$100,000,000

                                CREDIT AGREEMENT

                                      among

                         POWERHOUSE TECHNOLOGIES, INC.,
                                  as Borrower,

                               The Several Lenders
                        from Time to Time Parties Hereto,

                              LEHMAN BROTHERS INC.,
                                   as Arranger

                          LEHMAN COMMERCIAL PAPER INC.,
                             as Administrative Agent

                          LEHMAN COMMERCIAL PAPER INC.,
                              as Syndication Agent

                                       and

                       CANADIAN IMPERIAL BANK OF COMMERCE,
                             as Documentation Agent

                           Dated as of October 9, 1998






<PAGE>










                                TABLE OF CONTENTS



                                                                            Page

SECTION 1.  DEFINITIONS........................................................1
         1.1  Defined Terms....................................................1
         1.2  Other Definitional Provisions...................................23

SECTION 2.  AMOUNT AND TERMS OF COMMITMENTS...................................23
         2.1  Term Loan Commitments...........................................23
         2.2  Procedure for Term Loan Borrowing...............................23
         2.3  Repayment of Term Loans.........................................24
         2.4  Revolving Credit Commitments....................................25
         2.5  Procedure for Revolving Credit Borrowing........................26
         2.6  Repayment of Loans; Evidence of Debt............................26
         2.7  Commitment Fees, etc. ..........................................27
         2.8  Termination or Reduction of Revolving Credit Commitments;
               Increase of Revolving Credit Commitments.......................27
         2.9  Optional Prepayments............................................28
         2.10  Mandatory Prepayments and Commitment Reductions................29
         2.11  Conversion and Continuation Options............................30
         2.12  Minimum Amounts and Maximum Number of Eurodollar Tranches......30
         2.13  Interest Rates and Payment Dates...............................30
         2.14  Computation of Interest and Fees...............................31
         2.15  Inability to Determine Interest Rate...........................31
         2.16  Pro Rata Treatment and Payments................................32
         2.17  Requirements of Law............................................34
         2.18  Taxes..........................................................35
         2.19  Indemnity......................................................37
         2.20  Illegality.....................................................37
         2.21  Change of Lending Office.......................................37

SECTION 3.  LETTERS OF CREDIT.................................................38
         3.1  L/C Commitment..................................................38
         3.2  Procedure for Issuance of Letter of Credit......................38
         3.3  Fees and Other Charges..........................................39
         3.4  L/C Participations..............................................39
         3.5  Reimbursement Obligation of the Borrower........................40
         3.6  Obligations Absolute............................................40
         3.7  Letter of Credit Payments.......................................41
         3.8  Applications....................................................41
         3.9  Participating Interest in Existing Letters of Credit............41

SECTION 4.  REPRESENTATIONS AND WARRANTIES....................................42
         4.1  Financial Condition.............................................42
         4.2  No Change.......................................................43
         4.3  Corporate Existence; Compliance with Law........................43
         4.4  Corporate Power; Authorization; Enforceable Obligations.........43


                                       i

<PAGE>



         4.5  No Legal Bar....................................................44
         4.6  No Material Litigation..........................................44
         4.7  No Default......................................................44
         4.8  Ownership of Property; Liens....................................44
         4.9  Intellectual Property...........................................44
         4.10  Taxes..........................................................45
         4.11  Federal Regulations............................................45
         4.12  Labor Matters..................................................45
         4.13  ERISA..........................................................45
         4.14  Investment Company Act; Other Regulations......................46
         4.15  Subsidiaries...................................................46
         4.16  Use of Proceeds................................................46
         4.17  Environmental Matters..........................................46
         4.18  Accuracy of Information, etc...................................47
         4.19  Security Documents.............................................48
         4.20  Solvency.......................................................49
         4.21  Regulation H...................................................49

SECTION 5.  CONDITIONS PRECEDENT..............................................49
         5.1  Conditions to Initial Extension of Credit.......................49
         5.2  Conditions to Each Extension of Credit..........................53

SECTION 6.  AFFIRMATIVE COVENANTS.............................................53
         6.1  Financial Statements............................................53
         6.2  Certificates; Other Information.................................54
         6.3  Payment of Obligations..........................................55
         6.4  Conduct of Business and Maintenance of Existence, etc. .........55
         6.5  Maintenance of Property; Insurance..............................55
         6.6  Inspection of Property; Books and Records; Discussions..........56
         6.7  Notices.........................................................56
         6.8  Environmental Laws..............................................57
         6.9  Interest Rate Protection........................................57
         6.10  Additional Collateral, etc.....................................57
         6.11  Further Assurances.............................................59
         6.12  Removal of Prohibition on Negative Pledge......................59
         6.13  Completion of Phase II Evaluation..............................59
         6.14  Surveys........................................................59

SECTION 7.  NEGATIVE COVENANTS................................................60
         7.1  Financial Condition Covenants...................................60
         7.2  Limitation on Indebtedness......................................61
         7.3  Limitation on Liens.............................................62
         7.4  Limitation on Fundamental Changes...............................63
         7.5  Limitation on Disposition of Property...........................63
         7.6  Limitation on Restricted Payments...............................64
         7.7  Limitation on Capital Expenditures..............................64
         7.8  Limitation on Investments.......................................64
         7.9  Limitation on Transactions with Affiliates......................65
         7.10  Limitation on Sales and Leasebacks.............................65


                                       ii

<PAGE>



         7.11  Limitation on Changes in Fiscal Periods........................65
         7.12  Limitation on Negative Pledge Clauses..........................65
         7.13  Limitation on Restrictions on Subsidiary Distributions.........66
         7.14  Limitation on Lines of Business................................66
         7.15  Foreign Exposure Limitation....................................66
         7.16  Limitation on Optional Payments and Modifications of Debt
                    Instruments, etc..........................................66

SECTION 8.  EVENTS OF DEFAULT.................................................67

SECTION 9.  THE AGENTS........................................................70
         9.1  Appointment.....................................................70
         9.2  Delegation of Duties............................................70
         9.3  Exculpatory Provisions..........................................70
         9.4  Reliance by Agents..............................................71
         9.5  Notice of Default...............................................71
         9.6  Non-Reliance on Agents and Other Lenders........................71
         9.7  Indemnification.................................................72
         9.8  Agent in Its Individual Capacity................................72
         9.9  Successor Agents................................................72
         9.10  Authorization to Release Liens.................................73
         9.11  The Arranger and the Documentation Agent.......................73

SECTION 10.  MISCELLANEOUS....................................................73
         10.1  Amendments and Waivers.........................................73
         10.2  Notices........................................................75
         10.3  No Waiver; Cumulative Remedies.................................75
         10.4  Survival of Representations and Warranties.....................76
         10.5  Payment of Expenses............................................76
         10.6  Successors and Assigns; Participations and Assignments.........77
         10.7  Adjustments; Set-off...........................................79
         10.8  Counterparts...................................................80
         10.9  Severability...................................................80
         10.10  Integration...................................................80
         10.11  GOVERNING LAW.................................................80
         10.12  Submission To Jurisdiction; Waivers...........................80
         10.13  Acknowledgements..............................................81
         10.14  Confidentiality...............................................81
         10.15  Release of Collateral Security and Guarantee Obligations......82
         10.16  Accounting Changes............................................82
         10.17  Delivery of Lender Addenda.  .................................82
         10.18  WAIVERS OF JURY TRIAL.  ......................................82



                                       iii

<PAGE>









ANNEXES:

A                     Pricing Grid


SCHEDULES:

1.1                   Mortgaged Property
3.9                   Existing Letters of Credit
4.4                   Consents, Authorizations, Filings and Notices
4.15                  Subsidiaries
4.19(a)               UCC Filing Jurisdictions
4.19(b)               Mortgage Filing Jurisdictions
7.2(d)                Existing Indebtedness
7.3(f)                Existing Liens


EXHIBITS:

A                     Form of Guarantee and Collateral Agreement
B                     Form of Compliance Certificate
C                     Form of Closing Certificate
D-1                   Form of Mortgage (Real Property)
D-2                   Form of Aircraft Mortgage
E                     Form of Assignment and Acceptance
F                     Matters to be Covered in Legal Opinions
G-1                   Form of Term Note
G-2                   Form of Revolving Credit Note
H                     Form of Prepayment Option Notice
I                     Form of Exemption Certificate
J                     Form of Lender Addendum
K                     Form of Revolving Credit Commitment Increase Supplement
L                     Form of New Lender Supplement
M                     Form of Participation Agreement



                                       iv

<PAGE>


                                                                               1












          CREDIT  AGREEMENT,  dated as of  October  9,  1998,  among  POWERHOUSE
TECHNOLOGIES,  INC, a Delaware  corporation (the "Borrower"),  the several banks
and other  financial  institutions  from time to time parties to this  Agreement
(the  "Lenders"),  LEHMAN  BROTHERS  INC.,  as  advisor  and  arranger  (in such
capacity, the "Arranger"), LEHMAN COMMERCIAL PAPER INC., as administrative agent
(in such capacity, the "Administrative Agent"), LEHMAN COMMERCIAL PAPER INC., as
syndication  agent (in such capacity,  the  "Syndication  Agent"),  and CANADIAN
IMPERIAL  BANK OF  COMMERCE.,  as  Documentation  Agent (in such  capacity,  the
"Documentation Agent").


                              W I T N E S S E T H:


          WHEREAS, the Borrower wishes to establish credit facilities to provide
financing for the repayment of certain  existing  indebtedness,  to fund capital
expenditures and for other general corporate purposes; and

          WHEREAS,  the  Lenders  are  willing  to make such  credit  facilities
available upon and subject to the terms and conditions hereinafter set forth;

          NOW,  THEREFORE,  in  consideration of the premises and the agreements
hereinafter set forth, the parties hereto hereby agree as follows:


                             SECTION 1. DEFINITIONS

          1.1 Defined Terms. As used in this Agreement, the terms listed in this
Section 1.1 shall have the respective meanings set forth in this Section 1.1.

          "Adjustment Date": as defined in the Pricing Grid.

          "Administrative Agent": as defined in the preamble hereto.

          "Affiliate":  as to any Person,  any other Person  which,  directly or
     indirectly,  is in control of, is controlled by, or is under common control
     with, such Person.  For purposes of this definition,  "control" of a Person
     means the power, directly or indirectly,  either to (a) vote 10% or more of
     the securities  having  ordinary voting power for the election of directors
     (or persons  performing  similar functions) of such Person or (b) direct or
     cause the direction of the management and policies of such Person,  whether
     by contract or otherwise.

          "Agents":  the collective  reference to the Administrative  Agent, the
     Syndication Agent and the Documentation Agent.



<PAGE>


                                                                               2




          "Aggregate  Exposure":  with  respect  to any  Lender at any time,  an
     amount equal to (a) until the Closing Date,  the  aggregate  amount of such
     Lender's  Commitments at such time and (b)  thereafter,  the sum of (i) the
     aggregate then unpaid principal amount of such Lender's Term Loans and (ii)
     the amount of such Lender's  Revolving Credit Commitment then in effect or,
     if the Revolving Credit  Commitments  have been  terminated,  the amount of
     such Lender's Revolving Extensions of Credit then outstanding.

          "Aggregate  Exposure  Percentage"  with  respect  to any Lender at any
     time,  the ratio  (expressed  as a percentage)  of such Lender's  Aggregate
     Exposure  at such time to the  Aggregate  Exposure  of all  Lenders at such
     time.

          "Agreement":  this  Credit  Agreement,  as  amended,  supplemented  or
     otherwise modified from time to time.

          "Aircraft":  a 1974 Sabreliner  Model 40, carrying FAA  Identification
     Number N999VT.

          "Aircraft Mortgage": the Aircraft Mortgage,  substantially in the form
     of Exhibit D-2, to be executed by Powerhouse Technologies, Inc., in respect
     of the Aircraft, as the same may from time to time be amended, supplemented
     or otherwise modified.

          "Applicable  Margin":  for each  Type of Loan,  the rate per annum set
     forth under the relevant column heading below:

                                                Base Rate             Eurodollar
                                                  Loans                  Loans
                                                  -----                  -----

          Revolving Credit Loans                  1.25%                  2.25%
          Tranche A Term Loans                    1.25%                  2.25%
          Tranche B Term Loans                    1.75%                  2.75%

     provided,  that on and after  the first  Adjustment  Date,  the  Applicable
     Margin for Loans under each  Facility  will be  determined  pursuant to the
     Pricing Grid.

          "Application":  an application, in such form as the Issuing Lender may
     specify from time to time,  requesting  the Issuing Lender to open a Letter
     of Credit.

          "Arranger": as defined in the preamble hereto.

          "Asset  Sale":  any  Disposition  of  Property  or series  of  related
     Dispositions  of Property  (excluding  any such  Disposition  permitted  by
     clause (a), (b), (c) or (d) of Section 7.5) which yields gross  proceeds to
     the Borrower or any of its Subsidiaries



<PAGE>


                                                                               3




     (valued at the  initial  principal  amount  thereof in the case of non-cash
     proceeds  consisting of notes or other debt  securities  and valued at fair
     market value in the case of other non-cash proceeds) in excess of $50,000.

          "Assignee": as defined in Section 10.6(c).

          "Assignor": as defined in Section 10.6(c).

          "Available  Revolving Credit  Commitment":  as to any Revolving Credit
     Lender at any time,  an amount  equal to the  excess,  if any,  of (a) such
     Lender's  Revolving Credit Commitment then in effect over (b) such Lender's
     Revolving Extensions of Credit then outstanding.

          "Base  Rate":  for any day,  a rate per  annum  (rounded  upwards,  if
     necessary,  to the next 1/16 of 1%) equal to the  greatest of (a) the Prime
     Rate in effect on such day, (b) the Base CD Rate in effect on such day plus
     1% and (c) the Federal Funds  Effective Rate in effect on such day plus 1/2
     of 1%. For  purposes  hereof:  "Prime Rate" shall mean the rate of interest
     per annum publicly  announced from time to time by the Reference  Lender as
     its prime or base rate in effect at its  principal  office in New York City
     (the  Prime  Rate not being  intended  to be the  lowest  rate of  interest
     charged by the Reference  Lender in connection with extensions of credit to
     debtors);  "Base CD Rate"  shall mean the sum of (a) the product of (i) the
     Three-Month  Secondary CD Rate and (ii) a fraction,  the numerator of which
     is one and the denominator of which is one minus the C/D Reserve Percentage
     and (b) the C/D Assessment Rate; and "Three-Month  Secondary CD Rate" shall
     mean, for any day, the secondary  market rate for three-month  certificates
     of deposit  reported  as being in effect on such day (or, if such day shall
     not be a  Business  Day,  the next  preceding  Business  Day) by the  Board
     through the public  information  telephone line of the Federal Reserve Bank
     of New York (which rate will, under the current  practices of the Board, be
     published in Federal Reserve  Statistical Release H.15(519) during the week
     following  such day), or, if such rate shall not be so reported on such day
     or such next  preceding  Business Day, the average of the secondary  market
     quotations for  three-month  certificates  of deposit of major money center
     banks in New York City received at approximately  10:00 A.M., New York City
     time, on such day (or, if such day shall not be a Business Day, on the next
     preceding  Business Day) by the  Reference  Lender from three New York City
     negotiable  certificate of deposit dealers of recognized  standing selected
     by it. Any change in the Base Rate due to a change in the Prime  Rate,  the
     Three-Month  Secondary CD Rate or the Federal Funds Effective Rate shall be
     effective as of the opening of business on the effective day of such change
     in the Prime Rate, the  Three-Month  Secondary CD Rate or the Federal Funds
     Effective Rate, respectively.

          "Base Rate Loans":  Loans the rate of interest  applicable to which is
     based upon the Base Rate.




<PAGE>


                                                                               4




          "Benefitted Lender": as defined in Section 10.7.

          "Board":  the Board of Governors of the Federal  Reserve System of the
     United States (or any successor).

          "Borrower": as defined in the preamble hereto.

          "Borrowing Date": any Business Day specified by the Borrower as a date
     on  which  the  Borrower  requests  the  relevant  Lenders  to  make  Loans
     hereunder.

          "Business  Day":  (i) for all purposes other than as covered by clause
     (ii)  below,  a day  other  than a  Saturday,  Sunday or other day on which
     commercial  banks in New York City are  authorized  or  required  by law to
     close and (ii) with respect to all notices and determinations in connection
     with, and payments of principal and interest on,  Eurodollar Loans, any day
     which is a Business Day described in clause (i) and which is also a day for
     trading by and between banks in Dollar deposits in the interbank eurodollar
     market.

          "Capital  Expenditures":  for any period,  with respect to any Person,
     the aggregate of all  expenditures by such Person and its  Subsidiaries for
     the  acquisition  or  leasing  (pursuant  to a  capital  lease) of fixed or
     capital  assets or additions to equipment  or  intangible  assets  relating
     thereto  (including  replacements,  capitalized  repairs  and  improvements
     during  such  period)  which  should  be   capitalized   under  GAAP  on  a
     consolidated balance sheet of such Person and its Subsidiaries.

          "Capital Lease Obligations": as to any Person, the obligations of such
     Person  to pay  rent  or  other  amounts  under  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 capital  leases on a balance  sheet of such Person  under
     GAAP,  and,  for  the  purposes  of  this  Agreement,  the  amount  of such
     obligations  at any time shall be the  capitalized  amount  thereof at such
     time determined in accordance with GAAP.

          "Capital  Stock":  any and all shares,  interests,  participations  or
     other equivalents  (however  designated) of capital stock of a corporation,
     any and all  equivalent  ownership  interests  in a  Person  (other  than a
     corporation) and any and all warrants, rights or options to purchase any of
     the foregoing.

          "Cash  Equivalents":  (a) marketable direct  obligations issued by, or
     unconditionally  guaranteed  by, the United States  Government or issued by
     any  agency  thereof  and backed by the full faith and credit of the United
     States, in each case maturing within one year from the date of acquisition;
     (b)  certificates  of deposit,  time deposits,  eurodollar time deposits or
     overnight  bank deposits  having  maturities of six months or less from the
     date of acquisition issued by any Lender or by any commercial



<PAGE>


                                                                               5




     bank organized  under the laws of the United States of America or any state
     thereof having combined capital and surplus of not less than  $500,000,000;
     (c)  commercial  paper of an issuer rated at least A-2 by Standard & Poor's
     Ratings  Services  ("S&P")  or  P-2  by  Moody's  Investors  Service,  Inc.
     ("Moody's"),  or carrying an equivalent  rating by a nationally  recognized
     rating agency,  if both of the two named rating  agencies cease  publishing
     ratings of commercial  paper  issuers  generally,  and maturing  within six
     months from the date of  acquisition;  (d)  repurchase  obligations  of any
     Lender or of any commercial bank satisfying the  requirements of clause (b)
     of this definition,  having a term of not more than 30 days with respect to
     securities  issued or fully  guaranteed  or insured  by the  United  States
     government;  (e)  securities  with  maturities of one year or less from the
     date of acquisition  issued or fully guaranteed by any state,  commonwealth
     or territory of the United States,  by any political  subdivision or taxing
     authority  of any such state,  commonwealth  or territory or by any foreign
     government,  the  securities  of  which  state,  commonwealth,   territory,
     political subdivision,  taxing authority or foreign government (as the case
     may be) are rated at least A by S&P or A by Moody's;  (f)  securities  with
     maturities  of six  months or less from the date of  acquisition  backed by
     standby  letters  of credit  issued by any  Lender or any  commercial  bank
     satisfying the requirements of clause (b) of this definition; or (g) shares
     of money market mutual or similar funds which invest  exclusively in assets
     satisfying the requirements of clauses (a) through (f) of this definition.

          "C/D Assessment  Rate":  for any day as applied to any Base Rate Loan,
     the  annual  assessment  rate in effect on such day which is  payable  by a
     member  of the  Bank  Insurance  Fund  maintained  by the  Federal  Deposit
     Insurance  Corporation  (the "FDIC")  classified  as  well-capitalized  and
     within supervisory  subgroup "B" (or a comparable successor assessment risk
     classification) within the meaning of 12 C.F.R. ss. 327.4 (or any successor
     provision)  to the  FDIC  (or  any  successor)  for  the  FDIC's  (or  such
     successor's)  insuring time deposits at offices of such  institution in the
     United States.

          "C/D  Reserve  Percentage":  for any day as  applied  to any Base Rate
     Loan, that  percentage  (expressed as a decimal) which is in effect on such
     day, as  prescribed  by the Board,  for  determining  the  maximum  reserve
     requirement for a Depositary Institution (as defined in Regulation D of the
     Board as in effect from time to time) in respect of new  non-personal  time
     deposits in Dollars having a maturity of 30 days or more.

          "Closing Date":  the date on which the conditions  precedent set forth
     in  Section  5.1 shall have been  satisfied,  which date shall be not later
     than October 9, 1998.

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

          "Collateral": all Property of the Loan Parties, now owned or hereafter
     acquired,  upon which a Lien is  purported  to be  created by any  Security
     Document.




<PAGE>


                                                                               6




          "Commitment":  as to any  Lender,  the sum of the  Tranche A Term Loan
     Commitment,  the Tranche B Term Loan  Commitment  and the Revolving  Credit
     Commitment of such Lender.

          "Commitment Fee Rate": 1/2 of 1% per annum.

          "Commonly Controlled Entity": an entity,  whether or not incorporated,
     which is under  common  control  with the  Borrower  within the  meaning of
     Section 4001 of ERISA or is part of a group which includes the Borrower and
     which is treated as a single employer under Section 414 of the Code.

          "Compliance Certificate": a certificate duly executed by a Responsible
     Officer substantially in the form of Exhibit B.

          "Confidential  Information  Memorandum":  the Confidential Information
     Memorandum dated September 1998 and furnished to the initial Lenders.

          "Consolidated  Current  Assets":  at any date, all amounts (other than
     cash and Cash  Equivalents)  which would,  in conformity  with GAAP, be set
     forth opposite the caption "total current  assets" (or any like caption) on
     a consolidated  balance sheet of the Borrower and its  Subsidiaries at such
     date.

          "Consolidated  Current  Liabilities":  at any date,  all amounts which
     would,  in conformity  with GAAP, be set forth  opposite the caption "total
     current  liabilities" (or any like caption) on a consolidated balance sheet
     of the Borrower and its  Subsidiaries  at such date,  but excluding (a) the
     current portion of any Funded Debt of the Borrower and its Subsidiaries and
     (b) without duplication of clause (a) above, all Indebtedness consisting of
     Revolving Credit Loans to the extent otherwise included therein.

          "Consolidated  EBITDA":  for any period,  Consolidated  Net Income for
     such period  plus,  without  duplication  and to the extent  reflected as a
     charge in the  statement of such  Consolidated  Net Income for such period,
     the sum of (a) income  tax  expense,  (b)  Consolidated  Interest  Expense,
     amortization  or  writeoff of debt  discount  and debt  issuance  costs and
     commissions,   discounts  and  other  fees  and  charges   associated  with
     Indebtedness  (including  the Loans),  (c)  depreciation  and  amortization
     expense,  (d) amortization of intangibles  (including,  but not limited to,
     goodwill)  and  organization  costs,  (e)  any  extraordinary,  unusual  or
     non-recurring  expenses  or losses  (including,  whether  or not  otherwise
     includable  as a separate item in the  statement of such  Consolidated  Net
     Income for such period,  losses on sales of assets  outside of the ordinary
     course of business) and (f) any other non-cash  charges,  and minus, to the
     extent included in the statement of such  Consolidated  Net Income for such
     period,  the sum of (a) interest  income (except to the extent  deducted in
     determining Consolidated Interest Expense), (b) any extraordinary,  unusual
     or  non-recurring  income or gains  (including,  whether  or not  otherwise
     includable as a separate item in the statement of



<PAGE>


                                                                               7




     such Consolidated Net Income for such period,  gains on the sales of assets
     outside of the  ordinary  course of  business)  and (c) any other  non-cash
     income, all as determined on a consolidated basis.

          "Consolidated  Fixed Charge Coverage Ratio": for any period, the ratio
     of (a)  Consolidated  EBITDA  for such  period  to (b)  Consolidated  Fixed
     Charges for such period.

          "Consolidated  Fixed  Charges":  for  any  period,  the  sum  (without
     duplication)  of (a)  Consolidated  Interest  Expense for such period,  (b)
     provision  for  cash  income  taxes  made  by  the  Borrower  or any of its
     Subsidiaries  on a  consolidated  basis in respect  of such  period and (c)
     scheduled  payments  made  during such  period on account of  principal  of
     Indebtedness  of  the  Borrower  or  any  of  its  Subsidiaries  (including
     scheduled principal payments in respect of the Term Loans).

          "Consolidated  Interest Coverage Ratio":  for any period, the ratio of
     (a)  Consolidated  EBITDA  for such  period  to (b)  Consolidated  Interest
     Expense for such period.

          "Consolidated  Interest  Expense":  for  any  period,  total  interest
     expense  (including that attributable to Capital Lease  Obligations) of the
     Borrower  and  its  Subsidiaries  for  such  period  with  respect  to  all
     outstanding  Indebtedness of the Borrower and its Subsidiaries  (including,
     without limitation,  all commissions,  discounts and other fees and charges
     owed with  respect to letters of credit and bankers'  acceptance  financing
     and net costs under Hedge  Agreements  in respect of interest  rates to the
     extent  such net costs are  allocable  to such  period in  accordance  with
     GAAP).

          "Consolidated  Leverage  Ratio":  as at the last day of any  period of
     four consecutive fiscal quarters,  the ratio of (a) Consolidated Total Debt
     on such day to (b) Consolidated  EBITDA for such period;  provided that for
     purposes  of  calculating  Consolidated  EBITDA  of the  Borrower  and  its
     Subsidiaries for any period, the Consolidated EBITDA of any Person acquired
     by the Borrower or its Subsidiaries during such period shall be included on
     a pro forma  basis  for such  period  (assuming  the  consummation  of such
     acquisition  and  the  incurrence  or  assumption  of any  Indebtedness  in
     connection  therewith  occurred  on the  first day of such  period)  if the
     consolidated  balance  sheet of such acquired  Person and its  consolidated
     Subsidiaries as at the end of the period  preceding the acquisition of such
     Person and the related consolidated  statements of income and stockholders'
     equity and of cash  flows for the  period in respect of which  Consolidated
     EBITDA  is to be  calculated  (i)  have  been  previously  provided  to the
     Administrative Agent and the Lenders and (ii) either (A) have been reported
     on  without  a  qualification  arising  out of the  scope  of the  audit by
     independent  certified public accountants of nationally recognized standing
     or (B) have been found acceptable by the Administrative Agent.




<PAGE>


                                                                               8




          "Consolidated Net Income": for any period, the consolidated net income
     (or  loss)  of  the  Borrower  and  its   Subsidiaries,   determined  on  a
     consolidated  basis in accordance  with GAAP;  provided that there shall be
     excluded  (a) the income (or  deficit) of any Person  accrued  prior to the
     date  it  becomes  a  Subsidiary  of the  Borrower  or is  merged  into  or
     consolidated with the Borrower or any of its  Subsidiaries,  (b) the income
     (or  deficit) of any Person  (other than a Subsidiary  of the  Borrower) in
     which the Borrower or any of its  Subsidiaries  has an ownership  interest,
     except to the  extent  that any such  income is  actually  received  by the
     Borrower  or  such   Subsidiary   in  the  form  of  dividends  or  similar
     distributions and (c) the  undistributed  earnings of any Subsidiary of the
     Borrower  to the extent that the  declaration  or payment of  dividends  or
     similar  distributions  by such  Subsidiary is not at the time permitted by
     the  terms  of any  Contractual  Obligation  (other  than  under  any  Loan
     Document) or Requirement of Law applicable to such Subsidiary.

          "Consolidated  Net Worth":  at any date,  all amounts which would,  in
     conformity  with GAAP, be included on a  consolidated  balance sheet of the
     Borrower and its Subsidiaries under stockholders' equity at such date.

          "Consolidated Total Debt": at any date, the aggregate principal amount
     of all  Funded  Debt of the  Borrower  and its  Subsidiaries  at such date,
     determined on a consolidated basis in accordance with GAAP.

          "Consolidated   Working   Capital":   at  any  date,   the  excess  of
     Consolidated   Current  Assets  on  such  date  over  Consolidated  Current
     Liabilities on such date.

          "Continuing  Directors":  the directors of the Borrower on the Closing
     Date,  and each other  director,  if, in each case,  such other  director's
     nomination  for  election  to the board of  directors  of the  Borrower  is
     recommended by at least 66-2/3% of the then Continuing Directors.

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

          "Default":  any of the events  specified  in Section 8, whether or not
     any requirement  for the giving of notice,  the lapse of time, or both, has
     been satisfied.

          "Disposition": with respect to any Property, any sale, lease, sale and
     leaseback,  assignment,  conveyance, transfer or other disposition thereof;
     the terms "Dispose" and "Disposed of" shall have correlative meanings.

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




<PAGE>


                                                                               9




          "Domestic Subsidiary":  any Subsidiary of the Borrower organized under
     the laws of any jurisdiction within the United States of America.

          "ECF  Percentage":  with  respect to any fiscal year of the  Borrower,
     50%;  provided,  that the ECF Percentage for any fiscal year shall be 0% if
     the  Consolidated  Leverage Ratio as of the last day of such fiscal year is
     not greater than 2.0 to 1.0.

          "Environmental  Laws": any and all laws, rules,  orders,  regulations,
     statutes,   ordinances,   guidelines,  codes,  decrees,  or  other  legally
     enforceable requirements (including, without limitation, common law) of any
     international  authority,  foreign  government,  the United States,  or any
     state,  local,  municipal  or  other  governmental  authority,  regulating,
     relating  to or  imposing  liability  or  standards  of conduct  concerning
     protection of the  environment or of human health,  or employee  health and
     safety, as has been, is now, or may at any time hereafter be, in effect.

          "Environmental  Permits":  any and all permits,  licenses,  approvals,
     registrations,   notifications,  exemptions  and  any  other  authorization
     required under any Environmental Law.

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

          "Eurocurrency  Reserve  Requirements":  for  any day as  applied  to a
     Eurodollar Loan, the aggregate  (without  duplication) of the maximum rates
     (expressed as a decimal fraction) of reserve requirements in effect on such
     day  (including,  without  limitation,  basic,  supplemental,  marginal and
     emergency reserves under any regulations of the Board or other Governmental
     Authority  having  jurisdiction  with respect thereto) dealing with reserve
     requirements  prescribed for eurocurrency funding (currently referred to as
     "Eurocurrency  Liabilities"  in Regulation D of the Board)  maintained by a
     member bank of the Federal Reserve System.

