of any  collateral  for all or any part of the Guaranteed
          Obligations,   including   any  failure  to  conduct  a   commercially
          reasonable sale or other  disposition of any collateral for all or any
          part of the Guaranteed Obligations;

               (viii) any  judicial or  nonjudicial  foreclosure  or sale of, or
          other  election of  remedies  with  respect  to, any  interest in real
          property or other  collateral  serving as security for all or any part
          of the Guaranteed Obligations,  even though such foreclosure,  sale or
          election  of  remedies  may  impair  the  subrogation  rights  of  any
          Subsidiary  Guarantor or may preclude any  Subsidiary  Guarantor  from
          obtaining  reimbursement,   contribution,   indemnification  or  other
          recovery from any other Subsidiary  Guarantor,  the Borrower any other
          guarantor or any other Person and even though the Borrower may not, as
          a result of such foreclosure,  sale or election of remedies, be liable
          for any deficiency;

               (ix) any benefits the Borrower,  any Subsidiary  Guarantor or any
          other  guarantor may otherwise  derive from Sections  580(a),  580(b),
          580(d)  or  726 of the  California  Code  of  Civil  Procedure  or any
          comparable provisions of the laws of any other jurisdiction;

               (x) any act or omission of the  Administrative  Agent, any Lender
          or any other person that directly or indirectly results in or aids the
          discharge  or  release  of  the  Borrower  or  any  other   Subsidiary
          Guarantor,  of all or any part of the  Guaranteed  Obligations  or any
          security or guarantee  (including any letter of credit) for all or any
          part of the Guaranteed Obligations by operation of law or otherwise;

               (xi) any law which  provides  that the  obligation of a surety or
          guarantor  must neither be larger in amount nor in other respects more
          burdensome  than that of the  principal  or which  reduces a  surety's
          principal obligation;

               (xii) the possibility that the obligations of the Borrower to the
          Administrative  Agent and the Lenders may at any time and from time to
          time exceed the aggregate liability of the Subsidiary Guarantors under
          this Article;

               (xiii)  any  counterclaim,  set-off  or  other  claim  which  the
          Borrower or any other Subsidiary Guarantor has or alleges to have with
          respect to all or any part of the Guaranteed Obligations;

               (xiv) any  failure of the  Administrative  Agent or any Lender to
          file or enforce a claim in any  bankruptcy  or other  proceeding  with
          respect to any Person;

               (xv) the election by the Administrative Agent or any Lender, in a
          bankruptcy   proceeding  of  any  Person,   of  the   application   or
          nonapplication  of Section  1111(b)(2) of the United States Bankruptcy
          Code;

               (xvi) any  extension  of  credit  or the grant of any lien  under
          Section 364 of the United States Bankruptcy Code;

               (xvii) any use of cash collateral under Section 363 of the United
          States Bankruptcy Code;

               (xviii)  any  agreement  or  stipulation   with  respect  to  the
          provision of adequate  protection in any bankruptcy  proceeding of any
          Person;

               (xix) the  avoidance  of any lien in favor of the  Administrative
          Agent or any Lender for any reason;

               (xx) any  bankruptcy,  insolvency,  reorganization,  arrangement,
          readjustment of debt,  liquidation or dissolution proceeding commenced
          by or against any Person,  including  any discharge of, or bar or stay
          against collecting,  all or any part of the Guaranteed Obligations (or
          any interest on all or any part of the Guaranteed  Obligations)  in or
          as a result of any such proceeding;

               (xxi) any other  circumstance  whatsoever  that  might  otherwise
          constitute  a legal or  equitable  discharge or defense of a surety or
          guarantor,  including by reason of Sections 2809,  2810,  2819,  2839,
          2845,  2850, 2899, 3275 and 3433 of the California Civil Code, and any
          future  judicial   decisions  or  legislation  or  of  any  comparable
          provisions of the laws of any other jurisdiction; or

               (xxiii) diligence,  presentment,  demand of payment,  protest and
          all notices whatsoever.

          (c)  Each  Subsidiary   Guarantor   represents  and  warrants  to  the
     Administrative  Agent that it has  established  adequate means of obtaining
     financial and other information pertaining to the business,  operations and
     condition (financial and otherwise) of the Borrower and its properties on a
     continuing basis and that such Subsidiary  Guarantor is now and will in the
     future remain fully  familiar with the business,  operations  and condition
     (financial  and  otherwise)  of  the  Borrower  and  its  properties.  Each
     Subsidiary  Guarantor further  represents and warrants that it has reviewed
     and approved  this  Agreement  and the related Loan  Documents and is fully
     familiar with the transactions contemplated by such Loan Documents and that
     it will in the future remain fully familiar with such  transaction and with
     any new  Loan  Documents  and the  transaction  contemplated  by such  Loan
     Documents.   Each  Subsidiary   Guarantor   hereby   expressly  waives  and
     relinquishes  any  duty on the  part  of the  Administrative  Agent  or the
     Lenders  (should  any such  duty  exist) to  disclose  to such or any other
     Subsidiary Guarantor any matter of fact or other information related to the
     business,  operations or condition (financial or otherwise) of the Borrower
     or its properties or to any Loan Documents or the  transactions  undertaken
     pursuant to, or contemplated by, such Loan Documents, whether now or in the
     future known by the Administrative Agent or any Lender.

     SECTION 3.03  REINSTATEMENT.  The obligations of the Subsidiary  Guarantors
under this Article shall be  automatically  reinstated if and to the extent that
for any reason any  payment  by or on behalf of the  Borrower  in respect of the
Guaranteed  Obligations is rescinded or must be otherwise restored by any holder
of any of the Guaranteed Obligations,  whether as a result of any proceedings in
bankruptcy or reorganization or otherwise and the Subsidiary  Guarantors jointly
and severally agree that they will indemnify the  Administrative  Agent and each
Lender on demand  for all  reasonable  costs and  expenses  (including,  without
limitation, fees of counsel) incurred by the Administrative Agent or such Lender
in connection with such rescission or restoration,  including any such costs and
expenses  incurred in  defending  against any claim  alleging  that such payment
constituted  a  preference,  fraudulent  transfer or similar  payment  under any
bankruptcy, insolvency or similar law.

     SECTION 3.04  SUBROGATION.  Each  Subsidiary  Guarantor  hereby  waives all
rights of subrogation or contribution,  whether arising by contract or operation
of law (including,  without limitation, any such right arising under the Federal
Bankruptcy  Code) or  otherwise  by reason of any  payment by it pursuant to the
provisions of this Article and further  agrees with the Borrower for the benefit
of each of its creditors  (including,  without  limitation,  each Lender and the
Administrative  Agent) that any such payment by it shall,  to the fullest extent
permitted by law,  constitute a dividend on the common stock of such  Subsidiary
Guarantor  owned by the Borrower or a return of capital paid by such  Subsidiary
Guarantor to the Borrower and, otherwise, an investment in the equity capital of
the Borrower by such Subsidiary Guarantor. Each Subsidiary Guarantor understands
that, by reason of the foregoing provisions of this Section, the exercise by the
Administrative  Agent  or  any  Lender  of  the  rights,  remedies,  powers  and
privileges  that it has under this  Article  and under the other Loan  Documents
will result in nonreimbursable  liabilities under this Agreement.  Nevertheless,
each  Subsidiary  Guarantor  hereby  authorizes and empowers the  Administrative
Agent  and the  Lenders  to  exercise,  in its or  their  sole  discretion,  any
combination  of such rights,  remedies,  powers and privileges as they, in their
sole discretion, shall deem appropriate.

     SECTION 3.05  REMEDIES.  The  Subsidiary  Guarantors  jointly and severally
agree  that,  as  between  the  Subsidiary   Guarantors  and  the  Lenders,  the
obligations of the Borrower under this Agreement may be declared to be forthwith
due and payable as provided in Article  VIII (and shall be deemed to have become
automatically due and payable in the circumstances provided in Article VIII) for
purposes  of  Section  3.01  notwithstanding  any  stay,   injunction  or  other
prohibition  preventing  such  declaration  (or such  obligations  from becoming
automatically due and payable) as against the Borrower and that, in the event of
such declaration (or such obligations being deemed to have become  automatically
due and  payable),  such  obligations  (whether  or not due and  payable  by the
Borrower)  shall forthwith  become due and payable by the Subsidiary  Guarantors
for purposes of Section 3.01.

     SECTION  3.06  CONTINUING  GUARANTEE.  The  guarantee  in this Article is a
continuing  guarantee,  and shall apply to all Guaranteed  Obligations  whenever
arising.

     SECTION  3.07  LIMITATION  ON  GUARANTEE  OBLIGATIONS.  In  any  action  or
proceeding   involving  any  state  corporate  law,  or  any  state  or  Federal
bankruptcy,  insolvency,  reorganization  or other law  affecting  the rights of
creditors  generally,  if the  obligations  of any  Subsidiary  Guarantor  under
Section  3.01  would  otherwise  be held or  determined  to be void,  invalid or
unenforceable,  or subordinated to the claims of any other creditors, on account
of the amount of its liability  under Section 3.01,  then,  notwithstanding  any
other  provision  hereof to the contrary,  the amount of such  liability  shall,
without  any  further  action by such  Subsidiary  Guarantor,  any  Lender,  the
Administrative  Agent or any other Person, be automatically  limited and reduced
to the highest amount which is valid and enforceable and not subordinated to the
claims of other creditors as determined in such action or proceeding.


                                   ARTICLE IV

                         REPRESENTATIONS AND WARRANTIES

     The Borrower represents and warrants to the Lenders that:

     SECTION  4.01.   ORGANIZATION;   POWERS.  Each  of  the  Borrower  and  its
Subsidiaries is duly organized,  validly existing and in good standing under the
laws of the  jurisdiction  of its  organization,  has all  requisite  power  and
authority  to carry on its  business  as now  conducted  and,  except  where the
failure to do so,  individually  or in the  aggregate,  could not  reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good  standing  in, every  jurisdiction  where such  qualification  is
required.

     SECTION 4.02.  AUTHORIZATION;  ENFORCEABILITY.  The Transactions are within
each Obligor's  corporate  powers and have been duly authorized by all necessary
corporate and, if required,  by all necessary shareholder action. This Agreement
has been duly executed and delivered by each Obligor and  constitutes,  and each
of the other Loan  Documents to which it is a party when  executed and delivered
by such Obligor will constitute,  a legal,  valid and binding obligation of such
Obligor,  enforceable  against each Obligor in accordance with its terms, except
as  such   enforceability   may  be  limited  by  (a)  bankruptcy,   insolvency,
reorganization,  moratorium or similar laws of general  applicability  affecting
the  enforcement  of  creditors'  rights  and (b)  the  application  of  general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

     SECTION 4.03. GOVERNMENTAL APPROVALS; NO CONFLICTS. The Transactions (a) do
not require any consent or approval  of,  registration  or filing  with,  or any
other action by, any  Governmental  Authority,  except for (i) such as have been
obtained  or made  and  are in full  force  and  effect  and  (ii)  filings  and
recordings in respect of the Liens created  pursuant to the Security  Documents,
(b) will not violate any applicable law or regulation or the charter, by-laws or
other organizational documents of the Borrower or any of its Subsidiaries or any
order of any Governmental Authority, (c) will not violate or result in a default
under any indenture,  agreement or other instrument binding upon the Borrower or
any of its Subsidiaries or assets, or give rise to a right thereunder to require
any payment to be made by any such Person,  and (d) except for the Liens created
pursuant  to  the  Security  Documents,  will  not  result  in the  creation  or
imposition of any Lien on any asset of the Borrower or any of its Subsidiaries.

     SECTION 4.04. FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE.

     (a) The Borrower has heretofore  furnished to the Lenders its  consolidated
balance sheet and statements of income,  stockholders' equity and cash flows (i)
as of and for the fiscal year ended  February  28,  1997,  reported on by Arthur
Andersen LLP, independent public accountants,  and (ii) as of and for the fiscal
quarter and the portion of the fiscal year ended August 31,  1997,  certified by
its chief financial  officer.  Such financial  statements present fairly, in all
material  respects,  the financial  position and results of operations  and cash
flows of the Borrower and its Consolidated Subsidiaries as of such dates and for
such periods in accordance with GAAP,  subject to year-end audit adjustments and
the absence of  footnotes  in the case of the  statements  referred to in clause
(ii) of the first sentence of this paragraph.

     (b) Since February 28, 1997,  there has been no material  adverse change in
the  business,  assets,  operations,   prospects  or  condition,   financial  or
otherwise, of the Borrower and its Consolidated Subsidiaries, taken as a whole.

     SECTION 4.05. PROPERTIES.

     (a) Each of the Borrower and its  Subsidiaries  has good title to, or valid
leasehold  interests  in, all its real and personal  Properties  material to its
business,  subject only to Liens  permitted by Section 7.02 and except for minor
defects in title that do not interfere  with its ability to conduct its business
as  currently  conducted  or to  utilize  such  Properties  for  their  intended
purposes.

     (b) Each of the Borrower and its Subsidiaries  owns, or is licensed to use,
all trademarks,  tradenames, copyrights, patents and other intellectual property
material  to its  business,  and  the  use  thereof  by  the  Borrower  and  its
Subsidiaries  does not infringe upon the rights of any other Person,  except for
any  such  infringements  that,  individually  or in the  aggregate,  could  not
reasonably be expected to result in a Material Adverse Effect.

     SECTION 4.06. LITIGATION.

     (a) There are no actions,  suits or proceedings by or before any arbitrator
or  Governmental  Authority  now  pending  against or, to the  knowledge  of the
Borrower,   threatened   against  or  affecting  the  Borrower  or  any  of  its
Subsidiaries  (i) as to which there is a  reasonable  possibility  of an adverse
determination and that, if adversely  determined,  could reasonably be expected,
individually or in the aggregate,  to have a Material Adverse Effect (other than
the Disclosed Matters) or (ii) that involve this Agreement or the Transactions.

     (b)  Since  the date of this  Agreement,  there  has been no  change in the
status of the Disclosed  Matters that,  individually  or in the  aggregate,  has
resulted in, or  materially  increased  the  likelihood  of, a Material  Adverse
Effect.

     SECTION  4.07.   ENVIRONMENTAL  MATTERS.  Each  of  the  Borrower  and  its
Subsidiaries has obtained all environmental, health and safety permits, licenses
and other  authorizations  required under all Environmental Laws to carry on its
business  as now being or as proposed  to be  conducted,  except as set forth in
Schedule  III hereto and except to the extent  failure to have any such  permit,
license or  authorization  would not (either  individually  or in the aggregate)
have  a  Material   Adverse   Effect.   Each  of  such  permits,   licenses  and
authorizations  is in full  force and effect  and each of the  Borrower  and its
Subsidiaries is in compliance with the terms and conditions thereof, and is also
in compliance with all other limitations,  restrictions,  conditions, standards,
prohibitions,  requirements,  obligations, schedules and timetables contained in
any  applicable  Environmental  Law or in any  regulation,  code,  plan,  order,
decree,  judgment,   injunction,   notice  or  demand  letter  issued,  entered,
promulgated or approved  thereunder,  except as set forth in Schedule III hereto
and  except  to the  extent  failure  to  comply  therewith  would  not  (either
individually or in the aggregate) have a Material Adverse Effect.

     In addition, except as set forth in Schedule III:

          (a)  No  notice,   notification,   demand,  request  for  information,
     citation, summons or order has been issued, no complaint has been filed, no
     penalty  has been  assessed  and no  investigation  or review is pending or
     threatened by any  governmental or other entity with respect to any alleged
     failure  by  the  Borrower  or  any  of  its   Subsidiaries   to  have  any
     environmental,  health or safety  permit,  license  or other  authorization
     required under any  Environmental Law in connection with the conduct of the
     business of the Borrower or any of its  Subsidiaries or with respect to any
     generation,  treatment,  storage, recycling,  transportation,  discharge or
     disposal,  or any  Release  of any  Hazardous  Materials  generated  by the
     Borrower or any of its  Subsidiaries,  in each case in circumstances  which
     may reasonably be expected to have a Material Adverse Effect.

          (b) Neither the Borrower nor any of its Subsidiaries owns, operates or
     leases a treatment,  storage or disposal facility  requiring a permit under
     the Resource  Conservation  and Recovery Act of 1976, as amended,  or under
     any comparable state or local statute; and

               (i) no polychlorinated biphenyls (PCB's) are or have been present
          at any site or facility now or previously owned, operated or leased by
          the Borrower or any of its Subsidiaries;

               (ii) no asbestos or asbestos-containing  materials is or has been
          present at any site or facility now or previously  owned,  operated or
          leased by the Borrower or any of its Subsidiaries;

               (iii)  there  are  no   underground   storage  tanks  or  surface
          impoundments for Hazardous Materials, active or abandoned, at any site
          or  facility  now or  previously  owned,  operated  or  leased  by the
          Borrower or any of its Subsidiaries;

               (iv) no Hazardous  Materials  have been  Released at, on or under
          any site or facility now or  previously  owned,  operated or leased by
          the  Borrower  or any of its  Subsidiaries  in a  reportable  quantity
          established by statute, ordinance, rule, regulation or order; and

               (v) no Hazardous Materials have been otherwise Released at, on or
          under any site or facility now or previously owned, operated or leased
          by the Borrower or any of its Subsidiaries;

     that, in the case of any of clauses (i) through (v) above,  may  reasonably
     be expected to have a Material Adverse Effect.