          "Eurodollar Base Rate":  with respect to each day during each Interest
     Period  pertaining to a Eurodollar  Loan, the rate per annum  determined on
     the basis of the rate for  deposits in Dollars  for a period  equal to such
     Interest  Period  commencing  on the  first  day of  such  Interest  Period
     appearing  on Page 3750 of the  Telerate  screen as of 11:00  A.M.,  London
     time, two Business Days prior to the beginning of such Interest Period.  In
     the  event  that such  rate  does not  appear on Page 3750 of the  Telerate
     screen  (or  otherwise  on such  screen),  the  "Eurodollar  Base Rate" for
     purposes of this definition  shall be determined by reference to such other
     comparable  publicly  available service for displaying  eurodollar rates as
     may be  selected  by the  Administrative  Agent or, in the  absence of such
     availability, by reference to the rate at which the Administrative Agent is
     offered  Dollar  deposits at or about 11:00 A.M.,  New York City time,  two
     Business  Days  prior  to the  beginning  of such  Interest  Period  in the
     interbank  eurodollar  market where its eurodollar and foreign currency and
     exchange



<PAGE>


                                                                              10




     operations  are then being  conducted for delivery on the first day of such
     Interest Period for the number of days comprised therein.

          "Eurodollar Loans":  Loans the rate of interest applicable to which is
     based upon the Eurodollar Rate.

          "Eurodollar  Rate":  with  respect  to each day during  each  Interest
     Period  pertaining to a Eurodollar  Loan, a rate per annum  determined  for
     such day in accordance  with the following  formula  (rounded upward to the
     nearest 1/100th of 1%):

                              Eurodollar Base Rate
                    ----------------------------------------
                    1.00 - Eurocurrency Reserve Requirements

          "Eurodollar Tranche": the collective reference to Eurodollar Loans the
     then  current  Interest  Periods  with respect to all of which begin on the
     same date and end on the same later date  (whether  or not such Loans shall
     originally have been made on the same day).

          "Event of Default": any of the events specified in Section 8, provided
     that any requirement for the giving of notice,  the lapse of time, or both,
     has been satisfied.

          "Excess Cash Flow":  for any fiscal year of the Borrower,  the excess,
     if any, of (a) the sum, without duplication, of (i) Consolidated Net Income
     for such fiscal  year,  (ii) an amount  equal to the amount of all non-cash
     charges (including  depreciation and amortization)  deducted in arriving at
     such  Consolidated  Net Income,  (iii)  decreases in  Consolidated  Working
     Capital for such fiscal  year,  (iv) an amount equal to the  aggregate  net
     non-cash  loss on the  Disposition  of  Property  by the  Borrower  and its
     Subsidiaries  during such fiscal year (other than sales of inventory in the
     ordinary  course of business),  to the extent  deducted in arriving at such
     Consolidated  Net Income and (v) the net  increase  during such fiscal year
     (if any) in deferred tax accounts of the Borrower over (b) the sum, without
     duplication,  of (i) an amount equal to the amount of all non-cash  credits
     included in arriving at such  Consolidated  Net Income,  (ii) the aggregate
     amount  actually paid by the Borrower and its  Subsidiaries  in cash during
     such  fiscal  year  on  account  of  Capital  Expenditures  (excluding  the
     principal   amount  of  Indebtedness   incurred  in  connection  with  such
     expenditures  and any such  expenditures  financed with the proceeds of any
     Reinvestment   Deferred   Amount),   (iii)  the  aggregate  amount  of  all
     prepayments of Revolving Credit Loans during such fiscal year to the extent
     accompanying   permanent  optional   reductions  of  the  Revolving  Credit
     Commitments and all optional prepayments of the Term Loans and other Funded
     Debt during such fiscal year,  (iv) the  aggregate  amount of all regularly
     scheduled principal payments of Funded Debt (including, without limitation,
     the Term  Loans) of the  Borrower  and its  Subsidiaries  made  during such
     fiscal year (other than in respect of any revolving  credit facility to the
     extent  there  is not an  equivalent  permanent  reduction  in  commitments
     thereunder), (v) increases in Consolidated Working Capital for such fiscal



<PAGE>


                                                                              11




     year,  (vi) an  amount  equal to the  aggregate  net  non-cash  gain on the
     Disposition  of Property by the Borrower and its  Subsidiaries  during such
     fiscal  year  (other  than sales of  inventory  in the  ordinary  course of
     business),  to the extent  included in arriving  at such  Consolidated  Net
     Income, (vii) the net decrease during such fiscal year (if any) in deferred
     tax accounts of the Borrower and (viii) with respect to the Borrower's 1999
     fiscal year only,  the amount  determined  by the Borrower and certified to
     the Administrative  Agent (which certificate shall include  calculations in
     reasonable detail) as the Borrower's  reasonable  estimate of the amount of
     Capital  Expenditures   required  in  fiscal  year  2000  relating  to  the
     Borrower's on-line lottery contract with the State of Florida.

          "Excess Cash Flow Application Date": as defined in Section 2.10(c).

          "Excluded  Assets":   as  defined  in  the  Guarantee  and  Collateral
     Agreement.

          "Excluded Foreign Accounts and Assets":  (a) accounts receivable owing
     by Persons  domiciled  in, or  Governmental  Authorities  of,  Canada,  (b)
     accounts   receivable  owing  by  Persons  domiciled  in,  or  Governmental
     Authorities of,  Australia in an aggregate amount at any time not exceeding
     $10,000,000, provided, that such accounts receivables are payable within 90
     days  after the  creation  thereof  and are paid on or before  the due date
     thereof and (c) up to $1,000,000 of  Investments  (other than  accounts) in
     Canada.

          "Excluded Foreign Subsidiaries":  any Foreign Subsidiary in respect of
     which either (i) the pledge of all of the Capital Stock of such  Subsidiary
     as  Collateral  or  (ii)  the   guaranteeing  by  such  Subsidiary  of  the
     Obligations,  would, in the good faith judgment of the Borrower,  result in
     adverse tax consequences to the Borrower.

          "Existing Credit  Facilities":  collectively (i) the Borrower's Credit
     Agreement, dated as of February 16, 1995, as amended, with U.S. Bank, N.A.,
     and (ii) the Borrower's note payable to Electronic Data Systems Corporation
     arising  out of the  January  30,  1997  settlement  of claims  between the
     Borrower and Electronic Data Systems Corporation.

          "Existing Letters of Credit": as defined in Section 3.9.

          "Existing Issuing Bank": as defined in Section 3.9.

          "Facility":  each of (a) the Tranche A Term Loan  Commitments  and the
     Tranche A Term Loans made thereunder (the "Tranche A Term Loan  Facility"),
     (b) the Tranche B Term Loan  Commitments  and the Tranche B Term Loans made
     thereunder  (the  "Tranche B Term Loan  Facility"),  and (c) the  Revolving
     Credit  Commitments  and the  extensions  of credit  made  thereunder  (the
     "Revolving Credit Facility").




<PAGE>


                                                                              12




          "Federal Funds Effective  Rate":  for any day, the weighted average of
     the rates on  overnight  federal  funds  transactions  with  members of the
     Federal Reserve System  arranged by federal funds brokers,  as published on
     the next  succeeding  Business Day by the Federal Reserve Bank of New York,
     or, if such rate is not so published  for any day which is a Business  Day,
     the average of the quotations for the day of such transactions  received by
     the  Reference  Lender  from three  federal  funds  brokers  of  recognized
     standing selected by it.

          "Foreign  Subsidiary":  any  Subsidiary  of the Borrower that is not a
     Domestic Subsidiary.

          "Funded Debt":  as to any Person,  all  indebtedness of such Person of
     the type  described in clauses  (a)-(e),  inclusive,  of the  definition of
     "Indebtedness" in this Section 1.1.

          "Funding  Office":  the  office  specified  from  time  to time by the
     Administrative  Agent as its funding  office by notice to the  Borrower and
     the Lenders.

          "GAAP":  generally accepted accounting principles in the United States
     of America as in effect  from time to time,  except  that for  purposes  of
     Section 7.1, GAAP shall be  determined  on the basis of such  principles in
     effect on the date hereof and consistent with those used in the preparation
     of the most  recent  audited  financial  statements  delivered  pursuant to
     Section 4.1(b).

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

          "Guarantee  and  Collateral  Agreement":  the Guarantee and Collateral
     Agreement to be executed and delivered by the Borrower and each  Subsidiary
     Guarantor,  substantially  in the  form of  Exhibit  A, as the  same may be
     amended, supplemented or otherwise modified from time to time.

          "Guarantee Obligation":  as to any Person (the "guaranteeing person"),
     any  obligation  of (a)  the  guaranteeing  person  or (b)  another  Person
     (including,  without  limitation,  any bank  under any letter of credit) to
     induce  the  creation  of  which  the  guaranteeing  person  has  issued  a
     reimbursement,  counterindemnity  or  similar  obligation,  in either  case
     guaranteeing or in effect guaranteeing any Indebtedness,  leases, dividends
     or other obligations (the "primary  obligations") of any other third Person
     (the  "primary  obligor") in any manner,  whether  directly or  indirectly,
     including,  without limitation,  any obligation of the guaranteeing person,
     whether or not contingent,  (i) to purchase any such primary  obligation or
     any Property  constituting  direct or indirect security  therefor,  (ii) to
     advance or supply funds (1) for the purchase or payment of any such primary
     obligation or (2) to maintain working capital or equity



<PAGE>


                                                                              13




     capital of the primary  obligor or  otherwise  to maintain the net worth or
     solvency of the primary obligor, (iii) to purchase Property,  securities or
     services  primarily  for the  purpose  of  assuring  the  owner of any such
     primary obligation of the ability of the primary obligor to make payment of
     such primary  obligation  or (iv)  otherwise to assure or hold harmless the
     owner of any such  primary  obligation  against  loss in  respect  thereof;
     provided,  however,  that the term Guarantee  Obligation  shall not include
     endorsements  of  instruments  for deposit or  collection  in the  ordinary
     course  of  business.  The  amount  of  any  Guarantee  Obligation  of  any
     guaranteeing  person shall be deemed to be the lower of (a) an amount equal
     to the stated or determinable  amount of the primary  obligation in respect
     of which such  Guarantee  Obligation is made and (b) the maximum amount for
     which such  guaranteeing  person may be liable pursuant to the terms of the
     instrument  embodying  such  Guarantee  Obligation,   unless  such  primary
     obligation and the maximum amount for which such guaranteeing person may be
     liable  are not  stated or  determinable,  in which case the amount of such
     Guarantee Obligation shall be such guaranteeing person's maximum reasonably
     anticipated  liability in respect  thereof as determined by the Borrower in
     good faith.

          "Hedge Agreements": all interest rate swaps, caps or collar agreements
     or  similar  arrangements  entered  into  by  the  Borrower  providing  for
     protection  against  fluctuations  in interest  rates or currency  exchange
     rates or the exchange of nominal interest obligations,  either generally or
     under specific contingencies.

          "Indebtedness":  of any Person at any date, without  duplication,  (a)
     all  indebtedness of such Person for borrowed money, (b) all obligations of
     such Person for the deferred  purchase price of Property or services (other
     than  trade  payables  incurred  in the  ordinary  course of such  Person's
     business),  (c) all obligations of such Person  evidenced by notes,  bonds,
     debentures or other similar  instruments,  (d) all indebtedness  created or
     arising under any conditional sale or other title retention  agreement with
     respect to Property  acquired by such  Person  (even  though the rights and
     remedies  of the  seller or lender  under  such  agreement  in the event of
     default  are limited to  repossession  or sale of such  Property),  (e) all
     Capital  Lease  Obligations  of such Person,  (f) all  obligations  of such
     Person,  contingent  or otherwise,  as an account  party under  acceptance,
     letter of credit or similar facilities, (g) all obligations of such Person,
     contingent or otherwise,  to purchase,  redeem, retire or otherwise acquire
     for value any Capital Stock of such Person,  (h) all Guarantee  Obligations
     of such Person in respect of obligations of the kind referred to in clauses
     (a)  through  (g) above;  (i) all  obligations  of the kind  referred to in
     clauses (a)  through (h) above  secured by (or for which the holder of such
     obligation has an existing  right,  contingent or otherwise,  to be secured
     by) any Lien on  Property  (including,  without  limitation,  accounts  and
     contract  rights)  owned by such  Person,  whether  or not such  Person has
     assumed or become  liable for the payment of such  obligation,  (j) for the
     purposes of Section 8(e) only, all obligations of such Person in respect of
     Hedge  Agreements  and  (k)  the  liquidation   value  of  any  mandatorily
     redeemable  preferred Capital Stock of such Person or its Subsidiaries held
     by any Person other than such Person and its Wholly Owned Subsidiaries.



<PAGE>


                                                                              14




          "Indemnified Liabilities": as defined in Section 10.5.

          "Indemnitee": as defined in Section 10.5.

          "Insolvency":  with respect to any  Multiemployer  Plan, the condition
     that such Plan is insolvent within the meaning of Section 4245 of ERISA.

          "Insolvent": pertaining to a condition of Insolvency.

          "Intellectual  Property":  the  collective  reference  to all  rights,
     priorities  and  privileges  relating  to  intellectual  property,  whether
     arising under United  States,  multinational  or foreign laws or otherwise,
     including,  without limitation,  copyrights,  copyright licenses,  patents,
     patent licenses, trademarks,  trademark licenses, technology,  know-how and
     processes,  and all rights to sue at law or in equity for any  infringement
     or other  impairment  thereof,  including the right to receive all proceeds
     and damages therefrom.

          "Interest Payment Date": (a) as to any Base Rate Loan, the last day of
     each  March,  June,  September  and  December  to occur  while such Loan is
     outstanding  and  the  final  maturity  date of  such  Loan,  (b) as to any
     Eurodollar Loan having an Interest Period of three months or less, the last
     day of such  Interest  Period,  (c) as to any  Eurodollar  Loan  having  an
     Interest  Period longer than three months,  each day which is three months,
     or a whole multiple  thereof,  after the first day of such Interest  Period
     and the last day of such Interest Period and (d) as to any Loan (other than
     any  Revolving  Credit  Loan  that is a Base  Rate  Loan),  the date of any
     repayment or prepayment made in respect thereof.

          "Interest  Period":  as to any Eurodollar  Loan,  (a)  initially,  the
     period  commencing on the borrowing or conversion date, as the case may be,
     with  respect to such  Eurodollar  Loan and ending one,  two,  three or six
     months  thereafter,  as selected by the Borrower in its notice of borrowing
     or notice of  conversion,  as the case may be, given with respect  thereto;
     and (b)  thereafter,  each  period  commencing  on the last day of the next
     preceding  Interest  Period  applicable to such  Eurodollar Loan and ending
     one, two,  three or six months  thereafter,  as selected by the Borrower by
     irrevocable notice to the Administrative Agent not less than three Business
     Days prior to the last day of the then current Interest Period with respect
     thereto;  provided  that,  all  of the  foregoing  provisions  relating  to
     Interest Periods are subject to the following:

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




<PAGE>


                                                                              15




               (ii) any Interest Period that would  otherwise  extend beyond the
          Scheduled  Revolving Credit  Termination Date or beyond the date final
          payment  is due on the  Tranche  A Term  Loans or the  Tranche  B Term
          Loans,  as  the  case  may  be,  shall  end on  the  Revolving  Credit
          Termination Date or such due date, as applicable;

               (iii) any Interest Period that begins on the last Business Day of
          a  calendar  month  (or on a day for  which  there  is no  numerically
          corresponding  day in the calendar  month at the end of such  Interest
          Period) shall end on the last Business Day of a calendar month; and

               (iv) the  Borrower  shall  select  Interest  Periods so as not to
          require a payment  or  prepayment  of any  Eurodollar  Loan  during an
          Interest Period for such Loan.

          "Investments": as defined in Section 7.8.

          "Issuing  Lender":   any  Revolving  Credit  Lender  selected  by  the
     Borrower,  with  the  approval  of such  Revolving  Credit  Lender  and the
     Administrative  Agent,  to be the  issuer  of  Letters  of  Credit,  in its
     capacity as such an issuer.

          "L/C Commitment": $15,000,000.

          "L/C Fee Payment Date":  the last day of each March,  June,  September
     and December and the last day of the Revolving Credit Commitment Period.

          "L/C Obligations":  at any time, an amount equal to the sum of (a) the
     aggregate then undrawn and unexpired amount of the then outstanding Letters
     of Credit and (b) the aggregate  amount of drawings under Letters of Credit
     which have not then been reimbursed pursuant to Section 3.5.

          "L/C  Participants":  the  collective  reference to all the  Revolving
     Credit Lenders other than the Issuing Lender.

          "Lender  Addendum":  with  respect  to any  initial  Lender,  a Lender
     Addendum,  substantially  in the  form of  Exhibit  J, to be  executed  and
     delivered by such Lender on the Closing Date as provided in Section 10.17.

          "Lenders": as defined in the preamble hereto.

          "Letters of Credit": as defined in Section 3.1(a).

          "Lien":  any  mortgage,  pledge,  hypothecation,  assignment,  deposit
     arrangement,  encumbrance,  lien  (statutory  or  other),  charge  or other
     security interest or



<PAGE>


                                                                              16




     any  preference,  priority  or other  security  agreement  or  preferential
     arrangement  of  any  kind  or  nature   whatsoever   (including,   without
     limitation, any conditional sale or other title retention agreement and any
     capital lease having  substantially  the same economic effect as any of the
     foregoing).

          "Loan": any loan made by any Lender pursuant to this Agreement.

          "Loan  Documents":   this  Agreement,   the  Security  Documents,  the
     Syndication Letter Agreement, the Applications and the Notes.

          "Loan Parties": the Borrower and each Subsidiary of the Borrower which
     is a party to a Loan Document.

          "Majority Facility Lenders": with respect to any Facility, the holders
     of more than 50% of the aggregate unpaid principal amount of the Term Loans
     or  the  Total  Revolving  Extensions  of  Credit,  as  the  case  may  be,
     outstanding  under such Facility  (or, in the case of the Revolving  Credit
     Facility, prior to any termination of the Revolving Credit Commitments, the
     holders of more than 50% of the Total Revolving Credit Commitments).

          "Majority  Revolving Credit Facility  Lenders":  the Majority Facility
     Lenders in respect of the Revolving Credit Facility.

          "Material  Adverse  Effect":  a  material  adverse  effect  on (a) the
     business, assets, property, condition (financial or otherwise) or prospects
     of the Borrower and its  Subsidiaries  taken as a whole or (b) the validity
     or  enforceability  of this Agreement or any of the other Loan Documents or
     the  rights  or  remedies  of  the  Agents  or  the  Lenders  hereunder  or
     thereunder.

          "Material  Environmental  Amount": an amount or amounts payable by the
     Borrower  and/or any of its  Subsidiaries,  in the  aggregate  in excess of
     $500,000,  for:  costs to comply with any  Environmental  Law; costs of any
     investigation,  and  any  remediation,  of any  Material  of  Environmental
     Concern; and compensatory damages (including, without limitation damages to
     natural resources),  punitive damages, fines, and penalties pursuant to any
     Environmental Law.

          "Materials  of  Environmental  Concern":  any  gasoline  or  petroleum
     (including  crude  oil or any  fraction  thereof)  or  petroleum  products,
     polychlorinated   biphenyls,    urea-formaldehyde   insulation,   asbestos,
     pollutants, contaminants, radioactivity, and any other substances or forces
     of any kind,  whether  or not any such  substance  or force is  defined  as
     hazardous or toxic under any Environmental  Law, that is regulated pursuant
     to or could give rise to liability under any Environmental Law.




<PAGE>


                                                                              17




          "Material Contract":  any contract,  agreement or other undertaking to
     which the  Borrower  or any  Subsidiary  is a party,  pursuant to which the
     Borrower or such Subsidiary will receive  payments  (including  payments in
     the form of promissory notes or other  indebtedness or property) in amounts
     which could reasonably be estimated to exceed $2,000,000 in any fiscal year
     or  $5,000,000  in  the  aggregate,   including,  without  limitation,  the
     contracts listed in Schedule 7 to the Guarantee and Collateral Agreement.

          "Material  Promissory  Note":  each promissory note, in an unpaid face
     amount in excess of $500,000 (or such lesser  amount as the  Administrative
     Agent may establish,  by notice to the  Borrower),  held by the Borrower of
     any of its Subsidiaries.

          "Mortgaged Properties": the real properties listed on Schedule 1.1, as
     to which the  Administrative  Agent for the benefit of the Lenders shall be
     granted a Lien pursuant to the Mortgages.

          "Mortgages": each of the mortgages and deeds of trust made by any Loan
     Party in favor of, or for the benefit of, the Administrative  Agent for the
     benefit of the Lenders, substantially in the form of Exhibit D-1 (with such
     changes thereto as shall be advisable under the law of the  jurisdiction in
     which such mortgage or deed of trust is to be recorded), as the same may be
     amended, supplemented or otherwise modified from time to time.

          "Multiemployer  Plan": a Plan which is a multiemployer plan as defined
     in Section 4001(a)(3) of ERISA.

          "Net Cash  Proceeds":  (a) in  connection  with any Asset  Sale or any
     Recovery  Event,  the  proceeds  thereof  in the  form  of  cash  and  Cash
     Equivalents  (including  any  such  proceeds  received  by way of  deferred
     payment  of  principal  pursuant  to a note or  installment  receivable  or
     purchase  price  adjustment  receivable or otherwise,  but only as and when
     received) of such Asset Sale or Recovery  Event,  net of  attorneys'  fees,
     accountants' fees,  investment banking fees, amounts required to be applied
     to the  repayment of  Indebtedness  secured by a Lien  expressly  permitted
     hereunder  on any asset which is the subject of such Asset Sale or Recovery
     Event  (other  than any Lien  pursuant  to a Security  Document)  and other
     customary fees and expenses actually  incurred in connection  therewith and
     net of taxes paid or reasonably estimated to be payable as a result thereof
     (after taking into account any available tax credits or deductions  and any
     tax sharing  arrangements)  and (b) in connection with any issuance or sale
     of equity securities or debt securities or instruments or the incurrence of
     loans, the cash proceeds received from such issuance or incurrence,  net of
     attorneys' fees, investment banking fees,  accountants' fees,  underwriting
     discounts and commissions  and other  customary fees and expenses  actually
     incurred in connection therewith.

          "Non-Excluded Taxes": as defined in Section 2.18(a).



<PAGE>


                                                                              18




          "Non-U.S. Lender": as defined in Section 2.18(d).

          "Notes":  the collective  reference to any promissory  note evidencing
     Loans.

          "Obligations":  the unpaid  principal of and  interest on  (including,
     without  limitation,  interest accruing after the maturity of the Loans and
     Reimbursement  Obligations  and interest  accruing  after the filing of any
     petition  in   bankruptcy,   or  the   commencement   of  any   insolvency,
     reorganization or like proceeding, relating to the Borrower, whether or not
     a claim for  post-filing  or  post-petition  interest  is  allowed  in such
     proceeding)  the Loans and all other  obligations  and  liabilities  of the
     Borrower to the  Administrative  Agent or to any Lender (or, in the case of
     Hedge Agreements, any affiliate of any Lender), whether direct or indirect,
     absolute or contingent,  due or to become due, or now existing or hereafter
     incurred,  which  may arise  under,  out of, or in  connection  with,  this
     Agreement,  any other Loan  Document,  the  Letters  of  Credit,  any Hedge
     Agreement  entered  into with any Lender or any  affiliate of any Lender or
     any other  document  made,  delivered  or given in  connection  herewith or
     therewith,  whether  on  account  of  principal,  interest,   reimbursement
     obligations,   fees,  indemnities,   costs,  expenses  (including,  without
     limitation,   all  fees,  charges  and  disbursements  of  counsel  to  the
     Administrative  Agent or to any Lender that are  required to be paid by the
     Borrower pursuant hereto) or otherwise.

          "Other  Taxes":  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 hereunder or from the execution,  delivery or
     enforcement  of, or otherwise  with respect to, this Agreement or any other
     Loan Document.

          "Participant": as defined in Section 10.6(b).

          "Participation Agreement": as defined in Section 3.9.

          "Payment  Office":  the  office  specified  from  time  to time by the
     Administrative  Agent as its payment  office by notice to the  Borrower and
     the Lenders.

          "PBGC": the Pension Benefit Guaranty Corporation  established pursuant
     to Subtitle A of Title IV of ERISA (or any successor).

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

          "Plan":  at a  particular  time,  any  employee  benefit plan which is
     covered  by ERISA  and in  respect  of which  the  Borrower  or a  Commonly
     Controlled  Entity is (or, if such plan were terminated at such time, would
     under  Section 4069 of ERISA be deemed to be) an  "employer"  as defined in
     Section 3(5) of ERISA.



<PAGE>


                                                                              19




          "Prepayment Option Notice": as defined in Section 2.16(d).

          "Pricing Grid": the pricing grid attached hereto as Annex A.

          "Pro Forma Balance Sheet": as defined in Section 4.1(a).

          "Projections": as defined in Section 6.2(c).

          "Property":  any  right  or  interest  in or to  property  of any kind
     whatsoever,  whether  real,  personal  or mixed  and  whether  tangible  or
     intangible,  including,  without  limitation,  Capital  Stock of any Person
     other than the Borrower.

          "Recovery  Event":  any  settlement  of or  payment  in respect of any
     property  or  casualty  insurance  claim  or  any  condemnation  proceeding
     relating to any asset of the Borrower or any of its Subsidiaries.

          "Reference Lender": Citibank, N.A.

          "Register": as defined in Section 10.6(d).

          "Regulation  U":  Regulation  U of the Board as in effect from time to
     time.

          "Reimbursement   Obligation":   the  obligation  of  the  Borrower  to
     reimburse  the Issuing  Lender  pursuant  to Section 3.5 for amounts  drawn
     under Letters of Credit.

          "Reinvestment  Deferred  Amount":  with  respect  to any  Reinvestment
     Event,  the aggregate Net Cash Proceeds  received by the Borrower or any of
     its  Subsidiaries  in connection  therewith which are not applied to prepay
     the Term Loans or reduce  the  Revolving  Credit  Commitments  pursuant  to
     Section 2.10(b) as a result of the delivery of a Reinvestment Notice.

          "Reinvestment  Event":  any Asset Sale or Recovery Event in respect of
     which the Borrower has delivered a Reinvestment Notice.

          "Reinvestment  Notice":  a written  notice  executed by a  Responsible
     Officer  stating  that no Default or Event of Default has  occurred  and is
     continuing  and  that  the  Borrower  (directly  or  indirectly  through  a
     Subsidiary)  intends and  expects to use all or a specified  portion of the
     Net Cash  Proceeds  of an Asset Sale or  Recovery  Event to acquire  assets
     useful in its business.

          "Reinvestment  Prepayment  Amount":  with respect to any  Reinvestment
     Event,  the  Reinvestment  Deferred Amount relating thereto less any amount
     expended  prior to the  relevant  Reinvestment  Prepayment  Date to acquire
     assets useful in the Borrower's business.



<PAGE>


                                                                              20




          "Reinvestment  Prepayment  Date":  with  respect  to any  Reinvestment
     Event,  the  earlier  of (a) the  date  occurring  six  months  after  such
     Reinvestment  Event  and (b) the  date on which  the  Borrower  shall  have
     determined not to, or shall have otherwise ceased to, acquire assets useful
     in  the  Borrower's  business  with  all  or any  portion  of the  relevant
     Reinvestment Deferred Amount.

          "Reorganization":   with  respect  to  any  Multiemployer   Plan,  the
     condition that such plan is in reorganization within the meaning of Section
     4241 of ERISA.

          "Reportable  Event": any of the events set forth in Section 4043(c) of
     ERISA,  other than those events as to which the thirty day notice period is
     waived under  subsections  .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC
     Reg. ss. 4043.

          "Required  Lenders":  at any time, the holders of more than 50% of (a)
     until the Closing Date, the Commitments and (b) thereafter,  the sum of (i)
     the aggregate  unpaid  principal  amount of the Term Loans then outstanding
     and (ii) the Total Revolving  Credit  Commitments then in effect or, if the
     Revolving  Credit  Commitments  have been  terminated,  the Total Revolving
     Extensions  of Credit then  outstanding;  provided,  that so long as Lehman
     Commercial  Paper Inc. holds more than 50% of the amounts  described in the
     foregoing  clause (a) or (b), as the case may be, the Required Lenders must
     be at least two Lenders.

          "Required  Prepayment  Lenders":  the  Majority  Facility  Lenders  in
     respect of each Facility.

          "Requirement   of  Law":  as  to  any  Person,   the   Certificate  of
     Incorporation and By-Laws or other organizational or governing documents of
     such Person, and any law, treaty, rule or regulation or determination of an
     arbitrator  or a court  or  other  Governmental  Authority,  in  each  case
     applicable  to or binding  upon such  Person or any of its  Property  or to
     which such Person or any of its Property is subject.

          "Responsible Officer": the chief executive officer, president or chief
     financial  officer  of the  Borrower,  but in any  event,  with  respect to
     financial matters, the chief financial officer of the Borrower.

          "Restricted Payments": as defined in Section 7.6.

          "Revolving  Credit  Commitment":  as to any Lender,  the obligation of
     such Lender,  if any, to make  Revolving  Credit Loans and  participate  in
     Letters of Credit,  in an  aggregate  principal  and/or  face amount not to
     exceed the amount set forth under the heading "Revolving Credit Commitment"
     opposite such Lender's name on Schedule 1 to the Lender Addendum  delivered
     by such Lender,  or, as the case may be, in the  Assignment  and Acceptance
     pursuant to which such Lender became a party hereto, as



<PAGE>


                                                                              21




     the same may be changed from time to time pursuant to the terms hereof. The
     original amount of the Total Revolving Credit Commitments is $50,000,000.

          "Revolving  Credit Commitment  Period":  the period from and including
     the Closing Date to the Revolving Credit Termination Date.

          "Revolving  Credit Lender":  each Lender which has a Revolving  Credit
     Commitment or which is the holder of Revolving Credit Loans.

          "Revolving Credit Loans": as defined in Section 2.4.

          "Revolving  Credit  Percentage":  as to any Revolving Credit Lender at
     any time, the percentage which such Lender's  Revolving  Credit  Commitment
     then constitutes of the Total Revolving Credit Commitments (or, at any time
     after the Revolving  Credit  Commitments  shall have expired or terminated,
     the  percentage  which the  aggregate  principal  amount  of such  Lender's
     Revolving  Credit  Loans  then  outstanding  constitutes  of the  aggregate
     principal amount of the Revolving Credit Loans then outstanding).

          "Revolving Credit Termination Date": September 30, 2003.

          "Revolving Extensions of Credit": as to any Revolving Credit Lender at
     any time, an amount equal to the sum of (a) the aggregate  principal amount
     of all  Revolving  Credit Loans made by such Lender then  outstanding,  (b)
     such  Lender's  Revolving  Credit  Percentage of the L/C  Obligations  then
     outstanding and (c) such Lender's Revolving Credit Percentage of the sum of
     (i) aggregate undrawn face amount of all Existing Letters of Credit at such
     time and (ii) the aggregate  amount drawn under Existing  Letters of Credit
     to the extent such amount has not been  reimbursed  by the Borrower at such
     time.

          "Route Companies": the collective reference to Automatic Music Service
     of Billings, Inc., a Montana corporation, Automation First, Inc., a Montana
     corporation,  and Raven's D&R Music, Inc., a Montana  corporation,  and any
     other  Subsidiary  Guarantor  designated  in  writing by the  Borrower  and
     consented to by the Administrative Agent.

          "SEC": the Securities and Exchange  Commission (or successors  thereto
     or an analogous Governmental Authority).

          "Security  Documents":  the collective  reference to the Guarantee and
     Collateral  Agreement,  the Mortgages,  the Aircraft Mortgage and all other
     security documents hereafter delivered to the Administrative Agent granting
     a Lien  on any  Property  of any  Person  to  secure  the  obligations  and
     liabilities of any Loan Party under any Loan Document.




<PAGE>


                                                                              22




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

          "Solvent": when used with respect to any Person, means that, as of any
     date of determination,  (a) the amount of the "present fair saleable value"
     of the assets of such Person  will,  as of such date,  exceed the amount of
     all "liabilities of such Person, contingent or otherwise", as of such date,
     as such quoted terms are determined in accordance with  applicable  federal
     and state laws governing  determinations of the insolvency of debtors,  (b)
     the present fair  saleable  value of the assets of such Person will,  as of
     such date,  be greater  than the amount  that will be  required  to pay the
     liability  of such Person on its debts as such debts  become  absolute  and
     matured,  (c) such Person will not have, as of such date,  an  unreasonably
     small  amount of capital with which to conduct its  business,  and (d) such
     Person will be able to pay its debts as they  mature.  For purposes of this
     definition, (i) "debt" means liability on a "claim", and (ii) "claim" means
     any (x)  right  to  payment,  whether  or not such a right  is  reduced  to
     judgment, liquidated,  unliquidated, fixed, contingent, matured, unmatured,
     disputed,  undisputed,  legal, equitable, secured or unsecured or (y) right
     to an equitable  remedy for breach of performance if such breach gives rise
     to a right to payment,  whether or not such right to an equitable remedy is
     reduced to judgment,  fixed,  contingent,  matured or unmatured,  disputed,
     undisputed, secured or unsecured.

          "Subsidiary":  as to any Person, a corporation,  partnership,  limited
     liability  company  or  other  entity  of  which  shares  of stock or other
     ownership  interests having ordinary voting power (other than stock or such
     other ownership interests having such power only by reason of the happening
     of a  contingency)  to elect a majority of the board of  directors or other
     managers of such  corporation,  partnership or other entity are at the time
     owned,  or the  management  of which is otherwise  controlled,  directly or
     indirectly  through one or more  intermediaries,  or both,  by such Person.
     Unless  otherwise  qualified,  all  references  to  a  "Subsidiary"  or  to
     "Subsidiaries"   in  this   Agreement   shall  refer  to  a  Subsidiary  or
     Subsidiaries of the Borrower.

          "Subsidiary Guarantor": each Subsidiary of the Borrower other than any
     Excluded Foreign Subsidiary set forth on Schedule 4.5 hereof.

          "Syndication  Date": the date on which the Syndication Agent completes
     the  syndication  of the  Facilities  and  the  entities  selected  in such
     syndication process become parties to this Agreement.

          "Syndication Letter Agreement":  the letter agreement, dated as of the
     Closing  Date,  between  the  Borrower  and the  Syndication  Agent and the
     Arranger relating to the syndication of the Facilities.

          "Term Loan Facilities": the collective reference to the Tranche A Term
     Loan Facility and the Tranche B Term Loan Facility.



<PAGE>


                                                                              23




          "Term Loan Lenders":  the  collective  reference to the Tranche A Term
     Loan Lenders and the Tranche B Term Loan Lenders.

          "Term Loans": the collective reference to the Tranche A Term Loans and
     the Tranche B Term Loans.

          "Total  Revolving  Credit  Commitments":  at any time,  the  aggregate
     amount of the Revolving Credit Commitments then in effect.

          "Total  Revolving  Extensions of Credit":  at any time,  the aggregate
     amount  of the  Revolving  Extensions  of Credit  of the  Revolving  Credit
     Lenders outstanding at such time.

          "Tranche A Term Loan": as defined in Section 2.1.

          "Tranche A Term Loan Commitment":  as to any Lender, the obligation of
     such  Lender,  if  any,  to make a  Tranche  A Term  Loan  to the  Borrower
     hereunder  in a  principal  amount not to exceed the amount set forth under
     the heading "Tranche A Term Loan Commitment" opposite such Lender's name on
     Schedule 1 to the Lender Addendum delivered by such Lender, or, as the case
     may be, in the  Assignment  and  Acceptance  pursuant  to which such Lender
     became  a party  hereto,  as the  same  may be  changed  from  time to time
     pursuant to the terms hereof.  The original aggregate amount of the Tranche
     A Term Loan Commitments is $25,000,000.

          "Tranche A Term Loan  Lender":  each Lender which has a Tranche A Term
     Loan Commitment or is the holder a Tranche A Term Loan.

          "Tranche A Term Loan Percentage":  as to Tranche A Term Loan Lender at
     any time, the percentage which such Lender's Tranche A Term Loan Commitment
     then  constitutes of the aggregate  Tranche A Term Loan Commitments (or, at
     any time  after the  Closing  Date,  the  percentage  which  the  aggregate
     principal  amount of such  Lender's  Tranche A Term Loans then  outstanding
     constitutes of the aggregate  principal  amount of the Tranche A Term Loans
     then outstanding).

          "Tranche B Term Loan": as defined in Section 2.1.

          "Tranche B Term Loan  Commitment":  as to Tranche B Term Loan  Lender,
     the obligation of such Lender, if any, to make a Tranche B Term Loan to the
     Borrower hereunder in a principal amount not to exceed the amount set forth
     under the heading "Tranche B Term Loan  Commitment"  opposite such Lender's
     name on Schedule 1 to the Lender Addendum  delivered by such Lender, or, as
     the case may be, in the Assignment  and  Acceptance  pursuant to which such
     Lender became a party hereto,  as the same may be changed from time to time
     pursuant to the terms hereof.  The original aggregate amount of the Tranche
     B Term Loan Commitments is $25,000,000.



<PAGE>


                                                                              24




          "Tranche B Term Loan  Lender":  each Lender which has a Tranche B Term
     Loan Commitment or which is the holder of a Tranche B Term Loan.

          "Tranche B Term Loan  Percentage":  as to any Lender at any time,  the
     percentage  which  such  Lender's  Tranche  B  Term  Loan  Commitment  then
     constitutes of the aggregate  Tranche B Term Loan  Commitments  (or, at any
     time after the Closing Date, the percentage  which the aggregate  principal
     amount of such Lender's Tranche B Term Loans then  outstanding  constitutes
     of the  aggregate  principal  amount  of the  Tranche  B  Term  Loans  then
     outstanding).

          "Transferee": as defined in Section 10.15.

          "Type": as to any Loan, its nature as a Base Rate Loan or a Eurodollar
     Loan.

          "Uniform  Customs":  the Uniform  Customs and Practice for Documentary
     Credits (1993 Revision),  International Chamber of Commerce Publication No.
     500, as the same may be amended from time to time.

          "Wholly Owned  Subsidiary":  as to any Person, any other Person all of
     the  Capital  Stock of  which  (other  than  directors'  qualifying  shares
     required  by law) is owned by such Person  directly  and/or  through  other
     Wholly Owned Subsidiaries.

          "Wholly Owned Subsidiary Guarantor":  any Subsidiary Guarantor that is
     a Wholly Owned Subsidiary of the Borrower.

          1.2 Other  Definitional  Provisions.  (a) Unless  otherwise  specified
therein,  all terms defined in this  Agreement  shall have the defined  meanings
when used in the other Loan Documents or any  certificate or other document made
or delivered pursuant hereto or thereto.

          (b)  As  used  herein  and  in  the  other  Loan  Documents,  and  any
certificate  or other  document  made or delivered  pursuant  hereto or thereto,
accounting  terms relating to the Borrower and its  Subsidiaries  not defined in
Section 1.1 and  accounting  terms partly  defined in Section 1.1, to the extent
not defined, shall have the respective meanings given to them under GAAP.

          (c) The words "hereof",  "herein" and "hereunder" and words of similar
import when used in this Agreement  shall refer to this Agreement as a whole and
not to any particular  provision of this  Agreement,  and Section,  Schedule and
Exhibit references are to this Agreement unless otherwise specified.

          (d) The  meanings  given  to terms  defined  herein  shall be  equally
applicable to both the singular and plural forms of such terms.





<PAGE>


                                                                              25




                   SECTION 2. AMOUNT AND TERMS OF COMMITMENTS

          2.1 Term Loan Commitments. Subject to the terms and conditions hereof,
(a) each  Tranche A Term  Loan  Lender  severally  agrees to make a term loan (a
"Tranche A Term Loan") to the  Borrower on the Closing  Date in an amount not to
exceed the amount of the Tranche A Term Loan  Commitment  of such Lender and (b)
each Tranche B Term Loan Lender severally agrees to make a term loan (a "Tranche
B Term Loan") to the Borrower on the Closing Date in an amount not to exceed the
amount of the Tranche B Term Loan Commitment of such Lender.  The Term Loans may
from time to time be Eurodollar  Loans or Base Rate Loans,  as determined by the
Borrower and notified to the  Administrative  Agent in accordance  with Sections
2.2 and 2.11.

          2.2 Procedure  for Term Loan  Borrowing.  The Borrower  shall give the
Administrative  Agent  irrevocable  notice (which notice must be received by the
Administrative  Agent prior to 10:00 A.M.,  New York City time, one Business Day
prior to the  anticipated  Closing Date)  requesting  that the Term Loan Lenders
make the  Term  Loans  on the  Closing  Date and  specifying  the  amount  to be
borrowed.  The Term Loans made on the Closing Date shall  initially be Base Rate
Loans,  and no Term Loan may be converted into or continued as a Eurodollar Loan
having an Interest Period in excess of one month prior to the Syndication  Date.
Upon receipt of such notice the Administrative  Agent shall promptly notify each
Term Loan Lender thereof.  Not later than 12:00 Noon, New York City time, on the
Closing  Date each Term Loan Lender shall make  available to the  Administrative
Agent at the Funding  Office an amount in immediately  available  funds equal to
the Term Loan or Term Loans to be made by such Lender. The Administrative  Agent
shall make available to the Borrower the aggregate of the amounts made available
to the  Administrative  Agent by the Term Loan Lenders in like funds as received
by the Administrative Agent from the Lenders.

          2.3  Repayment  of Term  Loans.  (a) The  Tranche  A Term Loan of each
Tranche  A  Lender  shall  mature  in  20  consecutive  quarterly  installments,
commencing  on December 31,  1998,  each of which shall be in an amount equal to
such Lender's Tranche A Term Loan Percentage  multiplied by the amount set forth
below opposite such installment:

          Installment                                       Principal Amount
          -----------                                       ----------------

          December 31, 1998                                       $  625,000
          March 31, 1999                                             625,000
          June 30, 1999                                              625,000
          September 30, 1999                                         625,000
          December 31, 1999                                          625,000
          March 31, 2000                                             625,000
          June 30, 2000                                              625,000
          September 30, 2000                                         625,000
          December 31, 2000                                          937,500
          March 31, 2001                                             937,500



<PAGE>


                                                                              26




          June 30, 2001                                              937,500
          September 30, 2001                                         937,500
          December 31, 2001                                          937,500
          March 31, 2002                                             937,500
          June 30, 2002                                              937,500
          September 30, 2002                                         937,500
          December 31, 2002                                        3,125,000
          March 31, 2003                                           3,125,000
          June 30, 2003                                            3,125,000
          September 30, 2003                                       3,125,000

          (b) The Tranche B Term Loan of each  Tranche B Lender  shall mature in
24 consecutive quarterly installments,  commencing on December 31, 1998, each of
which  shall  be in an  amount  equal  to  such  Lender's  Tranche  B Term  Loan
Percentage multiplied by the amount set forth below opposite such installment:

          Installment                                       Principal Amount
          -----------                                       ----------------

          December 31, 1998                                        $  62,500
          March 31, 1999                                              62,500
          June 30, 1999                                               62,500
          September 30, 1999                                          62,500
          December 31, 1999                                           62,500
          March 31, 2000                                              62,500
          June 30, 2000                                               62,500
          September 30, 2000                                          62,500
          December 31, 2000                                           62,500
          March 31, 2001                                              62,500
          June 30, 2001                                               62,500
          September 30, 2001                                          62,500
          December 31, 2001                                           62,500
          March 31, 2002                                              62,500
          June 30, 2002                                               62,500
          September 30, 2002                                          62,500
          December 31, 2002                                           62,500
          March 31, 2003                                              62,500
          June 30, 2003                                               62,500
          September 30, 2003                                          62,500
          December 31, 2003                                           62,500
          March 31, 2004                                              62,500
          June 30, 2004                                               62,500
          September 30, 2004                                          62,500
          December 31, 2004                                       23,500,000




<PAGE>


                                                                              27




          2.4  Revolving  Credit  Commitments.  (a)  Subject  to the  terms  and
conditions  hereof,  each  Revolving  Credit  Lender  severally  agrees  to make
revolving credit loans  ("Revolving  Credit Loans") to the Borrower from time to
time during the Revolving  Credit  Commitment  Period in an aggregate  principal
amount at any one time outstanding  which, when added to such Lender's Revolving
Credit Percentage of the L/C Obligations then  outstanding,  does not exceed the
amount of such Lender's Revolving Credit Commitment. During the Revolving Credit
Commitment  Period the  Borrower may use the  Revolving  Credit  Commitments  by
borrowing,  prepaying  the  Revolving  Credit  Loans in  whole  or in part,  and
reborrowing,  all in  accordance  with the  terms  and  conditions  hereof.  The
Revolving  Credit Loans may from time to time be  Eurodollar  Loans or Base Rate
Loans, as determined by the Borrower and notified to the Administrative Agent in
accordance  with Sections 2.5 and 2.11,  provided that no Revolving  Credit Loan
shall be made as a Eurodollar  Loan after the day that is one month prior to the
Revolving Credit Termination Date.

          (b) The Borrower shall repay all outstanding Revolving Credit Loans on
the Revolving Credit Termination Date.

          2.5 Procedure for Revolving Credit Borrowing.  The Borrower may borrow
under the Revolving Credit  Commitments  during the Revolving Credit  Commitment
Period  on  any  Business  Day,  provided  that  the  Borrower  shall  give  the
Administrative  Agent  irrevocable  notice (which notice must be received by the
Administrative Agent prior to 12:00 Noon, New York City time, (a) three Business
Days prior to the requested  Borrowing Date, in the case of Eurodollar Loans, or
(b) one Business Day prior to the requested  Borrowing Date, in the case of Base
Rate Loans),  specifying (i) the amount and Type of Revolving Credit Loans to be
borrowed,  (ii) the requested Borrowing Date and (iii) in the case of Eurodollar
Loans, the length of the initial Interest Period therefor.  Any Revolving Credit
Loans  made on the  Closing  Date shall  initially  be Base Rate  Loans,  and no
Revolving  Credit  Loan  may be  made  as,  converted  into  or  continued  as a
Eurodollar  Loan having an  Interest  Period in excess of one month prior to the
Syndication Date. Each borrowing under the Revolving Credit Commitments shall be
in an amount  equal to (x) in the case of Base Rate  Loans,  $500,000 or a whole
multiple  thereof  (or,  if  the  then  aggregate   Available  Revolving  Credit
Commitments are less than $1,000,000, such lesser amount) and (y) in the case of
Eurodollar Loans,  $2,500,000 or a whole multiple of $500,000 in excess thereof.
Upon  receipt of any such notice from the  Borrower,  the  Administrative  Agent
shall  promptly  notify each  Revolving  Credit Lender  thereof.  Each Revolving
Credit  Lender  will  make the  amount of its pro rata  share of each  borrowing
available  to the  Administrative  Agent for the account of the  Borrower at the
Funding  Office prior to 12:00 Noon,  New York City time, on the Borrowing  Date
requested by the Borrower in funds immediately  available to the  Administrative
Agent.  Such  borrowing  will  then be made  available  to the  Borrower  by the
Administrative Agent in like funds as received by the Administrative Agent.

          2.6  Repayment of Loans;  Evidence of Debt.  (a) The  Borrower  hereby
unconditionally  promises to pay to the Administrative  Agent for the account of
the appropriate Revolving Credit Lender or Term Loan Lender, as the case may be,
(i) the then unpaid



<PAGE>


                                                                              28




principal  amount of each Revolving  Credit Loan of such Revolving Credit Lender
on the  Revolving  Credit  Termination  Date (or such  earlier date on which the
Loans  become due and payable  pursuant  to Section  8), and (ii) the  principal
amount of each Term Loan of such Term Loan Lender in  installments  according to
the  amortization  schedule set forth in Section 2.3 (or on such earlier date on
which the Loans  become due and payable  pursuant  to Section  8). The  Borrower
hereby  further  agrees to pay  interest on the unpaid  principal  amount of the
Loans from time to time  outstanding  from the date hereof until payment in full
thereof at the rates per annum, and on the dates, set forth in Section 2.13.

          (b) Each Lender shall  maintain in accordance  with its usual practice
an account or accounts  evidencing  indebtedness  of the Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of  principal  and  interest  payable  and paid to such Lender from time to time
under this Agreement.

          (c)  The  Administrative  Agent,  on  behalf  of the  Borrower,  shall
maintain the Register pursuant to Section 10.6(e),  and a subaccount therein for
each  Lender,  in which  shall be  recorded  (i) the  amount  of each  Loan made
hereunder and any Note  evidencing such Loan, the Type thereof and each 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)  both the  amount of any sum  received  by the  Administrative  Agent
hereunder from the Borrower and each Lender's share thereof.

          (d) The entries  made in the  Register and the accounts of each Lender
maintained  pursuant  to  Section  2.6(b)  shall,  to the  extent  permitted  by
applicable  law, be prima facie  evidence  of the  existence  and amounts of the
obligations  of the  Borrower  therein  recorded;  provided,  however,  that the
failure of any Lender or the  Administrative  Agent to maintain  the Register or
any such  account,  or any error  therein,  shall not in any  manner  affect the
obligation of the Borrower to repay (with applicable interest) the Loans made to
such Borrower by such Lender in accordance with the terms of this Agreement.

          (e) The Borrower agrees that,  upon the request to the  Administrative
Agent by any  Lender,  the  Borrower  will  execute and deliver to such Lender a
promissory  note of the Borrower  evidencing any Term Loans or Revolving  Credit
Loans, as the case may be, of such Lender, substantially in the forms of Exhibit
G-1 or G-2,  respectively,  with appropriate insertions as to date and principal
amount.

          2.7  Commitment  Fees,  etc.  (a) The  Borrower  agrees  to pay to the
Administrative  Agent  for  the  account  of  each  Revolving  Credit  Lender  a
commitment  fee for the period from and  including  the Closing Date to the last
day of the Revolving Credit  Commitment  Period,  computed at the Commitment Fee
Rate on the average daily amount of the Available Revolving Credit Commitment of
such Lender  during the period for which payment is made,  payable  quarterly in
arrears on the last day of each March,  June,  September and December and on the
Revolving  Credit  Termination  Date,  commencing  on the first of such dates to
occur after the date hereof.



<PAGE>


                                                                              29




          (b) The Borrower  agrees to pay to the  Syndication  Agent the fees in
the amounts and on the dates previously agreed to in writing by the Borrower and
the Syndication Agent.

          (c) The Borrower agrees to pay to the Administrative Agent the fees in
the  amounts  and on the dates  from time to time  agreed to in  writing  by the
Borrower and the Administrative Agent.

          2.8 Termination or Reduction of Revolving Credit Commitments; Increase
of Revolving Credit Commitments. (a) The Borrower shall have the right, upon not
less than three Business Days' notice to the Administrative  Agent, to terminate
the Revolving Credit  Commitments or, from time to time, to reduce the amount of
the Revolving Credit Commitments; provided that no such termination or reduction
of  Revolving  Credit  Commitments  shall be permitted  if, after giving  effect
thereto  and to any  prepayments  of the  Revolving  Credit  Loans  made  on the
effective date thereof,  the Total  Revolving  Extensions of Credit would exceed
the Total Revolving Credit Commitments. Any such reduction shall be in an amount
equal to $1,000,000,  or a whole multiple thereof,  and shall reduce permanently
the Revolving Credit Commitments then in effect.

          (b) In the event that the Borrower  wishes to increase  the  aggregate
Revolving Credit Commitments at any time when no Default or Event of Default has
occurred and is continuing,  it shall notify the Administrative Agent in writing
of the amount (the "Offered  Increase  Amount") of such proposed  increase (such
notice, a "Revolving Credit  Commitment  Increase  Notice").  The Borrower shall
offer each of the Lenders the opportunity to participate in its Revolving Credit
Percentage of the Offered Increase Amount pursuant to paragraph (c) below and if
any Lender, in its sole discretion,  elects not to participate in its portion of
the  Offered  Increase  Amount,  the  Borrower  may,  with  the  consent  of the
Administrative Agent (which consent shall not be unreasonably  withheld),  offer
one or more  additional  banks or  financial  institutions  the  opportunity  to
participate in such portion of the Offered Increase Amount pursuant to paragraph
(d) below.  The Borrower or, if requested by the  Borrower,  the  Administrative
Agent, will notify all Lenders, and, if applicable, the other banks or financial
institutions, of such offer.

          (c) Any  Lender  which  accepts  an  offer  to it by the  Borrower  to
increase its Revolving Credit Commitment pursuant to this Section shall, in each
case,  execute  a  Revolving  Credit  Commitment  Increase  Supplement  with the
Borrower and the Administrative  Agent,  substantially in the form of Exhibit K,
whereupon  such Lender  shall be bound by and  entitled to the  benefits of this
Agreement with respect to the full amount of its Revolving Credit  Commitment as
so increased.

          (d) Any additional bank,  financial  institution or other entity which
the Borrower selects to offer  participation  in the increased  Revolving Credit
Commitments  and which elects to become a party to this  Agreement and provide a
Revolving Credit  Commitment in an amount so offered and accepted by it pursuant
to this Section shall execute a New Lender



<PAGE>


                                                                              30




Supplement with the Borrower and the Administrative Agent,  substantially in the
form of Exhibit L,  whereupon such bank,  financial  institution or other entity
shall become a Lender for all purposes and to the same extent as if originally a
party  hereto  and  shall be  bound  by and  entitled  to the  benefits  of this
Agreement,  provided that the Revolving Credit Commitment of any such new Lender
shall be in an amount not less than $5,000,000.

          (e) Notwithstanding  anything to the contrary in this Section,  (i) in
no event  shall any  transaction  effected  pursuant to this  Section  cause the
aggregate  Revolving Credit Commitments to exceed $75,000,000 and (ii) no Lender
shall have any obligation to increase its Revolving Credit  Commitment unless it
agrees to do so in its sole discretion.

          2.9 Optional  Prepayments.  The Borrower may at any time and from time
to time prepay the Loans, in whole or in part, without premium or penalty,  upon
irrevocable notice delivered to the Administrative Agent at least three Business
Days prior thereto in the case of Eurodollar Loans and at least one Business Day
prior  thereto in the case of Base Rate Loans,  which notice  shall  specify the
date and amount of prepayment and whether the prepayment is of Eurodollar  Loans
or Base Rate Loans;  provided,  that if a Eurodollar  Loan is prepaid on any day
other than the last day of the Interest Period applicable thereto,  the Borrower
shall also pay any amounts owing  pursuant to Section 2.19.  Upon receipt of any
such notice the Administrative  Agent shall promptly notify each relevant Lender
thereof.  If any such notice is given, the amount specified in such notice shall
be due and payable on the date specified therein, together with accrued interest
to such  date on the  amount  prepaid.  Partial  prepayments  of Term  Loans and
Revolving  Credit Loans shall be in an aggregate  principal amount of $1,000,000
or a whole multiple thereof.

          2.10 Mandatory Prepayments and Commitment  Reductions.  (a) Unless the
Required  Prepayment Lenders shall otherwise agree, if any Indebtedness shall be
incurred by the Borrower or any of its Subsidiaries  (excluding any Indebtedness
incurred  in  accordance  with  Section  7.2 as in  effect  on the  date of this
Agreement),  an amount equal to 100% of the Net Cash  Proceeds  thereof shall be
applied on the date of such  incurrence  toward the prepayment of the Term Loans
and the reduction of the Revolving  Credit  Commitments  as set forth in Section
2.10(d).

          (b) Unless the Required  Prepayment  Lenders shall otherwise agree, if
on any date,  the  Borrower or any of its  Subsidiaries  shall  receive Net Cash
Proceeds  from any Asset Sale or  Recovery  Event  then,  unless a  Reinvestment
Notice shall be delivered in respect  thereof,  such Net Cash Proceeds  shall be
applied on such date toward the  prepayment  of the Term Loans and the reduction
of the Revolving Credit  Commitments as set forth in Section 2.10(d);  provided,
that,  notwithstanding  the  foregoing,  (i) the  aggregate Net Cash Proceeds of
Asset  Sales  and  Recovery  Events  that may be  excluded  from  the  foregoing
prepayment  requirement  pursuant  to a  Reinvestment  Notice  shall not  exceed
$5,000,000  in any fiscal  year of the  Borrower  and (ii) on each  Reinvestment
Prepayment  Date,  an amount equal to the  Reinvestment  Prepayment  Amount with
respect to the relevant Reinvestment Event shall be



<PAGE>


                                                                              31




applied  toward  the  prepayment  of the Term  Loans  and the  reduction  of the
Revolving Credit Commitments as set forth in Section 2.10(d).

          (c) Unless the Required  Prepayment Lenders shall otherwise agree, if,
for any fiscal  year of the  Borrower  commencing  with the fiscal  year  ending
December 31, 1999,  there shall be Excess Cash Flow, the Borrower  shall, on the
relevant  Excess Cash Flow  Application  Date,  apply the ECF Percentage of such
Excess Cash Flow toward the  prepayment  of the Term Loans and the  reduction of
the Revolving  Credit  Commitments  as set forth in Section  2.10(d).  Each such
prepayment  and  commitment  reduction  shall be made on a date (an "Excess Cash
Flow  Application  Date") no later than five days  after the  earlier of (i) the
date on which the financial  statements  of the Borrower  referred to in Section
6.1(a),  for the fiscal year with respect to which such  prepayment is made, are
required  to be  delivered  to the  Lenders  and (ii) the  date  such  financial
statements are actually delivered.

          (d)  Amounts  to  be  applied  in  connection  with   prepayments  and
Commitment reductions made pursuant to this Section shall be applied,  first, to
the  prepayment  of the Term  Loans  and,  second,  to  reduce  permanently  the
Revolving  Credit  Commitments.  Any  such  reduction  of the  Revolving  Credit
Commitments  shall be accompanied by prepayment of the Revolving Credit Loans to
the extent,  if any,  that the Total  Revolving  Extensions of Credit exceed the
amount of the Total Revolving Credit Commitments as so reduced, provided that if
the aggregate  principal  amount of Revolving  Credit Loans then  outstanding is
less than the  amount of such  excess  (because  L/C  Obligations  constitute  a
portion  thereof),  the  Borrower  shall,  to the extent of the  balance of such
excess,  replace  outstanding Letters of Credit and/or deposit an amount in cash
in a cash collateral account  established with the Administrative  Agent for the
benefit  of  the   Lenders  on  terms  and   conditions   satisfactory   to  the
Administrative Agent. The application of any prepayment pursuant to this Section
shall be made,  first, to Base Rate Loans and, second, to Eurodollar Loans. Each
prepayment  of the Loans  under this  Section  (except in the case of  Revolving
Credit Loans that are Base Rate Loans) shall be accompanied by accrued  interest
to the date of such prepayment on the amount prepaid.

          2.11 Conversion and Continuation  Options.  (a) The Borrower may elect
from time to time to convert  Eurodollar  Loans to Base Rate Loans by giving the
Administrative  Agent at least two Business  Days' prior  irrevocable  notice of
such election, provided that any such conversion of Eurodollar Loans may only be
made on the last day of an Interest  Period with respect  thereto.  The Borrower
may elect from time to time to convert  Base Rate Loans to  Eurodollar  Loans by
giving the Administrative  Agent at least three Business Days' prior irrevocable
notice of such  election  (which  notice shall specify the length of the initial
Interest  Period  therefor),  provided that no Base Rate Loan under a particular
Facility may be converted  into a Eurodollar  Loan (i) when any Event of Default
has  occurred and is  continuing  and the  Administrative  Agent or the Majority
Facility  Lenders in respect of such  Facility  have  determined in its or their
sole  discretion  not to permit such  conversions or (ii) after the date that is
one month prior to the final  scheduled  termination  or  maturity  date of such
Facility.  Upon  receipt  of any such  notice  the  Administrative  Agent  shall
promptly notify each relevant Lender thereof.



<PAGE>


                                                                              32




          (b) Any  Eurodollar  Loan may be continued as such upon the expiration
of the then current  Interest Period with respect thereto by the Borrower giving
irrevocable  notice  to  the  Administrative   Agent,  in  accordance  with  the
applicable provisions of the term "Interest Period" set forth in Section 1.1, of
the length of the next Interest Period to be applicable to such Loans,  provided
that no Eurodollar Loan under a particular Facility may be continued as such (i)
when any Event of Default has occurred and is continuing and the  Administrative
Agent has or the  Majority  Facility  Lenders in respect of such  Facility  have
determined in its or their sole discretion not to permit such  continuations  or
(ii) after the date that is one month prior to the final  scheduled  termination
or maturity date of such Facility,  and provided,  further, that if the Borrower
shall fail to give any required  notice as described  above in this paragraph or
if such  continuation  is not permitted  pursuant to the preceding  proviso such
Loans  shall be  automatically  converted  to Base Rate Loans on the last day of
such  then  expiring  Interest  Period.  Upon  receipt  of any such  notice  the
Administrative Agent shall promptly notify each relevant Lender thereof.

          2.12  Minimum  Amounts  and  Maximum  Number of  Eurodollar  Tranches.
Notwithstanding  anything to the  contrary in this  Agreement,  all  borrowings,
conversions,   continuations  and  optional   prepayments  of  Eurodollar  Loans
hereunder and all  selections  of Interest  Periods  hereunder  shall be in such
amounts and be made pursuant to such  elections so that, (a) after giving effect
thereto,  the aggregate principal amount of the Eurodollar Loans comprising each
Eurodollar  Tranche shall be equal to $2,500,000 or a whole multiple of $500,000
in  excess  thereof  and (b) no more  than  five  Eurodollar  Tranches  shall be
outstanding at any one time.

          2.13 Interest Rates and Payment Dates.  (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the  Eurodollar  Rate  determined  for such day plus the
Applicable Margin.

          (b) Each Base Rate Loan shall bear  interest at a rate per annum equal
to the Base Rate plus the Applicable Margin.