          (c) Neither the Borrower nor any of its  Subsidiaries  has transported
     or  arranged  for  the  transportation  of any  Hazardous  Material  to any
     location that is listed on the National  Priorities  List ("NPL") under the
     Comprehensive  Environmental  Response,  Compensation  and Liability Act of
     1980, as amended  ("CERCLA"),  listed for possible  inclusion on the NPL by
     the  Environmental  Protection  Agency in the  Comprehensive  Environmental
     Response and  Liability  Information  System,  as provided for by 40 C.F.R.
     Section 300.5 ("CERCLIS"), or on any similar state or local list or that is
     the  subject  of  Federal,  state or  local  enforcement  actions  or other
     investigations  that may lead to Environmental  Claims in a material amount
     against the Borrower or any of its Subsidiaries.

          (d) No  oral or  written  notification  of a  Release  of a  Hazardous
     Material  has been  filed by or on  behalf  of the  Borrower  or any of its
     Subsidiaries and no site or facility now or previously  owned,  operated or
     leased by the Borrower or any of its Subsidiaries is listed or proposed for
     listing on the NPL,  CERCLIS or any similar  state list of sites  requiring
     investigation or clean-up.

          (e) No Liens have arisen under or pursuant to any  Environmental  Laws
     on any site or facility owned, operated or leased by the Borrower or any of
     its Subsidiaries,  and no government action has been taken or is in process
     that could  subject any such site or facility to such Liens and neither the
     Borrower nor any of its Subsidiaries  would be required to place any notice
     or restriction  relating to the presence of Hazardous Materials at any site
     or facility owned by it in any deed to the real Property on which such site
     or facility is located.

          (f) All environmental investigations,  studies, audits, tests, reviews
     or  other  analyses  conducted  by or  that  are in the  possession  of the
     Borrower or any of its Subsidiaries in relation to facts,  circumstances or
     conditions at or affecting  any site or facility now or  previously  owned,
     operated  or leased by the  Borrower  or any of its  Subsidiaries  and that
     could result in a Material  Adverse  Effect have been made available to the
     Lenders.

     SECTION 4.08. COMPLIANCE WITH LAWS AND AGREEMENTS. Each of the Borrower and
its  Subsidiaries is in compliance with all laws,  regulations and orders of any
Governmental  Authority  applicable  to it or its Property  and all  indentures,
agreements and other instruments  binding upon it or its Property,  except where
the failure to do so, individually or in the aggregate,  could not reasonably be
expected to result in a Material Adverse Effect.  No Default has occurred and is
continuing.

     SECTION 4.09.  INVESTMENT AND HOLDING COMPANY STATUS.  Neither the Borrower
nor any of its  Subsidiaries  is (a) an  "investment  company" as defined in, or
subject  to  regulation  under,  the  Investment  Company  Act of  1940 or (b) a
"holding  company" as defined  in, or subject to  regulation  under,  the Public
Utility Holding Company Act of 1935.

     SECTION 4.10.  TAXES.  Each of the Borrower and its Subsidiaries has timely
filed or caused to be filed all Tax returns  and  reports  required to have been
filed and has paid or caused to be paid all Taxes  required to have been paid by
it,  except (a) Taxes  that are being  contested  in good  faith by  appropriate
proceedings  and for which  such  Person  has set  aside on its  books  adequate
reserves or (b) to the extent that the failure to do so could not  reasonably be
expected to result in a Material Adverse Effect.

     SECTION 4.11.  ERISA.  The Borrower and its ERISA Affiliates have fulfilled
their respective  obligations  under the minimum funding  standards of ERISA and
the Code  with  respect  to each  Plan  and are in  compliance  in all  material
respects with the  presently  applicable  provisions of ERISA and the Code,  and
have not incurred any  liability to the PBGC or any Plan or  Multiemployer  Plan
(other than to make contributions,  pay annual PBGC premiums or pay out benefits
in the ordinary course of business).

     SECTION  4.12.  DISCLOSURE.  The Borrower has  disclosed to the Lenders all
agreements,  instruments and corporate or other  restrictions to which it or any
of its  Subsidiaries  is  subject,  and all  other  matters  known to it,  that,
individually  or in the aggregate,  could  reasonably be expected to result in a
Material Adverse Effect. None of the reports, financial statements, certificates
or other information  furnished by or on behalf of the Obligors to the Lender in
connection  with the  negotiation of this Agreement and the other Loan Documents
or delivered  hereunder or  thereunder  (as  modified or  supplemented  by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements  therein,  in the light
of the circumstances under which they were made, not misleading;  PROVIDED that,
with respect to projected  financial  information,  the Borrower represents only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time.

     SECTION  4.13.  USE  OF  CREDIT.  Neither  the  Borrower  nor  any  of  its
Subsidiaries is engaged principally,  or as one of its important activities,  in
the business of extending credit for the purpose, whether immediate,  incidental
or ultimate,  of buying or carrying Margin Stock, and no part of the proceeds of
any extension of credit hereunder will be used to buy or carry any Margin Stock.

     SECTION 4.14. MATERIAL AGREEMENTS AND LIENS.

     (a) Part A of  Schedule II is a complete  and  correct  list of each credit
agreement, loan agreement,  indenture, purchase agreement,  guarantee, letter of
credit  or  other  arrangement  providing  for  or  otherwise  relating  to  any
Indebtedness  or any  extension of credit (or  commitment  for any  extension of
credit) to, or guarantee by, the Borrower or any of its Subsidiaries outstanding
on the date hereof the  aggregate  principal  or face amount of which  equals or
exceeds (or may equal or exceed) $200,000,  and the aggregate  principal or face
amount outstanding or that may become outstanding under each such arrangement is
correctly described in Part A of Schedule II.

     (b) Part B of  Schedule  II is a  complete  and  correct  list of each Lien
securing Indebtedness of any Person outstanding on the date hereof the aggregate
principal  or face  amount of which  equals or exceeds  (or may equal or exceed)
$250,000 and  covering any Property of the Borrower or any of its  Subsidiaries,
and the  aggregate  Indebtedness  secured  (or that may be secured) by each such
Lien and the Property covered by each such Lien is correctly described in Part B
of Schedule II.

     SECTION 4.15. CAPITALIZATION.  The authorized capital stock of the Borrower
consists,  as at  November  30,  1997,  of an  aggregate  of  81,000,000  shares
consisting of (i) 60,000,000  shares of Class A common stock, par value $.01 per
share,  of which  15,377,187  shares are duly and validly issued and outstanding
and  2,199,320  shares are issued and held in treasury,  each of which shares is
fully paid and  nonassessable,  (ii) 20,000,000  shares of Class B common stock,
par value $.01 per share, of which 3,330,458  shares are duly and validly issued
and  outstanding  and 625,725  shares are issued and held in  treasury,  each of
which  shares is fully  paid and  nonassessable  and (iii)  1,000,000  shares of
preferred  stock,  par value  $.01 per  share,  none of which are  issued or are
outstanding.

     As at November 30, 1997,  12.13% of such issued and  outstanding  shares of
Class A common stock and 85.22% of such issued and outstanding shares of Class B
common  stock are owned  beneficially  and of record by (i)  Marvin  Sands,  his
spouse, his children or his grandchildren, (ii) trusts which are for the benefit
of Marvin Sands, his spouse,  his children or his grandchildren or Andrew Stern,
which trusts are under the control of Marvin Sands, his spouse,  his children or
his grandchildren or (iii)  partnerships which are controlled by (and a majority
in interest of the  partnership  interests in which are owned by) Marvin  Sands,
his spouse,  his  children,  his  grandchildren,  by a trust  referred to in the
foregoing  clause (ii) or by a partnership that satisfies the conditions of this
clause  (iii).  The  percentage of Class A common stock set forth above does not
include  shares of Class A common stock (i) that may be acquired by Marvin Sands
or his  children  through  the  exercise of any stock  options or (ii)  issuable
pursuant  to  the  conversion   feature  of  the  Class  B  common  stock  owned
beneficially  and of  record  by any of the  persons,  trusts  and  partnerships
referred to in the foregoing clauses (i), (ii) and (iii).

     As of the date hereof, (x) except for conversion rights associated with the
Class B  common  stock,  purchase  rights  associated  with the  Employee  Stock
Purchase Plan,  options  associated  with the Long-Term Stock Incentive Plan and
options listed on Schedule V hereto, there are no outstanding Equity Rights with
respect to the  Borrower  and (y) there are no  outstanding  obligations  of the
Borrower or any of its Subsidiaries to repurchase,  redeem, or otherwise acquire
any shares of  capital  stock of the  Borrower  nor,  are there any  outstanding
obligations of the Borrower or any of its  Subsidiaries  to make payments to any
Person, such as "phantom stock" payments, where the amount thereof is calculated
with  reference  to the fair market value or equity value of the Borrower or any
Subsidiary.  The Borrower has heretofore delivered to the Administrative Agent a
complete and correct copy of the Employee  Stock  Purchase  Plan,  the Long-Term
Stock  Incentive Plan and the Incentive  Stock Option Plan, each as in effect on
the date hereof.

     SECTION 4.16. SUBSIDIARIES AND INVESTMENTS, ETC.

     (a) Set forth in Part A of  Schedule IV is a complete  and correct  list of
all of the  Subsidiaries  of the Borrower as of the date hereof,  together with,
for  each  such  Subsidiary,  (i)  the  jurisdiction  of  organization  of  such
Subsidiary,  (ii) each Person holding ownership interests in such Subsidiary and
(iii) the nature of the  ownership  interests  held by each such  Person and the
percentage  of  ownership  of such  Subsidiary  represented  by  such  ownership
interests.  Except  as  disclosed  in Part A of  Schedule  IV,  (x)  each of the
Borrower and its  Subsidiaries  owns,  free and clear of Liens (other than Liens
created pursuant to the Security  Documents),  and has the unencumbered right to
vote, all outstanding  ownership interests in each Person shown to be held by it
in Part A of Schedule IV, (y) all of the issued and outstanding capital stock of
each such Person  organized as a corporation is validly  issued,  fully paid and
nonassessable  and (z) there are no  outstanding  Equity  Rights with respect to
such Person.

     (b) Set forth in Part B of  Schedule IV is a complete  and correct  list of
all Investments  (other than Investments  disclosed in Part A of Schedule IV and
other than  Investments of the types referred to in clauses (b), (c), (e) or (g)
of Section 7.04) held by the Borrower or any of its  Subsidiaries  in any Person
on the date hereof and, for each such Investment, (x) the identity of the Person
or Persons holding such Investment and (y) the nature of such Investment. Except
as disclosed in Part B of Schedule IV, each of the Borrower and its Subsidiaries
owns,  free and clear of all Liens  (other  than Liens  created  pursuant to the
Security Documents), all such Investments.

     (c) None of the  Subsidiaries  of the  Borrower  is,  on the  date  hereof,
subject to any indenture, agreement, instrument or other arrangement of the type
described in Section 7.07 (and not  permitted by clauses (i) through (v) of said
Section).

     SECTION 4.17. REAL PROPERTY. Except with respect to leased space which does
not cost in excess of $25,000 per month in rental expense, set forth in Schedule
VI is a list,  as of the  date  of this  Agreement,  of all  the  real  Property
interests  held by the Borrower and its  Subsidiaries,  indicating  in each case
whether the respective Property is owned or leased, the identity of the owner or
lessee and the location of the respective Property.


                                    ARTICLE V

                                   CONDITIONS

     SECTION 5.01.  EFFECTIVE DATE. The obligations of the Lenders to make Loans
and of the Issuing Lenders to issue Letters of Credit hereunder shall not become
effective until the date on which the  Administrative  Agent shall have received
each of the  following  documents,  each of which shall be  satisfactory  to the
Administrative Agent (and to the extent specified below, to each Lender) in form
and  substance  (or such  condition  shall have been waived in  accordance  with
Section 10.02):

          (a)  EXECUTED  COUNTERPARTS.  From  each  party  hereto  either  (i) a
     counterpart  of this  Agreement  signed  on  behalf  of such  party or (ii)
     written  evidence  satisfactory  to the  Administrative  Agent  (which  may
     include telecopy transmission of a signed signature page of this Agreement)
     that such party has signed a counterpart of this Agreement.

          (b) OPINION OF COUNSEL TO THE  OBLIGORS.  Favorable  written  opinions
     (addressed  to the  Administrative  Agent  and the  Lenders  and  dated the
     Effective Date) of (i) Nixon, Hargrave, Devans & Doyle LLP, counsel for the
     Obligors,  substantially  in the form of Exhibit D-1, (ii) Landels,  Ripley
     and  Diamond,   LLP,   special   California   counsel  for  the   Obligors,
     substantially  in the form of  Exhibit  D-2 and  (iii)  Fulton,  Hubbard  &
     Hubbard,  special Kentucky  counsel for the Obligors,  substantially in the
     form of Exhibit D-3, and in each case covering such other matters  relating
     to  the  Obligors,   this  Agreement,   any  other  Loan  Document  or  the
     Transactions  as the Required  Lenders shall  reasonably  request (and each
     Obligor  hereby  requests  each such counsel to deliver such opinion to the
     Lenders).

          (c) OPINION OF SPECIAL NEW YORK  COUNSEL TO CHASE.  An opinion,  dated
     the Effective Date, of Milbank,  Tweed,  Hadley & McCloy,  special New York
     counsel to Chase,  substantially in the form of Exhibit E (and Chase hereby
     instructs such counsel to deliver such opinion to the Lenders).

          (d)  CORPORATE  DOCUMENTS.  Such  documents  and  certificates  as the
     Administrative  Agent or its counsel may reasonably request relating to the
     organization,   existence   and  good   standing  of  each   Obligor,   the
     authorization  of the  Transactions and any other legal matters relating to
     the Obligors, this Agreement or the Transactions, all in form and substance
     satisfactory to the Administrative Agent and its counsel.

          (e) OFFICER'S CERTIFICATE. A certificate, dated the Effective Date and
     signed by the  President,  a Vice  President or a Financial  Officer of the
     Borrower,  confirming  compliance  with  the  conditions  set  forth in the
     lettered clauses of the first sentence of Section 5.03.

          (f) SECURITY  AGREEMENT.  The Security  Agreement,  duly  executed and
     delivered by the Borrower, the Subsidiary Guarantors and the Administrative
     Agent and the  certificates  identified  under the name of such  Obligor in
     Annex 1 thereto,  in each case accompanied by undated stock powers executed
     in blank.  In  addition,  each  Obligor  shall have taken such other action
     (including, without limitation, delivering to the Administrative Agent, for
     filing,  appropriately  completed  and  duly  executed  copies  of  Uniform
     Commercial  Code financing  statements) as the  Administrative  Agent shall
     have requested in order to perfect the security  interests created pursuant
     to the Security Agreement.

          (g) MORTGAGES;  TITLE INSURANCE; ETC.. The following documents each of
     which shall be executed (and, where  appropriate,  acknowledged) by Persons
     satisfactory to the Administrative Agent:

               (i) with respect to each Mortgage,  an instrument of Modification
          and  Confirmation  pursuant  to which  such  Mortgage  shall have been
          amended in form and substance satisfactory to the Administrative Agent
          to spread  the Lien  thereof  to secure  the  obligations  under  this
          Agreement,  in each case duly executed,  acknowledged and delivered by
          the respective parties thereto,  in recordable form (in such number of
          copies as the Administrative Agent shall have requested); and

               (ii) mortgagee down-date  continuation reports for existing title
          policies  issued pursuant to the Existing  Credit  Agreement,  subject
          only to such exceptions as are satisfactory to each Lender and, to the
          extent  necessary under  applicable law, for filing in the appropriate
          county land offices,  Uniform  Commercial  Code  financing  statements
          covering  fixtures,  in each  case  appropriately  completed  and duly
          executed.

     In addition, the Borrower shall have paid to the respective title companies
     all expenses of such title companies in connection with the issuance of the
     down-date  continuation  reports  and in  addition  shall have paid to such
     title companies an amount equal to the recording and stamp taxes payable in
     connection with recording the respective  instruments of  Modification  and
     Confirmation in the appropriate county land offices.