          (c) (i) If all or a  portion  of the  principal  amount of any Loan or
Reimbursement  Obligation  shall not be paid  when due  (whether  at the  stated
maturity, by acceleration or otherwise), all outstanding Loans and Reimbursement
Obligations  (whether or not  overdue)  shall bear  interest at a rate per annum
which is equal to (x) in the case of the Loans, the rate that would otherwise be
applicable thereto pursuant to the foregoing  provisions of this Section plus 2%
or (y) in the case of  Reimbursement  Obligations,  the rate  applicable to Base
Rate Loans under the  Revolving  Credit  Facility  plus 2%, and (ii) if all or a
portion of any interest payable on any Loan or  Reimbursement  Obligation or any
commitment  fee or other  amount  payable  hereunder  shall not be paid when due
(whether at the stated  maturity,  by acceleration  or otherwise),  such overdue
amount shall bear interest at a rate per annum equal to the rate then applicable
to Base Rate Loans under the relevant  Facility  plus 2% (or, in the case of any
such other  amounts that do not relate to a particular  Facility,  the rate then
applicable to Base Rate Loans under the Revolving  Credit  Facility plus 2%), in
each case, with respect to clauses



<PAGE>


                                                                              33




(i) and (ii) above,  from the date of such non-payment until such amount is paid
in full (after as well as before judgment).

          (d)  Interest  shall be payable in  arrears on each  Interest  Payment
Date,  provided that interest accruing pursuant to paragraph (c) of this Section
shall be payable from time to time on demand.

          2.14  Computation  of  Interest  and  Fees.  (a)  Interest,  fees  and
commissions  payable  pursuant  hereto  shall be  calculated  on the  basis of a
360-day year for the actual days elapsed, except that, with respect to Base Rate
Loans  the rate of  interest  on which is  calculated  on the basis of the Prime
Rate, the interest  thereon shall be calculated on the basis of a 365- (or 366-,
as the case may be) day year for the actual  days  elapsed.  The  Administrative
Agent shall as soon as practicable  notify the Borrower and the relevant Lenders
of each determination of a Eurodollar Rate. Any change in the interest rate on a
Loan  resulting  from a change  in the  Base  Rate or the  Eurocurrency  Reserve
Requirements  shall become effective as of the opening of business on the day on
which such change becomes effective.  The Administrative  Agent shall as soon as
practicable  notify the Borrower and the relevant  Lenders of the effective date
and the amount of each such change in interest rate.

          (b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this  Agreement  shall be conclusive and binding on
the   Borrower  and  the  Lenders  in  the  absence  of  manifest   error.   The
Administrative  Agent  shall,  at the  request of the  Borrower,  deliver to the
Borrower a statement showing the quotations used by the Administrative  Agent in
determining any interest rate pursuant to Section 2.13(a).

          2.15  Inability to Determine  Interest Rate. If prior to the first day
of any Interest Period:

          (a)  the   Administrative   Agent   shall   have   determined   (which
     determination  shall be conclusive and binding upon the Borrower)  that, by
     reason  of  circumstances  affecting  the  relevant  market,  adequate  and
     reasonable means do not exist for ascertaining the Eurodollar Rate for such
     Interest Period, or

          (b) the  Administrative  Agent  shall have  received  notice  from the
     Majority  Facility  Lenders in respect of the  relevant  Facility  that the
     Eurodollar  Rate  determined or to be determined  for such Interest  Period
     will  not  adequately  and  fairly  reflect  the cost to such  Lenders  (as
     conclusively  certified  by such  Lenders) of making or  maintaining  their
     affected Loans during such Interest Period,

the Administrative Agent shall give telecopy or telephonic notice thereof to the
Borrower and the relevant  Lenders as soon as  practicable  thereafter.  If such
notice is given (x) any Eurodollar Loans under the relevant  Facility  requested
to be made on the first day of such  Interest  Period shall be made as Base Rate
Loans,  (y) any  Loans  under  the  relevant  Facility  that  were to have  been
converted on the first day of such Interest Period to Eurodollar Loans



<PAGE>


                                                                              34




shall be continued as Base Rate Loans and (z) any outstanding  Eurodollar  Loans
under the  relevant  Facility  shall be  converted,  on the last day of the then
current  Interest Period with respect  thereto,  to Base Rate Loans.  Until such
notice has been withdrawn by the  Administrative  Agent,  no further  Eurodollar
Loans under the relevant  Facility shall be made or continued as such, nor shall
the  Borrower  have the right to convert  Loans under the  relevant  Facility to
Eurodollar Loans.

          2.16 Pro Rata  Treatment  and  Payments.  (a)  Each  borrowing  by the
Borrower from the Lenders hereunder,  each payment by the Borrower on account of
any commitment fee and any reduction of the  Commitments of the Lenders shall be
made pro rata  according  to the  respective  Tranche A Term  Loan  Percentages,
Tranche B Term Loan Percentages or Revolving Credit Percentages, as the case may
be, of the relevant Lenders. Each payment (other than prepayments) in respect of
principal  or interest in respect of the Loans,  each payment in respect of fees
payable  hereunder,  and each payment in respect of  Reimbursement  Obligations,
shall be applied to the  amounts of such  obligations  owing to the  Lenders pro
rata according to the respective amounts then due and owing to the Lenders.

          (b) Each mandatory  prepayment  required by Section 2.10 to be applied
to Term  Loans  shall be  allocated  among  the Term  Loan  Facilities  pro rata
according to the respective  outstanding  principal  amounts of Term Loans under
such Facilities.  Each optional prepayment in respect of the Term Loans shall be
allocated  among the Term Loan  Facilities  in  accordance  with the  Borrower's
instructions.  Each  payment  (including  each  prepayment)  of the  Term  Loans
outstanding  under any Term Loan Facility shall be allocated among the Term Loan
Lenders  holding such Term Loans pro rata based on the principal  amount of such
Term  Loans  held by such  Term  Loan  Lenders,  and  shall  be  applied  to the
installments  of such Term  Loans pro rata  based on the  remaining  outstanding
principal  amount of such  installments.  Amounts prepaid on account of the Term
Loans may not be reborrowed.

          (c) Each  payment  (including  each  prepayment)  by the  Borrower  on
account of principal of and interest on the Revolving Credit Loans shall be made
pro rata  according  to the  respective  outstanding  principal  amounts  of the
Revolving Credit Loans then held by the Revolving Credit Lenders.

          (d) Notwithstanding  anything to the contrary in Sections 2.9, 2.10 or
2.16, so long as any Tranche A Term Loans are  outstanding,  each Tranche B Term
Loan  Lender  may,  at its  option,  decline  up to 100% of the  portion  of any
optional  prepayment or mandatory payment applicable to the Tranche B Term Loans
of  such  Lender;  accordingly,  with  respect  to the  amount  of any  optional
prepayment described in Section 2.9 or mandatory prepayment described in Section
2.10 that is  allocated  to Tranche B Term Loans (such  amounts,  the "Tranche B
Prepayment  Amount"),  at any time when Tranche A Term Loans remain outstanding,
the Borrower will, (i) in the case of any optional prepayment which the Borrower
wishes to make,  not later than 20 Business  Days prior to the date on which the
Borrower  wishes to make such optional  prepayment,  and (ii) in the case of any
mandatory  prepayment  required to be made  pursuant to Section 2.10, in lieu of
applying such amount to the



<PAGE>


                                                                              35




prepayment of Tranche B Term Loans, as provided in paragraph Section 2.10(d), on
the date specified in Section 2.10 for such prepayment,  give the Administrative
Agent  telephonic  notice  (promptly  confirmed in writing)  requesting that the
Administrative  Agent  prepare  and  provide  to each  Tranche B Lender a notice
(each,  a  "Prepayment  Option  Notice")  as  described  below.  As  promptly as
practicable  after receiving such notice from the Borrower,  the  Administrative
Agent will send to each Tranche B Lender a Prepayment Option Notice, which shall
be in the form of  Exhibit  H, and shall  include  an offer by the  Borrower  to
prepay on the date (each a "Prepayment Date") that is 10 Business Days after the
date of the Prepayment Option Notice, the Tranche B Term Loans of such Lender by
an amount  equal to the  portion  of the  Prepayment  Amount  indicated  in such
Lender's Prepayment Option Notice as being applicable to such Lender's Tranche B
Term  Loans.  On  the  Prepayment  Date,  (i)  the  Borrower  shall  pay  to the
Administrative  Agent the aggregate  amount  necessary to prepay that portion of
the  outstanding  relevant Term Loans in respect of which Tranche B Lenders have
accepted prepayment as described above (such Lenders,  the "Accepting  Lenders")
with such amount being  applied to reduce the Tranche B Prepayment  Amounts with
respect  to each  Accepting  Lender,  and (ii)  the  Borrower  shall  pay to the
Administrative  Agent an amount equal to the portion of the Tranche B Prepayment
Amount not accepted by the  Accepting  Lenders with such amount being applied to
the prepayment of the Tranche A Term Loans.

          (e) All payments  (including  prepayments)  to be made by the Borrower
hereunder,  whether on account of principal,  interest, fees or otherwise, shall
be made without  setoff or  counterclaim  and shall be made prior to 12:00 Noon,
New York City time, on the due date thereof to the Administrative Agent, for the
account of the Lenders,  at the Payment  Office,  in Dollars and in  immediately
available funds. The Administrative  Agent shall distribute such payments to the
Lenders  promptly  upon  receipt  in like  funds  as  received.  If any  payment
hereunder (other than payments on the Eurodollar  Loans) becomes due and payable
on a day other than a Business  Day,  such payment shall be extended to the next
succeeding  Business  Day. If any payment on a  Eurodollar  Loan becomes due and
payable  on a day other than a  Business  Day,  the  maturity  thereof  shall be
extended to the next succeeding Business Day unless the result of such extension
would be to extend such payment into another calendar month, in which event such
payment shall be made on the immediately  preceding Business Day. In the case of
any  extension  of any  payment  of  principal  pursuant  to the  preceding  two
sentences,  interest thereon shall be payable at the then applicable rate during
such extension.

          (f) Unless  the  Administrative  Agent  shall  have been  notified  in
writing by any Lender  prior to a  borrowing  that such Lender will not make the
amount  that  would  constitute  its share of such  borrowing  available  to the
Administrative  Agent, the  Administrative  Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such  assumption,  make  available to the Borrower a
corresponding amount. If such amount is not made available to the Administrative
Agent by the required time on the Borrowing Date therefor, such Lender shall pay
to the Administrative  Agent, on demand,  such amount with interest thereon at a
rate equal to the daily  average  Federal  Funds  Effective  Rate for the period
until such Lender makes such



<PAGE>


                                                                              36




amount immediately  available to the Administrative  Agent. A certificate of the
Administrative  Agent  submitted to any Lender with respect to any amounts owing
under this paragraph  shall be conclusive in the absence of manifest  error.  If
such  Lender's   share  of  such   borrowing  is  not  made   available  to  the
Administrative Agent by such Lender within three Business Days of such Borrowing
Date,  the  Administrative  Agent shall also be entitled to recover  such amount
with interest  thereon at the rate per annum applicable to Base Rate Loans under
the relevant Facility, on demand, from the Borrower.

          (g) Unless  the  Administrative  Agent  shall  have been  notified  in
writing by the Borrower  prior to the date of any payment  being made  hereunder
that the Borrower will not make such payment to the  Administrative  Agent,  the
Administrative  Agent may assume that the Borrower is making such  payment,  and
the  Administrative  Agent may, but shall not be required  to, in reliance  upon
such assumption,  make available to the Lenders their respective pro rata shares
of a  corresponding  amount.  If such payment is not made to the  Administrative
Agent by the Borrower  within three  Business  Days of such required  date,  the
Administrative  Agent shall be entitled to recover,  on demand, from each Lender
to which any amount which was made available pursuant to the preceding sentence,
such  amount  with  interest  thereon  at the rate per annum  equal to the daily
average Federal Funds  Effective  Rate.  Nothing herein shall be deemed to limit
the rights of the Administrative Agent or any Lender against the Borrower.

          2.17  Requirements of Law. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or compliance
by any Lender with any request or directive  (whether or not having the force of
law) from any central bank or other  Governmental  Authority made  subsequent to
the date hereof:

                (i) shall  subject any Lender to any tax of any kind  whatsoever
        with respect to this Agreement, any Letter of Credit, any Application or
        any  Eurodollar  Loan  made by it, or change  the basis of  taxation  of
        payments to such  Lender in respect  thereof  (except  for  Non-Excluded
        Taxes  covered  by  Section  2.18 and  changes in the rate of tax on the
        overall net income of such Lender);

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

                (iii) shall impose on such Lender any other condition;

and the result of any of the  foregoing  is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing  or  maintaining  Eurodollar  Loans or  issuing or  participating  in
Letters of  Credit,  or to reduce any  amount  receivable  hereunder  in respect
thereof, then, in any such case, the Borrower shall



<PAGE>


                                                                              37




promptly pay such Lender,  upon its demand,  any additional amounts necessary to
compensate such Lender for such increased cost or reduced amount receivable.  If
any Lender  becomes  entitled to claim any additional  amounts  pursuant to this
Section,   it  shall   promptly   notify  the  Borrower  (with  a  copy  to  the
Administrative Agent) of the event by reason of which it has become so entitled.

          (b) If any Lender  shall have  determined  that the adoption of or any
change  in  any  Requirement  of  Law  regarding  capital  adequacy  or  in  the
interpretation  or  application  thereof  or  compliance  by such  Lender or any
corporation  controlling  such Lender with any  request or  directive  regarding
capital adequacy  (whether or not having the force of law) from any Governmental
Authority  made  subsequent to the date hereof shall have the effect of reducing
the  rate  of  return  on  such  Lender's  or such  corporation's  capital  as a
consequence of its obligations hereunder or under or in respect of any Letter of
Credit to a level  below that which such Lender or such  corporation  could have
achieved but for such adoption,  change or compliance (taking into consideration
such Lender's or such  corporation's  policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time, after
submission  by such Lender to the  Borrower  (with a copy to the  Administrative
Agent) of a written request therefor, the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such reduction.

          (c) A certificate as to any  additional  amounts  payable  pursuant to
this  Section  submitted  by any  Lender  to the  Borrower  (with  a copy to the
Administrative  Agent) shall be conclusive in the absence of manifest error. The
obligations  of  the  Borrower  pursuant  to  this  Section  shall  survive  the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.

          2.18 Taxes. (a) All payments made by the Borrower under this Agreement
shall be made free and clear of, and without  deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies, imposts,
duties,  charges,  fees,  deductions or withholdings,  now or hereafter imposed,
levied, collected, withheld or assessed by any Governmental Authority, excluding
net income  taxes and  franchise  taxes  (imposed  in lieu of net income  taxes)
imposed on any Agent or any Lender as a result of a present or former connection
between  such Agent or such  Lender  and the  jurisdiction  of the  Governmental
Authority  imposing such tax or any political  subdivision  or taxing  authority
thereof or therein  (other  than any such  connection  arising  solely from such
Agents or such Lenders having  executed,  delivered or performed its obligations
or received a payment  under,  or  enforced,  this  Agreement  or any other Loan
Document).  If any such non-excluded taxes, levies,  imposts,  duties,  charges,
fees,  deductions  or  withholdings  ("Non-Excluded  Taxes") or Other  Taxes are
required  to be  withheld  from any  amounts  payable to any Agent or any Lender
hereunder,  the  amounts  so  payable  to such  Agent  or such  Lender  shall be
increased to the extent  necessary to yield to such Agent or such Lender  (after
payment of all  Non-Excluded  Taxes and Other Taxes)  interest or any such other
amounts  payable  hereunder  at the rates or in the  amounts  specified  in this
Agreement,  provided,  however,  that the  Borrower  shall  not be  required  to
increase any such amounts payable to any Lender with respect to any Non-Excluded
Taxes (i) that are  attributable  to such  Lender's  failure to comply  with the
requirements  of  paragraph  (d) or (e) of this  Section or



<PAGE>

                                                                              38

(ii) that are United States withholding taxes imposed on amounts payable to such
Lender at the time the Lender becomes a party to this  Agreement,  except to the
extent  that  such  Lender's  assignor  (if  any) was  entitled,  at the time of
assignment, to receive additional amounts from the Borrower with respect to such
Non-Excluded Taxes pursuant to Section 2.18(a).

          (b) In  addition,  the  Borrower  shall  pay any  Other  Taxes  to the
relevant Governmental Authority in accordance with applicable law.

          (c) Whenever any Non-Excluded  Taxes or Other Taxes are payable by the
Borrower,  as promptly as possible  thereafter  the  Borrower  shall send to the
Administrative  Agent for the account of the  relevant  Agent or Lender,  as the
case may be, a certified copy of an original  official  receipt  received by the
Borrower showing payment thereof.  If the Borrower fails to pay any Non-Excluded
Taxes or Other Taxes when due to the  appropriate  taxing  authority or fails to
remit to the  Administrative  Agent  the  required  receipts  or other  required
documentary  evidence,  the Borrower shall  indemnify the Agents and the Lenders
for any incremental taxes,  interest or penalties that may become payable by any
Agent or any  Lender as a result of any such  failure.  The  agreements  in this
Section 2.18 shall survive the  termination of this Agreement and the payment of
the Loans and all other amounts payable hereunder.

          (d) Each Lender (or  Transferee)  that is not a citizen or resident of
the United States of America, a corporation, partnership or other entity created
or  organized  in or under  the laws of the  United  States of  America  (or any
jurisdiction  thereof), or any estate or trust that is subject to federal income
taxation  regardless  of the source of its income (a  "Non-U.S.  Lender")  shall
deliver to the  Borrower  and the  Administrative  Agent  (or,  in the case of a
Participant,  to the Lender from which the related participation shall have been
purchased) two copies of either U.S.  Internal Revenue Service Form 1001 or Form
4224, or, in the case of a Non-U.S.  Lender claiming exemption from U.S. federal
withholding  tax under  Section  871(h) or  881(c) of the Code with  respect  to
payments  of  "portfolio  interest"  a  statement  substantially  in the form of
Exhibit I and a Form W-8,  or any  subsequent  versions  thereof  or  successors
thereto  properly  completed and duly executed by such Non-U.S.  Lender claiming
complete  exemption from, or a reduced rate of, U.S. federal  withholding tax on
all payments by the Borrower under this Agreement and the other Loan  Documents.
Such forms shall be delivered by each  Non-U.S.  Lender on or before the date it
becomes a party to this  Agreement  (or, in the case of any  Participant,  on or
before  the date such  Participant  purchases  the  related  participation).  In
addition,  each  Non-U.S.  Lender  shall  deliver such forms  promptly  upon the
obsolescence  or  invalidity of any form  previously  delivered by such Non-U.S.
Lender.  Each Non-U.S.  Lender shall promptly notify the Borrower at any time it
determines  that  it is no  longer  in a  position  to  provide  any  previously
delivered  certificate  to the  Borrower  (or any  other  form of  certification
adopted by the U.S. taxing  authorities for such purpose).  Notwithstanding  any
other provision of this paragraph, a Non-U.S. Lender shall not be



<PAGE>


                                                                              39




required  to deliver  any form  pursuant to this  paragraph  that such  Non-U.S.
Lender is not legally able to deliver.

          (e) A Lender that is entitled to an  exemption  from or  reduction  of
non-U.S. 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,  provided  that such Lender is
legally entitled to complete, execute and deliver such documentation and in such
Lender's reasonable judgment such completion,  execution or submission would not
materially prejudice the legal position of such Lender.

          2.19  Indemnity.  The Borrower  agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a  consequence  of (a) default by the Borrower in making a borrowing
of,  conversion into or continuation of Eurodollar  Loans after the Borrower has
given a notice  requesting  the same in accordance  with the  provisions of this
Agreement,  (b)  default  by the  Borrower  in making any  prepayment  after the
Borrower has given a notice  thereof in accordance  with the  provisions of this
Agreement or (c) the making of a prepayment or conversion of Eurodollar Loans on
a day which is not the last day of an Interest Period with respect thereto. Such
indemnification  may include an amount  equal to the excess,  if any, of (i) the
amount of interest which would have accrued on the amount so prepaid,  or not so
borrowed,  converted  or  continued,  for  the  period  from  the  date  of such
prepayment or of such failure to borrow,  convert or continue to the last day of
such  Interest  Period  (or,  in the case of a failure  to  borrow,  convert  or
continue,  the  Interest  Period that would have  commenced  on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding,  however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by such Lender) which
would have  accrued to such  Lender on such  amount by  placing  such  amount on
deposit for a comparable  period with leading banks in the interbank  eurodollar
market.  A  certificate  as to any  amounts  payable  pursuant  to this  Section
submitted to the Borrower by any Lender  shall be  conclusive  in the absence of
manifest  error.  This covenant shall survive the  termination of this Agreement
and the payment of the Loans and all other amounts payable hereunder.

          2.20 Illegality.  Notwithstanding  any other provision  herein, if the
adoption of or any change in any Requirement of Law or in the  interpretation or
application  thereof  shall make it unlawful  for any Lender to make or maintain
Eurodollar  Loans as contemplated by this Agreement,  (a) the commitment of such
Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as such and
convert Base Rate Loans to Eurodollar Loans shall forthwith be cancelled and (b)
such Lender's  Loans then  outstanding  as Eurodollar  Loans,  if any,  shall be
converted  automatically  to Base Rate Loans on the respective  last days of the
then current  Interest Periods with respect to such Loans or within such earlier
period as required by law. If



<PAGE>


                                                                              40




any such  conversion of a Eurodollar  Loan occurs on a day which is not the last
day of the then current Interest Period with respect thereto, the Borrower shall
pay to such Lender such amounts,  if any, as may be required pursuant to Section
2.19.

          2.21 Change of Lending  Office.  Each  Lender  agrees  that,  upon the
occurrence of any event giving rise to the operation of Section 2.17, 2.18(a) or
2.20 with respect to such Lender,  it will,  if requested by the  Borrower,  use
reasonable efforts (subject to overall policy  considerations of such Lender) to
designate  another  lending office for any Loans affected by such event with the
object  of  avoiding  the  consequences  of  such  event;  provided,  that  such
designation  is made on terms that, in the sole  judgment of such Lender,  cause
such Lender and its lending office(s) to suffer no economic, legal or regulatory
disadvantage,  and provided,  further, that nothing in this Section shall affect
or postpone any of the  obligations  of any Borrower or the rights of any Lender
pursuant to Section 2.17, 2.18(a) or 2.20.


                          SECTION 3. LETTERS OF CREDIT

          3.1 L/C  Commitment.  (a) Subject to the terms and conditions  hereof,
the Issuing Lender,  in reliance on the agreements of the other Revolving Credit
Lenders set forth in Section 3.4(a), agrees to issue letters of credit ("Letters
of Credit")  for the  account of the  Borrower  on any  Business  Day during the
Revolving Credit  Commitment Period in such form as may be approved from time to
time by the  Issuing  Lender;  provided  that the Issuing  Lender  shall have no
obligation  to issue any  Letter  of  Credit  if,  after  giving  effect to such
issuance,  (i) the L/C  Obligations  would exceed the L/C Commitment or (ii) the
aggregate  amount of the Available  Revolving Credit  Commitments  would be less
than zero.  Each Letter of Credit shall (i) be  denominated  in Dollars and (ii)
expire no later  than the  earlier of (x) the first  anniversary  of its date of
issuance  and (y) the date which is five  Business  Days prior to the  Scheduled
Revolving  Credit  Termination  Date,  provided that any Letter of Credit with a
one-year  term may  provide  for the renewal  thereof  for  additional  one-year
periods  (which shall in no event extend  beyond the date  referred to in clause
(y) above).

          (b) Each Letter of Credit shall be subject to the Uniform Customs and,
to the extent not inconsistent therewith, the laws of the State of New York.

          (c) The Issuing Lender shall not at any time be obligated to issue any
Letter of Credit  hereunder if such issuance  would  conflict with, or cause the
Issuing  Lender or any L/C  Participant  to exceed  any limits  imposed  by, any
applicable Requirement of Law.

          3.2 Procedure for Issuance of Letter of Credit.  The Borrower may from
time to time  request  that the  Issuing  Lender  issue a Letter  of  Credit  by
delivering to the Issuing Lender at its address for notices  specified herein an
Application  therefor,  completed to the satisfaction of the Issuing Lender, and
such other  certificates,  documents  and other  papers and  information  as the
Issuing Lender may request. Upon receipt of any Application,  the Issuing Lender
will process such Application and the  certificates,  documents and other papers
and



<PAGE>


                                                                              41




information  delivered  to it in  connection  therewith in  accordance  with its
customary  procedures and shall  promptly  issue the Letter of Credit  requested
thereby  (but in no event  shall the  Issuing  Lender be  required  to issue any
Letter of Credit  earlier  than three  Business  Days  after its  receipt of the
Application therefor and all such other certificates, documents and other papers
and  information  relating  thereto) by issuing  the  original of such Letter of
Credit  to the  beneficiary  thereof  or as  otherwise  may be  agreed to by the
Issuing Lender and the Borrower. The Issuing Lender shall furnish a copy of such
Letter of Credit to the Borrower promptly  following the issuance  thereof.  The
Issuing Lender shall promptly furnish to the  Administrative  Agent, which shall
in turn promptly  furnish to the Lenders,  notice of the issuance of each Letter
of Credit (including the amount thereof).

          3.3 Fees and Other  Charges.  (a) The  Borrower  will pay a fee on the
aggregate  drawable amount of all  outstanding  Letters of Credit at a per annum
rate equal to the  Applicable  Margin then in effect with respect to  Eurodollar
Loans under the Revolving  Credit  Facility,  shared ratably among the Revolving
Credit  Lenders and payable  quarterly  in arrears on each L/C Fee Payment  Date
after the  issuance  date.  In addition,  the Borrower  shall pay to the Issuing
Lender for its own account a fronting fee on the  aggregate  drawable  amount of
all outstanding  Letters of Credit of 1/8 of 1% per annum,  payable quarterly in
arrears on each L/C Fee Payment Date after the issuance date.

          (b) In addition  to the  foregoing  fees,  the  Borrower  shall pay or
reimburse the Issuing Lender for such normal and customary costs and expenses as
are incurred or charged by the Issuing Lender in issuing, negotiating, effecting
payment under, amending or otherwise administering any Letter of Credit.

          3.4 L/C  Participations.  (a) The Issuing Lender irrevocably agrees to
grant and hereby  grants to each L/C  Participant,  and,  to induce the  Issuing
Lender to issue Letters of Credit  hereunder,  each L/C Participant  irrevocably
agrees to accept and purchase and hereby  accepts and purchases from the Issuing
Lender,  on  the  terms  and  conditions   hereinafter   stated,  for  such  L/C
Participant's  own  account  and risk an  undivided  interest  equal to such L/C
Participant's  Revolving Credit  Percentage in the Issuing Lender's  obligations
and rights under each Letter of Credit  issued  hereunder and the amount of each
draft   paid  by  the   Issuing   Lender   thereunder.   Each  L/C   Participant
unconditionally  and irrevocably agrees with the Issuing Lender that, if a draft
is paid  under  any  Letter  of  Credit  for  which  the  Issuing  Lender is not
reimbursed  in full  by the  Borrower  in  accordance  with  the  terms  of this
Agreement,  such L/C Participant  shall pay to the Issuing Lender upon demand at
the Issuing  Lender's  address for notices  specified  herein an amount equal to
such L/C Participant's  Revolving Credit Percentage of the amount of such draft,
or any part thereof, which is not so reimbursed.

          (b) If any amount  required to be paid by any L/C  Participant  to the
Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion
of any payment made by the Issuing  Lender under any Letter of Credit is paid to
the Issuing  Lender  within three  Business  Days after the date such payment is
due, such L/C  Participant  shall pay to the Issuing  Lender on demand an amount
equal to the product of (i) such amount, times (ii) the daily



<PAGE>


                                                                              42




average  Federal Funds  Effective  Rate during the period from and including the
date such payment is required to the date on which such  payment is  immediately
available to the Issuing  Lender,  times (iii) a fraction the numerator of which
is the number of days that  elapse  during such  period and the  denominator  of
which is 360.  If any such  amount  required  to be paid by any L/C  Participant
pursuant to Section  3.4(a) is not made  available to the Issuing Lender by such
L/C  Participant  within three Business Days after the date such payment is due,
the Issuing  Lender shall be entitled to recover from such L/C  Participant,  on
demand,  such amount with interest thereon  calculated from such due date at the
rate per  annum  applicable  to Base  Rate  Loans  under  the  Revolving  Credit
Facility.  A certificate of the Issuing Lender  submitted to any L/C Participant
with respect to any amounts  owing under this Section shall be conclusive in the
absence of manifest error.

          (c)  Whenever,  at any time after the Issuing  Lender has made payment
under any Letter of Credit and has  received  from any L/C  Participant  its pro
rata share of such payment in accordance with Section 3.4(a), the Issuing Lender
receives any payment related to such Letter of Credit (whether directly from the
Borrower or otherwise,  including  proceeds of collateral applied thereto by the
Issuing  Lender),  or any payment of interest  on account  thereof,  the Issuing
Lender  will  distribute  to such L/C  Participant  its pro rata share  thereof;
provided,  however,  that in the event  that any such  payment  received  by the
Issuing Lender shall be required to be returned by the Issuing Lender,  such L/C
Participant  shall return to the Issuing Lender the portion  thereof  previously
distributed by the Issuing Lender to it.

          3.5 Reimbursement  Obligation of the Borrower.  The Borrower agrees to
reimburse the Issuing Lender on each date on which the Issuing  Lender  notifies
the  Borrower  of the date and amount of a draft  presented  under any Letter of
Credit and paid by the  Issuing  Lender for the amount of (a) such draft so paid
and (b) any taxes,  fees,  charges or other  costs or  expenses  incurred by the
Issuing Lender in connection with such payment.  Each such payment shall be made
to the Issuing  Lender at its address  for  notices  specified  herein in lawful
money of the  United  States of  America  and in  immediately  available  funds.
Interest  shall  be  payable  on any and all  amounts  remaining  unpaid  by the
Borrower under this Section from the date such amounts  become payable  (whether
at stated  maturity,  by acceleration or otherwise) until payment in full at the
rate set forth in (i) until the second  Business Day  following  the date of the
applicable drawing,  Section 2.13(b) and (ii) thereafter,  Section 2.13(c). Each
drawing under any Letter of Credit shall (unless an event of the type  described
in clause (i) or (ii) of Section 8(f) shall have occurred and be continuing with
respect to the Borrower,  in which case the procedures  specified in Section 3.4
for  funding  by L/C  Participants  shall  apply)  constitute  a request  by the
Borrower to the Administrative  Agent for a borrowing pursuant to Section 2.5 of
Base Rate Loans in the amount of such drawing.  The Borrowing  Date with respect
to such borrowing shall be the date of such drawing.

          3.6  Obligations  Absolute.  The  Borrower's  obligations  under  this
Section 3 shall be absolute and  unconditional  under any and all  circumstances
and  irrespective  of any setoff,  counterclaim  or defense to payment which the
Borrower may have or have had against the Issuing  Lender,  any beneficiary of a
Letter of Credit or any other Person. The Borrower



<PAGE>


                                                                              43




also  agrees  with the  Issuing  Lender  that the  Issuing  Lender  shall not be
responsible for, and the Borrower's Reimbursement  Obligations under Section 3.5
shall not be affected by, among other  things,  the validity or  genuineness  of
documents or of any  endorsements  thereon,  even though such documents shall in
fact prove to be invalid,  fraudulent or forged, or any dispute between or among
the Borrower and any  beneficiary  of any Letter of Credit or any other party to
which such Letter of Credit may be transferred  or any claims  whatsoever of the
Borrower  against  any  beneficiary  of  such  Letter  of  Credit  or  any  such
transferee.  The  Issuing  Lender  shall not be liable for any error,  omission,
interruption  or delay in  transmission,  dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except for
errors or omissions  found by a final and  nonappealable  decision of a court of
competent  jurisdiction  to have resulted  from the gross  negligence or willful
misconduct of the Issuing  Lender.  The Borrower agrees that any action taken or
omitted by the Issuing  Lender under or in connection  with any Letter of Credit
or the related drafts or documents,  if done in the absence of gross  negligence
or willful  misconduct and in accordance with the standards or care specified in
the Uniform  Commercial  Code of the State of New York,  shall be binding on the
Borrower  and shall not result in any  liability  of the  Issuing  Lender to the
Borrower.

          3.7 Letter of Credit  Payments.  If any draft shall be  presented  for
payment under any Letter of Credit, the Issuing Lender shall promptly notify the
Borrower  of the date and amount  thereof.  The  responsibility  of the  Issuing
Lender to the Borrower in connection  with any draft presented for payment under
any Letter of Credit  shall,  in addition to any  payment  obligation  expressly
provided  for in such  Letter of  Credit,  be limited  to  determining  that the
documents  (including  each  draft)  delivered  under  such  Letter of Credit in
connection  with such  presentment  are  substantially  in conformity  with such
Letter of Credit.

          3.8 Applications.  To the extent that any provision of any Application
related  to any Letter of Credit is  inconsistent  with the  provisions  of this
Section 3, the provisions of this Section 3 shall apply.

          3.9 Participating Interest in Existing Letters of Credit. (a) Prior to
the date of this  Agreement,  U.S.  Bank,  N.A. (the  "Existing  Issuing  Bank")
issued,  for the account of the  Borrower,  the letters of credit  described  on
Schedule 3.9 (the "Existing Letters of Credit"). On the Closing Date, LCPI, will
enter into the Participation  Agreement,  substantially in the form of Exhibit M
(the "Participation Agreement").

          (b)  LCPI  irrevocably  agrees  to grant  and  hereby  grants  to each
Revolving  Credit  Lender,  and, to induce LCPI to enter into the  Participation
Agreement,  each  Revolving  Credit  Lender  irrevocably  agrees to  accept  and
purchase and hereby accepts and purchases from LCPI, on the terms and conditions
hereinafter  stated, for such Revolving Credit Lender's own account and risk, an
undivided  interest equal to such Revolving  Credit  Lender's  Revolving  Credit
Percentage in LCPI's  obligations and rights under the Participation  Agreement.
Each Revolving Credit Lender  unconditionally  and irrevocably  agrees with LCPI
that,  if  LCPI  makes  a  payment  to  the  Existing  Issuing  Bank  under  the
Participation Agreement



<PAGE>


                                                                              44




for which LCPI is not reimbursed in full by the Borrower in accordance  with the
terms of this  Agreement,  such  Revolving  Credit Lender shall pay to LCPI upon
demand at the Payment Office an amount equal to such Revolving  Credit  Lender's
Revolving Credit Percentage of the amount of such payment,  or any part thereof,
which is not so reimbursed.

          (c) If any amount  required to be paid by any Revolving  Credit Lender
to LCPI  pursuant to this  Section is paid to LCPI within  three  Business  Days
after the date such payment is due,  such  Revolving  Credit Lender shall pay to
LCPI on demand an amount equal to the product of (i) such amount, times (ii) the
daily average  Federal Funds Effective Rate during the period from and including
the  date  such  payment  is  required  to the  date on which  such  payment  is
immediately  available to LCPI, times (iii) a fraction the numerator of which is
the number of days that elapse during such period and the  denominator  of which
is 360. If any such amount  required to be paid by any  Revolving  Credit Lender
pursuant to this Section is not made available to LCPI by such Revolving  Credit
Lender within three Business Days after the date such payment is due, LCPI shall
be entitled to recover from such Revolving Credit Lender, on demand, such amount
with  interest  thereon  calculated  from  such due  date at the rate per  annum
applicable to Base Rate Loans under the Revolving Credit Facility. A certificate
of LCPI  submitted to any  Revolving  Credit  Lender with respect to any amounts
owing under this Section shall be conclusive in the absence of manifest error.

          (d)  Whenever,  at any time  after  LCPI has made  payment  under  the
Participation  Agreement and has received  from any Revolving  Credit Lender its
pro rata share of such payment in accordance with Section 3.4(a),  LCPI receives
any payment  related to such  payment  (whether  directly  from the  Borrower or
otherwise,  including  proceeds of collateral  applied  thereto by LCPI), or any
payment of interest on account  thereof,  LCPI will distribute to such Revolving
Credit Lender its pro rata share thereof;  provided,  however, that in the event
that any such payment received by LCPI shall be required to be returned by LCPI,
such Revolving Credit Lender shall return to LCPI the portion thereof previously
distributed by LCPI to it.

          (e) The Borrower  agrees to reimburse  LCPI on each date on which LCPI
notifies  the  Borrower of the date and amount of a payment made by it under the
Participation  Agreement  for the amount of (i) such payment and (ii) any taxes,
fees,  charges or other costs or expenses  incurred by LCPI in  connection  with
such payment.  Each such payment shall be made to LCPI at the Payment  Office in
lawful money of the United States of America and in immediately available funds.
Interest  shall  be  payable  on any and all  amounts  remaining  unpaid  by the
Borrower under this Section from the date such amounts  become payable  (whether
at stated  maturity,  by acceleration or otherwise) until payment in full at the
rate set forth in Section 2.13(c).

          (f) The Borrower  will pay a fee on the aggregate  drawable  amount of
all  outstanding  Existing  Letters  of Credit at a per annum  rate equal to the
Applicable  Margin then in effect  with  respect to  Eurodollar  Loans under the
Revolving Credit Facility, shared ratably among the Revolving Credit Lenders and
payable quarterly in arrears on each L/C Fee



<PAGE>


                                                                              45




Payment Date. In addition,  the Borrower shall pay to LCPI for its own account a
fronting  fee on the  aggregate  drawable  amount  of all  outstanding  Existing
Letters of Credit of 1/8 of 1% per annum,  payable  quarterly in arrears on each
L/C Fee Payment Date.


                    SECTION 4. REPRESENTATIONS AND WARRANTIES

          To induce the Agents and the Lenders to enter into this  Agreement and
to make the  Loans  and issue or  participate  in the  Letters  of  Credit,  the
Borrower hereby represents and warrants to each Agent and each Lender that:

                  4.1   Financial   Condition.   (a)  The  unaudited  pro  forma
consolidated balance sheet of the Borrower and its consolidated  Subsidiaries as
at June 30, 1998 (including the notes thereto) (the "Pro Forma Balance  Sheet"),
copies of which have heretofore been furnished to each Lender, has been prepared
giving  effect (as if such events had occurred on such date) to (i) the Loans to
be made on the Closing Date and the use of proceeds thereof and (ii) the payment
of fees and expenses in  connection  with the  foregoing.  The Pro Forma Balance
Sheet has been prepared based on the best information  available to the Borrower
as of the date of delivery thereof, and presents fairly on a pro forma basis the
estimated financial position of Borrower and its consolidated Subsidiaries as at
June 30, 1998,  assuming that the events specified in the preceding sentence had
actually occurred at such date.

          (b) The audited  consolidated  balance  sheets of the Borrower and its
consolidated Subsidiaries as at December 31, 1996 and December 31, 1997, and the
related consolidated statements of income and of cash flows for the fiscal years
ended on such dates,  reported on by and  accompanied by an  unqualified  report
from KPMG Peat Marwick LLP, present fairly the consolidated  financial condition
of the  Borrower  and its  consolidated  Subsidiaries  as at such date,  and the
consolidated  results of its operations and its consolidated  cash flows for the
respective fiscal years then ended. The unaudited  consolidated balance sheet of
the  Borrower and its  consolidated  Subsidiaries  as at June 30, 1998,  and the
related  unaudited  consolidated  statements  of income  and cash  flows for the
six-month period ended on such date,  present fairly the consolidated  financial
condition of the Borrower and its consolidated Subsidiaries as at such date, and
the consolidated  results of its operations and its consolidated  cash flows for
the six-month period then ended (subject to normal year-end audit  adjustments).
All such  financial  statements,  including  the  related  schedules  and  notes
thereto,  have  been  prepared  in  accordance  with GAAP  applied  consistently
throughout the periods involved (except as approved by the  aforementioned  firm
of accountants and disclosed therein).  The Borrower and its Subsidiaries do not
have any material Guarantee Obligations,  contingent liabilities and liabilities
for taxes, or any long-term leases or unusual forward or long-term  commitments,
including,  without  limitation,  any interest rate or foreign  currency swap or
exchange  transaction or other  obligation in respect of derivatives,  which are
not  reflected  in the most  recent  financial  statements  referred  to in this
paragraph.  During the period from  December 31, 1997 to and  including the date
hereof there has been no  Disposition  by the Borrower or any  Subsidiary of any
material part of its business or Property.


<PAGE>


                                                                              46




          4.2 No Change.  Since  December 31, 1997 there has been no development
or event  which  has had or could  reasonably  be  expected  to have a  Material
Adverse Effect.

          4.3 Corporate Existence; Compliance with Law. Each of the Borrower and
its  Subsidiaries  (a) is duly organized,  validly existing and in good standing
under the laws of the  jurisdiction of its  organization,  (b) has the corporate
power and authority,  and the legal right,  to own and operate its Property,  to
lease the Property it operates as lessee and to conduct the business in which it
is currently engaged, (c) is duly qualified as a foreign corporation and in good
standing  under  the laws of each  jurisdiction  where its  ownership,  lease or
operation   of  Property  or  the  conduct  of  its   business   requires   such
qualification,  except to the extent that any failure to be so  qualified  could
not, in the aggregate,  reasonably be expected to have a Material Adverse Effect
and (d) is in compliance with all  Requirements of Law except to the extent that
the failure to comply  therewith  could not,  in the  aggregate,  reasonably  be
expected to have a Material Adverse Effect.

          4.4 Corporate Power; Authorization; Enforceable Obligations. Each Loan
Party has the  corporate  power and  authority,  and the legal  right,  to make,
deliver and perform the Loan  Documents  to which it is a party and, in the case
of the Borrower,  to borrow  hereunder.  Each Loan Party has taken all necessary
corporate  action to authorize the  execution,  delivery and  performance of the
Loan  Documents  to which it is a party  and,  in the case of the  Borrower,  to
authorize the  borrowings  on the terms and  conditions  of this  Agreement.  No
consent  or  authorization  of,  filing  with,  notice  to or other act by or in
respect  of, any  Governmental  Authority  or any other  Person is  required  in
connection  with  the  Acquisition  and the  borrowings  hereunder  or with  the
execution, delivery,  performance,  validity or enforceability of this Agreement
or any of the Loan Documents, except (i) consents,  authorizations,  filings and
notices described in Schedule 4.4, which consents,  authorizations,  filings and
notices have been obtained or made and are in full force and effect and (ii) the
filings  referred to in Section 4.19.  Each Loan Document has been duly executed
and delivered on behalf of each Loan Party thereto. This Agreement  constitutes,
and each other Loan Document upon execution will constitute,  a legal, valid and
binding  obligation of each Loan Party  thereto,  enforceable  against each such
Loan Party in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting  the  enforcement  of  creditors'  rights  generally  and  by  general
equitable  principles (whether enforcement is sought by proceedings in equity or
at law).

          4.5 No Legal Bar.  The  execution,  delivery and  performance  of this
Agreement and the other Loan Documents,  the issuance of Letters of Credit,  the
borrowings  hereunder  and the use of the proceeds  thereof will not violate any
Requirement of Law or any  Contractual  Obligation of the Borrower or any of its
Subsidiaries  and will not result in, or require,  the creation or imposition of
any Lien on any of their  respective  properties  or  revenues  pursuant  to any
Requirement  of Law or any such  Contractual  Obligation  (other  than the Liens
created by the Security Documents). No Requirement of Law or Contractual


<PAGE>


                                                                              47




Obligation  applicable  to  the  Borrower  or  any  of  its  Subsidiaries  could
reasonably be expected to have a Material Adverse Effect.

          4.6 No Material Litigation. No litigation, investigation or proceeding
of or before any  arbitrator  or  Governmental  Authority  is pending or, to the
knowledge of the  Borrower,  threatened by or against the Borrower or any of its
Subsidiaries or against any of their respective  properties or revenues (a) with
respect to any of the Loan  Documents  or any of the  transactions  contemplated
hereby or thereby,  or (b) which could reasonably be expected to have a Material
Adverse Effect.

          4.7 No Default. Neither the Borrower nor any of its Subsidiaries is in
default  under or with  respect  to any of its  Contractual  Obligations  in any
respect which could reasonably be expected to have a Material Adverse Effect. No
Default or Event of Default has occurred and is continuing.

          4.8  Ownership  of  Property;  Liens.  Each  of the  Borrower  and its
Subsidiaries  has title in fee simple to, or a valid leasehold  interest in, all
its real property,  and good title to, or a valid leasehold interest in, all its
other  Property,  and none of such  Property  is subject  to any Lien  except as
permitted by Section 7.3.

          4.9 Intellectual  Property.  The Borrower and each of its Subsidiaries
owns, or is licensed to use, all Intellectual Property necessary for the conduct
of its business as currently conducted.  No material claim has been asserted and
is pending by any Person  challenging or questioning the use of any Intellectual
Property or the validity or effectiveness of any Intellectual Property, nor does
or the  Borrower  know  of any  valid  basis  for  any  such  claim.  The use of
Intellectual  Property by the Borrower and its Subsidiaries does not infringe on
the rights of any Person in any material respect.

          4.10 Taxes.  Each of the  Borrower  and each of its  Subsidiaries  has
filed or caused to be filed all  Federal,  state and other  material tax returns
which  are  required  to be filed  and has paid  all  taxes  shown to be due and
payable on said  returns  or on any  assessments  made  against it or any of its
Property and all other taxes,  fees or other charges imposed on it or any of its
Property by any Governmental Authority (other than any the amount or validity of
which are currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been provided on the
books of the Borrower or its Subsidiaries,  as the case may be); no tax Lien has
been filed,  and, to the knowledge of the Borrower,  no claim is being asserted,
with respect to any such tax, fee or other charge.

          4.11 Federal Regulations. No part of the proceeds of any Loans will be
used for  "purchasing"  or "carrying"  any "margin  stock" within the respective
meanings of each of the quoted terms under  Regulation U as now and from time to
time hereafter in effect or for any purpose which violates the provisions of the
Regulations  of the Board.  If  requested  by any  Lender or the  Administrative
Agent, the Borrower will furnish to the Administrative Agent



<PAGE>


                                                                              48




and each Lender a  statement  to the  foregoing  effect in  conformity  with the
requirements  of FR Form  U-1 or FR Form  G-3,  as  applicable,  referred  to in
Regulation  U. The  assets of the  Borrower  and its  Subsidiaries  constituting
"margin  stock"  within the meaning of  Regulation  U do not and will not at any
time  constitute  more than 7% in value of the  assets of the  Borrower  and its
Subsidiaries.

          4.12  Labor  Matters.  There are no strikes  or other  labor  disputes
against the Borrower or any of its Subsidiaries  pending or, to the knowledge of
the  Borrower,   threatened  that  (individually  or  in  the  aggregate)  could
reasonably be expected to have a Material  Adverse  Effect.  Hours worked by and
payment made to employees of the Borrower and its Subsidiaries  have not been in
violation of the Fair Labor Standards Act or any other applicable Requirement of
Law dealing with such  matters that  (individually  or in the  aggregate)  could
reasonably be expected to have a Material Adverse Effect.  All payments due from
the  Borrower  or any of its  Subsidiaries  on  account of  employee  health and
welfare  insurance that  (individually  or in the aggregate) could reasonably be
expected to have a Material Adverse Effect if not paid have been paid or accrued
as a liability on the books of the Borrower or the relevant Subsidiary.

          4.13 ERISA.  Neither a Reportable  Event nor an  "accumulated  funding
deficiency"  (within  the  meaning of Section  412 of the Code or Section 302 of
ERISA) has occurred during the five-year  period prior to the date on which this
representation  is made or deemed made with  respect to any Plan,  and each Plan
has complied in all material  respects with the  applicable  provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no Lien
in favor of the PBGC or a Plan has arisen,  during such  five-year  period.  The
present value of all accrued  benefits under each Single Employer Plan (based on
those  assumptions  used to fund  such  Plans)  did not,  as of the last  annual
valuation date prior to the date on which this  representation is made or deemed
made,  exceed the value of the  assets of such Plan  allocable  to such  accrued
benefits by a material amount.  Neither the Borrower nor any Commonly Controlled
Entity has had a complete  or partial  withdrawal  from any  Multiemployer  Plan
which has  resulted  or could  reasonably  be  expected  to result in a material
liability  under ERISA,  and neither the  Borrower  nor any Commonly  Controlled
Entity  would  become  subject  to any  material  liability  under  ERISA if the
Borrower or any such Commonly Controlled Entity were to withdraw completely from
all Multiemployer Plans as of the valuation date most closely preceding the date
on which this  representation is made or deemed made. No such Multiemployer Plan
is in Reorganization or Insolvent.

          4.14 Investment  Company Act; Other  Regulations.  No Loan Party is an
"investment  company",  or a company  "controlled"  by an "investment  company",
within the meaning of the  Investment  Company Act of 1940, as amended.  No Loan
Party is  subject  to  regulation  under  any  Requirement  of Law  (other  than
Regulation X of the Board) which limits its ability to incur Indebtedness.

          4.15  Subsidiaries.  (a) The  Subsidiaries  listed  on  Schedule  4.15
constitute  all the  Subsidiaries  of the Borrower at the date hereof,  Schedule
4.15 sets forth as of the Closing



<PAGE>


                                                                              49




Date the name and  jurisdiction of  incorporation  of each Subsidiary and, as to
each such Subsidiary, the percentage of each class of Capital Stock owned by any
Loan Party.

          (b) There are no outstanding subscriptions,  options, warrants, calls,
rights or other  agreements or commitments  (other than stock options granted to
employees or directors and directors'  qualifying shares) of any nature relating
to any Capital Stock of the Borrower or any Subsidiary.

          4.16 Use of Proceeds.  The proceeds of the Term Loans shall be used to
refinance in full all  Indebtedness  under the Existing  Credit  Facilities,  to
finance  repurchases by the Borrower of its common stock to the extent permitted
by  Section  7.6(b)  and to fund  Capital  Expenditures  and  general  corporate
purposes of the Borrower  and its  Subsidiaries.  The proceeds of the  Revolving
Credit  Loans and the Letters of Credit shall be used to fund letters of credit,
Capital  Expenditures  and general working capital  purposes of the Borrower and
its Subsidiaries in the ordinary course of business.

          4.17  Environmental  Matters.  Other  than  exceptions  to  any of the
following  that could  not,  individually  or in the  aggregate,  reasonably  be
expected to result in the payment of a Material Environmental Amount:

          (a) the Borrower and its Subsidiaries:  (i) are, and within the period
     of all applicable  statutes of limitation have been, in compliance with all
     applicable Environmental Laws; (ii) hold all Environmental Permits (each of
     which is in full force and  effect)  required  for any of their  current or
     intended  operations  or for  any  property  owned,  leased,  or  otherwise
     operated by any of them; (iii) are, and within the period of all applicable
     statutes  of  limitation  have  been,  in  compliance  with  all  of  their
     Environmental  Permits;  and (iv)  reasonably  believe that:  each of their
     Environmental  Permits will be timely  renewed and complied  with,  without
     material expense; any additional Environmental Permits that may be required
     of any of them will be timely obtained and complied with,  without material
     expense;  and compliance with any  Environmental Law that is or is expected
     to become applicable to any of them will be timely attained and maintained,
     without material expense.

          (b) Materials of Environmental  Concern are not present at, on, under,
     in, or about any real property now or formerly owned, leased or operated by
     the  Borrower  or  any  of  its  Subsidiaries,  or at  any  other  location
     (including,   without  limitation,  any  location  to  which  Materials  of
     Environmental  Concern  have  been  sent for  re-use  or  recycling  or for
     treatment,  storage, or disposal) which could reasonably be expected to (i)
     give rise to liability of the Borrower or any of its Subsidiaries under any
     applicable  Environmental  Law or otherwise result in costs to the Borrower
     or any of its Subsidiaries, or (ii) interfere with the Borrower's or any of
     its Subsidiaries'  continued operations,  or (iii) impair the fair saleable
     value of any real  property  owned or leased by the  Borrower or any of its
     Subsidiaries.




<PAGE>


                                                                              50




          (c)  There is no  judicial,  administrative,  or  arbitral  proceeding
     (including any notice of violation or alleged  violation) under or relating
     to any  Environmental  Law to which the Borrower or any of its Subsidiaries
     is, or to the knowledge of the Borrower or any of its Subsidiaries will be,
     named as a party that is pending or, to the  knowledge  of the  Borrower or
     any of its Subsidiaries, threatened.

          (d) Neither the Borrower nor any of its  Subsidiaries has received any
     written request for information,  or been notified that it is a potentially
     responsible   party  under  or   relating  to  the  federal   Comprehensive
     Environmental  Response,  Compensation,  and  Liability  Act or any similar
     Environmental  Law,  or with  respect  to any  Materials  of  Environmental
     Concern.

          (e) Neither the Borrower nor any of its  Subsidiaries has entered into
     or agreed to any consent decree,  order, or settlement or other  agreement,
     or is subject to any judgment,  decree, or order or other agreement, in any
     judicial, administrative,  arbitral, or other forum for dispute resolution,
     relating to compliance with or liability under any Environmental Law.

          (f) Neither the  Borrower nor any of its  Subsidiaries  has assumed or
     retained,  by contract or operation of law,  any  liabilities  of any kind,
     fixed or contingent,  known or unknown, under any Environmental Law or with
     respect to any Material of Environmental Concern.

          4.18  Accuracy  of  Information,  etc.  No  statement  or  information
contained  in  this  Agreement,   any  other  Loan  Document,  the  Confidential
Information Memorandum or any other document, certificate or statement furnished
to the  Administrative  Agent or the Lenders or any of them,  by or on behalf of
any Loan Party for use in connection with the transactions  contemplated by this
Agreement or the other Loan Documents,  contained as of the date such statement,
information,  document or  certificate  was so furnished (or, in the case of the
Confidential  Information  Memorandum,  as of the date of this  Agreement),  any
untrue  statement  of a  material  fact or  omitted  to  state a  material  fact
necessary  in order to make the  statements  contained  herein  or  therein  not
misleading. The projections and pro forma financial information contained in the
materials  referenced  above are based upon good faith estimates and assumptions
believed by  management  of the Borrower to be  reasonable  at the time made, it
being recognized by the Lenders that such financial information as it relates to
future  events is not to be viewed as fact and that  actual  results  during the
period or periods  covered by such  financial  information  may differ  from the
projected results set forth therein by a material amount. There is no fact known
to any Loan Party that could  reasonably be expected to have a Material  Adverse
Effect  that  has  not  been  expressly  disclosed  herein,  in the  other  Loan
Documents, in the Confidential Information Memorandum or in any other documents,
certificates  and statements  furnished to the Agents and the Lenders for use in
connection  with the  transactions  contemplated  hereby  and by the other  Loan
Documents.




<PAGE>


                                                                              51




          4.19 Security Documents. (a) The Guarantee and Collateral Agreement is
effective to create in favor of the Administrative Agent, for the benefit of the
Lenders,  a legal,  valid and  enforceable  security  interest in the Collateral
described  therein  and  proceeds  thereof.  In the  case of the  Pledged  Stock
described in the Guarantee and Collateral Agreement, when any stock certificates
representing such Pledged Stock are delivered to the  Administrative  Agent, and
in the case of the other  Collateral  described in the Guarantee and  Collateral
Agreement,  when  financing  statements  in  appropriate  form are  filed in the
offices specified on Schedule 4.19(a) (which financing statements have been duly
completed and executed and delivered to the Administrative Agent) and such other
filings as are specified on Schedule 3 to the Guarantee and Collateral Agreement
(all of which filings have been duly  completed),  the Guarantee and  Collateral
Agreement shall constitute a fully perfected Lien on, and security  interest in,
all right,  title and  interest of the Loan Parties in such  Collateral  and the
proceeds  thereof,  as security for the Obligations (as defined in the Guarantee
and Collateral Agreement), in each case prior and superior in right to any other
Person  (except,  in the case of  Collateral  other than  Pledged  Stock,  Liens
permitted by Section 7.3).

          (b) Each of the  Mortgages  is  effective  to  create  in favor of the
Administrative  Agent,  for the  benefit  of the  Lenders,  a legal,  valid  and
enforceable  Lien on the  Mortgaged  Properties  described  therein and proceeds
thereof,  and when the Mortgages are filed in the offices  specified on Schedule
4.19(b),  each such Mortgage  shall  constitute a fully  perfected  Lien on, and
security  interest in, all right,  title and interest of the Loan Parties in the
Mortgaged  Properties and the proceeds thereof,  as security for the Obligations
(as defined in the relevant Mortgage),  in each case prior and superior in right
to any other Person.

          (c) The  Aircraft  Mortgage  is  effective  to  create in favor of the
Administrative  Agent,  for the  benefit  of the  Lenders,  a legal,  valid  and
enforceable Lien on the Aircraft and proceeds thereof,  and when the filings and
recordings  specified  in the Aircraft  Mortgage  have been duly  effected,  the
Aircraft  Mortgage  shall  constitute  a fully  perfected  Lien on, and security
interest  in, all right,  title and interest of the Loan Parties in the Aircraft
and the proceeds  thereof,  as security for the  Obligations  (as defined in the
Aircraft Mortgage), prior and superior in right to any other Person.

          4.20  Solvency.  Each Loan  Party is, and after  giving  effect to the
incurrence of all  Indebtedness  and  obligations  being  incurred in connection
herewith  will  be  and  will  continue  to  be,  Solvent   (excluding  in  such
determination  any  payables  or  receivables  between or among one or more Loan
Parties).

          4.21 Regulation H. No Mortgage  encumbers improved real property which
is located in an area that has been  identified  by the Secretary of Housing and
Urban  Development  as an area having  special  flood hazards and in which flood
insurance  has been made  available  under the National  Flood  Insurance Act of
1968.

          4.22 Year 2000  Matters.  Any  reprogramming  required  to permit  the
proper  functioning,  in and  following  the year  2000,  of (i) the  Borrower's
computer systems and (ii)



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                                                                              52




equipment  containing  embedded  microchips  (including  systems  and  equipment
supplied by others or with which Borrower's  systems  interface) and the testing
of all  such  material  systems  and  equipment,  as so  reprogrammed,  will  be
completed by January 1, 1999. The cost to the Borrower of such reprogramming and
testing  and of the  reasonably  foreseeable  consequences  of year  2000 to the
Borrower (including, without limitation, reprogramming errors and the failure of
others' systems or equipment) will not result in a Default or a Material Adverse
Effect.  Except  for  such of the  reprogramming  referred  to in the  preceding
sentence as may be necessary, the computer and management information systems of
the Borrower and its  Subsidiaries  are and, with ordinary course  upgrading and
maintenance,  will continue for the term of this Agreement to be,  sufficient to
permit the Borrower to conduct its business without Material Adverse Effect.


                         SECTION 5. CONDITIONS PRECEDENT

          5.1 Conditions to Initial  Extension of Credit.  The agreement of each
Lender to make the initial  extension  of credit  requested  to be made by it is
subject to the  satisfaction,  prior to or concurrently  with the making of such
extension of credit on the Closing Date, of the following conditions precedent:

          (a) Loan Documents.  The Administrative  Agent shall have received (i)
     this Agreement,  executed and delivered by a duly authorized officer of the
     Borrower,  (ii)  the  Guarantee  and  Collateral  Agreement,  executed  and
     delivered by a duly authorized  officer of the Borrower and each Subsidiary
     Guarantor,  (iii) a Mortgage  covering  each of the  Mortgaged  Properties,
     executed and delivered by a duly authorized  officer of each party thereto,
     (iv) the Aircraft  Mortgage,  executed by a duly authorized officer of each
     party  thereto,  and (v) for the  account of each  relevant  Lender,  Notes
     conforming to the requirements  hereof and executed and delivered by a duly
     authorized officer of the Borrower.

          (b) Pro Forma Balance Sheet;  Financial Statements.  The Lenders shall
     have received (i) the Pro Forma Balance  Sheet,  (ii) audited  consolidated
     financial statements of the Borrower and its consolidated  Subsidiaries for
     the 1996 and 1997 fiscal  years and (iii)  unaudited  interim  consolidated
     financial statements of the Borrower and its consolidated  Subsidiaries for
     each fiscal  quarterly  period ended  subsequent  to the date of the latest
     applicable  financial  statements delivered pursuant to clause (ii) of this
     paragraph as to which such financial  statements  are  available,  and such
     financial  statements shall not, in the reasonable judgment of the Lenders,
     reflect any material adverse change in the consolidated financial condition
     of the  Borrower  and its  consolidated  Subsidiaries,  as reflected in the
     financial   statements  or  projections   contained  in  the   Confidential
     Information Memorandum.

          (c) Approvals. All governmental and third party approvals necessary in
     connection  with  the  continuing   operations  of  the  Borrower  and  its
     Subsidiaries and the



<PAGE>


                                                                              53




     transactions  contemplated  hereby shall have been  obtained and be in full
     force and effect.

          (d) Related Agreements.  The Administrative  Agent shall have received
     (in a form reasonably  satisfactory to the Syndication  Agent), with a copy
     for each Lender,  true and correct copies,  certified as to authenticity by
     the  Borrower,  of  such  documents  or  instruments  as may be  reasonably
     requested by the Syndication Agent, including,  without limitation,  copies
     of  contracts  with  lottery   authorities   and  licenses  issued  by  any
     Governmental  Authority  and  a  copy  of  any  debt  instrument,  security
     agreement  or other  material  contract to which the Loan  Parties may be a
     party.

          (e)  Termination of Existing  Credit  Facilities.  The  Administrative
     Agent shall have received evidence satisfactory to the Administrative Agent
     and the  Syndication  Agent that the Existing  Credit  Facilities  shall be
     simultaneously  terminated,  all amounts thereunder shall be simultaneously
     paid in full and arrangements satisfactory to the Syndication Agent and the
     Administrative  Agent shall have been made for the termination of Liens and
     security interests granted in connection therewith.