          (h) INSURANCE.  Certificates of insurance  evidencing the existence of
     all insurance required to be maintained by the Borrower pursuant to Section
     6.05(b) and the designation of the  Administrative  Agent as the loss payee
     or additional named insured,  as the case may be,  thereunder to the extent
     required  by  Section  6.05(b),  such  certificates  to be in such form and
     contain such information as is specified in Section  6.05(b).  In addition,
     the Borrower shall have delivered (i) a certificate of a Financial  Officer
     of the Borrower  setting forth the  insurance  obtained by it in accordance
     with the requirements of Section 6.05(b) and stating that such insurance is
     in full force and effect and that all premiums then due and payable thereon
     have  been  paid and  (ii) a  written  report,  dated  reasonably  near the
     Effective  Date,  of Johnson & Higgins and Accordia of the South,  Inc., or
     any other firm of independent  insurance  brokers of nationally  recognized
     standing,  as to such  insurance and stating that, in their  opinion,  such
     insurance adequately protects the interests of the Administrative Agent and
     the Lenders and is in compliance with the provisions of Section 6.05(b).

          (i) ENVIRONMENTAL  MATTERS.  An environmental  risk questionnaire with
     respect  to each of the  existing  sites  and  facilities  that are  owned,
     operated or leased by the Borrower or any of its  Subsidiaries  and covered
     by environmental surveys and assessments delivered pursuant to the Existing
     Credit Agreement,  and such  environmental  questionnaire  (containing such
     inquiries  with  respect  to  environmental  matters  as  shall  have  been
     requested by any Lender),  and the responses thereto,  shall be in form and
     substance   satisfactory  to  the  Administrative  Agent.  In  addition  if
     requested  by  any  Lender,   the  Borrower  shall  have  provided  to  the
     Administrative  Agent an  environmental  assessment  prepared  by a firm of
     environmental  consultants  (familiar with the  identification of toxic and
     hazardous   substances),   in  form  and  substance   satisfactory  to  the
     Administrative  Agent, based upon physical on-site inspections by such firm
     of the  existing  sites and  facilities  owned,  operated  or leased by the
     Borrower or any of its Subsidiaries,  as well as a historical review of the
     uses of such sites and facilities and of the business and operations of the
     Borrower or any of its Subsidiaries  (including any former  Subsidiaries or
     divisions  of  the  Borrower  or any of its  Subsidiaries  that  have  been
     disposed  prior to the date of the assessment and with respect to which the
     Borrower  or  any of its  Subsidiaries  may  have  retained  liability  for
     Environmental Claims).

          (j) SOLVENCY ANALYSIS.  A certificate from the chief financial officer
     of the  Borrower to the effect  that,  as of the  Effective  Date and after
     giving effect to the initial extension of credit hereunder and to the other
     transactions contemplated hereby, (i) the aggregate value of all Properties
     of the Borrower and its  Subsidiaries  at their present fair saleable value
     (I.E.,  the  amount  which  may  be  realized  within  a  reasonable  time,
     considered to be six months to one year, either through  collection or sale
     at the regular  market  value,  conceiving  the latter as the amount  which
     could be obtained  for the  Property  in  question  within such period by a
     capable  and  diligent  business  person  from an  interested  buyer who is
     willing to purchase under ordinary selling conditions),  exceeds the amount
     of all the  debts  and  liabilities  (including  contingent,  subordinated,
     unmatured   and   unliquidated   liabilities)   of  the  Borrower  and  its
     Subsidiaries,  (ii)  the  Borrower  and its  Subsidiaries  will  not,  on a
     consolidated  basis,  have an  unreasonably  small  capital  with  which to
     conduct their  business  operations  as heretofore  conducted and (iii) the
     Borrower  and  its  Subsidiaries  will  have,  on  a  consolidated   basis,
     sufficient cash flow to enable them to pay their debts as they mature.

          (k)  REPAYMENT  OF  EXISTING  CREDIT  AGREEMENT.   Evidence  that  the
     principal of and interest  on, and all other  amounts  owing in respect of,
     the  Indebtedness  (other  than in respect of letters of credit  which,  as
     provided  in Section  2.06(l)  are to become  Letters of Credit  hereunder)
     under  the  Existing  Credit   Agreement  shall  have  been  (or  shall  be
     simultaneously)  paid in  full,  that  any  commitments  to  extend  credit
     thereunder  shall  have  been (or  shall  be  simultaneously)  canceled  or
     terminated and that all  Guarantees in respect of, and all Liens  securing,
     any such  Indebtedness  shall  have been  assigned  or  transferred  to the
     Administrative  Agent  hereunder (or  arrangements  for such  assignment or
     transfer satisfactory to the Administrative Agent shall have been made).

          (l) OTHER DOCUMENTS.  Such other documents as the Administrative Agent
     or any Lender or special New York counsel to Chase may reasonably request.

     The  obligation  of any  Lender  to make its  initial  extension  of credit
hereunder  is also  subject to the  payment by the  Borrower of such fees as the
Borrower shall have agreed to pay to any Lender or the  Administrative  Agent in
connection  herewith,  including  the  reasonable  fees and expenses of Milbank,
Tweed,  Hadley & McCloy,  special New York counsel to Chase,  in connection with
the negotiation,  preparation,  execution and delivery of this Agreement and the
other Loan Documents and the extensions of credit  hereunder (to the extent that
statements for such fees and expenses have been delivered to the Borrower).

     The  Administrative  Agent shall notify the Borrower and the Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing,  the  obligations of the Lenders to make Loans and of the Issuing
Lenders to issue Letters of Credit  hereunder shall not become  effective unless
each of the foregoing  conditions  is satisfied  (or waived  pursuant to Section
10.02) on or prior to 3:00 p.m.,  New York City time, on December 31, 1997 (and,
in the event such  conditions  are not so satisfied or waived,  the  Commitments
shall terminate at such time).

     SECTION 5.02. SPECIAL  CONDITIONS FOR TRANCHE II TERM LOAN BORROWINGS.  The
obligation  of each  Lender to make a Tranche  II Term Loan of any Series on the
occasion of any Tranche II Term Loan Borrowing is subject to the satisfaction of
the following additional conditions:

          (a) TRANCHE II TERM LOAN  AGREEMENT.  Each of the Tranche II Term Loan
     Lenders in respect of such  Series,  the  Borrower  and the  Administrative
     Agent  shall have  executed  the  Tranche II Term Loan  Agreement  for such
     Series pursuant to which such Lenders agree to become  obligated in respect
     of a Tranche II Term Loan Commitment hereunder.

          (b)  USE  OF  PROCEEDS.  The  Borrower  shall  have  delivered  to the
     Administrative  Agent a certificate  specifying  in  reasonable  detail the
     proposed use of the proceeds of such Tranche II Term Loan Borrowing  (which
     use shall comply with the requirements of Section 6.08).

          (c) PRO FORMA  COMPLIANCE.  The Borrower  shall have  delivered to the
     Administrative  Agent a certificate of a Financial  Officer of the Borrower
     setting  forth  calculations  in form and  detail  (including  assumptions)
     satisfactory to the Administrative Agent demonstrating pro forma compliance
     with  Section  7.08  for (i) the  four  consecutive  fiscal  quarters  most
     recently  ended  prior to the  proposed  date of the  Tranche  II Term Loan
     Borrowing  and (ii) the current  fiscal  quarter and each of the next three
     succeeding  fiscal  quarters  (in each case on a pro forma  basis under the
     assumption  that  such  Tranche  II Term  Loan  Borrowing  and any  related
     Acquisition  from the proceeds of such  Borrowing  had been effected on the
     first day(s) of such respective period(s)).

          (d) OTHER DOCUMENTS. The Administrative Agent shall have received such
     other  documents in  connection  with such  Borrower as the  Administrative
     Agent or any of the Tranche II Term Loan  Lenders of such Series or special
     New York counsel to Chase may reasonably request.

     SECTION 5.03.  EACH CREDIT EVENT.  The  obligation of each Lender to make a
Loan on the  occasion of any  Borrowing,  and of each  Issuing  Lender to issue,
amend,  renew or extend any Letter of Credit,  is subject to the satisfaction of
the following conditions:

          (a) the  representations  and  warranties of the Borrower set forth in
     this Agreement,  and of each Obligor in each of the other Loan Documents to
     which it is a party,  shall  be true and  correct  on and as of the date of
     such Borrowing or the date of issuance,  amendment, renewal or extension of
     such Letter of Credit, as applicable; and

          (b) at the  time  of and  immediately  after  giving  effect  to  such
     Borrowing or the issuance,  amendment,  renewal or extension of such Letter
     of Credit, as applicable, no Default shall have occurred and be continuing.

Each Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit  shall be deemed to  constitute  a  representation  and  warranty  by the
Borrower  on the date  thereof  as to the  matters  specified  in the  preceding
sentence.


                                   ARTICLE VI

                              AFFIRMATIVE COVENANTS

     Until the Commitments  have expired or been terminated and the principal of
and interest on each Loan and all fees payable hereunder shall have been paid in
full and all  Letters of Credit  shall have  expired  or  terminated  and all LC
Disbursements shall have been reimbursed, the Borrower covenants and agrees with
the Lenders that:

     SECTION 6.01. FINANCIAL STATEMENTS AND OTHER INFORMATION. The Borrower will
furnish to the Administrative Agent and each Lender:

          (a) within 90 days after the end of each fiscal year of the  Borrower,
     the  audited   consolidated   balance  sheets  and  related  statements  of
     operations,  stockholders'  equity and cash flows of the  Borrower  and its
     Consolidated Subsidiaries as of the end of and for such year, setting forth
     in each case in comparative  form the figures for the previous fiscal year,
     all  reported  on by  Arthur  Andersen  LLP  or  other  independent  public
     accountants of recognized  national  standing (without a "going concern" or
     like  qualification or exception and without any qualification or exception
     as to the  scope  of such  audit)  to the  effect  that  such  consolidated
     financial  statements present fairly in all material respects the financial
     condition and results of  operations  of the Borrower and its  Consolidated
     Subsidiaries on a consolidated  basis in accordance with GAAP  consistently
     applied;

          (b)  within 45 days  after the end of each of the first  three  fiscal
     quarters of each  fiscal year of the  Borrower,  the  consolidated  balance
     sheet and related statements of operations,  stockholders'  equity and cash
     flows of the Borrower and its  Consolidated  Subsidiaries  as of the end of
     and for such  fiscal  quarter  and the then  elapsed  portion of the fiscal
     year,  setting forth in each case in comparative  form the figures for (or,
     in the  case of the  balance  sheet,  as of the  end of) the  corresponding
     period or periods of the previous fiscal year, all certified by a Financial
     Officer of the Borrower as presenting  fairly in all material  respects the
     financial  condition  and results of  operations  of the  Borrower  and its
     Consolidated  Subsidiaries on a consolidated  basis in accordance with GAAP
     consistently applied,  subject to normal year-end audit adjustments and the
     absence of footnotes;

          (c)  concurrently  with any  delivery of  financial  statements  under
     clause (a) or (b) of this Section,  a certificate of a Financial Officer of
     the Borrower (i)  certifying as to whether a Default has occurred and, if a
     Default has occurred,  specifying the details  thereof and any action taken
     or  proposed  to  be  taken  with  respect  thereto,   (ii)  setting  forth
     calculations in form and detail  satisfactory to the  Administrative  Agent
     demonstrating compliance with Sections 7.01(g),  7.04(i), 7.04(j) and 7.08,
     (iii) setting  forth a  calculation  of the Debt Ratio as at the end of the
     respective  fiscal period (and indicating which Category of Applicable Rate
     shall become  effective upon the delivery of such  financial  statements as
     contemplated  by the  definition of the term  "Applicable  Rate" in Section
     1.01) and (iv)  stating  whether  any change in GAAP or in the  application
     thereof has  occurred  since the date of the audited  financial  statements
     referred  to in  Section  4.04  and,  if  any  such  change  has  occurred,
     specifying   the  effect  of  such  change  on  the  financial   statements
     accompanying such certificate;

          (d)  concurrently  with any  delivery of  financial  statements  under
     clause (a) of this Section,  (i) a certificate of the accounting  firm that
     reported  on  such  financial  statements  stating  whether  they  obtained
     knowledge  during  the  course  of  their  examination  of  such  financial
     statements of any Default (which  certificate  may be limited to the extent
     required by accounting rules or guidelines) and (ii) a calculation  setting
     forth the amount of Excess Cash Flow for the relevant period for which such
     Excess Cash Flow is to be calculated under Section 2.11(c)(iii);

          (e) promptly after the same become publicly  available,  copies of all
     periodic and other reports,  proxy  statements and other materials filed by
     the Borrower or any of its  Subsidiaries  with the  Securities and Exchange
     Commission,  or any Governmental  Authority succeeding to any or all of the
     functions of said Commission,  or with any national securities exchange, or
     distributed by the Borrower to its shareholders  generally or to holders of
     Subordinated Indebtedness generally, as the case may be; and

          (f) promptly  following any request  therefor,  such other information
     regarding the operations,  business affairs and financial  condition of the
     Borrower or any of its  Subsidiaries,  or compliance with the terms of this
     Agreement and the other Loan Documents,  as the Administrative Agent or any
     Lender may reasonably request.

     SECTION 6.02.  NOTICES OF MATERIAL EVENTS. The Borrower will furnish to the
Administrative Agent and each Lender prompt written notice of the following:

          (a) the occurrence of any Default;

          (b) the filing or commencement of any action, suit or proceeding by or
     before any arbitrator or  Governmental  Authority  against or affecting the
     Borrower or any of its  Affiliates  that,  if adversely  determined,  could
     reasonably be expected to result in a Material Adverse Effect;

          (c) the occurrence of any ERISA Event that, alone or together with any
     other ERISA  Events that have  occurred,  could  reasonably  be expected to
     result in liability of the  Borrower and its  Subsidiaries  in an aggregate
     amount exceeding $1,000,000;

          (d) the assertion of any Environmental Claim by any Person against, or
     with respect to the activities of, the Borrower or any of its  Subsidiaries
     and any alleged violation of or non-compliance  with any Environmental Laws
     or any permits,  licenses or  authorizations,  other than any Environmental
     Claim or alleged violation that, if adversely determined, would not (either
     individually or in the aggregate) have a Material Adverse Effect; and

          (e) any other  development  that  results in, or could  reasonably  be
     expected to result in, a Material Adverse Effect.

Each notice  delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or  development  requiring such notice and any action taken
or proposed to be taken with respect thereto.

     SECTION 6.03. EXISTENCE;  CONDUCT OF BUSINESS.  The Borrower will, and will
cause each of its  Subsidiaries  to, do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its legal existence and the
rights, licenses,  permits, privileges and franchises material to the conduct of
its  business;  PROVIDED  that the  foregoing  shall not  prohibit  any  merger,
consolidation, liquidation or dissolution permitted under Section 7.03.

     SECTION 6.04.  PAYMENT OF  OBLIGATIONS.  The Borrower  will, and will cause
each of its  Subsidiaries  to, pay its  obligations,  including Tax liabilities,
that,  if not paid,  could result in a Material  Adverse  Effect before the same
shall become  delinquent or in default,  except where (a) the validity or amount
thereof is being  contested in good faith by  appropriate  proceedings,  (b) the
Borrower or such  Subsidiary has set aside on its books  adequate  reserves with
respect  thereto in  accordance  with GAAP and (c) the  failure to make  payment
pending such contest  could not  reasonably  be expected to result in a Material
Adverse Effect.

     SECTION 6.05. MAINTENANCE OF PROPERTIES;  INSURANCE. The Borrower will, and
will  cause each of its  Subsidiaries  to, (a) keep and  maintain  all  Property
material to the conduct of its  business in good  working  order and  condition,
ordinary wear and tear excepted,  and (b) maintain,  with financially  sound and
reputable insurance companies,  insurance in such amounts and against such risks
as are  customarily  maintained  by  companies  engaged  in the same or  similar
businesses operating in the same or similar locations.

     SECTION 6.06. BOOKS AND RECORDS;  INSPECTION RIGHTS. The Borrower will, and
will cause each of its  Subsidiaries to, keep proper books of record and account
in  which  full,  true  and  correct  entries  are  made  of  all  dealings  and
transactions in relation to its business and activities.  The Borrower will, and
will cause each of its Subsidiaries to, permit any representatives designated by
the Administrative  Agent or any Lender,  upon reasonable prior notice, to visit
and inspect its  properties,  to examine  and make  extracts  from its books and
records,  and to discuss its affairs,  finances and condition  with its officers
and  independent  accountants,  all at such  reasonable  times  and as  often as
reasonably requested.

     SECTION 6.07.  COMPLIANCE WITH LAWS. The Borrower will, and will cause each
of its Subsidiaries to, comply with all laws,  rules,  regulations and orders of
any Governmental  Authority  applicable to it or its Property,  except where the
failure to do so,  individually  or in the  aggregate,  could not  reasonably be
expected to result in a Material Adverse Effect.