          (f) Fees. The Lenders,  Syndication Agent and the Administrative Agent
     shall have  received  all fees  required to be paid,  and all  expenses for
     which   invoices   have  been   presented   (including   reasonable   fees,
     disbursements and other charges of counsel to the Agents), on or before the
     Closing Date.  All such amounts will be paid with proceeds of Loans made on
     the Closing Date and will be reflected in the funding instructions given by
     the Borrower to the Administrative Agent on or before the Closing Date.

          (g) Business  Plan.  The Lenders  shall have  received a  satisfactory
     business  plan  for  fiscal  years  1998-2004  and a  satisfactory  written
     analysis of the business and prospects of the Borrower and its Subsidiaries
     for the period from the Closing Date through September 30, 2004.

          (h) Solvency  Analysis.  The Lenders  shall have received a reasonably
     satisfactory  solvency analysis certified by the chief financial officer of
     the  Borrower  which shall  document  the  solvency of the Borrower and its
     Subsidiaries  considered as a whole after giving effect to the transactions
     contemplated hereby.

          (i) Lien Searches.  The  Administrative  Agent shall have received the
     results of a recent lien search in each of the  jurisdictions  where assets
     of the Loan Parties are  located,  and such search shall reveal no liens on
     any of the  assets of the  Borrower  or its  Subsidiaries  except for liens
     permitted by Section 7.3.

          (j)  Environmental   Matters.  The  Administrative  Agent  shall  have
     received,  with a copy for each Lender, a written environmental  assessment
     regarding the Borrower and its  Subsidiaries,  prepared by an environmental
     consultant acceptable to the



<PAGE>


                                                                              54




     Administrative  Agent, in form,  scope,  and substance  satisfactory to the
     Administrative  Agent,  together  with  a  letter  from  the  environmental
     consultant   permitting   the  Agents  and  the  Lenders  to  rely  on  the
     environmental assessment as if addressed to and prepared for each of them.

          (k) Closing Certificate.  The Administrative Agent shall have received
     a certificate of each Loan Party, dated the Closing Date,  substantially in
     the form of Exhibit C, with appropriate insertions and attachments.

          (l) Legal Opinions.  The Administrative  Agent shall have received the
     following executed legal opinions:

               (i) the legal opinion of Rogers & Hardin, counsel to the Borrower
          and its Subsidiaries, substantially in the form of Exhibit F-1; and

               (ii) the legal opinion of Daugherty,  Fowler & Peregrin,  Special
          Counsel for matters related to the Aircraft, and

               (iii) the legal  opinion of local  counsel  in each of  Delaware,
          Florida,  Montana,  New Mexico,  Nevada,  and Pennsylvania and of such
          other   special   and  local   counsel  as  may  be  required  by  the
          Administrative Agent

     Each such legal  opinion  shall  cover such other  matters  incident to the
     transactions contemplated by this Agreement as the Administrative Agent may
     reasonably require.

          (m) Pledged  Stock;  Stock Power;  Pledged Notes . The  Administrative
     Agent shall have received (i) the  certificates  representing the shares of
     Capital Stock pledged  pursuant to the Guarantee and Collateral  Agreement,
     together with an undated stock power for each such certificate  executed in
     blank by a duly  authorized  officer of the  pledgor  thereof and (ii) each
     Material  Promissory Note pledged to the  Administrative  Agent pursuant to
     the Guarantee and Collateral Agreement endorsed (without recourse) in blank
     (or accompanied by an executed  transfer form in blank  satisfactory to the
     Syndication Agent) by the pledgor thereof.

          (n) Filings,  Registrations and Recordings.  Each document (including,
     without  limitation,  any  Uniform  Commercial  Code  financing  statement)
     required by the Security Documents or under law or reasonably  requested by
     the  Administrative  Agent to be filed,  registered or recorded in order to
     create  in  favor  of the  Administrative  Agent,  for the  benefit  of the
     Lenders, a perfected Lien on the Collateral  described  therein,  prior and
     superior in right to any other  Person  (other  than with  respect to Liens
     expressly  permitted by Section  7.3),  shall be in proper form for filing,
     registration or recordation.




<PAGE>


                                                                              55




          (o)  Title  Insurance;  Flood  Insurance.  (i)  If  requested  by  the
     Administrative Agent, the Administrative Agent shall have received, and the
     title insurance company issuing the policy referred to in clause (ii) below
     (the "Title  Insurance  Company") shall have received,  maps or plats of an
     as-built survey of the sites of the Mortgaged  Properties  certified to the
     Administrative   Agent  and  the  Title  Insurance   Company  in  a  manner
     satisfactory to them, dated a date satisfactory to the Administrative Agent
     and the Title  Insurance  Company by an independent  professional  licensed
     land  surveyor  satisfactory  to the  Administrative  Agent  and the  Title
     Insurance  Company,  which maps or plats and the  surveys on which they are
     based  shall  be  made in  accordance  with  the  Minimum  Standard  Detail
     Requirements for Land Title Surveys jointly  established and adopted by the
     American Land Title  Association and the American Congress on Surveying and
     Mapping in 1992,  and,  without  limiting the  generality of the foregoing,
     there  shall be  surveyed  and shown on such  maps,  plats or  surveys  the
     following: (A) the locations on such sites of all the buildings, structures
     and other improvements and the established  building setback lines; (B) the
     lines of streets  abutting the sites and width thereof;  (C) all access and
     other  easements  appurtenant  to  the  sites;  (D)  all  roadways,  paths,
     driveways, easements, encroachments and overhanging projections and similar
     encumbrances affecting the site, whether recorded, apparent from a physical
     inspection  of the  sites  or  otherwise  known  to the  surveyor;  (E) any
     encroachments  on any  adjoining  property by the building  structures  and
     improvements on the sites; (F) if the site is described as being on a filed
     map,  a legend  relating  the  survey to said map;  and (G) the flood  zone
     designations, if any, in which the Mortgaged Properties are located.

          (ii) The  Administrative  Agent shall have received in respect of each
     Mortgaged  Property a mortgagee's  title insurance  policy (or policies) or
     marked up unconditional  binder for such insurance.  Each such policy shall
     (A) be in an amount satisfactory to the Administrative Agent; (B) be issued
     at ordinary rates;  (C) insure that the Mortgage  insured thereby creates a
     valid first Lien on such  Mortgaged  Property free and clear of all defects
     and encumbrances,  except as disclosed therein; (D) name the Administrative
     Agent for the benefit of the Lenders as the insured  thereunder;  (E) be in
     the form of ALTA Loan Policy - 1970  (Amended  10/17/70 and  10/17/84)  (or
     equivalent  policies);   (F)  contain  such  endorsements  and  affirmative
     coverage  as the  Administrative  Agent may  reasonably  request and (G) be
     issued  by  title  companies   satisfactory  to  the  Administrative  Agent
     (including any such title companies acting as co-insurers or reinsurers, at
     the option of the Administrative  Agent).  The  Administrative  Agent shall
     have received  evidence  satisfactory to it that all premiums in respect of
     each such policy,  all charges for mortgage  recording tax, and all related
     expenses, if any, have been paid.

          (iii) If requested by the  Administrative  Agent,  the  Administrative
     Agent shall have received (A) a policy of flood  insurance which (1) covers
     any parcel of improved  real  property  which is encumbered by any Mortgage
     (2) is written in an amount not less than the outstanding  principal amount
     of the indebtedness secured by such Mortgage



<PAGE>


                                                                              56




     which is reasonably allocable to such real property or the maximum limit of
     coverage made  available  with respect to the  particular  type of property
     under the National Flood Insurance Act of 1968,  whichever is less, and (3)
     has a term ending not later than the maturity of the  Indebtedness  secured
     by such  Mortgage and (B)  confirmation  that the Borrower has received the
     notice required pursuant to Section 208(e)(3) of Regulation H of the Board.

          (iv)  The  Administrative  Agent  shall  have  received  a copy of all
     recorded  documents  referred to, or listed as  exceptions to title in, the
     title policy or policies referred to in clause (ii) above and a copy of all
     other material documents affecting the Mortgaged Properties.

          (p) Insurance.  The Administrative Agent shall have received insurance
     certificates  satisfying the  requirements  of Section 5.3 of the Guarantee
     and Collateral Agreement.

          5.2  Conditions  to Each  Extension of Credit.  The  agreement of each
Lender to make any  extension  of credit  requested to be made by it on any date
(including,  without limitation,  its initial extension of credit) is subject to
the satisfaction of the following conditions precedent:

          (a)  Representations  and Warranties.  Each of the representations and
     warranties  made by any Loan  Party in or  pursuant  to the Loan  Documents
     shall be true and  correct  on and as of such  date as if made on and as of
     such date.

          (b) No Default. No Default or Event of Default shall have occurred and
     be  continuing  on such date or after giving  effect to the  extensions  of
     credit requested to be made on such date.

Each  borrowing  by and issuance of a Letter of Credit on behalf of the Borrower
hereunder shall constitute a  representation  and warranty by the Borrower as of
the date of such  extension  of credit  that the  conditions  contained  in this
Section 5.2 have been satisfied.


                        SECTION 6. AFFIRMATIVE COVENANTS

          The Borrower hereby agrees that, so long as the Commitments  remain in
effect, any Letter of Credit remains  outstanding or any Loan or other amount is
owing to any Lender or any Agent  hereunder,  the Borrower shall and shall cause
each of its Subsidiaries to:

          6.1 Financial Statements. Furnish to each Agent and each Lender:

          (a) as soon as  available,  but in any event  within 90 days after the
     end of each fiscal year of the Borrower, a copy of the audited consolidated
     balance sheet of the



<PAGE>


                                                                              57




     Borrower and its  consolidated  Subsidiaries as at the end of such year and
     the related audited consolidated statements of income and of cash flows for
     such year,  setting forth in each case in comparative  form the figures for
     the  previous  year,   reported  on  without  a  "going  concern"  or  like
     qualification or exception,  or  qualification  arising out of the scope of
     the  audit,  by KPMG  Marwick  LLP or other  independent  certified  public
     accountants of nationally recognized standing; and

          (b) as soon as  available,  but in any event  not  later  than 45 days
     after the end of each of the first three  quarterly  periods of each fiscal
     year of the  Borrower,  the  unaudited  consolidated  balance  sheet of the
     Borrower and its  consolidated  Subsidiaries  as at the end of such quarter
     and the related  unaudited  consolidated  statements  of income and of cash
     flows for such  quarter and the portion of the fiscal year  through the end
     of such quarter, setting forth in each case in comparative form the figures
     for the previous year,  certified by a Responsible  Officer as being fairly
     stated  in  all  material   respects  (subject  to  normal  year-end  audit
     adjustments);

all such  financial  statements  shall be complete  and correct in all  material
respects and shall be prepared in reasonable  detail and in accordance with GAAP
applied  consistently  throughout the periods  reflected  therein and with prior
periods (except as approved by such accountants or officer,  as the case may be,
and disclosed therein).

          6.2 Certificates;  Other  Information.  Furnish to each Agent and each
Lender, or, in the case of clause (g), to the relevant Lender:

          (a)  concurrently  with  the  delivery  of  the  financial  statements
     referred to in Section 6.1(a),  a certificate of the independent  certified
     public accountants  reporting on such financial  statements stating that in
     making the examination  necessary therefor no knowledge was obtained of any
     Default or Event of Default, except as specified in such certificate;

          (b)  concurrently  with  the  delivery  of  any  financial  statements
     pursuant to Section 6.1, (i) a certificate of a Responsible Officer stating
     that, to the best of each such Responsible  Officer's knowledge,  each Loan
     Party during such period has observed or performed all of its covenants and
     other  agreements,  and  satisfied  every  condition,   contained  in  this
     Agreement  and the  other  Loan  Documents  to  which  it is a party  to be
     observed,  performed or satisfied by it, and that such Responsible  Officer
     has  obtained no  knowledge  of any  Default or Event of Default  except as
     specified in such  certificate  and (ii) in the case of quarterly or annual
     financial  statements,   (x)  a  Compliance   Certificate   containing  all
     information and  calculations  necessary for determining  compliance by the
     Borrower  and its  Subsidiaries  with  the  provisions  of  this  Agreement
     referred to therein as of the last day of the fiscal quarter or fiscal year
     of the Borrower,  as the case may be, and (y) to the extent not  previously
     disclosed  to the  Administrative  Agent,  a listing of any county or state
     within the United States where any Loan Party keeps  inventory or equipment
     having an aggregate book value in excess



<PAGE>


                                                                              58




     of  $250,000  for any such state  (excluding  Excluded  Assets)  and of any
     Intellectual Property acquired by any Loan Party since the date of the most
     recent list  delivered  pursuant to this clause (y) (or, in the case of the
     first such list so delivered, since the Closing Date);

          (c) as soon as available, and in any event no later than 45 days after
     the end of each fiscal year of the Borrower, a detailed consolidated budget
     for the following fiscal year (including a projected  consolidated  balance
     sheet of the Borrower and its  Subsidiaries  as of the end of the following
     fiscal year,  and the related  consolidated  statements  of projected  cash
     flow,  projected changes in financial position and projected income),  and,
     as soon as  available,  significant  revisions,  if any, of such budget and
     projections   with   respect  to  such  fiscal  year   (collectively,   the
     "Projections"),  which  Projections  shall in each case be accompanied by a
     certificate  of a Responsible  Officer  stating that such  Projections  are
     based on reasonable  estimates,  information  and assumptions and that such
     Responsible  Officer  has no reason to believe  that such  Projections  are
     incorrect or misleading in any material respect;

          (d)  within  45  days  after  the end of each  fiscal  quarter  of the
     Borrower,  an analysis of the financial condition and results of operations
     of the Borrower and its  Subsidiaries  for such fiscal  quarter and for the
     period from the  beginning  of the then  current  fiscal year to the end of
     such fiscal quarter,  as compared to the portion of the current Projections
     covering such periods and to the comparable periods of the previous year;

          (e) within five days after the same are sent,  copies of all financial
     statements and reports which the Borrower sends to the holders of any class
     of its debt  securities or public equity  securities  and, within five days
     after the same are filed,  copies of all financial  statements  and reports
     which the Borrower may make to, or file with, the SEC;

          (f) as soon as possible and in any event within five  Business Days of
     obtaining knowledge thereof: (i) any development, event, or condition that,
     individually  or in  the  aggregate  with  other  developments,  events  or
     conditions,  could  reasonably  be expected to result in the payment by the
     Borrower  and  its   Subsidiaries,   in  the   aggregate,   of  a  Material
     Environmental  Amount; and (ii) any notice that any governmental  authority
     may deny any application for an  Environmental  Permit sought by, or revoke
     or refuse to renew any Environmental Permit held by, the Borrower; and

          (g) promptly,  such additional  financial and other information as any
     Lender,  through the Administrative Agent, may from time to time reasonably
     request.

          6.3 Payment of Obligations.  Pay, discharge or otherwise satisfy at or
before  maturity or before they become  delinquent,  as the case may be, all its
material  obligations  of whatever  nature,  except where the amount or validity
thereof is currently being contested in


<PAGE>


                                                                              59




good faith by appropriate  proceedings and reserves in conformity with GAAP with
respect  thereto  have  been  provided  on  the  books  of the  Borrower  or its
Subsidiaries, as the case may be.

          6.4 Conduct of Business and  Maintenance  of  Existence,  etc. (a) (i)
Preserve,  renew and keep in full force and effect its  corporate  existence and
(ii)  take  all  reasonable  action  to  maintain  all  rights,  privileges  and
franchises necessary or desirable in the normal conduct of its business, except,
in each case, as otherwise  permitted by Section 7.4 and except,  in the case of
clause (ii) above,  to the extent that failure to do so could not  reasonably be
expected to have a Material Adverse Effect;  and (b) comply with all Contractual
Obligations and  Requirements of Law except to the extent that failure to comply
therewith could not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.

          6.5  Maintenance  of  Property;  Insurance.  (a) Keep all Property and
systems  useful  and  necessary  in its  business  in  good  working  order  and
condition,  ordinary wear and tear  excepted and (b) maintain  with  financially
sound and  reputable  insurance  companies  insurance  on all its Property in at
least such  amounts and against at least such risks (but  including in any event
public liability,  product liability and business  interruption  insurance,  and
errors and  omissions  insurance  in respect of each  Material  Contract  as are
usually  insured  against in the same general  area by companies  engaged in the
same or a similar business.

          6.6 Inspection of Property; Books and Records;  Discussions.  (a) Keep
proper books of records and account in which full,  true and correct  entries in
conformity  with GAAP and all  Requirements of Law shall be made of all dealings
and  transactions  in relation to its  business  and  activities  and (b) permit
representatives  of any Lender to visit and  inspect any of its  properties  and
examine and make  abstracts  from any of its books and records at any reasonable
time and as often as may  reasonably  be desired  and to discuss  the  business,
operations, properties and financial and other condition of the Borrower and its
Subsidiaries  with officers and  employees of the Borrower and its  Subsidiaries
and  with its  independent  certified  public  accountants;  provided,  that the
Lenders will  coordinate all such visits through the  Administrative  Agent such
that, so long as no Event of Default  shall be in  existence,  there shall be no
more than 4 such visits in any fiscal year.

          6.7 Notices. Promptly give notice to the Administrative Agent and each
Lender of:

          (a) the occurrence of any Default or Event of Default;

          (b)  any (i)  default  or  event  of  default  under  any  Contractual
     Obligation  of the  Borrower  or any of its  Subsidiaries  (other  than  as
     specified  in  Section  6.7(d))  or  (ii)   litigation,   investigation  or
     proceeding  which may exist at any time  between the Borrower or any of its
     Subsidiaries and any Governmental  Authority,  which in either case, if not
     cured or if adversely  determined,  as the case may be, could reasonably be
     expected to have a Material Adverse Effect;


<PAGE>


                                                                              60




          (c) any litigation or proceeding  affecting the Borrower or any of its
     Subsidiaries  in which the amount  involved is  $2,000,000  or more and not
     covered by insurance or in which injunctive or similar relief is sought;

          (d) the following  events, as soon as possible and in any event within
     30 days after the  Borrower  knows or has reason to know  thereof:  (i) the
     occurrence of any  Reportable  Event with respect to any Plan, a failure to
     make any required contribution to a Plan, the creation of any Lien in favor
     of  the  PBGC  or a Plan  or  any  withdrawal  from,  or  the  termination,
     Reorganization  or  Insolvency  of,  any  Multiemployer  Plan or  (ii)  the
     institution of proceedings or the taking of any other action by the PBGC or
     the Borrower or any Commonly  Controlled Entity or any  Multiemployer  Plan
     with respect to the withdrawal from, or the termination,  Reorganization or
     Insolvency of, any Plan;

          (e) any of the following  events,  immediately  after  becoming  aware
     thereof: (i) the election by any party to any Material Contract (other than
     the Borrower and its  Subsidiaries)  to terminate,  or not to exercise in a
     timely fashion,  any option to renew or extend such Material Contract,  if,
     after giving pro forma effect to the termination of such Material  Contract
     as of the last day of the fiscal quarter most recently ended,  the Borrower
     would be in violation of any covenant  contained in Section 7.1 or (ii) any
     notice from any such party to any such Material Contract to the effect that
     the  Borrower or its  Subsidiary,  as the case may be, is in default  under
     such Material Contract; and

          (f) any  development  or event  which has had or could  reasonably  be
     expected to have a Material Adverse Effect.

Each notice  pursuant to this Section shall be  accompanied  by a statement of a
Responsible  Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower or the relevant Subsidiary proposes to take
with respect thereto.

          6.8 Environmental  Laws. (a) Comply in all material respects with, and
ensure  compliance in all material  respects by all tenants and  subtenants,  if
any,  with,  all  applicable  Environmental  Laws,  and obtain and comply in all
material respects with and maintain,  and ensure that all tenants and subtenants
obtain  and  comply in all  material  respects  with and  maintain,  any and all
licenses,  approvals,  notifications,   registrations  or  permits  required  by
applicable Environmental Laws.

          (b) Conduct and complete  all  investigations,  studies,  sampling and
testing,   and  all  remedial,   removal  and  other  actions   required   under
Environmental  Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental  Authorities  regarding  Environmental
Laws.

          6.9 Interest Rate Protection.  In the case of the Borrower,  within 90
days after the Closing Date, enter into Hedge Agreements to the extent necessary
to provide that at least


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                                                                              61




$25,000,000  of the aggregate  principal  amount of the Term Loans is subject to
interest  rate  protection  for a period of not less than thirty  months,  which
Hedge Agreements shall have terms and conditions reasonably  satisfactory to the
Administrative Agent.

          6.10  Additional  Collateral,  etc.  (a) With  respect to any Property
acquired  after the  Closing  Date by the  Borrower  or any of its  Subsidiaries
(other than (w) Excluded  Assets,  (x) any real property or the Capital Stock of
any new Subsidiary,  (y) any Property  subject to a Lien expressly  permitted by
Section 7.3(g) and (z) Property  acquired by an Excluded Foreign  Subsidiary) as
to which the Administrative Agent, for the benefit of the Lenders, does not have
a perfected Lien,  promptly (i) execute and deliver to the Administrative  Agent
such  amendments  to the  Guarantee  and  Collateral  Agreement  or  such  other
documents as the  Administrative  Agent deems necessary or advisable to grant to
the Administrative Agent, for the benefit of the Lenders, a security interest in
such  Property and (ii) take all actions  necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a perfected first priority
security interest in such Property,  including without limitation, the filing of
Uniform  Commercial Code financing  statements in such  jurisdictions  as may be
required  by  the  Guarantee  and  Collateral  Agreement  or by law or as may be
requested by the Administrative Agent.

          (b) With  respect to any fee  interest in any real  property  having a
value (together with improvements thereof) of at least $2,000,000 acquired after
the Closing Date by the Borrower or any of its Subsidiaries (other than any such
real  property  owned  by an  Excluded  Foreign  Subsidiary  subject  to a  Lien
expressly permitted by Section 7.3(g)), promptly (i) execute and deliver a first
priority Mortgage in favor of the  Administrative  Agent, for the benefit of the
Lenders,  covering such real property,  (ii) if requested by the  Administrative
Agent,  provide  the  Lenders  with (x) title and  extended  coverage  insurance
covering such real property in an amount at least equal to the purchase price of
such real estate (or such other amount as shall be  reasonably  specified by the
Administrative Agent) as well as a current ALTA survey thereof,  together with a
surveyor's  certificate  and (y) any  consents or  estoppels  reasonably  deemed
necessary or  advisable  by the  Administrative  Agent in  connection  with such
mortgage  or deed  of  trust,  each  of the  foregoing  in  form  and  substance
reasonably  satisfactory to the  Administrative  Agent and (iii) if requested by
the Administrative  Agent,  deliver to the  Administrative  Agent legal opinions
relating to the matters  described  above,  which  opinions shall be in form and
substance,  and from  counsel,  reasonably  satisfactory  to the  Administrative
Agent.

          (c) With respect to any new Subsidiary (other than an Excluded Foreign
Subsidiary)  created or acquired after the Closing Date (which, for the purposes
of this  paragraph,  shall include any existing  Subsidiary that ceases to be an
Excluded  Foreign  Subsidiary),  by the  Borrower  or  any of its  Subsidiaries,
promptly (i) execute and deliver to the Administrative  Agent such amendments to
the  Guarantee  and  Collateral  Agreement  as the  Administrative  Agent  deems
necessary or advisable to grant to the Administrative  Agent, for the benefit of
the Lenders,  a perfected first priority  security interest in the Capital Stock
of such new Subsidiary which is owned by the Borrower or any of its Subsidiaries
(unless such



<PAGE>


                                                                              62




Capital Stock constitutes  Excluded Assets),  (ii) deliver to the Administrative
Agent the certificates  representing  such Capital Stock,  together with undated
stock powers, in blank,  executed and delivered by a duly authorized  officer of
the  Borrower  or such  Subsidiary,  as the case may be,  (iii)  cause  such new
Subsidiary (A) to become a party to the Guarantee and  Collateral  Agreement and
(B) to take such actions  necessary or advisable to grant to the  Administrative
Agent  for the  benefit  of the  Lenders a  perfected  first  priority  security
interest in the Collateral  described in the Guarantee and Collateral  Agreement
with respect to such new Subsidiary,  including,  without limitation, the filing
of Uniform Commercial Code financing  statements in such jurisdictions as may be
required  by  the  Guarantee  and  Collateral  Agreement  or by law or as may be
requested  by  the   Administrative   Agent,   and  (iv)  if  requested  by  the
Administrative  Agent,  deliver  to  the  Administrative  Agent  legal  opinions
relating to the matters  described  above,  which  opinions shall be in form and
substance,  and from  counsel,  reasonably  satisfactory  to the  Administrative
Agent.

          (d) With respect to any new  Excluded  Foreign  Subsidiary  created or
acquired  after the Closing  Date by the  Borrower  or any of its  Subsidiaries,
promptly (i) execute and deliver to the Administrative  Agent such amendments to
the  Guarantee  and  Collateral  Agreement  as the  Administrative  Agent  deems
necessary or advisable in order to grant to the  Administrative  Agent,  for the
benefit of the Lenders,  a perfected  first  priority  security  interest in the
Capital  Stock of such new  Subsidiary  which is owned by the Borrower or any of
its  Subsidiaries  (provided  that in no event  shall more than 65% of the total
outstanding  Capital  Stock of any  such new  Subsidiary  be  required  to be so
pledged), (ii) deliver to the Administrative Agent the certificates representing
such Capital Stock,  together with undated stock powers, in blank,  executed and
delivered by a duly authorized  officer of the Borrower or such  Subsidiary,  as
the case may be,  and take  such  other  action as may be  necessary  or, in the
opinion  of the  Administrative  Agent,  desirable  to  perfect  the Lien of the
Administrative  Agent  thereon,  and (iii) if  requested  by the  Administrative
Agent,  deliver to the  Administrative  Agent  legal  opinions  relating  to the
matters described above, which opinions shall be in form and substance, and from
counsel, reasonably satisfactory to the Administrative Agent.

          6.11 Further  Assurances.  In the case of the  Borrower,  from time to
time execute and deliver, or cause to be executed and delivered, such additional
instruments,  certificates  or  documents,  and take all  such  actions,  as the
Administrative Agent may reasonably request, for the purposes of implementing or
effectuating  the provisions of this Agreement and the other Loan Documents,  or
of more fully perfecting or renewing the rights of the Administrative  Agent and
the Lenders with  respect to the  Collateral  (or with respect to any  additions
thereto  or  replacements  or  proceeds  thereof  or with  respect  to any other
property or assets hereafter  acquired by the Borrower which may be deemed to be
part of the  Collateral)  pursuant  hereto or thereto.  Upon the exercise by the
Administrative  Agent or any Lender of any  power,  right,  privilege  or remedy
pursuant  to this  Agreement  or the other Loan  Documents  which  requires  any
consent, approval, recording, qualification or authorization of any Governmental
Authority,  the Borrower  will execute and deliver,  or will cause the execution
and  delivery  of,  all  applications,  certifications,  instruments  and  other
documents  and  papers  that  the  Administrative  Agent or such  Lender  may be
required to obtain from the



<PAGE>


                                                                              63




Borrower or any of its Subsidiaries  for such  governmental  consent,  approval,
recording, qualification or authorization.

          6.12 Removal of Prohibition on Negative Pledge. On the Closing Date or
promptly   thereafter,   initiate   and  pursue  all  actions  and  execute  all
instruments,  documents,  certificates  and  agreements  necessary to remove the
prohibition on the negative pledge of assets in the State of Nevada.

          6.13  Completion  of Phase II  Evaluation.  Within  sixty  days of the
Closing Date,  (i) have conducted and completed by an  environmental  consultant
acceptable to the Administrative Agent (the "Environmental  Consultant") a Phase
II written environmental  assessment of the property of Nuevo Sol Turf Club Inc.
commonly known as "Sunland Park" and located in Dona Ana County,  New Mexico and
in El Paso  County,  Texas in form,  scope  and  substance  satisfactory  to the
Administrative Agent, together with a letter from such environmental  consultant
permitting the Agents and the Lenders to rely on the environmental assessment as
if  addressed  to and  prepared  for each of them and (ii) with  respect  to any
recommendation in such assessment, such recommendation shall have been completed
to  the  satisfaction  of  the  Environmental  Consultant  (as  set  forth  in a
certificate signed by the Environmental  Consultant) or the Administrative Agent
shall be  satisfied  that  appropriate  actions  have  been  taken so that  such
recommendation will be implemented in a timely manner.

          6.14 Surveys.  Within sixty days of the Closing Date,  deliver or have
delivered to both the  Administrative  Agent and the applicable  title insurance
company  maps or plats of an  as-built  survey of the  sites of the  owned  real
property covered by the Mortgages certified to the Administrative  Agent and the
applicable title insurance company in a manner reasonably  satisfactory to them,
dated  a date  reasonably  satisfactory  to the  Administrative  Agent  and  the
applicable title insurance company by an independent  professional licensed land
surveyor reasonably  satisfactory to the Administrative Agent and the applicable
title insurance  company,  which maps or plats and the surveys on which they are
based shall be made in accordance with the Minimum Standard Detail  Requirements
for Land Title  Surveys  jointly  established  and adopted by the American  Land
Title  Association  and the American  Congress on Surveying and Mapping in 1992,
and, without  limiting the generality of the foregoing,  there shall be surveyed
and shown on such maps,  plats or surveys the  following:  (i) the  locations on
such  sites of all the  buildings,  structures  and other  improvements  and the
established building setback lines; (ii) the lines of streets abutting the sites
and width thereof; (iii) all access and other easements appurtenant to the sites
necessary to use the sites;  (iv) all  roadways,  paths,  driveways,  easements,
encroachments and overhanging projections and similar encumbrances affecting the
sites,  whether  recorded,  apparent from a physical  inspection of the sites or
otherwise known to the surveyor; (v) any encroachments on any adjoining property
by the building  structures and  improvements on the sites; and (vi) if the site
is described as being on a filed map, a legend relating the survey to said map.





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                                                                              64




                          SECTION 7. NEGATIVE COVENANTS

          The Borrower hereby agrees that, so long as the Commitments  remain in
effect, any Letter of Credit remains  outstanding or any Loan or other amount is
owing to any Lender or any Agent  hereunder,  the Borrower  shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly:

          7.1 Financial Condition Covenants.

          (a)  Consolidated  Leverage Ratio.  Permit the  Consolidated  Leverage
Ratio as at the last day of any period of four  consecutive  fiscal  quarters of
the Borrower (or, if less, the number of full fiscal quarters  subsequent to the
Closing  Date) ending  during any period set forth below to exceed the ratio set
forth below opposite such period:

                                                              Consolidated
            Period                                           Leverage Ratio
            ------                                           --------------

          Closing Date - 12/31/00                              3.0 to 1.0
          Thereafter                                           2.5 to 1.0

          (b)  Consolidated  Interest  Coverage Ratio.  Permit the  Consolidated
Interest  Coverage Ratio for any period of four  consecutive  fiscal quarters of
the Borrower (or, if less, the number of full fiscal quarters  subsequent to the
Closing Date) ending during any period set forth below to be less than the ratio
set forth below opposite such fiscal quarter:

                                                         Consolidated Interest
             Fiscal Quarter                                  Coverage Ratio

          Closing Date - 12/31/98                              3.5 to 1.0
          1/1/99-12/31/99                                      4.0 to 1.0
          1/1/00-12/31/00                                      4.5 to 1.0
          thereafter                                           5.0 to 1.0

          (c) Consolidated Fixed Charge Coverage Ratio.  Permit the Consolidated
Fixed Charge Coverage Ratio for any period of four  consecutive  fiscal quarters
of the Borrower (or, if less, the number of full fiscal  quarters  subsequent to
the Closing Date) to be less than 2.50 to 1.00.