     SECTION  6.08.  USE OF PROCEEDS AND LETTERS OF CREDIT.  The proceeds of the
Tranche I Revolving Loans will be used solely to (a) repay on the Effective Date
Indebtedness  owing under the Existing  Credit  Agreement,  (b) provide  working
capital for the Borrower and its Subsidiaries,  (c) make Acquisitions  permitted
under Section 7.03,  (d) pay the expenses  relating to the  consummation  of the
transactions  contemplated hereby and (e) to provide funds for the other general
corporate  purposes  (including  Capital  Expenditures)  of the Borrower and its
Subsidiaries,  PROVIDED that, as provided in Section 7.03(d),  the Borrower will
not use more than  $50,000,000 of the proceeds of the Tranche I Revolving  Loans
to fund any such transaction and/or pay any related fees or expenses referred to
in said Section. The proceeds of the Tranche I Term Loans will be used solely to
repay on the  Effective  Date  Indebtedness  owing  under  the  Existing  Credit
Agreement. The proceeds of the Tranche II Revolving Loans will be used solely to
provide working capital for the Borrower and its  Subsidiaries.  The proceeds of
the Tranche II Term Loans will be used solely in  connection  with  Acquisitions
permitted under Section 7.03  (excluding,  however,  the acquisition of vineyard
properties),  PROVIDED that an aggregate of up to $50,000,000 of the proceeds of
all Tranche II Term Loan Borrowings may be used for general  corporate  purposes
of the  Borrower.  No part of the  proceeds  of any Loan  will be used,  whether
directly or  indirectly,  for any purpose that entails a violation of any of the
Regulations  of the Board,  including  Regulations G, U and X. Letters of Credit
will be issued only to support  general  corporate  purposes of the Borrower and
its Subsidiaries.

     SECTION 6.09. CERTAIN OBLIGATIONS RESPECTING SUBSIDIARIES.

     (a)  SUBSIDIARY  GUARANTORS.  The Borrower will take such action,  and will
cause each of its  Subsidiaries to take such action,  from time to time as shall
be  necessary  to ensure  that all  Subsidiaries  of the  Borrower  (other  then
Excluded Entities) are "Subsidiary  Guarantors" hereunder.  Without limiting the
generality  of the  foregoing,  in the  event  that the  Borrower  or any of its
Subsidiaries shall acquire or form any new Subsidiary after the date hereof that
the Borrower or the respective  Subsidiary  anticipates  will not be an Excluded
Entity (or, in the event that any Excluded  Entity shall cease to be an Excluded
Entity),  the  Borrower  or  the  respective  Subsidiary  will  cause  such  new
Subsidiary (or such Excluded Entity which ceases to be an Excluded Entity) to

          (i) become a "Subsidiary Guarantor" hereunder,  and an "Obligor" under
     the Security Agreement pursuant to a Guarantee Assumption Agreement,

          (ii) take such  action  (including  delivering  such  shares of stock,
     executing and delivering such Uniform Commercial Code financing statements)
     as shall be necessary  to create and perfect  valid and  enforceable  first
     priority Liens on  substantially  all of the personal  Property of such new
     Subsidiary  as  collateral   security  for  the  obligations  of  such  new
     Subsidiary hereunder and

          (iii) deliver such proof of corporate action,  incumbency of officers,
     opinions  of  counsel  and other  documents  as is  consistent  with  those
     delivered by each Obligor pursuant to Section 5.01 on the Effective Date or
     as the Administrative Agent shall have requested.

     (b) OWNERSHIP OF  SUBSIDIARIES.  The Borrower  will, and will cause each of
its Subsidiaries to, take such action from time to time as shall be necessary to
ensure that each of its  Subsidiaries  (other than Joint  Venture  Entities  and
Inactive  Subsidiaries)  is a Wholly-  Owned  Subsidiary.  In the event that any
additional  shares of stock shall be issued by any  Subsidiary,  the  respective
Obligor agrees forthwith to deliver to the Administrative  Agent pursuant to the
Security Agreement the certificates evidencing such shares of stock, accompanied
by undated  stock powers  executed in blank and to take such other action as the
Administrative  Agent shall  request to perfect the  security  interest  created
therein pursuant to the Security Agreement,  PROVIDED that,  notwithstanding the
foregoing, the Obligors shall not be required to pledge more than 66-2/3% of the
outstanding shares of voting stock of any Foreign Subsidiary.


                                   ARTICLE VII

                               NEGATIVE COVENANTS

     Until the  Commitments  have expired or terminated and the principal of and
interest on each Loan and all fees payable  hereunder have been paid in full and
all Letters of Credit have expired or terminated and all LC Disbursements  shall
have been reimbursed, the Borrower covenants and agrees with the Lenders that:

     SECTION 7.01.  INDEBTEDNESS.  The Borrower will not, nor will it permit any
of  its  Subsidiaries  to,  create,   incur,  assume  or  permit  to  exist  any
Indebtedness, except:

          (a) Indebtedness created hereunder;

          (b)  Indebtedness  existing on the date hereof and set forth in Part A
     of Schedule II (or,  to the extent not meeting the minimum  thresholds  for
     required  listing on said  Schedule  II  pursuant  to Section  4.14,  in an
     aggregate amount not exceeding $1,000,000),  PROVIDED that in any event the
     principal  of and interest  on, and all other  amounts  owing in respect of
     Indebtedness  under the Existing Credit Agreement (other than in respect of
     letters of credit  which,  as  provided  in Section  2.06(l)  are to become
     Letters of Credit hereunder) shall be repaid in full on the Effective Date;

          (c) Subordinated Indebtedness;

          (d)  Indebtedness  of any  Subsidiary  to the  Borrower  or any  other
     Subsidiary;

          (e) Guarantees by the Borrower of  Indebtedness  of any Subsidiary and
     by any Subsidiary of Indebtedness of the Borrower or any other Subsidiary;

          (f) Guarantees by the Borrower or by any Subsidiary of Indebtedness of
     any Person (other than the Borrower or any of its  Subsidiaries);  PROVIDED
     that the aggregate  principal amount of Indebtedness in respect of all such
     Guarantees shall not exceed $25,000,000 at any time outstanding; and

          (g) other  Indebtedness  (including  Capital Lease Obligations) of the
     Borrower and its  Subsidiaries,  PROVIDED that at the time of the creation,
     incurrence  or  assumption  thereof  and at any time  after  giving  effect
     thereto  the  aggregate  principal  amount of such  Indebtedness  shall not
     exceed $40,000,000.

     SECTION 7.02.  LIENS.  The Borrower will not, nor will it permit any of its
Subsidiaries  to,  create,  incur,  assume  or  permit  to exist any Lien on any
Property or asset now owned or  hereafter  acquired by it, or assign or sell any
income or revenues (including  accounts  receivable) or rights in respect of any
thereof, except:

          (a) Liens created  pursuant to the Security  Documents (and,  prior to
     the Effective Date, Liens securing  Indebtedness  under the Existing Credit
     Agreement);

          (b) Permitted Encumbrances;

          (c) any Lien on any  Property  or asset of the  Borrower or any of its
     Subsidiaries  existing  on the  date  hereof  and  set  forth  in Part B of
     Schedule  II (or, to the extent not  meeting  the  minimum  thresholds  for
     required  listing on said  Schedule  II  pursuant  to Section  4.14,  in an
     aggregate  amount not exceeding  $500,000);  PROVIDED that (i) no such Lien
     shall  extend to any other  Property or asset of the Borrower or any of its
     Subsidiaries  and (ii) any such Lien shall  secure  only those  obligations
     which  it  secures  on  the  date  hereof  and  extensions,   renewals  and
     replacements thereof that do not increase the outstanding  principal amount
     thereof;

          (d) any Lien upon tangible  personal  Property acquired after the date
     hereof by the  Borrower or any of its  Subsidiaries,  which Lien either (A)
     existed on such  Property  before the time of its  acquisition  and was not
     created in anticipation  thereof, or (B) was created solely for the purpose
     of securing Indebtedness  permitted under Section 7.02(e) representing,  or
     incurred  to  finance,  refinance  or  refund,  the cost of such  Property;
     PROVIDED  that (i)  such  Lien is not  created  in  contemplation  of or in
     connection  with such  acquisition,  (ii) such Lien  shall not apply to any
     other  Property or assets of the Borrower or any  Subsidiary and (iii) such
     Lien shall  secure only those  obligations  which it secures on the date of
     such  acquisition  and  extensions,   renewals  and  replacements   thereof
     permitted under clause (e) below; and

          (e) any extension, renewal or replacement of the foregoing,  provided,
     however,  that the Liens  permitted  hereunder shall not be spread to cover
     any additional  Indebtedness or Property (other than a substitution of like
     Property).

     SECTION  7.03.  FUNDAMENTAL  CHANGES.  The  Borrower  will not, nor will it
permit  any of its  Subsidiaries  to,  enter into any  transaction  of merger or
consolidation  or  amalgamation,  or liquidate,  wind up or dissolve  itself (or
suffer any  liquidation  or  dissolution).  The  Borrower  will not, nor will it
permit any of its  Subsidiaries  to,  acquire any business or Property  from, or
capital  stock  of,  or be a party to any  acquisition  of,  any  Person  except
purchases  of  inventory  and other  Property to be sold or used in the ordinary
course  of  business,  Investments  permitted  under  Section  7.04 and  Capital
Expenditures.  The Borrower will not, nor will it permit any of its Subsidiaries
to, convey, sell, lease, transfer or otherwise dispose of, in one transaction or
a series of  transactions,  any part of its  business or  Property,  whether now
owned or hereafter  acquired  (including,  without  limitation,  receivables and
lease-hold  interests,  but excluding  sales and other  dispositions  of (i) any
inventory  or other  Property  sold or  disposed  of in the  ordinary  course of
business and on ordinary  business  terms and (ii) other Property so long as the
amount of such other Property sold in any single fiscal year by the Borrower and
its  Subsidiaries  shall  have a fair  market  value  not in excess of 3% of the
Consolidated Tangible Assets as at the first day of such fiscal year).

     Notwithstanding the foregoing provisions of this Section:

          (a) any Subsidiary of the Borrower may be merged or consolidated  with
     or into:  (i) the  Borrower  if the  Borrower  shall be the  continuing  or
     surviving corporation or (ii) any Wholly-Owned Subsidiary; PROVIDED that in
     any such transaction,  the Wholly-Owned  Subsidiary shall be the continuing
     or surviving corporation;

          (b) any such Subsidiary may sell, lease, transfer or otherwise dispose
     of any or all of its Property (upon voluntary  liquidation or otherwise) to
     the Borrower or a Wholly-Owned Subsidiary of the Borrower;

          (c) the  Borrower  or any  Subsidiary  of the  Borrower  may  merge or
     consolidate  with  any  other  Person  if (i) in the  case of a  merger  or
     consolidation  of the Borrower,  the Borrower is the surviving  corporation
     and,  in any  other  case,  the  surviving  corporation  is a  Wholly-Owned
     Subsidiary of the Borrower and (ii) after giving effect  thereto no Default
     would exist hereunder;

          (d) the  Borrower  may (either  directly,  or  indirectly  through its
     Wholly-Owned  Subsidiaries)  acquire  the  business or  Property  from,  or
     capital  stock of, or enter into a joint  venture with, or be a party to an
     Acquisition  of another  Person,  so long as at the time  thereof and after
     giving effect  thereto,  no Default or Event of Default shall have occurred
     and be continuing  hereunder and the Borrower  shall have  delivered to the
     Administrative  Agent a certificate of its chief financial  officer to such
     effect;  PROVIDED that the Borrower will not use more than  $50,000,000  of
     the proceeds of the Tranche I Revolving Loans to fund any such  transaction
     and/or pay any related fees or expenses;

          (e) the  Borrower  may (either  directly,  or  indirectly  through its
     Wholly-Owned  Subsidiaries)  sell, lease,  transfer or otherwise dispose of
     the Madera Wine Cellars facility located in Madera, California;

          (f) the Borrower may, for the purpose of transferring its jurisdiction
     of  incorporation  from Delaware to another state of  incorporation,  merge
     with and into a  Wholly-Owned  Subsidiary in a transaction  constituting  a
     tax-free reorganization under 368(a)(1)(F) of the Code, so long as:

               (x) the  Borrower  shall give the Lenders and the  Administrative
          Agent at least 15 days prior written  notice of the occurrence of such
          merger;

               (y) such  Subsidiary  shall  execute and deliver an instrument in
          form and substance  satisfactory to each Lender and the Administrative
          Agent  pursuant to which such  Subsidiary  shall,  effective upon such
          merger,  assume all of the  obligations of the Borrower  hereunder and
          under the  Security  Documents  (and  execute and  deliver  such other
          instruments  as the  Administrative  Agent shall request to ensure the
          continued perfection and priority of any Liens granted by the Borrower
          pursuant to the Security Documents); and

               (z) such Subsidiary shall deliver such proof of corporate action,
          incumbency of officers,  opinions of counsel and other documents as is
          consistent  with those  delivered by the Borrower  pursuant to Section
          5.01  hereof  upon  the  Effective  Date  or  as  any  Lender  or  the
          Administrative Agent shall have requested; and

          (g) the Borrower may, for the purpose of making itself a  Wholly-Owned
     Subsidiary  of  a  newly-formed   holding   company  (herein  the  "HOLDING
     COMPANY"), enter into a transaction of merger or consolidation with another
     entity or transfer  its assets to another  entity (such  entity,  in either
     such case, being herein called the "NEW COMPANY"), so long as:

               (u) the  Borrower  shall give the Lenders and the  Administrative
          Agent at least 15 days prior written  notice of the occurrence of such
          transaction (which notice shall specify the manner and timing in which
          such transaction is to occur);

               (v) in such  transaction  the  shareholders of the Borrower shall
          receive in exchange  for the shares of stock in the  Borrower  held by
          them  immediately  prior to such  transaction  newly-issued  shares of
          stock  in the  Holding  Company  representing  substantially  the same
          respective  percentage  ownership  interests in the Holding Company as
          such  shareholders  held in the  Borrower  immediately  prior  to such
          transaction;

               (w)  immediately  after giving  effect to such  transaction,  the
          Borrower  (or  the  New  Company,  as the  case  may  be)  shall  be a
          Wholly-Owned Subsidiary of the Holding Company;

               (x) in the event that such transaction  constitutes a merger with
          a New  Company in which the  Borrower is not the  surviving  entity or
          such  transaction  involves the transfer by the Borrower of its assets
          to a New  Company,  the New  Company  shall  execute  and  deliver  an
          instrument in form and substance  satisfactory  to each Lender and the
          Administrative   Agent  pursuant  to  which  the  New  Company  shall,
          effective upon such transaction,  assume all of the obligations of the
          Borrower  hereunder and under the Security  Documents (and execute and
          deliver  such other  instruments  as the  Administrative  Agent  shall
          request to ensure the continued  perfection  and priority of any Liens
          granted by the Borrower pursuant to the Security Documents);

               (y) the Holding  Company  shall execute and deliver an instrument
          in  form  and   substance   satisfactory   to  each   Lender  and  the
          Administrative  Agent  pursuant  to which the Holding  Company  shall,
          effective upon such  transaction,  guarantee all of the obligations of
          the Borrower (or the New Company,  as the case may be)  hereunder  and
          under the  Security  Documents  and  pledge all of the shares of stock
          held by it in the Borrower  (or the New  Company,  as the case may be)
          and shall take such further action as the  Administrative  Agent shall
          request to ensure the  perfection and priority of any Liens granted by
          the Holding Company pursuant to such instrument; and

               (z) the Holding Company and the Borrower (or the New Company,  as
          the case may be) shall each deliver  such proof of  corporate  action,
          incumbency of officers,  opinions of counsel and other documents as is
          consistent  with those  delivered by the Borrower  pursuant to Section
          5.01 upon the  Effective  Date or as any Lender or the  Administrative
          Agent shall have requested.

     SECTION 7.04. INVESTMENTS. The Borrower will not, nor will it permit any of
its  Subsidiaries  to,  make or  permit to remain  outstanding  any  Investments
except:

          (a) Investments  outstanding on the date hereof and identified in Part
     B of Schedule IV;

          (b) operating deposit accounts with banks;

          (c) Permitted Investments;

          (d) Investments by the Borrower and its  Wholly-Owned  Subsidiaries in
     the Borrower and its Wholly-Owned Subsidiaries, PROVIDED that the aggregate
     amount of such  Investments  in  Foreign  Subsidiaries,  together  with the
     aggregate  amount of Investments in Joint Venture  Entities under paragraph
     (i) below, shall not exceed $20,000,000 at any one time;

          (e) Hedging Agreements entered into in the ordinary course of business
     and not for speculative purposes;

          (f) Investments permitted pursuant to clause (d) of Section 7.03;

          (g)  Investments  consisting of security  deposits with  utilities and
     other like Persons made in the ordinary course of business;

          (h) the Senior  Subordinated  Note  Guarantees,  and any  Guarantee of
     additional  Subordinated  Indebtedness  that complies with the requirements
     Section 7.09(b);

          (i) Investments by the Borrower and its  Subsidiaries in Joint Venture
     Entities  (and  Investments  by Joint Venture  Entities in other  Persons),
     PROVIDED that the  aggregate  amount of such  Investments  in Joint Venture
     Entities,  together with the  aggregate  amount of  Investments  in Foreign
     Subsidiaries,  under paragraph (d) above,  shall not exceed  $20,000,000 at
     any one time; and

          (j)  additional  Investments  by  the  Borrower  (excluding,  however,
     Investments in Joint Venture Entities) up to but not exceeding  $15,000,000
     at any one time outstanding.

The aggregate  amount of an Investment at any one time  outstanding for purposes
of  clauses  (d),  (i) and (j)  above  shall  be  deemed  to be equal to (A) the
aggregate  amount of cash,  together  with the  aggregate  fair market  value of
Property, loaned, advanced, contributed,  transferred or otherwise invested that
gives  rise to such  Investment  MINUS (B) the  aggregate  amount of  dividends,
distributions or other payments  received in cash in respect of such Investment;
the amount of an  Investment  shall not in any event be reduced by reason of any
write-off  of such  Investment  nor  increased  by any increase in the amount of
earnings  retained in the Person in which such  Investment is made that have not
been dividended, distributed or otherwise paid out.

     SECTION 7.05. RESTRICTED PAYMENTS.

     (a) The Borrower will not, nor will it permit any of its  Subsidiaries  to,
declare or make, or agree to pay or make, directly or indirectly, any Restricted
Payment, except that the Borrower may (i) declare and pay dividends with respect
to its capital  stock payable  solely in additional  shares of its common stock,
(ii) make Restricted Payments in respect of stock appreciation  rights, or other
stock-based  awards,  as  contemplated  by the Long-Term Stock Incentive Plan so
long as no  Default  shall  have  occurred  and be  continuing  or would  result
therefrom,  (iii) cancel or terminate any warrants,  options or any other rights
to acquire  any shares of capital  stock of the  Borrower  in  exchange  for the
issuance of any other  warrants,  options or rights to acquire shares of capital
stock of the Borrower,  (iv) repurchase its capital stock to the extent provided
in  paragraph  (b) below and (v) declare and make  Restricted  Payments in cash,
subject  (in the case of this  clause  (v)) to the  satisfaction  of each of the
following  conditions  on the date of such  Restricted  Payment and after giving
effect thereto:

          (w) no Default shall have occurred and be continuing;

          (x) the aggregate amount of Restricted Payments made during any fiscal
     year,  including the fiscal year ending February 28, 1998, shall not exceed
     an amount equal to 50% of  consolidated  net income of the Borrower and its
     Consolidated Subsidiaries for such fiscal year;

          (y) the Debt Ratio for the period of four consecutive  fiscal quarters
     most recently ended prior to the date of any such Restricted  Payment shall
     not exceed 2.00 to 1; and

          (z) the Borrower shall have delivered to the Administrative  Agent, at
     least 10 Business  Days (but not more than 20  Business  Days) prior to the
     date of  declaration  of any such  Restricted  Payment,  a certificate of a
     Financial Officer of the Borrower setting forth  computations in reasonable
     detail  demonstrating  satisfaction  of the foregoing  conditions as at the
     date of such  certificate and stating that such Financial  Officer believes
     in good faith that none of such conditions will fail to be satisfied on the
     date of payment of such Restricted Payment,

it being understood that to the extent the conditions specified in the foregoing
clauses  (w)  through  (y) are  satisfied  on the  date of  declaration  of such
Restricted  Payment by the board of directors of the Borrower,  such  Restricted
Payment may be made at any time within the 60- day period thereafter, regardless
of whether such conditions continue to be satisfied.

     (b) The Borrower may on any date make any Restricted  Payment consisting of
a repurchase of its capital stock, PROVIDED that:

          (i) the Borrower shall have delivered to the Administrative  Agent, at
     least 10 Business  Days (but not earlier  than the first day of the current
     fiscal quarter) prior to such date, a certificate of a Financial Officer of
     the Borrower  setting  forth an aggregate  amount  (herein,  the  "PROPOSED
     AMOUNT")  proposed  to be  expended  by the  Borrower  in  respect  of such
     repurchase  and  calculations  in form and detail  (including  assumptions)
     satisfactory to the Administrative Agent demonstrating on a pro forma basis
     that the Borrower  would have been in  compliance  with Section 7.08 during
     the four quarter period  most-recently  ended,  and during the four-quarter
     period  following the date of such Restricted  Payment,  in each case after
     giving effect to Restricted Payments in the Proposed Amount;

          (ii) the  Borrower  will  not  make  Restricted  Payments  under  this
     paragraph (b) in excess of the Proposed  Amount  without  delivering to the
     Administrative Agent pursuant to clause (i) above another calculation (with
     respect  to  an  additional  "Proposed  Amount")  demonstrating  pro  forma
     compliance as described in said clause (i) with respect to such  additional
     "Proposed Amount"; and

          (iii) the Borrower  will not make any  Restricted  Payment  under this
     paragraph (b) unless at the time thereof,  and after giving effect thereto,
     no Default shall have occurred and be continuing.

     (c)  Nothing in this  Section  shall be deemed to  prohibit  the payment of
dividends  by any  Subsidiary  of the  Borrower to the  Borrower or to any other
Subsidiary of the Borrower.

     SECTION 7.06. TRANSACTIONS WITH AFFILIATES. The Borrower will not, nor will
it permit any of its  Subsidiaries  to, sell,  lease or  otherwise  transfer any
property or assets to, or purchase,  lease or otherwise  acquire any property or
assets from,  or otherwise  engage in any other  transactions  with,  any of its
Affiliates;  PROVIDED that (x) any Affiliate who is an individual may serve as a
director,  officer or employee of the  Borrower or any of its  Subsidiaries  and
receive reasonable compensation for his or her services in such capacity and (y)
the  Borrower  and its  Subsidiaries  may enter into  transactions  (other  than
extensions of credit by the Borrower or any of its Subsidiaries to an Affiliate)
providing  for the leasing of Property,  the rendering or receipt of services or
the purchase or sale of inventory and other  Property in the ordinary  course of
business if the monetary or business  consideration  arising  therefrom would be
substantially  as  advantageous  to the  Borrower  and its  Subsidiaries  as the
monetary  or  business   consideration   which  would  obtain  in  a  comparable
transaction with a Person not an Affiliate.

     During any period that the Borrower is a public  company  regulated by, and
required to file regular  periodic  reports with,  the  Securities  and Exchange
Commission,  any compensation  paid to an executive officer of the Borrower (who
is an Affiliate) which has been specifically  approved by the board of directors
of the Borrower (or by the  Compensation  Committee of the board of directors of
the Borrower) during such period will be deemed to be reasonable for purposes of
the  foregoing.  Notwithstanding  the  foregoing,  the  Borrower  may enter into
so-called  split-dollar life insurance agreements with Affiliates  substantially
in the form of Schedule VII, so long as the aggregate amount of premiums payable
by the Borrower  during any fiscal year  pursuant to such  agreements  shall not
exceed $2,000,000 in the aggregate.

     SECTION 7.07. CERTAIN  RESTRICTIONS ON SUBSIDIARIES.  The Borrower will not
permit any of its  Subsidiaries  (other then Joint  Venture  Entities)  to enter
into,  after the date hereof,  any  indenture,  agreement,  instrument  or other
arrangement  that,  directly or indirectly,  prohibits or restrains,  or has the
effect of prohibiting or restraining,  or imposes  materially adverse conditions
upon,  the  incurrence or payment of  Indebtedness,  the granting of Liens,  the
declaration or payment of dividends,  the making of loans, advances,  guarantees
or  Investments  or the  sale,  assignment,  transfer  or other  disposition  of
Property;  PROVIDED that (i) the foregoing shall not apply to  restrictions  and
conditions  imposed by law or by this  Agreement,  (ii) the foregoing  shall not
apply  to  restrictions   and  conditions   existing   pursuant  to  the  Senior
Subordinated  Note Indenture (but shall apply to any extension or renewal of, or
any amendment or  modification  expanding the scope of, any such  restriction or
condition),  or  pursuant to any  additional  Subordinated  Indebtedness  to the
extent that such  restrictions are not less favorable to the Borrower than those
contained in the Senior  Subordinated Note Indenture,  (iii) the foregoing shall
not apply to customary  restrictions  and  conditions  contained  in  agreements
relating  to  the  sale  of  a  Subsidiary  pending  such  sale,  provided  such
restrictions  and conditions apply only to the Subsidiary that is to be sold and
such sale is permitted hereunder,  (iv) as applied to Liens, the foregoing shall
not apply to  restrictions  or conditions  imposed by any agreement  relating to
secured  Indebtedness  permitted  by  this  Agreement  if such  restrictions  or
conditions  apply only to the property or assets securing such  Indebtedness and
(v) as applied to Liens,  the foregoing shall not apply to customary  provisions
in leases and other contracts restricting the assignment thereof.

     SECTION 7.08. CERTAIN FINANCIAL COVENANTS.

     (a) DEBT RATIO.  The Borrower  will not permit the Debt Ratio to exceed the
following respective ratios at any time during the following respective periods:

                PERIOD                                   RATIO

         From the date hereof
          through 2/28/99                              4.50 to 1

         From 3/1/99
          through 2/29/00                              4.00 to 1

         From 3/1/00 and at
          all times thereafter                         3.50 to 1


     (b) SENIOR DEBT RATIO.  The Borrower  will not permit the Senior Debt Ratio
to exceed the  following  respective  ratios at any time  during  the  following
respective periods:

                PERIOD                                   RATIO

         From the date hereof
          through 2/28/99                              3.50 to 1

         From 3/1/99 and at
          all times thereafter                         3.00 to 1


     (c) INTEREST  COVERAGE  RATIO.  The  Borrower  will not permit the Interest
Coverage Ratio to be less than 3.25 to 1 at any time.

     (d) FIXED  CHARGES  RATIO.  The Borrower  will not permit the Fixed Charges
Ratio to be less than 1.00 to 1 as at the last day of any fiscal quarter of each
fiscal year.

     SECTION 7.09.  SUBORDINATED  INDEBTEDNESS.  The Borrower may after the date
hereof  incur  additional  Subordinated  Indebtedness  subject to the  following
conditions  (each of which  shall  have  been  fulfilled  in form and  substance
satisfactory to the Required Lenders):

          (a) such Indebtedness  shall be subordinated to the obligations of the
     Borrower to pay principal of and interest on the Loans,  the  Reimbursement
     Obligations  and all other amounts  payable  hereunder on terms in form and
     substance  satisfactory to the Required  Lenders (it being  understood that
     the terms and  provisions  of the Senior  Subordinated  Note  Indenture are
     satisfactory to the Required Lenders);

          (b) such Indebtedness shall be an obligation of the Borrower only, and
     none of its  Subsidiaries  shall be contingently or otherwise  obligated in
     respect thereof,  unless subordinated to the obligations of such Subsidiary
     to  pay  principal  of  and  interest  on  the  Loans,  the   Reimbursement
     Obligations  and all other amounts  payable  hereunder on terms in form and
     substance  satisfactory to the Required  Lenders (it being  understood that
     the terms and  provisions  of the Senior  Subordinated  Note  Indenture are
     satisfactory to the Required Lenders);

          (c) to the extent required pursuant to Section 2.11(c)(v), proceeds of
     such  Indebtedness  shall be applied to prepay Loans in the manner provided
     in Section 2.11(c)(v);

          (d) the terms of such  Indebtedness  shall not  provide for payment of
     any portion of the principal thereof prior to the date six months after the
     final maturity of the Loans hereunder;

          (e) terms in  respect  of  financial  and other  covenants,  events of
     default and mandatory  prepayments  applicable to such  Indebtedness  shall
     have been  reasonably  determined by the Required  Lenders to be terms that
     are at the  time  customary  in the  market  for  subordinated  debt  being
     incurred by borrowers,  and in  transactions,  comparable in the reasonable
     judgment of the Required Lenders to the Borrower and proposed debt issuance
     (it being  understood  that the terms in  respect  of  financial  and other
     covenants,  events of default  and  mandatory  prepayments  included in the
     Senior  Subordinated  Note  Indenture  are, in the judgment of the Required
     Lenders, comparable to those customary in such market);

          (f) at the time of issuance  of such  Indebtedness,  and after  giving
     effect thereto,  the Borrower shall be in compliance with Section 7.08 (the
     determination  of such ratios to be calculated  under the  assumption  that
     such Indebtedness was issued, at the beginning of the respective period and
     that any other  Indebtedness to be retired with the proceeds thereof was in
     fact  retired  on such  date of  issuance),  and the  Borrower  shall  have
     delivered to the Administrative  Agent a certificate of its chief financial
     officer to such effect setting forth in reasonable  detail the computations
     necessary to determine such compliance; and

          (g) at the time of such issuance,  and after giving effect thereto, no
     Default or Event of Default shall have occurred and be continuing hereunder
     and  the  Borrower  shall  have  delivered  to the  Administrative  Agent a
     certificate of a Financial Officer to such effect.

     Neither the Borrower nor any of its  Subsidiaries  shall purchase,  redeem,
retire or  otherwise  acquire  for value,  or set apart any money for a sinking,
defeasance or other analogous fund for, the purchase, redemption,  retirement or
other  acquisition  of,  or make any  voluntary  payment  or  prepayment  of the
principal  of or  interest  on, or any other  amount  owing in  respect  of, any
Subordinated Indebtedness, except that the Borrower may (i) make payments on the
regularly-scheduled  payment dates with respect to the principal of and interest
on the Subordinated  Indebtedness as in effect on the date hereof (or, as to any
Subordinated  Indebtedness  issued  after  the date  hereof,  as  originally  in
effect),  and (ii) so long as no Default  shall have  occurred and be continuing
(or will occur as a result of such payment),  from the proceeds of  Subordinated
Indebtedness  issued in  accordance  with the first  paragraph of this  Section,
redeem  Subordinated  Indebtedness  that is being  refinanced as contemplated in
clause (c) of the first paragraph of this Section.  Neither the Borrower nor any
of its Subsidiaries  will consent to any  modification,  supplement or waiver of
any of the provisions of any Subordinated Indebtedness without the prior consent
of the Administrative Agent (with the approval of the Required Lenders).

     SECTION   7.10.    MODIFICATIONS    OF   CERTIFICATE   OF    INCORPORATION.
Notwithstanding  the  provisions  of  clause  (f) or (g) of  Section  7.03,  the
Borrower will not modify or supplement its  Certificate of  Incorporation  as in
effect on the date hereof in any manner  adverse to the interests of the Lenders
without the prior consent of the Administrative  Agent (with the approval of the
Required Lenders).

     SECTION 7.11.  INVENTORY LOCATED IN OFF-PREMISES  WAREHOUSES.  The Borrower
will not, nor will it permit any of its Subsidiaries  to, maintain  inventory at
Off-  Premises  Warehouses  in an amount in  excess  of  $50,000,000  (as to the
Borrower  and  all  Subsidiaries)  at any  time  unless  the  Borrower  or  such
Subsidiary   has  taken  such  steps  as  are   necessary  to  ensure  that  the
Administrative  Agent has a valid  prior  perfected  security  interest  in such
inventory (including,  without limitation,  the filing of an appropriate uniform
commercial code financing statement in the respective jurisdiction in which such
inventory is located naming the Borrower or such  Subsidiary as "secured  party"
and the delivery of satisfactory evidence that such an arrangement constitutes a
consignment or first priority  perfected  security interest under applicable law
and that such security interest has been validly assigned to the  Administrative
Agent under the Security Agreement).