          (d) Maintenance of Consolidated  Net Worth.  Permit  Consolidated  Net
Worth as of the last day of any fiscal  quarter of the  Borrower to be less than
the sum of (i) $76,449,000 plus (ii) 75% of the sum of (A) all proceeds received
by the  Borrower  after the Closing Date and on or prior to the last day of such
fiscal  quarter  from the sale of the  Borrower's  equity plus (B) the amount of
positive Consolidated Net Income for each fiscal



<PAGE>


                                                                              65




quarter ended after the Closing Date through and including the fiscal quarter in
respect of which the calculation is being made.

          7.2 Limitation on  Indebtedness.  Create,  incur,  assume or suffer to
exist any Indebtedness, except:

          (a) Indebtedness of any Loan Party pursuant to any Loan Document;

          (b)  Indebtedness  of the Borrower to any Subsidiary and of any Wholly
     Owned Subsidiary Guarantor to the Borrower or any other Subsidiary;

          (c)  Indebtedness  (including,   without  limitation,   Capital  Lease
     Obligations)  secured by Liens  permitted by Section 7.3(g) in an aggregate
     principal amount not to exceed $3,000,000 at any one time outstanding;

          (d) Indebtedness outstanding on the date hereof and listed on Schedule
     7.2(d) and any  refinancings,  refundings,  renewals or extensions  thereof
     (without any increase in the principal  amount thereof or any shortening of
     the maturity of any principal amount thereof);

          (e) Indebtedness of any Foreign Subsidiary, so long as (i) the holders
     of  such  Indebtedness  have  no  recourse  to the  Borrower  or any of its
     Domestic  Subsidiaries  or to any  assets  other  than the  assets  of such
     Foreign  Subsidiary  and  (ii)  the  aggregate  principal  amount  of  such
     Indebtedness  of all  Foreign  Subsidiaries  does  not at any  time  exceed
     $15,000,000; and

          (f) Guarantee  Obligations made in the ordinary course of business (i)
     by the Borrower or any of its  Subsidiaries  of obligations of the Borrower
     or any Subsidiary Guarantor, and (ii) by the Route Companies of obligations
     of any  current  or  prospective  customer  or  client  in  respect  of any
     remodeling or upgrading  that would enable such customer or client to lease
     or purchase equipment from such Route Company; provided,  however, that the
     total  amount of  Guarantee  Obligations  permitted  under this clause (ii)
     shall not exceed an aggregate of $1,500,000.

          7.3 Limitation on Liens. Create,  incur, assume or suffer to exist any
Lien upon any of its Property,  whether now owned or hereafter acquired,  except
for:

          (a) Liens for taxes not yet due or which are being  contested  in good
     faith by  appropriate  proceedings,  provided that  adequate  reserves with
     respect  thereto  are  maintained  on  the  books  of the  Borrower  or its
     Subsidiaries, as the case may be, in conformity with GAAP;

          (b) carriers', warehousemen's,  mechanics', materialmen's, repairmen's
     or other like Liens  arising in the ordinary  course of business  which are
     not overdue for a



<PAGE>


                                                                              66




     period of more than 30 days or which are being  contested  in good faith by
     appropriate proceedings;

          (c) pledges or  deposits in  connection  with  workers'  compensation,
     unemployment insurance and other social security legislation;

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

          (e)   easements,   rights-of-way,   restrictions   and  other  similar
     encumbrances  incurred in the  ordinary  course of business  which,  in the
     aggregate,  are not  substantial  in  amount  and  which do not in any case
     materially  detract  from the  value of the  Property  subject  thereto  or
     materially  interfere  with the  ordinary  conduct of the  business  of the
     Borrower or any of its Subsidiaries;

          (f) Liens in existence on the date hereof  listed on Schedule  7.3(f),
     securing  Indebtedness  permitted by Section 7.2(d),  provided that no such
     Lien is spread to cover any additional  Property after the Closing Date and
     that the amount of Indebtedness secured thereby is not increased;

          (g)  Liens  securing   Indebtedness  of  the  Borrower  or  any  other
     Subsidiary  incurred  pursuant to Section 7.2(c) to finance the acquisition
     of fixed or capital  assets,  provided that (i) such Liens shall be created
     substantially  simultaneously with the acquisition of such fixed or capital
     assets, (ii) such Liens do not at any time encumber any Property other than
     the  Property  financed  by such  Indebtedness  and  (iii)  the  amount  of
     Indebtedness secured thereby is not increased;

          (h) Liens created pursuant to the Security Documents;

          (i) Liens on Property used to operate  on-line lottery systems created
     by contracts  with any state lottery  commission  relating to such systems;
     and

          (j) any interest or title of a lessor under any lease  entered into by
     the Borrower or any other Subsidiary in the ordinary course of its business
     and covering only the assets so leased.

provided,  however,  that until the prohibition on the negative pledge of assets
in the State of Nevada has been  removed,  the  provisions  of this  Section 7.3
shall not apply to the Capital Stock of Video Lottery Consultants,  Inc. and VLC
of Nevada, Inc.

          7.4  Limitation  on  Fundamental  Changes.   Enter  into  any  merger,
consolidation  or  amalgamation,  or liquidate,  wind up or dissolve  itself (or
suffer any liquidation or dissolution),  or Dispose of all or substantially  all
of its Property or business, except that:



<PAGE>


                                                                              67




          (a) any Subsidiary of the Borrower may be merged or consolidated  with
     or into the Borrower (provided that the Borrower shall be the continuing or
     surviving  corporation) or with or into any Subsidiary  Guarantor (provided
     that  the  Subsidiary  Guarantor  shall  be  the  continuing  or  surviving
     corporation); and

          (b) any  Subsidiary  of the  Borrower may Dispose of any or all of its
     assets (upon  voluntary  liquidation  or  otherwise) to the Borrower or any
     Subsidiary Guarantor.

          7.5  Limitation  on  Disposition  of  Property.  Dispose of any of its
Property (including,  without limitation,  receivables and leasehold interests),
whether  now owned or  hereafter  acquired,  or, in the case of any  Subsidiary,
issue or sell any  shares  of such  Subsidiary's  Capital  Stock to any  Person,
except:

          (a) the  Disposition  of obsolete or worn out property in the ordinary
     course of business;

          (b) the sale of inventory in the ordinary course of business,  and the
     sale of receivables for collection in the ordinary course of business;

          (c) Dispositions permitted by Section 7.4(b);

          (d) the sale or  issuance  of any  Subsidiary's  Capital  Stock to the
     Borrower or any Subsidiary Guarantor;

          (e) the  Disposition of other assets having a fair market value not to
     exceed $5,000,000 in the aggregate for any fiscal year of the Borrower; and

          (f) any Recovery  Event,  provided,  that the  requirements of Section
     2.10(b) are complied with in connection therewith.

provided,  however,  that until the prohibition on the negative pledge of assets
in the State of Nevada has been  approved,  the  provisions  of this Section 7.5
shall not apply to the Capital Stock of Video Lottery Consultants,  Inc. and VLC
of Nevada, Inc.

          7.6  Limitation  on Restricted  Payments.  Declare or pay any dividend
(other than  dividends  payable solely in common stock of the Person making such
dividend)  on, or make any  payment  on  account  of, or set apart  assets for a
sinking or other  analogous  fund for,  the  purchase,  redemption,  defeasance,
retirement  or other  acquisition  of, any Capital  Stock of the Borrower or any
Subsidiary, whether now or hereafter outstanding, or make any other distribution
in respect thereof,  either directly or indirectly,  whether in cash or property
or in obligations of the Borrower or any Subsidiary  (collectively,  "Restricted
Payments"), except that:




<PAGE>


                                                                              68




          (a) any Subsidiary may make Restricted Payments to the Borrower or any
     Subsidiary Guarantor; and

          (b) so long as no Default or Event of Default  shall have occurred and
     be continuing, the Borrower may spend up to $10,000,000 in the aggregate to
     repurchase shares of the Borrower's common stock.

          7.7  Limitation  on Capital  Expenditures.  Make or commit to make any
Capital  Expenditure,  except (a) Capital  Expenditures  of the Borrower and its
Subsidiaries  in the ordinary  course of business not exceeding,  for any fiscal
year set forth below, the amount set forth opposite such fiscal year:

               Fiscal Year                              Amount

                  1998                                 $42,000,000
                  1999                                  50,000,000
                  2000                                  52,000,000
                  2001                                  23,000,000
                  2002                                  30,000,000
                  2003                                  30,000,000
                  2004                                  16,000,000

provided,  that (i) up to 25% of any such amount  referred  to above,  if not so
expended in the fiscal year for which it is  permitted,  may be carried over for
expenditure  in the next  succeeding  fiscal year and (ii) Capital  Expenditures
made  pursuant to this  clause (a) during any fiscal year shall be deemed  made,
first, in respect of amounts carried over from the prior fiscal year pursuant to
subclause (i) above and, second, in respect of amounts permitted for such fiscal
year as provided  above and (b) Capital  Expenditures  made with the proceeds of
any Reinvestment Deferred Amount.

          7.8 Limitation on Investments.  Make any advance,  loan,  extension of
credit (by way of guaranty or otherwise) or capital contribution to, or purchase
any Capital Stock, bonds, notes,  debentures or other debt securities of, or any
assets  constituting an ongoing  business from, or make any other investment in,
any other Person (all of the foregoing, "Investments"), except:

          (a) extensions of trade credit in the ordinary course of business;

          (b) investments in Cash Equivalents;

          (c)   Investments   arising  in  connection  with  the  incurrence  of
     Indebtedness permitted by Section 7.2(b) and (e) ;




<PAGE>


                                                                              69




          (d)  loans  and   advances  to   employees  of  the  Borrower  or  any
     Subsidiaries of the Borrower in the ordinary course of business (including,
     without limitation,  for travel,  entertainment and relocation expenses) in
     an aggregate  amount for the Borrower and  Subsidiaries of the Borrower not
     to exceed $1,000,000 at any one time outstanding;

          (e)  Investments  by the  Borrower and its  Subsidiaries  in potential
     business  partners in the United  States,  such as race tracks,  technology
     companies,  casinos  and  other  similar  entities  engaged  in the same or
     similar  lines of business as those  engaged in on the Closing  Date by the
     Borrower  and  its  Subsidiaries,  in an  aggregate  amount  not  exceeding
     $10,000,000;

          (f)  Investments  by the  Borrower and its  Domestic  Subsidiaries  in
     Foreign  Subsidiaries,  provided,  that such  Investments  are permitted by
     Section 7.15;

          (g)  Investments in assets useful in the  Borrower's  business made by
     the  Borrower  or  any  of  its  Subsidiaries  with  the  proceeds  of  any
     Reinvestment Deferred Amount; and

          (h)  Investments  (other  than those  relating  to the  incurrence  of
     Indebtedness  permitted  by Section  7.8(c)) by the  Borrower or any of its
     Subsidiaries in the Borrower or any Person that,  prior to such investment,
     is a Subsidiary Guarantor.

          7.9  Limitation  on  Transactions  with  Affiliates.  Enter  into  any
transaction,  including,  without  limitation,  any  purchase,  sale,  lease  or
exchange  of  Property,  the  rendering  of any  service  or the  payment of any
management,  advisory  or  similar  fees,  with any  Affiliate  (other  than the
Borrower or any Subsidiary  Guarantor)  unless such transaction is (a) otherwise
permitted  under this  Agreement,  (b) in the ordinary course of business of the
Borrower  or such  Subsidiary,  as the  case  may  be,  and (c)  upon  fair  and
reasonable  terms no less favorable to the Borrower or such  Subsidiary,  as the
case may be, than it would obtain in a comparable arm's length  transaction with
a Person which is not an Affiliate.

          7.10  Limitation on Sales and  Leasebacks.  Enter into any arrangement
with any Person  providing for the leasing by the Borrower or any  Subsidiary of
real or personal  property which has been or is to be sold or transferred by the
Borrower or such  Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of such  property
or rental obligations of the Borrower or such Subsidiary.

          7.11 Limitation on Changes in Fiscal  Periods.  Permit the fiscal year
of the Borrower to end on a day other than December 31 or change the  Borrower's
method of determining fiscal quarters.

          7.12 Limitation on Negative  Pledge  Clauses.  Enter into or suffer to
exist or become effective any agreement which prohibits or limits the ability of
the Borrower or any of



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                                                                              70




its Subsidiaries to create,  incur,  assume or suffer to exist any Lien upon any
of its Property or revenues,  whether now owned or hereafter acquired, to secure
the  Obligations  or, in the case of any guarantor,  its  obligations  under the
Guarantee and Collateral Agreement,  other than (a) this Agreement and the other
Loan Documents, (b) any agreements governing any purchase money Liens or Capital
Lease Obligations  otherwise permitted hereby (in which case, any prohibition or
limitation shall only be effective against the assets financed thereby), (c) any
agreements with state lottery authorities or other Governmental Authorities with
respect to Property  used in connection  with the  operation of on-line  lottery
systems, and (d) any prohibitions imposed by any Requirement of Law.

          7.13  Limitation on Restrictions  on Subsidiary  Distributions.  Enter
into or  suffer to exist or  become  effective  any  consensual  encumbrance  or
restriction on the ability of any Subsidiary to (a) make Restricted  Payments in
respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness
owed to, the  Borrower  or any other  Subsidiary,  (b) make  Investments  in the
Borrower  or any  other  Subsidiary  or (c)  transfer  any of its  assets to the
Borrower or any other  Subsidiary,  except for such encumbrances or restrictions
existing  under or by reason  of (i) any  restrictions  existing  under the Loan
Documents  and  (ii) any  restrictions  with  respect  to a  Subsidiary  imposed
pursuant to an  agreement  which has been entered  into in  connection  with the
Disposition of all or  substantially  all of the Capital Stock or assets of such
Subsidiary.

          7.14 Limitation on Lines of Business. Enter into any business,  either
directly or through any  Subsidiary,  except for those  businesses  in which the
Borrower and its  Subsidiaries are engaged on the date of this Agreement and any
business directly related thereto.

     7.15 Foreign  Exposure  Limitation.  Permit the aggregate  amount,  without
duplication, of (a) Investments by the Borrower and its Domestic Subsidiaries in
Foreign Subsidiaries plus (b) of (1) all equipment and inventory located outside
the United  States and owned by the  Borrower  and its  Subsidiaries  (including
Foreign  Subsidiaries) and (2) all accounts receivable (whether or not evidenced
by a promissory note or other  instrument,  but in any event excluding  Excluded
Foreign  Accounts  and Assets)  owing to the Borrower  and its  Subsidiaries  by
Persons other than  Governmental  Authorities of, or Persons organized under the
laws of, or resident in, the United States or any state  thereof,  including the
District of Columbia,  to exceed at any time (i) $20,000,000 in the aggregate or
(ii)  $10,000,000  in  respect  of any one  country  other  than  [Intentionally
Deleted] or (iii) $15,000,000, in the case of [Intentionally Deleted].

          7.16  Limitation  on  Optional  Payments  and  Modifications  of  Debt
Instruments,  etc. (a) Make or offer to make any optional or voluntary  payment,
prepayment, repurchase or redemption of any Indebtedness other than the Loans or
(b) amend,  modify or otherwise  change,  or consent or agree to any  amendment,
modification,  waiver  or  other  change  to,  any of  the  terms  of any  other
Indebtedness, if such change would shorten its maturity or increase the interest
rate or fees  applicable  thereto  or make  any  other  change  which  would  be
materially adverse to the interests of the Lenders.



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                                                                              71





                          SECTION 8. EVENTS OF DEFAULT

          If any of the following events shall occur and be continuing:

          (a)  The  Borrower  shall  fail to pay any  principal  of any  Loan or
     Reimbursement  Obligation when due in accordance with the terms hereof;  or
     the Borrower  shall fail to pay any  interest on any Loan or  Reimbursement
     Obligation,  or any other amount payable  hereunder or under any other Loan
     Document,  within five days after any such interest or other amount becomes
     due in accordance with the terms hereof; or

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

          (c) (i) Any Loan Party shall default in the  observance or performance
     of any  agreement  contained in clause (i) or (ii) of Section  6.4(a) (with
     respect to the Borrower only),  Section 6.7(a),  Section 7 or Sections 5.1,
     5.5, 5.6, 5.7 and 5.9 of the Guarantee and Collateral  Agreement or (ii) an
     "Event of Default" under and as defined in any Mortgage shall have occurred
     and be continuing; or

          (d) Any Loan Party shall default in the  observance or  performance of
     any other agreement  contained in this Agreement or any other Loan Document
     (other than as provided in paragraphs (a) through (c) of this Section), and
     such default shall continue unremedied for a period of 30 days; or

          (e) The  Borrower  or any of its  Subsidiaries  shall (i)  default  in
     making any payment of any principal of any Indebtedness (including, without
     limitation,  any  Guarantee  Obligation,  but  excluding  the Loans) on the
     scheduled  or original due date with  respect  thereto;  or (ii) default in
     making any  payment of any  interest  on any such  Indebtedness  beyond the
     period of grace,  if any,  provided in the  instrument  or agreement  under
     which such Indebtedness was created;  or (iii) default in the observance or
     performance  of any  other  agreement  or  condition  relating  to any such
     Indebtedness  or  contained  in any  instrument  or  agreement  evidencing,
     securing or relating  thereto,  or any other event shall occur or condition
     exist, the effect of which default or other event or condition is to cause,
     or to permit the holder or beneficiary of such  Indebtedness  (or a trustee
     or agent on behalf of such holder or beneficiary) to cause, with the giving
     of notice if required,  such Indebtedness to become due prior to its stated
     maturity or (in the case of any such Indebtedness  constituting a Guarantee
     Obligation) to become payable; provided, that a default, event or condition
     described in clause (i),  (ii) or (iii) of this  paragraph (e) shall not at
     any time constitute an Event of Default  unless,  at such time, one or more
     defaults, events or conditions of the type described in clauses (i), (ii)



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                                                                              72




     and (iii) of this paragraph (e) shall have occurred and be continuing  with
     respect to Indebtedness  the outstanding  principal amount of which exceeds
     in the aggregate $500,000; or

          (f) (i) The  Borrower or any of its  Subsidiaries  shall  commence any
     case,  proceeding  or other  action (A) under any existing or future law of
     any jurisdiction,  domestic or foreign, relating to bankruptcy, insolvency,
     reorganization  or relief of  debtors,  seeking to have an order for relief
     entered  with  respect  to it, or seeking to  adjudicate  it a bankrupt  or
     insolvent, or seeking reorganization,  arrangement, adjustment, winding-up,
     liquidation, dissolution, composition or other relief with respect to it or
     its debts, or (B) seeking  appointment of a receiver,  trustee,  custodian,
     conservator or other similar  official for it or for all or any substantial
     part of its assets, or the Borrower or any of its Subsidiaries shall make a
     general assignment for the benefit of its creditors; or (ii) there shall be
     commenced  against  the  Borrower  or  any of its  Subsidiaries  any  case,
     proceeding  or other  action of a nature  referred  to in clause  (i) above
     which  (A)  results  in the  entry  of an  order  for  relief  or any  such
     adjudication  or appointment or (B) remains  undismissed,  undischarged  or
     unbonded for a period of 60 days; or (iii) there shall be commenced against
     the  Borrower  or any of its  Subsidiaries  any case,  proceeding  or other
     action seeking issuance of a warrant of attachment, execution, distraint or
     similar  process  against all or any  substantial  part of its assets which
     results in the entry of an order for any such  relief  which shall not have
     been vacated, discharged, or stayed or bonded pending appeal within 60 days
     from the entry  thereof;  or (iv) the  Borrower or any of its  Subsidiaries
     shall take any action in  furtherance  of, or  indicating  its  consent to,
     approval of, or  acquiescence  in, any of the acts set forth in clause (i),
     (ii), or (iii) above; or (v) the Borrower or any of its Subsidiaries  shall
     generally  not,  or shall be  unable  to,  or shall  admit in  writing  its
     inability to, pay its debts as they become due; or

          (g) (i) Any Person shall engage in any  "prohibited  transaction"  (as
     defined in Section 406 of ERISA or Section 4975 of the Code)  involving any
     Plan, (ii) any "accumulated  funding deficiency" (as defined in Section 302
     of ERISA),  whether or not waived,  shall exist with respect to any Plan or
     any Lien in favor of the PBGC or a Plan  shall  arise on the  assets of the
     Borrower or any Commonly Controlled Entity,  (iii) a Reportable Event shall
     occur with  respect  to, or  proceedings  shall  commence to have a trustee
     appointed,  or a trustee shall be appointed, to administer or to terminate,
     any  Single  Employer  Plan,  which  Reportable  Event or  commencement  of
     proceedings or  appointment  of a trustee is, in the reasonable  opinion of
     the Required Lenders,  likely to result in the termination of such Plan for
     purposes  of Title  IV of  ERISA,  (iv)  any  Single  Employer  Plan  shall
     terminate  for  purposes  of Title IV of  ERISA,  (v) the  Borrower  or any
     Commonly  Controlled  Entity  shall,  or in the  reasonable  opinion of the
     Required  Lenders is likely to, incur any  liability in  connection  with a
     withdrawal  from, or the Insolvency or  Reorganization  of, a Multiemployer
     Plan or (vi) any other event or condition shall occur or exist with respect
     to a Plan;  and in each case in clauses (i) through (vi) above,  such event
     or condition, together with all other such events or



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     conditions,  if any, could,  in the sole judgment of the Required  Lenders,
     reasonably be expected to have a Material Adverse Effect; or

          (h) One or more  judgments  or decrees  shall be entered  against  the
     Borrower or any of its  Subsidiaries  involving  for the  Borrower  and its
     Subsidiaries  taken as a whole a  liability  (not paid or fully  covered by
     insurance  as to which the  relevant  insurance  company  has  acknowledged
     coverage) of  $2,000,000 or more,  and all such  judgments or decrees shall
     not have been vacated,  discharged,  stayed or bonded pending appeal within
     30 days from the entry thereof; or

          (i) Any of the Security  Documents shall cease, for any reason,  to be
     in full force and effect,  or any Loan Party or any  Affiliate  of any Loan
     Party shall so assert, or any Lien created by any of the Security Documents
     shall cease to be enforceable and of the same effect and priority purported
     to be created thereby; or

          (j)  The  guarantee  contained  in  Section  2 of  the  Guarantee  and
     Collateral  Agreement shall cease, for any reason,  to be in full force and
     effect,  or any Loan  Party or any  Affiliate  of any Loan  Party  shall so
     assert; or

          (k) (i) Any Material  Contract  shall be terminated or shall expire by
     reason of the failure of any party thereto  (other than the Borrower or any
     Subsidiary  of the  Borrower) to exercise any right to extend such Material
     Contract,  if,  after giving pro forma  effect to the  termination  of such
     Material  Contract  as of the first day of the  period of four full  fiscal
     quarters  most  recently  ended  prior to the date of such  termination  or
     expiration, the Borrower would be in violation of any covenant contained in
     Section 7.1 or (ii) any license issued by any Governmental Authority to the
     Borrower  or any  Subsidiary  shall  be  terminated  by  such  Governmental
     Authority; or

          (l) (i) Any  "person"  or "group"  (as such terms are used in Sections
     13(d) and 14(d) of the  Securities  Exchange  Act of 1934,  as amended (the
     "Exchange  Act")),  shall  become,  or obtain  rights  (whether by means or
     warrants,  options or  otherwise)  to become,  the  "beneficial  owner" (as
     defined in Rules 13(d)-3 and 13(d)-5 under the Exchange  Act),  directly or
     indirectly,  of  more  than  25% of the  outstanding  common  stock  of the
     Borrower  or (ii) the board of  directors  of the  Borrower  shall cease to
     consist of a majority of Continuing Directors;

then, and in any such event, (A) if such event is an Event of Default  specified
in clause  (i) or (ii) of  paragraph  (f) above with  respect  to the  Borrower,
automatically  the  Commitments  shall  immediately   terminate  and  the  Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement  and the other Loan  Documents  (including,  without  limitation,  all
amounts  of L/C  Obligations,  whether  or not  the  beneficiaries  of the  then
outstanding  Letters  of Credit  shall have  presented  the  documents  required
thereunder) shall immediately  become due and payable,  and (B) if such event is
any other Event of Default,



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                                                                              74




either or both of the  following  actions may be taken:  (i) with the consent of
the Majority Revolving Credit Facility Lenders, the Administrative Agent may, or
upon  the  request  of the  Majority  Revolving  Credit  Facility  Lenders,  the
Administrative  Agent  shall,  by notice to the Borrower  declare the  Revolving
Credit  Commitments to be terminated  forthwith,  whereupon the Revolving Credit
Commitments  shall  immediately  terminate;  and (ii)  with the  consent  of the
Required  Lenders,  the  Administrative  Agent may,  or upon the  request of the
Required  Lenders,  the  Administrative  Agent shall, by notice to the Borrower,
declare  the Loans  hereunder  (with  accrued  interest  thereon)  and all other
amounts  owing under this  Agreement  and the other Loan  Documents  (including,
without  limitation,  all  amounts  of  L/C  Obligations,  whether  or  not  the
beneficiaries of the then outstanding Letters of Credit shall have presented the
documents required  thereunder) to be due and payable  forthwith,  whereupon the
same shall  immediately  become due and payable.  With respect to all Letters of
Credit with respect to which  presentment  for honor shall not have  occurred at
the time of an acceleration  pursuant to this  paragraph,  the Borrower shall at
such time  deposit in a cash  collateral  account  opened by the  Administrative
Agent an amount equal to the aggregate then undrawn and unexpired amount of such
Letters of Credit. Amounts held in such cash collateral account shall be applied
by the Administrative Agent to the payment of drafts drawn under such Letters of
Credit,  and the unused  portion  thereof after all such Letters of Credit shall
have expired or been fully drawn upon,  if any,  shall be applied to repay other
obligations of the Borrower hereunder and under the other Loan Documents.  After
all such  Letters of Credit  shall have  expired or been fully drawn  upon,  all
Reimbursement Obligations shall have been satisfied and all other obligations of
the Borrower  hereunder and under the other Loan Documents  shall have been paid
in full, the balance,  if any, in such cash collateral account shall be returned
to the Borrower (or such other Person as may be lawfully entitled thereto).


                              SECTION 9. THE AGENTS

          9.1  Appointment.   Each  Lender  hereby  irrevocably  designates  and
appoints  the Agents as the agents of such Lender under this  Agreement  and the
other Loan Documents, and each such Lender irrevocably authorizes each Agent, in
such  capacity,  to take such action on its behalf under the  provisions of this
Agreement  and the other Loan  Documents and to exercise such powers and perform
such duties as are  expressly  delegated  to the such Agent by the terms of this
Agreement and the other Loan  Documents,  together with such other powers as are
reasonably  incidental  thereto.  Notwithstanding  any provision to the contrary
elsewhere in this Agreement, no Agent shall have any duties or responsibilities,
except those expressly set forth herein, or any fiduciary  relationship with any
Lender,  and  no  implied  covenants,   functions,   responsibilities,   duties,
obligations or  liabilities  shall be read into this Agreement or any other Loan
Document or otherwise exist against any Agent.

          9.2  Delegation  of Duties.  Each Agent may  execute any of its duties
under this  Agreement  and the other  Loan  Documents  by or  through  agents or
attorneys-in-fact  and shall be  entitled  to advice of counsel  concerning  all
matters pertaining to such duties. No Agent



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                                                                              75




shall be responsible for the negligence or misconduct of any agents or attorneys
in-fact selected by it with reasonable care.

          9.3  Exculpatory  Provisions.  Neither  any  Agent  nor  any of  their
respective  officers,   directors,   employees,  agents,   attorneys-in-fact  or
affiliates  shall be (i) liable for any action  lawfully  taken or omitted to be
taken by it or such Person  under or in  connection  with this  Agreement or any
other Loan Document (except to the extent that any of the foregoing are found by
a final and nonappealable  decision of a court of competent jurisdiction to have
resulted from its or such Person's own gross  negligence or willful  misconduct)
or (ii)  responsible  in any  manner  to any of the  Lenders  for any  recitals,
statements,  representations or warranties made by any Loan Party or any officer
thereof  contained  in this  Agreement  or any  other  Loan  Document  or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agents under or in  connection  with,  this  Agreement or any
other Loan  Document  or for the value,  validity,  effectiveness,  genuineness,
enforceability  or  sufficiency  of this Agreement or any other Loan Document or
for any  failure of any Loan Party a party  thereto to perform  its  obligations
hereunder or  thereunder.  The Agents shall not be under any  obligation  to any
Lender to ascertain or to inquire as to the  observance or performance of any of
the agreements  contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of any Loan Party.

          9.4  Reliance by Agents.  Each Agent  shall be  entitled to rely,  and
shall be fully protected in relying, upon any instrument,  writing,  resolution,
notice, consent,  certificate,  affidavit,  letter,  telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed,  sent or made by the proper  Person
or Persons and upon advice and statements of legal counsel  (including,  without
limitation,  counsel to the Loan  Parties),  independent  accountants  and other
experts  selected by such Agent.  The Agents may deem and treat the payee of any
Note  as the  owner  thereof  for  all  purposes  unless  a  written  notice  of
assignment,  negotiation  or  transfer  thereof  shall  have been filed with the
Administrative Agent. Each Agent shall be fully justified in failing or refusing
to take any action  under this  Agreement or any other Loan  Document  unless it
shall first receive such advice or concurrence  of the Required  Lenders (or, if
so specified by this Agreement, all Lenders) as it deems appropriate or it shall
first be  indemnified  to its  satisfaction  by the Lenders  against any and all
liability  and  expense  which  may be  incurred  by it by  reason  of taking or
continuing  to take any such  action.  Each  Agent  shall in all  cases be fully
protected in acting, or in refraining from acting,  under this Agreement and the
other Loan Documents in accordance  with a request of the Required  Lenders (or,
if so specified by this Agreement, all Lenders), and such request and any action
taken or failure to act pursuant  thereto  shall be binding upon all the Lenders
and all future holders of the Loans.

          9.5 Notice of Default.  No Agent shall be deemed to have  knowledge or
notice of the  occurrence  of any Default or Event of Default  hereunder  unless
such Agent has received  notice from a Lender or the Borrower  referring to this
Agreement,  describing  such  Default or Event of Default and stating  that such
notice is a "notice  of  default".  In the event that the  Administrative  Agent
receives such a notice, the Administrative Agent shall give notice thereof



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to the Lenders.  The Administrative Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by the Required
Lenders (or, if so specified by this  Agreement,  all  Lenders);  provided  that
unless and until the  Administrative  Agent shall have received such directions,
the  Administrative  Agent may (but shall not be obligated to) take such action,
or refrain  from taking such  action,  with  respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.