                                  ARTICLE VIII

                                EVENTS OF DEFAULT

     If any of the following events ("EVENTS OF DEFAULT") shall occur:

          (a) the  Borrower  shall fail to pay any  principal of any Loan or any
     reimbursement  obligation in respect of any LC Disbursement when and as the
     same shall become due and payable,  whether at the due date thereof or at a
     date fixed for prepayment thereof or otherwise;

          (b) the Borrower shall fail to pay any interest on any Loan or any fee
     or any other amount (other than an amount referred to in clause (a) of this
     Article)  payable  under this  Agreement or under any other Loan  Document,
     when and as the same shall become due and payable,  and such failure  shall
     continue unremedied for a period of two or more Business Days;

          (c) any representation or warranty made or deemed made by or on behalf
     of the Borrower or any of its  Subsidiaries  in or in connection  with this
     Agreement  or any other Loan  Document  or any  amendment  or  modification
     hereof or thereof,  or in any report,  certificate,  financial statement or
     other document  furnished  pursuant to or in connection with this Agreement
     or any other Loan  Document  or any  amendment  or  modification  hereof or
     thereof, shall prove to have been incorrect when made or deemed made in any
     material respect;

          (d) the  Borrower  shall fail to observe or perform  any  covenant  or
     agreement  contained in Section 6.02,  6.03 (with respect to the Borrower's
     existence) or 6.09 or in Article VII;

          (e) any  Obligor  shall  fail to  observe  or  perform  any  covenant,
     condition  or  agreement  contained  in this  Agreement  (other  than those
     specified  in clause  (a),  (b) or (d) of this  Article)  or any other Loan
     Document and such failure shall  continue  unremedied for a period of 45 or
     more days after notice thereof from the Administrative  Agent (given at the
     request of any Lender) to the Borrower;

          (f) the  Borrower  or any of its  Subsidiaries  shall fail to make any
     payment  (whether of  principal or interest  and  regardless  of amount) in
     respect of any Material Indebtedness, when and as the same shall become due
     and payable;

          (g) any  event  or  condition  occurs  that  results  in any  Material
     Indebtedness  becoming due prior to its scheduled  maturity or that enables
     or  permits  (with or without  the  giving of notice,  the lapse of time or
     both) the holder or holders of any Material  Indebtedness or any trustee or
     agent on its or their behalf to cause any Material  Indebtedness  to become
     due, or to require the  prepayment,  repurchase,  redemption  or defeasance
     thereof,  prior to its  scheduled  maturity;  PROVIDED that this clause (g)
     shall not apply to secured Indebtedness that becomes due as a result of the
     voluntary  sale  or  transfer  of the  Property  or  assets  securing  such
     Indebtedness;

          (h) an  involuntary  proceeding  shall be commenced or an  involuntary
     petition shall be filed seeking (i)  liquidation,  reorganization  or other
     relief in respect of the Borrower or any of its  Subsidiaries or its debts,
     or of a substantial part of its assets, under any Federal, state or foreign
     bankruptcy,  insolvency,  receivership  or similar law now or  hereafter in
     effect  or  (ii)  the  appointment  of  a  receiver,   trustee,  custodian,
     sequestrator,  conservator  or similar  official for the Borrower or any of
     its Subsidiaries or for a substantial part of its assets,  and, in any such
     case, such  proceeding or petition shall continue  undismissed for a period
     of 60 or more days or an order or decree  approving  or ordering any of the
     foregoing shall be entered;

          (i) the  Borrower  or any of its  Subsidiaries  shall (i)  voluntarily
     commence  any  proceeding  or  file  any  petition   seeking   liquidation,
     reorganization  or  other  relief  under  any  Federal,  state  or  foreign
     bankruptcy,  insolvency,  receivership  or similar law now or  hereafter in
     effect,  (ii) consent to the institution of, or fail to contest in a timely
     and appropriate  manner, any proceeding or petition described in clause (h)
     of this  Article,  (iii)  apply  for or  consent  to the  appointment  of a
     receiver, trustee, custodian, sequestrator, conservator or similar official
     for the Borrower or any of its  Subsidiaries  or for a substantial  part of
     its assets,  (iv) file an answer  admitting the material  allegations  of a
     petition  filed  against  it in any such  proceeding,  (v)  make a  general
     assignment  for the  benefit of  creditors  or (vi) take any action for the
     purpose of effecting any of the foregoing;

          (j) the Borrower or any of its Subsidiaries shall become unable, admit
     in writing its inability or fail  generally to pay its debts as they become
     due;

          (k) one or more  judgments  for the  payment  of  money in  excess  of
     $500,000 in the aggregate  (exclusive of judgment  amounts fully covered by
     insurance  where the  insurer  has  admitted  liability  in respect of such
     judgment)  or in excess  of  $5,000,000  in the  aggregate  (regardless  of
     insurance  coverage)  shall be rendered  against the Borrower or any of its
     Subsidiaries  or  any  combination   thereof  and  the  same  shall  remain
     undischarged  for a period of 45  consecutive  days during which  execution
     shall not be effectively  stayed, or any action shall be legally taken by a
     judgment  creditor to attach or levy upon any assets of the Borrower or any
     of its Subsidiaries to enforce any such judgment;

          (l) an ERISA Event  shall have  occurred  that,  in the opinion of the
     Required Lenders, when taken together with all other ERISA Events that have
     occurred,  could  reasonably  be expected  to result in a Material  Adverse
     Effect;

          (m) a  reasonable  basis  shall  exist for the  assertion  against the
     Borrower or any of its  Subsidiaries  of (or there shall have been asserted
     against the  Borrower or any of its  Subsidiaries)  claims or  liabilities,
     whether  accrued,  absolute  or  contingent,  based on or arising  from the
     generation, storage, transport, handling or disposal of Hazardous Materials
     by  the  Borrower  or  any  of  its  Subsidiaries  or  Affiliates,  or  any
     predecessor  in interest  of the  Borrower  or any of its  Subsidiaries  or
     Affiliates,  or relating to any site or facility owned,  operated or leased
     by the Borrower or any of its  Subsidiaries or Affiliates,  which claims or
     liabilities  (insofar  as they are  payable by the  Borrower  or any of its
     Subsidiaries  but after  deducting any portion  thereof which is reasonably
     expected to be paid by other  creditworthy  Persons  jointly and  severally
     liable  therefor),  in the judgment of the Required  Lenders are reasonably
     likely  to  be  determined   adversely  to  the  Borrower  or  any  of  its
     Subsidiaries,  and the  amount  thereof  is,  singly  or in the  aggregate,
     reasonably likely to have a Material Adverse Effect;

          (n) common stock of the Borrower  (after giving effect to the exercise
     of all  outstanding  Equity Rights,  other than the conversion of shares of
     Class B common  stock into  shares of Class A common  stock),  which in the
     aggregate  represents  voting  power to elect at least  50% (in  number  of
     votes) of the board of directors of the  Borrower,  shall cease to be owned
     or  otherwise   controlled   by  (i)  Marvin  Sands,   his  children,   his
     grandchildren  or any spouse of any of the foregoing  persons,  (ii) trusts
     for the benefit of Marvin Sands,  his children,  his  grandchildren  or any
     spouse of any of the  foregoing  persons,  or any trust for the  benefit of
     Andrew  Stern,  which  trusts are under the  control of Marvin  Sands,  his
     children,  his grandchildren or any spouse of any of the foregoing persons,
     or (iii)  partnerships  which are controlled by (and a majority in interest
     of the  partnership  interests  in which are owned by)  Marvin  Sands,  his
     children, his grandchildren, any spouse of any of the foregoing persons, by
     a trust referred to in the foregoing clause (ii) or by any partnership that
     satisfies the conditions of this clause (iii); or

          (o) any Lien created by the Security  Documents  shall at any time not
     constitute  a valid and  perfected  Lien on the  collateral  intended to be
     covered  thereby  (to  the  extent  perfection  by  filing,   registration,
     recordation  or possession  is required  herein or therein) in favor of the
     Administrative  Agent,  free and clear of all other Liens (other than Liens
     permitted under Section 7.02 or under the respective  Security  Documents),
     or, except for expiration in accordance with its terms, any of the Security
     Documents  shall for whatever  reason be  terminated or cease to be in full
     force and effect, or the  enforceability  thereof shall be contested by any
     Obligor;

then,  and in every such event  (other than an event with respect to any Obligor
described  in clause  (h) or (i) of this  Article),  and at any time  thereafter
during the continuance of such event, the  Administrative  Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either or
both of the following actions, at the same or different times: (i) terminate the
Commitments, and thereupon the Commitments shall terminate immediately, and (ii)
declare the Loans then  outstanding  to be due and payable in whole (or in part,
in which case any principal not so declared to be due and payable may thereafter
be declared to be due and payable),  and thereupon the principal of the Loans so
declared to be due and payable,  together with accrued  interest thereon and all
fees and other obligations of the Obligors accrued  hereunder,  shall become due
and payable immediately, without presentment, demand, protest or other notice of
any kind,  all of which are hereby  waived by each  Obligor;  and in case of any
event  with  respect  to any  Obligor  described  in  clause  (h) or (i) of this
Article, the Commitments shall automatically  terminate and the principal of the
Loans then outstanding,  together with accrued interest thereon and all fees and
other obligations of the Obligors accrued hereunder,  shall automatically become
due and payable,  without  presentment,  demand,  protest or other notice of any
kind, all of which are hereby waived by each Obligor.


                                   ARTICLE IX

                            THE ADMINISTRATIVE AGENT

     Each of the Lenders and the Issuing Lenders hereby irrevocably appoints the
Administrative  Agent as its agent  hereunder and under the other Loan Documents
and authorizes the  Administrative  Agent to take such actions on its behalf and
to exercise  such powers as are  delegated  to the  Administrative  Agent by the
terms hereof or thereof, together with such actions and powers as are reasonably
incidental thereto.

     The Person serving as the  Administrative  Agent  hereunder  shall have the
same rights and powers in its  capacity as a Lender as any other  Lender and may
exercise  the same as  though  it were not the  Administrative  Agent,  and such
Person and its Affiliates may accept  deposits from, lend money to and generally
engage in any kind of  business  with the  Borrower or any  Subsidiary  or other
Affiliate thereof as if it were not the Administrative Agent hereunder.

     The  Administrative  Agent shall not have any duties or obligations  except
those  expressly  set forth  herein  and in the other  Loan  Documents.  Without
limiting the generality of the foregoing, (a) the Administrative Agent shall not
be subject to any  fiduciary or other  implied  duties,  regardless of whether a
Default has occurred and is continuing,  (b) the Administrative  Agent shall not
have any duty to take any  discretionary  action or exercise  any  discretionary
powers, except discretionary rights and powers expressly  contemplated hereby or
by the  other  Loan  Documents  that the  Administrative  Agent is  required  to
exercise in writing by the Required  Lenders,  and (c) except as  expressly  set
forth herein and in the other Loan Documents, the Administrative Agent shall not
have any duty to disclose,  and shall not be liable for the failure to disclose,
any  information  relating to the  Borrower or any of its  Subsidiaries  that is
communicated to or obtained by the bank serving as  Administrative  Agent or any
of its Affiliates in any capacity.  The Administrative Agent shall not be liable
for any action  taken or not taken by it with the  consent or at the  request of
the  Required  Lenders or in the absence of its own gross  negligence  or wilful
misconduct.  The  Administrative  Agent shall be deemed not to have knowledge of
any  Default   unless  and  until  written   notice  thereof  is  given  to  the
Administrative  Agent by the Borrower or a Lender, and the Administrative  Agent
shall not be  responsible  for or have any duty to ascertain or inquire into (i)
any statement,  warranty or  representation  made in or in connection  with this
Agreement  or any other Loan  Document,  (ii) the  contents of any  certificate,
report or other  document  delivered  hereunder or  thereunder  or in connection
herewith  or  therewith,  (iii)  the  performance  or  observance  of any of the
covenants,  agreements or other terms or conditions set forth herein or therein,
(iv)  the  validity,  enforceability,   effectiveness  or  genuineness  of  this
Agreement,  any other  Loan  Document  or any  other  agreement,  instrument  or
document,  or (v) the  satisfaction  of any  condition set forth in Article V or
elsewhere  herein or therein,  other than to confirm  receipt of items expressly
required to be delivered to the Administrative Agent.

     The  Administrative  Agent shall be  entitled  to rely upon,  and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement,  instrument,  document or other writing  believed by it to be genuine
and to have been signed or sent by the proper Person. The  Administrative  Agent
also may rely upon any statement  made to it orally or by telephone and believed
by it to be made by the proper  Person,  and shall not incur any  liability  for
relying thereon.  The  Administrative  Agent may consult with legal counsel (who
may be  counsel  for an  Obligor),  independent  accountants  and other  experts
selected by it, and shall not be liable for any action  taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.

     The  Administrative  Agent may perform any and all its duties and  exercise
its rights and powers by or through any one or more sub-agents  appointed by the
Administrative  Agent.  The  Administrative  Agent  and any such  sub-agent  may
perform any and all its duties and exercise its rights and powers  through their
respective  Related  Parties.  The  exculpatory   provisions  of  the  preceding
paragraphs  shall apply to any such sub-agent and to the Related  Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the credit facilities  provided
for herein as well as activities as Administrative Agent.

     Subject to the  appointment  and  acceptance of a successor  Administrative
Agent as provided in this paragraph,  the Administrative Agent may resign at any
time by notifying the Lenders,  the Issuing  Lenders and the Borrower.  Upon any
such  resignation,  the Required  Lenders shall have the right,  in consultation
with the  Borrower,  to appoint a successor,  which shall be a  commercial  bank
having  an  office  in New  York  City  and  capital  and  surplus  of at  least
$500,000,000.  If no such successor shall have been so appointed by the Required
Lenders  and shall  have  accepted  such  appointment  within 30 days  after the
retiring Administrative Agent gives notice of its resignation, then the retiring
Administrative  Agent may, on behalf of the  Lenders  and the  Issuing  Lenders,
appoint a successor  Administrative  Agent meeting the qualifications  described
above. Upon the acceptance of its appointment as Administrative  Agent hereunder
by a successor,  such successor  shall succeed to and become vested with all the
rights, powers,  privileges and duties of the retiring  Administrative Agent and
the  retiring  Administrative  Agent  shall be  discharged  from its  duties and
obligations  hereunder.  The  fees  payable  by  the  Borrower  to  a  successor
Administrative  Agent  shall  be the same as those  payable  to its  predecessor
unless  otherwise  agreed  between the  Borrower and such  successor.  After the
Administrative Agent's resignation hereunder, the provisions of this Article and
Section 10.03 shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as Administrative Agent.

     Each Lender  acknowledges  that it has,  independently and without reliance
upon the  Administrative  Agent or any other Lender and based on such  documents
and information as it has deemed  appropriate,  made its own credit analysis and
decision to enter into this  Agreement.  Each Lender also  acknowledges  that it
will,  independently and without reliance upon the  Administrative  Agent or any
other Lender and based on such  documents and  information as it shall from time
to time deem  appropriate,  continue to make its own  decisions in taking or not
taking action under or based upon this Agreement, any other Loan Document or any
related agreement or any document furnished hereunder or thereunder.

     Except as  otherwise  provided  in Section  10.02(b)  with  respect to this
Agreement,  the Administrative Agent may, with the prior consent of the Required
Lenders (but not otherwise),  consent to any modification,  supplement or waiver
under any of the Loan  Documents,  PROVIDED  that,  without the prior consent of
each Lender, the Administrative Agent shall not (except as provided herein or in
the Security  Documents) release any collateral or otherwise  terminate any Lien
under  any  Security  Document  providing  for  collateral  security,  agree  to
additional  obligations  being secured by such collateral  security  (unless the
Lien for such additional obligations shall be junior to the Lien in favor of the
other  obligations  secured  by such  Security  Document,  in  which  event  the
Administrative  Agent may consent to such junior Lien  provided  that it obtains
the consent of the Required Lenders thereto) or alter the relative priorities of
the obligations entitled to the benefits of the Liens created under the Security
Documents, except that no such consent shall be required, and the Administrative
Agent is hereby  authorized,  to release any Lien covering  Property that is the
subject of either a disposition of Property permitted hereunder or a disposition
to which the Required Lenders have consented.

     Without  the   authorization   of  the   Required   Lenders,   neither  the
Administrative  Agent nor any Lender  shall send to the  Borrower or the Trustee
under the Senior Subordinated Note Indenture any notice of a Default or Event of
Default  hereunder if such notice would result in a payment  block in respect of
the Senior Subordinated Notes.


                                    ARTICLE X

                                  MISCELLANEOUS

     SECTION  10.01.   NOTICES.   Except  in  the  case  of  notices  and  other
communications  expressly  permitted to be given by  telephone,  all notices and
other  communications  provided  for  herein  shall be in  writing  and shall be
delivered  by  hand  or  overnight  courier  service,  mailed  by  certified  or
registered mail or sent by telecopy, as follows:

          (a)  if to the  Borrower  or any  Subsidiary  Guarantor,  to it at 116
     Buffalo  Street,  Canandaigua,  New York  14424-1086,  Attention  of Robert
     Sands, Esq. (Telecopy No. (716) 394-6017);

          (b) if to the  Administrative  Agent,  to The Chase  Manhattan Bank, 1
     Chase Manhattan Plaza, 8th Floor, New York, New York 10081,  Attention Loan
     and Agency Services Group (Telecopy No. (212) 552-5658), with a copy to The
     Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017,  Attention
     of Elizabeth Iacoviello (Telecopy No. 212-270-6937);

          (c) if to  either  Issuing  Lender,  to it at such  address  as may be
     notified by it to the other parties hereto;

          (d)  if to the  Swingline  Lender,  to it at  such  address  as may be
     notified by it to the other parties hereto; and

          (e) if to a Lender,  to it at its  address  (or  telecopy  number) set
     forth in its Administrative Questionnaire.

Any party hereto may change its address or telecopy number for notices and other
communications  hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.

     SECTION 10.02. WAIVERS; AMENDMENTS.

     (a) NO DEEMED  WAIVERS;  REMEDIES  CUMULATIVE.  No  failure or delay by the
Administrative  Agent,  either  Issuing  Lender or any Lender in exercising  any
right or power hereunder shall operate as a waiver thereof, nor shall any single
or  partial  exercise  of  any  such  right  or  power,  or any  abandonment  or
discontinuance of steps to enforce such a right or power,  preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the  Administrative  Agent,  the Issuing Lenders and the Lenders
hereunder  are  cumulative  and are not exclusive of any rights or remedies that
they would  otherwise  have.  No waiver of any  provision  of this  Agreement or
consent  to any  departure  by any  Obligor  therefrom  shall  in any  event  be
effective  unless the same shall be permitted by paragraph  (b) of this Section,
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which  given.  Without  limiting the  generality  of the
foregoing,  the making of a Loan or issuance of a Letter of Credit  shall not be
construed as a waiver of any Default,  regardless of whether the  Administrative
Agent,  any Lender or either  Issuing Lender may have had notice or knowledge of
such Default at the time.

     (b)  AMENDMENTS.  Neither this  Agreement nor any  provision  hereof may be
waived,  amended or modified  except  pursuant to an agreement or  agreements in
writing entered into by the Borrower and the Required Lenders or by the Borrower
and the Administrative Agent with the consent of the Required Lenders;  PROVIDED
that no such  agreement  shall (i) increase any Commitment of any Lender without
the written consent of such Lender, (ii) reduce the principal amount of any Loan
or LC  Disbursement or reduce the rate of interest  thereon,  or reduce any fees
payable hereunder,  without the written consent of each Lender affected thereby,
(iii) postpone the scheduled date of payment of the principal amount of any Loan
or LC Disbursement,  or any interest thereon, or any fees payable hereunder,  or
reduce  the  amount  of,  waive or excuse  any such  payment,  or  postpone  the
scheduled date of expiration of any  Commitment,  without the written consent of
each  Lender  affected  thereby,  (iv)  alter the  manner in which  payments  or
prepayments of principal,  interest or other amounts  hereunder shall be applied
as between the Lenders or Classes of Loans,  (v) change any of the provisions of
this  Section or the  definition  of the term  "Required  Lenders"  or any other
provision  hereof  specifying  the number or percentage  of Lenders  required to
waive,  amend or modify any rights hereunder or make any  determination or grant
any  consent  hereunder,  without the written  consent of each  Lender,  or (vi)
release any  Subsidiary  Guarantor from any of its guarantee  obligations  under
Article III without the written  consent of each Lender;  and  PROVIDED  FURTHER
that (x) no such agreement shall amend, modify or otherwise affect the rights or
duties of the  Administrative  Agent,  either  Issuing  Lender or the  Swingline
Lender hereunder without the prior written consent of the Administrative  Agent,
such Issuing  Lender or the Swingline  Lender,  as the case may be, and (y) that
any  modification or supplement of Article III shall require the consent of each
Subsidiary Guarantor.

     Anything in this  Agreement to the contrary  notwithstanding,  no waiver or
modification  of any  provision of this  Agreement  that has the effect  (either
immediately  or at some  later  time) of  enabling  the  Borrower  to  satisfy a
condition  precedent to the making of a Revolving  Loan, or Tranche II Term Loan
of any Series, shall be effective against the Lenders of such Class for purposes
of  the  respective  Tranche  I  Revolving  Commitments,  Tranche  II  Revolving
Commitments or Tranche II Term Loan  Commitments of such Series,  as applicable,
unless the Required  Lenders of such Class shall have concurred with such waiver
or  modification,  and no  waiver  or  modification  of any  provision  of  this
Agreement  or any other Loan  Document  that could  reasonably  be  expected  to
adversely affect the Lenders of any Class shall be effective against the Lenders
of such Class  unless the  Required  Lenders of such Class shall have  concurred
with such waiver or modification.

     SECTION 10.03. EXPENSES; INDEMNITY; DAMAGE WAIVER.

     (a)  COSTS  AND  EXPENSES.  The  Borrower  shall  pay  (i)  all  reasonable
out-of-pocket  expenses incurred by the Administrative Agent and its Affiliates,
including the  reasonable  fees,  charges and  disbursements  of counsel for the
Administrative   Agent,  in  connection  with  the  syndication  of  the  credit
facilities  provided for herein,  the  preparation  and  administration  of this
Agreement  and the other Loan  Documents  or any  amendments,  modifications  or
waivers of the  provisions  hereof or thereof  (whether or not the  transactions
contemplated  hereby or thereby shall be  consummated),  (ii) all  out-of-pocket
expenses  incurred by either  Issuing  Lender in  connection  with the issuance,
amendment,  renewal  or  extension  of any  Letter of Credit or any  demand  for
payment   thereunder,   (iii)  all   out-of-pocket   expenses  incurred  by  the
Administrative  Agent, either Issuing Lender or any Lender,  including the fees,
charges and disbursements of any counsel for the  Administrative  Agent,  either
Issuing Lender or any Lender,  in connection  with the enforcement or protection
of its rights in connection  with this  Agreement and the other Loan  Documents,
including its rights under this Section, or in connection with the Loans made or
Letters of Credit issued  hereunder,  including in connection  with any workout,
restructuring  or  negotiations  in  respect  thereof  and (iv)  and all  costs,
expenses,  taxes,  assessments and other charges incurred in connection with any
filing,   registration,   recording  or  perfection  of  any  security  interest
contemplated by any Security Document or any other document referred to therein.

     (b)   INDEMNIFICATION  BY  BORROWER.   The  Borrower  shall  indemnify  the
Administrative  Agent,  each Issuing  Lender and each  Lender,  and each Related
Party  of any of the  foregoing  Persons  (each  such  Person  being  called  an
"INDEMNITEE")  against,  and to hold each Indemnitee  harmless from, any and all
losses, claims, damages,  liabilities and related expenses,  including the fees,
charges and  disbursements  of any counsel  for any  Indemnitee,  incurred by or
asserted  against any  Indemnitee  arising out of, in  connection  with, or as a
result of (i) the  execution or delivery of this  Agreement or any  agreement or
instrument  contemplated  hereby, the performance by the parties hereto of their
respective  obligations hereunder or the consummation of the Transactions or any
other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the
use of the proceeds therefrom (including any refusal by either Issuing Lender to
honor a demand for payment under a Letter of Credit if the  documents  presented
in  connection  with such demand do not  strictly  comply with the terms of such
Letter of Credit),  (iii) any actual or alleged presence or release of Hazardous
Materials  on or from any  Property  owned or operated by the Borrower or any of
its  Subsidiaries,  or any  Environmental  Liability  related  in any way to the
Borrower or any of its  Subsidiaries,  or (iv) any actual or prospective  claim,
litigation,  investigation  or  proceeding  relating  to any  of the  foregoing,
whether  based on contract,  tort or any other theory and  regardless of whether
any Indemnitee is a party thereto; PROVIDED that such indemnity shall not, as to
any Indemnitee,  be available to the extent that such losses,  claims,  damages,
liabilities  or  related  expenses  are  determined  by  a  court  of  competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of such Indemnitee.

     (c) REIMBURSEMENT BY LENDERS.  To the extent that the Borrower fails to pay
any amount  required to be paid by it to the  Administrative  Agent,  an Issuing
Lender or the Swingline Lender under paragraph (a) or (b) of this Section,  each
Lender severally agrees to pay to the Administrative  Agent, such Issuing Lender
or the Swingline Lender, as the case may be, such Lender's Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or indemnity
payment is sought) of such unpaid amount; PROVIDED that the unreimbursed expense
or indemnified loss, claim,  damage,  liability or related expense,  as the case
may be, was  incurred by or  asserted  against the  Administrative  Agent,  such
Issuing Lender or the Swingline Lender in its capacity as such.

     (d)  WAIVER OF  CONSEQUENTIAL  DAMAGES,  ETC.  To the extent  permitted  by
applicable  law, no Obligor shall assert,  and each Obligor hereby  waives,  any
claim against any Indemnitee, on any theory of liability, for special, indirect,
consequential  or  punitive  damages  (as  opposed to direct or actual  damages)
arising out of, in  connection  with,  or as a result of, this  Agreement or any
agreement or  instrument  contemplated  hereby,  the  Transactions,  any Loan or
Letter of Credit or the use of the proceeds thereof.

     (e) PAYMENTS.  All amounts due under this Section shall be payable promptly
after written demand therefor.

     SECTION 10.04. SUCCESSORS AND ASSIGNS.

     (a)  ASSIGNMENTS  GENERALLY.  The  provisions  of this  Agreement  shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns  permitted  hereby,  except that no Obligor may assign or
otherwise transfer any of its rights or obligations  hereunder without the prior
written consent of each Lender (and any attempted  assignment or transfer by any
Obligor  without such consent shall be null and void),  PROVIDED that any merger
or consolidation involving any Obligor permitted under Section 7.03 shall not be
deemed to be an assignment for purposes of this  paragraph (a).  Nothing in this
Agreement,  expressed  or implied,  shall be construed to confer upon any Person
(other  than  the  parties  hereto,  their  respective  successors  and  assigns
permitted hereby and, to the extent expressly  contemplated  hereby, the Related
Parties  of  each of the  Administrative  Agent,  the  Issuing  Lenders  and the
Lenders)  any legal or  equitable  right,  remedy or claim under or by reason of
this Agreement.

     (b) ASSIGNMENTS BY LENDERS.  Any Lender may assign to one or more assignees
all or a portion of its rights and obligations  under this Agreement  (including
all or a portion  of its  Commitments  and the  Loans at the time  owing to it);
PROVIDED that:

          (i) except in the case of an assignment to a Lender or an Affiliate of
     a Lender,  each of the Borrower and the  Administrative  Agent (and, in the
     case of an  assignment  of all or a portion of a Commitment or any Lender's
     obligations  in respect  of its LC  Exposure  or  Swingline  Exposure,  the
     respective  Issuing Lender and the Swingline  Lender) must give their prior
     written consent to such assignment (which consent shall not be unreasonably
     withheld),

          (ii) except in the case of an  assignment  to a Lender or an Affiliate
     of a  Lender  or an  assignment  of  the  entire  remaining  amount  of the
     assigning  Lender's  Commitment(s),  the amount of the Commitment(s) of the
     assigning Lender subject to each such assignment (determined as of the date
     the Assignment and Acceptance  with respect to such assignment is delivered
     to the Administrative Agent) shall not be less than $10,000,000 unless each
     of the Borrower and the Administrative Agent otherwise consent,

          (iii) each partial assignment of the Loans or Commitments of any Class
     shall be made as an assignment of a proportionate part of all the assigning
     Lender's  rights and  obligations  under this  Agreement in respect of such
     Class,  except that this clause  (iii) shall not apply to rights in respect
     of outstanding Competitive Loans,

          (iv) the parties to each  assignment  shall execute and deliver to the
     Administrative  Agent  an  Assignment  and  Acceptance,   together  with  a
     processing and recordation fee of $3,500, and

          (v) the  assignee,  if it shall not be a Lender,  shall deliver to the
     Administrative Agent an Administrative Questionnaire;

PROVIDED FURTHER that any consent of the Borrower  otherwise required under this
paragraph  shall not be required if an Event of Default  under clause (h) or (i)
of Article VIII has occurred and is  continuing.  Upon  acceptance and recording
pursuant to paragraph  (d) of this Section,  from and after the  effective  date
specified in each Assignment and Acceptance,  the assignee thereunder shall be a
party hereto and, to the extent of the interest  assigned by such Assignment and
Acceptance,  have the rights and  obligations of a Lender under this  Agreement,
and the  assigning  Lender  thereunder  shall,  to the  extent  of the  interest
assigned by such  Assignment and  Acceptance,  be released from its  obligations
under this Agreement (and, in the case of an Assignment and Acceptance  covering
all of the assigning Lender's rights and obligations under this Agreement,  such
Lender shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.15, 2.16, 2.17 and 10.03).  Any assignment or transfer by
a Lender of rights or obligations under this Agreement that does not comply with
this paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a  participation  in such rights and  obligations  in accordance  with
paragraph (e) of this Section.

     (c) MAINTENANCE OF REGISTER BY  ADMINISTRATIVE  AGENT.  The  Administrative
Agent,  acting for this purpose as an agent of the Borrower,  shall  maintain at
one of its  offices  in The  City  of New  York a copy of  each  Assignment  and
Acceptance  delivered to it and a register for the  recordation of the names and
addresses of the Lenders,  and the Commitments  of, and principal  amount of the
Loans and LC  Disbursements  owing to, each Lender  pursuant to the terms hereof
from  time to time  (the  "REGISTER").  The  entries  in the  Register  shall be
conclusive,  and the Borrower, the Administrative Agent, the Issuing Lenders and
the  Lenders  may treat each  Person  whose  name is  recorded  in the  Register
pursuant  to the terms  hereof as a Lender  hereunder  for all  purposes of this
Agreement,  notwithstanding  notice  to the  contrary.  The  Register  shall  be
available for inspection by the Borrower,  either Issuing Lender and any Lender,
at any reasonable time and from time to time upon reasonable prior notice.

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

     (e)  PARTICIPATIONS.  Any Lender may,  without the consent of the Borrower,
the Administrative  Agent,  either Issuing Lender or the Swingline Lender,  sell
participations  to one or more banks or other entities (a  "PARTICIPANT") in all
or a portion of such Lender's  rights and  obligations  under this Agreement and
the other Loan Documents  (including all or a portion of its Commitments and the
Loans  owing to it);  PROVIDED  that (i) such  Lender's  obligations  under this
Agreement and the other Loan Documents shall remain unchanged,  (ii) such Lender
shall remain solely  responsible to the other parties hereto for the performance
of such  obligations  and (iii) the  Borrower,  the  Administrative  Agent,  the
Issuing Lenders and the other Lenders shall continue to deal solely and directly
with such Lender in connection with such Lender's  rights and obligations  under
this  Agreement  and the other  Loan  Documents.  Any  agreement  or  instrument
pursuant to which a Lender sells such a  participation  shall  provide that such
Lender shall retain the sole right to enforce this  Agreement and the other Loan
Documents and to approve any amendment,  modification or waiver of any provision
of this  Agreement or any other Loan  Document;  PROVIDED that such agreement or
instrument  may provide  that such  Lender will not,  without the consent of the
Participant,  agree to any amendment,  modification  or waiver  described in the
first  proviso to Section  10.02(b)  that affects such  Participant.  Subject to
paragraph (f) of this Section,  the Borrower agrees that each Participant  shall
be entitled to the benefits of Sections  2.15,  2.16 and 2.17 to the same extent
as if it were a Lender and had acquired its interest by  assignment  pursuant to
paragraph (b) of this Section.

     (f)  LIMITATIONS  ON RIGHTS OF  PARTICIPANTS.  A  Participant  shall not be
entitled to receive  any greater  payment  under  Section  2.15 or 2.17 than the
applicable  Lender  would  have been  entitled  to receive  with  respect to the
participation sold to such Participant,  unless the sale of the participation to
such  Participant  is  made  with  the  Borrower's  prior  written  consent.   A
Participant  that  would be a Foreign  Lender  if it were a Lender  shall not be
entitled to the  benefits of Section 2.17 unless the Borrower is notified of the
participation  sold to such  Participant and such  Participant  agrees,  for the
benefit of the  Borrower,  to comply  with  Section  2.17(e) as though it were a
Lender.

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

     (h) NO ASSIGNMENTS  TO OBLIGORS OR AFFILIATES.  Anything in this Section to
the contrary  notwithstanding,  no Lender may assign or participate any interest
in any Loan or LC Exposure  held by it  hereunder  to the Borrower or any of its
Affiliates or Subsidiaries without the prior consent of each Lender.

     SECTION 10.05.  SURVIVAL.  All covenants,  agreements,  representations and
warranties  made  by  the  Borrower  herein  and in the  certificates  or  other
instruments  delivered in connection with or pursuant to this Agreement shall be
considered  to have been  relied  upon by the  other  parties  hereto  and shall
survive the execution and delivery of this Agreement and the making of any Loans
and issuance of any Letters of Credit,  regardless of any investigation  made by
any  such  other   party  or  on  its  behalf  and   notwithstanding   that  the
Administrative Agent, either Issuing Lender or any Lender may have had notice or
knowledge of any Default or incorrect representation or warranty at the time any
credit is  extended  hereunder,  and shall  continue in full force and effect as
long as the  principal of or any accrued  interest on any Loan or any fee or any
other  amount  payable  under this  Agreement is  outstanding  and unpaid or any
Letter of Credit is outstanding and so long as the Commitments  have not expired
or terminated.  The provisions of Sections 2.15,  2.16, 2.17, 3.03 and 10.03 and
Article IX shall  survive and remain in full force and effect  regardless of the
consummation  of the  transactions  contemplated  hereby,  the  repayment of the
Loans,  the  expiration  or  termination  of  the  Letters  of  Credit  and  the
Commitments or the termination of this Agreement or any provision hereof.

     SECTION 10.06. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement may
be  executed in  counterparts  (and by  different  parties  hereto on  different
counterparts), each of which shall constitute an original, but all of which when
taken  together  shall  constitute a single  contract.  This  Agreement  and any
separate letter  agreements  with respect to fees payable to the  Administrative
Agent  constitute the entire contract among the parties  relating to the subject
matter hereof and supersede any and all previous  agreements and understandings,
oral or written,  relating to the subject matter  hereof.  Except as provided in
Section 5.01,  this  Agreement  shall become  effective  when it shall have been
executed by the  Administrative  Agent and when the  Administrative  Agent shall
have  received  counterparts  hereof  which,  when  taken  together,   bear  the
signatures of each of the other parties hereto,  and thereafter shall be binding
upon and  inure to the  benefit  of the  parties  hereto  and  their  respective
successors and assigns.  Delivery of an executed counterpart of a signature page
of this  Agreement  by  telecopy  shall be  effective  as delivery of a manually
executed counterpart of this Agreement.

     SECTION  10.07.  SEVERABILITY.  Any provision of this  Agreement held to be
invalid,  illegal  or  unenforceable  in  any  jurisdiction  shall,  as to  such
jurisdiction,  be  ineffective to the extent of such  invalidity,  illegality or
unenforceability without affecting the validity,  legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a  particular  jurisdiction  shall not  invalidate  such  provision in any other
jurisdiction.

     SECTION 10.08.  RIGHT OF SETOFF. If an Event of Default shall have occurred
and be continuing, each Lender is hereby authorized at any time and from time to
time, to the fullest  extent  permitted by law, to set off and apply any and all
deposits (general or special, time or demand,  provisional or final) at any time
held and  other  indebtedness  at any time  owing by such  Lender  to or for the
credit or the account of any Obligor  against any of and all the  obligations of
any Obligor now or hereafter  existing under this Agreement held by such Lender,
irrespective of whether or not such Lender shall have made any demand under this
Agreement and although  such  obligations  may be unmatured.  The rights of each
Lender  under  this  Section  are in  addition  to  other  rights  and  remedies
(including other rights of setoff) which such Lender may have.

     SECTION 10.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

     (a) GOVERNING LAW. This Agreement shall be construed in accordance with and
governed by the law of the State of New York.

     (b)  SUBMISSION  TO  JURISDICTION.  Each  Obligor  hereby  irrevocably  and
unconditionally  submits,  for  itself  and its  Property,  to the  nonexclusive
jurisdiction  of the Supreme  Court of the State of New York sitting in New York
County and of the United States  District Court of the Southern  District of New
York,  and any  appellate  court from any thereof,  in any action or  proceeding
arising out of or relating to this Agreement,  or for recognition or enforcement
of any  judgment,  and  each  of  the  parties  hereto  hereby  irrevocably  and
unconditionally  agrees  that  all  claims  in  respect  of any such  action  or
proceeding  may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court.  Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other  jurisdictions  by suit on the judgment or in any other manner
provided  by law.  Nothing  in this  Agreement  shall  affect any right that the
Administrative  Agent, either Issuing Lender or any Lender may otherwise have to
bring any action or proceeding relating to this Agreement against any Obligor or
its properties in the courts of any jurisdiction.

     (c) WAIVER OF VENUE.  Each Obligor hereby  irrevocably and  unconditionally
waives,  to the  fullest  extent  it may  legally  and  effectively  do so,  any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding  arising out of or relating to this  Agreement in any court
referred to in paragraph (b) of this Section.  Each of the parties hereto hereby
irrevocably  waives,  to the fullest extent  permitted by law, the defense of an
inconvenient  forum to the  maintenance of such action or proceeding in any such
court.

     (d) SERVICE OF PROCESS.  Each party to this Agreement  irrevocably consents
to  service of process in the  manner  provided  for  notices in Section  10.01.
Nothing in this  Agreement  will affect the right of any party to this Agreement
to serve process in any other manner permitted by law.

     SECTION 10.10.  WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES,  TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY  IN ANY  LEGAL  PROCEEDING  DIRECTLY  OR  INDIRECTLY  ARISING  OUT OF OR
RELATING TO THIS  AGREEMENT OR THE  TRANSACTIONS  CONTEMPLATED  HEREBY  (WHETHER
BASED ON CONTRACT,  TORT OR ANY OTHER  THEORY).  EACH PARTY HERETO (A) CERTIFIES
THAT NO  REPRESENTATIVE,  AGENT OR ATTORNEY OF ANY OTHER PARTY HAS  REPRESENTED,
EXPRESSLY  OR  OTHERWISE,  THAT SUCH  OTHER  PARTY  WOULD  NOT,  IN THE EVENT OF
LITIGATION,  SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)  ACKNOWLEDGES  THAT IT
AND THE OTHER PARTIES  HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

     SECTION  10.11.  HEADINGS.  Article and Section  headings  and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement  and  shall  not  affect  the   construction  of,  or  be  taken  into
consideration in interpreting, this Agreement.

     SECTION 10.12. TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY.

     (a) TREATMENT OF CERTAIN INFORMATION.  The Borrower  acknowledges that from
time to time financial  advisory,  investment  banking and other services may be
offered or  provided  to the  Borrower  or one or more of its  Subsidiaries  (in
connection  with this  Agreement or  otherwise)  by any Lender or by one or more
subsidiaries  or  affiliates of such Lender and the Borrower  hereby  authorizes
each Lender to share any  information  delivered  to such Lender by the Borrower
and its  Subsidiaries  pursuant to this  Agreement,  or in  connection  with the
decision of such Lender to enter into this Agreement,  to any such subsidiary or
affiliate,  it being understood that any such subsidiary or affiliate  receiving
such  information  shall be bound by the  provisions  of  paragraph  (b) of this
Section as if it were a Lender hereunder.  Such authorization  shall survive the
repayment of the Loans,  the  expiration or termination of the Letters of Credit
and the  Commitments  or the  termination  of this  Agreement  or any  provision
hereof.

     (b) CONFIDENTIALITY.  Each of the Administrative Agent, the Issuing Lenders
and the  Lenders  agrees  (on  behalf  of  itself  and  each of its  affiliates,
directors,   officers,   employees   and   representatives)   to  maintain   the
confidentiality  of the Information (as defined below),  except that Information
may be disclosed (i) to its and its Affiliates' directors,  officers,  employees
and agents,  including  accountants,  legal counsel and other advisors (it being
understood  that the Persons to whom such disclosure is made will be informed of
the  confidential  nature  of such  Information  and  instructed  to  keep  such
Information  confidential),  (ii) to bank  examiners  (or any  other  regulatory
authority  having  jurisdiction  over any Lender or the  Administrative  Agent),
(iii)  to the  extent  required  by  applicable  laws or  regulations  or by any
subpoena or similar legal  process,  (iv) to any other party to this  Agreement,
(v) in connection with the exercise of any remedies hereunder or under any other
Loan Document or any suit,  action or proceeding  relating to this  Agreement or
any other Loan Document or the  enforcement  of rights  hereunder or thereunder,
(vi) subject to an agreement  containing  provisions  substantially  the same as
those  of  this  paragraph,  to  any  assignee  of or  Participant  in,  or  any
prospective  assignee  of or  Participant  in, any of its rights or  obligations
under this  Agreement,  (vii) with the consent of the  Borrower or (viii) to the
extent such Information (A) becomes publicly available other than as a result of
a breach of this paragraph or (B) becomes available to the Administrative Agent,
either  Issuing  Lender or any Lender on a  nonconfidential  basis from a source
other than an Obligor.  For the purposes of this paragraph,  "INFORMATION" means
all  information  received from any Obligor or any of its  Subsidiaries or Joint
Venture Entities relating to any Obligor, its business or any such Subsidiary or
Joint Venture Entity,  other than any such  information that is available to the
Administrative  Agent,  either Issuing Lender or any Lender on a nonconfidential
basis prior to  disclosure  by an Obligor.  Any Person  required to maintain the
confidentiality  of  Information as provided in this Section shall be considered
to have complied  with its  obligation to do so if such Person has exercised the
same degree of care to maintain the  confidentiality of such Information as such
Person would accord to its own confidential information.

     Unless  specifically  prohibited  by  applicable  law or court order,  each
Lender and the Administrative  Agent shall, prior to disclosure thereof,  notify
the  Borrower  of any  request  for  disclosure  of any  Information  (A) by any
governmental  agency or  representative  thereof (other than any such request in
connection with an examination of the financial condition of such Lender by such
governmental  agency) or (B)  pursuant  to legal  process,  and will  permit the
Borrower (to the extent the same would not  adversely  affect such Lender or the
Administrative Agent) to pursue available remedies to resist such disclosure and
or obtain a protective order limiting such disclosure.


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

                                        CANANDAIGUA BRANDS, INC.

                                        By /s/ Thomas S. Summer
                                           --------------------  
                                           Title:  Chief Financial Officer


                              SUBSIDIARY GUARANTORS
                              ---------------------

BATAVIA WINE CELLARS, INC.
CANANDAIGUA EUROPE LIMITED
CANANDAIGUA WINE COMPANY, INC
ROBERTS TRADING CORP.

By /s/ Thomas S. Summer
   --------------------
   Title:  Treasurer


BARTON INCORPORATED
BARTON BRANDS, LTD.
BARTON BEERS, LTD.
BARTON BRANDS OF CALIFORNIA, INC.
BARTON BRANDS OF GEORGIA, INC.
BARTON DISTILLERS IMPORT CORP.
MONARCH IMPORT COMPANY
STEVENS POINT BEVERAGE CO.
THE VIKING DISTILLERY, INC.

By /s/ Raymond E. Powers
   ---------------------
   Title:  Treasurer


BARTON FINANCIAL CORPORATION

By /s/ Raymond E. Powers
   ---------------------
   Title:  President



                                     LENDERS
                                     -------


                                        THE CHASE MANHATTAN BANK,
                                          individually, as Swingline Lender
                                          and as Administrative Agent

                                        By /s/ Carol A. Ulmer
                                           ------------------
                                           Title: Vice President


                                        CREDIT SUISSE FIRST BOSTON

                                        By /s/ Joel Glodowski
                                           ------------------
                                           Title: Managing Director

                                        By /s/ Daniel R. Wenger
                                           --------------------  
                                           Title: Associate


                                        THE FIRST NATIONAL BANK OF CHICAGO

                                        By /s/ Judith L. Mayberry
                                           ----------------------
                                           Title: Authorized Agent


                                        FLEET BANK

                                        By /s/ Martin K. Birmingham
                                           ------------------------
                                          Title: Vice President


                                        THE BANK OF NOVA SCOTIA

                                        By /s/ J. Alan Edwards
                                           -------------------
                                           Title: Authorized Signatory


                                        BANK OF TOKYO-MITSUBISHI TRUST COMPANY

                                        By /s/ Jim Brown
                                           -------------
                                           Title: Vice President


                                        CREDIT AGRICOLE INDOSUEZ

                                        By /s/ W. Leroy Startz
                                           -------------------
                                           Title: First Vice President

                                        By /s/ Katherine L. Abbott
                                           -----------------------
                                           Title: First Vice President


                                        CREDIT LYONNAIS, NEW YORK BRANCH

                                        By /s/ Vladimir Labun
                                           ------------------
                                           Title: First Vice President - Manager


                                        MANUFACTURERS AND TRADERS TRUST
                                          COMPANY

                                        By /s/ Philip M. Smith
                                           -------------------
                                           Title: Regional Senior Vice President


                                        COOPERATIEVE CENTRALE RAIFFEISEN-
                                          BOERENLEENBANK B.A. "RABOBANK
                                          NEDERLAND", NEW YORK BRANCH

                                        By /s/ Angelo J. Balestrieri
                                           -------------------------
                                           Title: Vice President

                                        By /s/ W. Pieter C. Kodde
                                           ----------------------
                                           Title: Vice President


                                        THE SUMITOMO BANK, LIMITED

                                        By /s/ James Drum
                                           --------------
                                           Title: Vice President, NY Office

                                        By /s/ William N. Paty
                                           -------------------
                                           Title: Vice President and Manager


                                        US TRUST

                                        By /s/ Thomas Z. Macina
                                           --------------------
                                           Title: Vice President


                                        WELLS FARGO BANK, N.A.

                                        By /s/ Clifford Lawrence
                                           ---------------------
                                           Title: Vice President


                                        CORESTATES BANK, NATIONAL ASSOCIATION

                                        By /s/ Robert A. Brown
                                           -------------------
                                           Title: Vice President


                                        THE FUJI BANK LIMITED, NEW YORK BRANCH

                                        By /s/ Teljl Teramoto
                                           ------------------
                                           Title: Vice President & Manager


                                        KEYBANK NATIONAL ASSOCIATION

                                        By /s/ Michael Landini
                                           -------------------
                                           Title: Vice President


                                        THE LONG TERM CREDIT BANK OF JAPAN,
                                          LIMITED, NEW YORK BRANCH

                                        By /s/ Jun Ebihara
                                           ---------------
                                           Title: 


                                        MELLON BANK

                                        By /s/ Peyton R. Latimer
                                           ---------------------
                                           Title: Senior Vice President


                                        MERITA BANK LTD

                                        By /s/ Frank Maffei
                                           ----------------
                                           Title: Vice President

                                        By /s/ Clifford Abramsky
                                           ---------------------
                                           Title: Vice President


                                        NATIONAL CITY BANK

                                        By /s/ Lisa B. Lisi
                                           ----------------
                                           Title: Assistant Vice President


                                        PNC BANK, NATIONAL ASSOCIATION

                                        By /s/ Thomas R. Colwell
                                           ---------------------
                                           Title: Vice President


                                        THE SAKURA BANK, LIMITED

                                        By /s/ Yasuhiro Terada
                                           -------------------
                                           Title: Senior Vice President


                                        SANWA BANK LTD.

                                        By /s/ Paul Judicke
                                           ----------------
                                           Title: Vice President


                                        STATE STREET BANK AND TRUST COMPANY

                                        By /s/ Chris Del Signore
                                           ---------------------  
                                           Title: 


                                        SUMITOMO TRUST & BANKING CO., LTD.,
                                          NEW YORK BRANCH

                                        By /s/ Suraj P. Bhatia
                                           -------------------
                                           Title: Senior Vice President
                                              Manager, Corporate Finance Dept.


                                        SUNTRUST BANK, ATLANTA

                                        By /s/ Robert V. Honeycutt
                                           -----------------------
                                           Title: Vice President

                                        By /s/ William McEhl
                                           -----------------
                                           Title: B.O.


                                        TOKAI BANK LTD., NEW YORK BRANCH

                                        By /s/ Kaoru Oda
                                           -------------
                                           Title: Assistant General Manager


<PAGE>

                    CREDIT AGREEMENT BETWEEN THE REGISTRANT,
        ITS PRINCIPAL OPERATING SUBSIDIARIES, AND CERTAIN BANKS FOR WHICH
              THE CHASE MANHATTAN BANK ACTS AS ADMINISTRATIVE AGENT


                     LIST OF OMITTED SCHEDULES AND EXHIBITS


SCHEDULE I        - Commitments
SCHEDULE II       - Material Agreements and Liens
SCHEDULE III      - Litigation and Environmental Matters
SCHEDULE IV       - Subsidiaries and Investments
SCHEDULE V        - Stock Options
SCHEDULE VI       - Real Property
SCHEDULE VII      - Life Insurance Agreements

EXHIBIT A         - Form of Assignment and Acceptance
EXHIBIT B         - Form of Security Agreement
EXHIBIT C         - Form of Guarantee Assumption Agreement
EXHIBIT D-1       - Form of Opinion of Special Counsel to Obligors
EXHIBIT D-2       - Form of Opinion of California Counsel to Obligors
EXHIBIT D-3       - Form of Opinion of Kentucky Counsel to Obligors
EXHIBIT E         - Form of Opinion of Special New York Counsel to The Chase 
                    Manhattan Bank