          9.6  Non-Reliance on Agents and Other Lenders.  Each Lender  expressly
acknowledges  that  neither  the  Agents nor any of their  respective  officers,
directors,  employees,  agents,  attorneys-in-fact  or affiliates  have made any
representations  or  warranties  to it and that no act by any Agent  hereinafter
taken, including any review of the affairs of a Loan Party or any affiliate of a
Loan Party,  shall be deemed to constitute any representation or warranty by any
Agent  to any  Lender.  Each  Lender  represents  to the  Agents  that  it  has,
independently and without reliance upon any Agent or any other Lender, and based
on such  documents and  information as it has deemed  appropriate,  made its own
appraisal  of  and  investigation  into  the  business,  operations,   property,
financial and other condition and creditworthiness of the Loan Parties and their
affiliates and made its own decision to make its Loans  hereunder and enter into
this  Agreement.  Each Lender also represents  that it will,  independently  and
without reliance upon any Agent or any other Lender, and based on such documents
and information as it shall deem  appropriate at the time,  continue to make its
own credit  analysis,  appraisals  and  decisions in taking or not taking action
under  this  Agreement  and  the  other  Loan   Documents,   and  to  make  such
investigation  as it  deems  necessary  to  inform  itself  as to the  business,
operations,  property, financial and other condition and creditworthiness of the
Loan  Parties  and their  affiliates.  Except  for  notices,  reports  and other
documents   expressly   required  to  be   furnished   to  the  Lenders  by  the
Administrative  Agent hereunder,  no Agent shall have any duty or responsibility
to  provide  any  Lender  with any credit or other  information  concerning  the
business, operations, property, condition (financial or otherwise), prospects or
creditworthiness  of any Loan Party or any  affiliate  of a Loan Party which may
come  into  the  possession  of such  Agent or any of its  officers,  directors,
employees, agents, attorneys-in-fact or affiliates.

          9.7 Indemnification.  The Lenders agree to indemnify each Agent in its
capacity as such (to the extent not  reimbursed  by or the  Borrower and without
limiting the obligation of or the Borrower to do so), ratably according to their
respective  Aggregate  Exposure  Percentages  in  effect  on the  date on  which
indemnification  is sought under this Section (or, if  indemnification is sought
after the date upon which the  Commitments  shall have  terminated and the Loans
shall have been paid in full, ratably in accordance with such Aggregate Exposure
Percentages  immediately  prior  to such  date),  from and  against  any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses or  disbursements  of any kind whatsoever which may at any time
(including,  without limitation, at any time following the payment of the Loans)
be imposed on, incurred by or asserted against such Agent in any way relating to
or  arising  out of,  the  Commitments,  this  Agreement,  any of the other Loan
Documents or any documents  contemplated  by or referred to herein or therein or
the transactions  contemplated  hereby or thereby or any action taken or omitted
by such



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                                                                              77




Agent under or in connection with any of the foregoing;  provided that no Lender
shall be liable for the payment of any portion of such liabilities, obligations,
losses,  damages,  penalties,  actions,  judgments,  suits,  costs,  expenses or
disbursements  which are found by a final and nonappealable  decision of a court
of competent jurisdiction to have resulted from such Agent's gross negligence or
willful misconduct. The agreements in this Section 9.7 shall survive the payment
of the Loans and all other amounts payable hereunder.

          9.8 Agent in Its  Individual  Capacity.  Each Agent and its affiliates
may make loans to,  accept  deposits  from and  generally  engage in any kind of
business with any Loan Party as though such Agent was not an Agent. With respect
to its Loans  made or  renewed  by it and with  respect  to any Letter of Credit
issued or  participated  in by it,  each Agent  shall  have the same  rights and
powers under this  Agreement and the other Loan  Documents as any Lender and may
exercise  the same as though it were not an Agent,  and the terms  "Lender"  and
"Lenders" shall include each Agent in its individual capacity.

          9.9  Successor  Agents.  The   Administrative   Agent  may  resign  as
Administrative  Agent upon 10 days' notice to the Lenders and the  Borrower.  If
the  Administrative  Agent  shall  resign as  Administrative  Agent  under  this
Agreement and the other Loan Documents,  then the Required Lenders shall appoint
from among the Lenders a successor agent for the Lenders,  which successor agent
shall  (unless  an Event of Default  under  Section  8(a) or  Section  8(f) with
respect to the Borrower  shall have  occurred and be  continuing)  be subject to
approval by the Borrower (which  approval shall not be unreasonably  withheld or
delayed), whereupon such successor agent shall succeed to the rights, powers and
duties of the Administrative  Agent, and the term  "Administrative  Agent" shall
mean such successor agent effective upon such appointment and approval,  and the
former Administrative  Agent's rights, powers and duties as Administrative Agent
shall be  terminated,  without  any other or further  act or deed on the part of
such former  Administrative Agent or any of the parties to this Agreement or any
holders  of the  Loans.  If no  successor  agent  has  accepted  appointment  as
Administrative  Agent  by  the  date  that  is  10  days  following  a  retiring
Administrative  Agent's  notice  of  resignation,  the  retiring  Administrative
Agent's  resignation  shall  nevertheless  thereupon become  effective,  and the
Lenders shall assume and perform all of the duties of the  Administrative  Agent
hereunder  until such time, if any, as the Required  Lenders appoint a successor
agent as provided for above.  The Syndication  Agent may, at any time, by notice
to the  Lenders  and the  Administrative  Agent,  resign  as  Syndication  Agent
hereunder, whereupon the duties, rights, obligations and responsibilities of the
Syndication Agent hereunder shall  automatically be assumed by, and inure to the
benefit of, the Administrative Agent, without any further act by the Syndication
Agent,  the  Administrative  Agent or any  Lender.  After any  retiring  Agent's
resignation  as Agent,  the  provisions  of this  Section  9 shall  inure to its
benefit as to any actions  taken or omitted to be taken by it while it was Agent
under this Agreement and the other Loan Documents.

          9.10  Authorization  to Release  Liens.  The  Administrative  Agent is
hereby  irrevocably  authorized  by each of the  Lenders  to  release  any  Lien
covering any Property of the



<PAGE>


                                                                              78




Borrower or any of its Subsidiaries  that is the subject of a Disposition  which
is permitted by this Agreement or which has been consented to in accordance with
Section 10.1.

          9.11 The Arranger and the  Documentation  Agent.  The Arranger and the
Documentation  Agent,  in their  respective  capacities  as such,  shall have no
duties or responsibilities,  and shall incur no liability,  under this Agreement
and the other Loan Documents.

                            SECTION 10. MISCELLANEOUS

          10.1 Amendments and Waivers.  Neither this Agreement or any other Loan
Document,  nor any terms  hereof or  thereof  may be  amended,  supplemented  or
modified  except in accordance  with the  provisions  of this Section 10.1.  The
Required Lenders and each Loan Party to the relevant Loan Document may, or (with
the written  consent of the Required  Lenders) the Agents and each Loan Party to
the  relevant  Loan  Document  may,  from time to time,  (a) enter into  written
amendments,  supplements or modifications hereto and to the other Loan Documents
(including  amendments  and  restatements  hereof or thereof) for the purpose of
adding any  provisions to this Agreement or the other Loan Documents or changing
in any manner the rights of the  Lenders  or of the Loan  Parties  hereunder  or
thereunder or (b) waive, on such terms and conditions as may be specified in the
instrument of waiver,  any of the  requirements  of this  Agreement or the other
Loan  Documents  or any  Default  or  Event  of  Default  and its  consequences;
provided,  however,  that no such waiver and no such  amendment,  supplement  or
modification  shall  (i)  forgive  the  principal  amount  or  extend  the final
scheduled date of maturity of any Loan or Reimbursement  Obligation,  extend the
scheduled date of any amortization  payment in respect of any Term Loan,  reduce
the stated rate of any interest or fee payable hereunder or extend the scheduled
date of any payment  thereof,  or increase  the amount or extend the  expiration
date of any  Commitment of any Lender,  in each case without the consent of each
Lender directly affected thereby;  (ii) amend,  modify or waive any provision of
this Section or reduce any  percentage  specified in the  definition of Required
Lenders or Required Prepayment Lenders, consent to the assignment or transfer by
the Borrower of any of its rights and  obligations  under this Agreement and the
other Loan  Documents,  release all or  substantially  all of the  Collateral or
release  all or  substantially  all  of the  Subsidiary  Guarantors  from  their
guarantee obligations under the Guarantee and Collateral Agreement, in each case
without the consent of all Lenders;  (iii) amend,  modify or waive any condition
precedent to any  extension of credit under the  Revolving  Credit  Facility set
forth in Section 5.2 (including,  without limitation,  the waiver of an existing
Default or Event of Default required to be waived in order for such extension of
credit to be made) without the consent of any Majority Revolving Credit Facility
Lenders;  (iv) reduce the  percentage  specified in the  definition  of Majority
Facility Lenders with respect to any Facility without the written consent of all
Lenders under such Facility; (v) amend, modify or waive any provision of Section
9 without the consent of any Agent directly affected thereby; (vi) amend, modify
or waive any  provision  of Section  2.18  without  the  consent of each  Lender
directly  affected  thereby;  or (vii) amend,  modify or waive any  provision of
Section 3 without  the consent of the  Issuing  Lender.  Any such waiver and any
such amendment, supplement or



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                                                                              79




modification  shall  apply  equally to each of the  Lenders and shall be binding
upon the Loan  Parties,  the Lenders,  the  Administrative  Agent and all future
holders of the Loans. In the case of any waiver,  the Loan Parties,  the Lenders
and the  Administrative  Agent shall be restored to their  former  position  and
rights hereunder and under the other Loan Documents, and any Default or Event of
Default  waived  shall be  deemed to be cured  and not  continuing;  but no such
waiver shall extend to any  subsequent or other Default or Event of Default,  or
impair any right consequent thereon. Any such waiver,  amendment,  supplement or
modification  shall be  effected by a written  instrument  signed by the parties
required to sign pursuant to the foregoing provisions of this Section; provided,
that delivery of an executed  signature page of any such instrument by facsimile
transmission  shall be effective as delivery of a manually executed  counterpart
thereof.  For the avoidance of doubt,  this Agreement may be amended (or amended
and  restated)  with  the  written   consent  of  the  Required   Lenders,   the
Administrative  Agent and each Loan Party to each  relevant Loan Document (x) to
add one or more additional credit facilities to this Agreement and to permit the
extensions of credit from time to time  outstanding  thereunder  and the accrued
interest and fees in respect thereof  (collectively,  the "Additional Extensions
of Credit") to share  ratably in the  benefits of this  Agreement  and the other
Loan  Documents  with the Term Loans and Revolving  Extensions of Credit and the
accrued  interest and fees in respect  thereof and (y) to include  appropriately
the Lenders holding such credit  facilities in any determination of the Required
Lenders,  Required  Prepayment  Lenders and Majority Revolving Facility Lenders;
provided, however, that no such amendment shall permit the Additional Extensions
of Credit to share  ratably  with or with  preference  to the Term  Loans in the
application  of  mandatory  prepayments  without  the  consent  of the  Required
Prepayment  Lenders or otherwise to share ratably with or with preference to the
Revolving  Extensions  of Credit  without the consent of the Majority  Revolving
Facility Lenders.

          10.2  Notices.  All  notices,  requests  and  demands  to or upon  the
respective  parties  hereto to be effective  shall be in writing  (including  by
telecopy),  and, unless otherwise expressly provided herein,  shall be deemed to
have been duly given or made when delivered,  or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received,  addressed (a) in the case of the Borrower and the Agents,  as follows
and (b) in the case of the  Lenders,  as set forth on  Schedule  I to the Lender
Addendum  to which  such  Lender is a party  or,  in the case of a Lender  which
becomes a party to this Agreement  pursuant to an Assignment and Acceptance,  in
such  Assignment and  Acceptance or (c) in the case of any party,  to such other
address as such party may hereafter notify to the other parties hereto:


          The Borrower:                  Powerhouse Technologies, Inc.
                                         2311 South Seventh Avenue
                                         Bozeman, Montana  59715
                                         Attention:  Susan Carstensen
                                         Telecopy:  (406) 582-4006
                                         Telephone:  (406) 585-6600



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                                                                              80




          The Syndication Agent:         Lehman Commercial Paper Inc.
                                         3 World Financial Center
                                         New York, New York 10285
                                         Attention:  Michael O'Brien
                                         Telecopy:  (212) 528-0819
                                         Telephone:  (212) 526-0437


          The Administrative Agent:      Lehman Commercial Paper Inc.
                                         3 World Financial Center
                                         New York, New York 10285
                                         Attention:  Michael O'Brien
                                         Telecopy:  (212) 528-0819
                                         Telephone:  (212) 526-0437

provided  that any notice,  request or demand to or upon the either Agent or any
Lender shall not be effective until received.

          10.3 No Waiver;  Cumulative  Remedies.  No failure to exercise  and no
delay in exercising,  on the part of the either Agent or any Lender,  any right,
remedy,  power or privilege  hereunder or under the other Loan  Documents  shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
right,  remedy,  power or  privilege  hereunder  preclude  any other or  further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights,  remedies,  powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.

          10.4 Survival of Representations  and Warranties.  All representations
and warranties made hereunder,  in the other Loan Documents and in any document,
certificate or statement  delivered  pursuant  hereto or in connection  herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans and other extensions of credit hereunder.

          10.5 Payment of Expenses.  The Borrower agrees (a) to pay or reimburse
the Agents for all their reasonable out-of-pocket costs and expenses incurred in
connection  with the  syndication of the Facilities  (other than fees payable to
syndicate  members) and the  development,  preparation and execution of, and any
amendment,  supplement  or  modification  to, this  Agreement and the other Loan
Documents and any other documents prepared in connection  herewith or therewith,
and the consummation and administration of the transactions  contemplated hereby
and  thereby,   including,   without   limitation,   the  reasonable   fees  and
disbursements and other charges of counsel to the  Administrative  Agent, (b) to
pay or  reimburse  each  Lender and the  Agents  for all its costs and  expenses
incurred in connection  with the enforcement or preservation of any rights under
this Agreement, the other Loan



<PAGE>


                                                                              81




Documents and any such other documents,  including, without limitation, the fees
and disbursements of counsel (including the allocated fees and disbursements and
other charges of in-house  counsel) to each Lender and of counsel to the Agents,
(c) to pay,  indemnify,  and hold each Lender and the Agents  harmless from, any
and all recording and filing fees and any and all  liabilities  with respect to,
or resulting from any delay in paying,  stamp,  excise and other taxes,  if any,
which  may be  payable  or  determined  to be  payable  in  connection  with the
execution  and  delivery of, or  consummation  or  administration  of any of the
transactions  contemplated by, or any amendment,  supplement or modification of,
or any waiver or consent under or in respect of, this Agreement,  the other Loan
Documents and any such other documents, and (d) to pay, indemnify, and hold each
Lender, the Agents,  their respective  affiliates and their respective officers,
directors,  trustees,  employees,  agents  and  controlling  persons  (each,  an
"Indemnitee")   harmless  from  and  against  any  and  all  other  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses or disbursements  of any kind or nature  whatsoever with respect to the
execution,  delivery,  enforcement,   performance  and  administration  of  this
Agreement,  the other Loan  Documents and any such other  documents,  including,
without limitation,  any of the foregoing relating to the use of proceeds of the
Loans  or  the  violation  of,   noncompliance  with  or  liability  under,  any
Environmental  Law  applicable  to the  operations  of the  Borrower  any of its
Subsidiaries or any of the Properties and the fees and  disbursements  and other
charges of legal counsel in connection  with claims,  actions or  proceedings by
any indemnitee  against the Borrower hereunder (all the foregoing in this clause
(d), collectively,  the "Indemnified Liabilities"),  provided, that the Borrower
shall have no obligation hereunder to any Indemnitee with respect to Indemnified
Liabilities to the extent such Indemnified  Liabilities are found by a final and
nonappealable  decision of a court of competent  jurisdiction  to have  resulted
from the gross  negligence  or willful  misconduct of such  Indemnitee.  Without
limiting  the  foregoing,  and to the extent  permitted by  applicable  law, the
Borrower agrees not to assert and to cause its Subsidiaries  not to assert,  and
hereby waives and agrees to cause its  Subsidiaries so to waive,  all rights for
contribution  or any other  rights  of  recovery  with  respect  to all  claims,
demands, penalties, fines, liabilities, settlements, damages, costs and expenses
of whatever kind or nature,  under or related to Environmental Laws, that any of
them might have by statute or otherwise  against any indemnitee.  The agreements
in this  Section  shall  survive  repayment  of the Loans and all other  amounts
payable hereunder.

          10.6 Successors and Assigns;  Participations and Assignments. (a) This
Agreement  shall be binding upon and inure to the benefit of the  Borrower,  the
Lenders,  the  Agents,  all  future  holders  of the Loans and their  respective
successors and assigns,  except that the Borrower may not assign or transfer any
of its rights or  obligations  under this  Agreement  without the prior  written
consent of the Agents and each Lender.

          (b) Any Lender may, without the consent of the Borrower, in accordance
with  applicable  law,  at any  time  sell to one or  more  banks  or  financial
institutions (each, a "Participant")  participating  interests in any Loan owing
to such  Lender,  any  Commitment  of such Lender or any other  interest of such
Lender  hereunder and under the other Loan  Documents.  In the event of any such
sale by a Lender of a participating interest to a



<PAGE>


                                                                              82




Participant, such Lender's obligations under this Agreement to the other parties
to this  Agreement  shall remain  unchanged,  such Lender  shall  remain  solely
responsible for the performance thereof,  such Lender shall remain the holder of
any  such  Loan  for all  purposes  under  this  Agreement  and the  other  Loan
Documents,  and the Borrower  and the Agents  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. In no event shall
any  Participant  under any such  participation  have any right to  approve  any
amendment or waiver of any provision of any Loan Document, or any consent to any
departure by any Loan Party therefrom, except to the extent that such amendment,
waiver or consent  would reduce the  principal  of, or interest on, the Loans or
any fees payable  hereunder,  or postpone the date of the final  maturity of the
Loans,  in each case to the extent subject to such  participation.  The Borrower
agrees that if amounts outstanding under this Agreement and the Loans are due or
unpaid,  or shall have been  declared or shall have become due and payable  upon
the occurrence of an Event of Default,  each  Participant  shall, to the maximum
extent  permitted  by  applicable  law, be deemed to have the right of setoff in
respect of its  participating  interest in amounts owing under this Agreement to
the same  extent  as if the  amount of its  participating  interest  were  owing
directly to it as a Lender under this  Agreement,  provided  that, in purchasing
such participating  interest, such Participant shall be deemed to have agreed to
share with the Lenders the  proceeds  thereof as provided in Section  10.7(a) as
fully as if it were a Lender  hereunder.  The  Borrower  also  agrees  that each
Participant  shall be entitled to the benefits of Sections  2.17,  2.18 and 2.19
with respect to its  participation in the Commitments and the Loans  outstanding
from time to time as if it was a Lender;  provided  that, in the case of Section
2.18, such Participant shall have complied with the requirements of said Section
and  provided,  further,  that no  Participant  shall be entitled to receive any
greater  amount  pursuant to any such Section than the  transferor  Lender would
have been  entitled  to receive  in  respect of the amount of the  participation
transferred by such transferor  Lender to such  Participant had no such transfer
occurred.

          (c) Any Lender (an "Assignor")  may, in accordance with applicable law
and upon written notice to the  Syndication  Agent, at any time and from time to
time assign to any Lender or any  affiliate  thereof or, with the consent of the
Borrower,  the Issuing Lender,  (in the case of assignments of Revolving  Credit
Commitments only) and the  Administrative  Agent (which, in each case, shall not
be unreasonably  withheld or delayed) (provided (x) that no such consent need be
obtained by Lehman  Commercial Paper Inc. for a period of 180 days following the
Closing Date and (y) the consent of the Issuing Lender and the Borrower need not
be obtained  with respect to any  assignment  of Term Loans),  to an  additional
bank,  financial  institution or other entity (an "Assignee") all or any part of
its rights and  obligations  under this Agreement  pursuant to an Assignment and
Acceptance,  substantially  in the form of Exhibit E,  executed by such Assignee
and such Assignor  (and,  where the consent of the  Borrower,  the Agents or the
Issuing Lender is required pursuant to the foregoing provisions, by the Borrower
and such  other  Persons)  and  delivered  to the  Administrative  Agent for its
acceptance and recording in the Register; provided that no such assignment to an
Assignee  (other  than  any  Lender  or any  affiliate  thereof)  shall be in an
aggregate  principal  amount of less than  $5,000,000,  and after giving  effect
thereto, the assigning Lender shall have



<PAGE>


                                                                              83




Commitments and Loans aggregating at least $5,000,000 (other than in the case of
an  assignment  of all of a Lender's  interests  under this  Agreement),  unless
otherwise agreed by the Borrower,  the Syndication Agent and the  Administrative
Agent.  Any such assignment  need not be ratable as among the  Facilities.  Upon
such execution, delivery, acceptance and recording, from and after the effective
date determined  pursuant to such  Assignment and  Acceptance,  (x) the Assignee
thereunder  shall  be a  party  hereto  and,  to the  extent  provided  in  such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
with a  Commitment  and/or  Loans as set  forth  therein,  and (y) the  Assignor
thereunder  shall, to the extent provided in such Assignment and Acceptance,  be
released  from its  obligations  under this  Agreement  (and,  in the case of an
Assignment and Acceptance  covering all of an Assignor's  rights and obligations
under  this  Agreement,  such  Assignor  shall  cease  to  be a  party  hereto).
Notwithstanding any provision of this Section, the consent of the Borrower shall
not be required  for any  assignment  which occurs at any time when any Event of
Default shall have occurred and be continuing.

          (d)  The  Administrative  Agent  shall,  on  behalf  of the  Borrower,
maintain at its address  referred to in Section  10.2 a copy of each  Assignment
and  Acceptance  delivered  to it  and  a  register  (the  "Register")  for  the
recordation of the names and addresses of the Lenders and the Commitment of, and
principal  amount of the Loans  owing to,  each  Lender  from time to time.  The
entries in the Register shall be conclusive,  in the absence of manifest  error,
and the  Borrower,  the  Administrative  Agent and the Lenders  shall treat each
Person  whose name is recorded in the Register as the owner of the Loans and any
Notes evidencing such Loans recorded therein for all purposes of this Agreement.
Any  assignment  of any  Loan,  whether  or not  evidenced  by a Note,  shall be
effective only upon  appropriate  entries with respect thereto being made in the
Register (and each Note shall expressly so provide).  Any assignment or transfer
of all or part of a Loan evidenced by a Note shall be registered on the Register
only upon  surrender  for  registration  of  assignment  or transfer of the Note
evidencing such Loan,  accompanied by a duly executed Assignment and Acceptance;
thereupon one or more new Notes in the same aggregate  principal amount shall be
issued to the  designated  Assignee,  and the old Notes shall be returned by the
Administrative  Agent to the Borrower marked "cancelled".  The Register shall be
available  for  inspection  by the  Borrower  or any  Lender or any Agent at any
reasonable time and from time to time upon reasonable prior notice.

          (e) Upon its receipt of an Assignment  and  Acceptance  executed by an
Assignor and an Assignee (and, in any case where the consent of any other Person
is required by Section 10.6(c), by each such other Person) together with payment
to the  Administrative  Agent of a  registration  and  processing  fee of $3,500
(except that no such  registration  and  processing  fee shall be payable in the
case of an Assignee  which is already a Lender or is an affiliate of a Lender or
a Person under common management with a Lender),  the Administrative Agent shall
(i) promptly  accept such  Assignment  and  Acceptance and (ii) on the effective
date determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation, to the Lenders, the
Agents and the Borrower.  On or prior to such effective  date, the Borrower,  at
its own expense,  upon request,  shall execute and deliver to the Administrative
Agent (in exchange for the Revolving Credit Note and/or


<PAGE>


                                                                              84




applicable  Term  Notes,  as the case may be,  of the  assigning  Lender)  a new
Revolving  Credit Note and/or  applicable Term Notes, as the case may be, to the
order of such  Assignee in an amount equal to the  Revolving  Credit  Commitment
and/or  applicable  Term  Loans,  as the case may be,  assumed or acquired by it
pursuant to such  Assignment and Acceptance  and, if the Assignor has retained a
Revolving Credit Commitment and/or Term Loans, as the case may be, upon request,
a new Revolving  Credit Note and/or Term Notes, as the case may be, to the order
of the Assignor in an amount equal to the  Revolving  Credit  Commitment  and/or
applicable Term Loans,  as the case may be,  retained by it hereunder.  Such new
Note or Notes shall be dated the Closing Date and shall otherwise be in the form
of the Note or Notes replaced thereby.

          (f) For avoidance of doubt, the parties to this Agreement  acknowledge
that the  provisions of this Section  concerning  assignments of Loans and Notes
relate only to absolute  assignments  and that such  provisions  do not prohibit
assignments  creating security interests,  including,  without  limitation,  any
pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank
in accordance with applicable law.

          (g) Each Lender, by becoming a Lender hereunder, represents that it is
a financial  institution  regulated  by a  Governmental  Authority of the United
States or a State thereof, or is a wholly-owned subsidiary of, or is managed by,
such a financial institution.

          10.7  Adjustments;  Set-off.  (a)  Except  to  the  extent  that  this
Agreement provides for payments to be allocated to a particular Lender or to the
Lenders under a particular Facility, if any Lender (a "Benefitted Lender") shall
at any time receive any payment of all or part of the  Obligations  owing to it,
or  receive  any  collateral  in  respect   thereof   (whether   voluntarily  or
involuntarily,  by  set-off,  pursuant  to events or  proceedings  of the nature
referred to in Section 8(f), or  otherwise),  in a greater  proportion  than any
such payment to or collateral  received by any other Lender,  if any, in respect
of such other Lender's  Obligations,  such Benefitted  Lender shall purchase for
cash from the other  Lenders a  participating  interest in such  portion of each
such other  Lender's  Obligations,  or shall provide such other Lenders with the
benefits of any such collateral,  as shall be necessary to cause such Benefitted
Lender to share the excess payment or benefits of such  collateral  ratably with
each of the  Lenders;  provided,  however,  that if all or any  portion  of such
excess payment or benefits is thereafter  recovered from such Benefitted Lender,
such purchase shall be rescinded,  and the purchase price and benefits returned,
to the extent of such recovery, but without interest.

          (b) In addition to any rights and remedies of the Lenders  provided by
law, each Lender shall have the right, without prior notice to the Borrower, any
such notice being  expressly  waived by the Borrower to the extent  permitted by
applicable  law,  upon any  amount  becoming  due and  payable  by the  Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise), to set
off and appropriate and apply against such amount any and all deposits  (general
or special,  time or demand,  provisional  or final),  in any currency,  and any
other credits,  indebtedness  or claims,  in any currency,  in each case whether
direct or



<PAGE>


                                                                              85




indirect,  absolute or  contingent,  matured or  unmatured,  at any time held or
owing by such Lender or any branch or agency thereof to or for the credit or the
account of the Borrower.  Each Lender agrees promptly to notify the Borrower and
the  Administrative  Agent  after any such setoff and  application  made by such
Lender,  provided  that the  failure  to give such  notice  shall not affect the
validity of such setoff and application.

          10.8  Counterparts.  This  Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts, and all of
said counterparts  taken together shall be deemed to constitute one and the same
instrument.  Delivery  of an  executed  signature  page  of  this  Agreement  by
facsimile  transmission  shall be effective  as delivery of a manually  executed
counterpart  hereof.  A set of the  copies of this  Agreement  signed by all the
parties shall be lodged with the Borrower and the Administrative Agent.

          10.9 Severability. Any provision of this Agreement which is prohibited
or  unenforceable  in  any  jurisdiction  shall,  as to  such  jurisdiction,  be
ineffective  to the  extent  of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction.

          10.10  Integration.  This  Agreement  and  the  other  Loan  Documents
represent the agreement of the Borrower, the Agents and the Lenders with respect
to  the  subject  matter  hereof,  and  there  are  no  promises,  undertakings,
representations  or  warranties  by any Agent or any Lender  relative to subject
matter hereof not expressly set forth or referred to herein or in the other Loan
Documents.

          10.11  GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE  PARTIES  UNDER THIS  AGREEMENT  SHALL BE  GOVERNED  BY, AND  CONSTRUED  AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

          10.12  Submission  To  Jurisdiction;   Waivers.  The  Borrower  hereby
irrevocably and unconditionally:

          (a)  submits  for  itself  and its  Property  in any  legal  action or
     proceeding relating to this Agreement and the other Loan Documents to which
     it is a party,  or for  recognition  and  enforcement  of any  judgment  in
     respect thereof, to the non-exclusive general jurisdiction of the courts of
     the State of New York,  the courts of the United  States of America for the
     Southern District of New York, and appellate courts from any thereof;

          (b) consents that any such action or proceeding may be brought in such
     courts and waives any  objection  that it may now or hereafter  have to the
     venue of any such  action  or  proceeding  in any such  court or that  such
     action or proceeding was brought in an inconvenient court and agrees not to
     plead or claim the same;



<PAGE>


                                                                              86




          (c) agrees that  service of process in any such  action or  proceeding
     may be effected by mailing a copy thereof by registered  or certified  mail
     (or any  substantially  similar  form of  mail),  postage  prepaid,  to the
     Borrower at its address set forth in Section 10.2 or at such other  address
     of which  the  Administrative  Agent  shall  have  been  notified  pursuant
     thereto;

          (d)  agrees  that  nothing  herein  shall  affect  the right to effect
     service of process in any other manner  permitted by law or shall limit the
     right to sue in any other jurisdiction; and

          (e) waives,  to the maximum extent not prohibited by law, any right it
     may have to claim or recover in any legal action or proceeding  referred to
     in this Section any special, exemplary, punitive or consequential damages.

          10.13 Acknowledgements. The Borrower hereby acknowledges that:

          (a) it has been advised by counsel in the  negotiation,  execution and
     delivery of this Agreement and the other Loan Documents;

          (b)  neither any Agent nor any Lender has any  fiduciary  relationship
     with or duty to the  Borrower  arising  out of or in  connection  with this
     Agreement or any of the other Loan Documents,  and the relationship between
     the Agents and Lenders,  on one hand, and the Borrower,  on the other hand,
     in connection  herewith or therewith is solely that of debtor and creditor;
     and

          (c) no joint venture is created  hereby or by the other Loan Documents
     or otherwise exists by virtue of the transactions contemplated hereby among
     the Lenders or among the Borrower and the Lenders.

          10.14  Confidentiality.  Each of the Agents and the Lenders  agrees to
keep  confidential all non-public  information  provided to it by any Loan Party
pursuant  to  this   Agreement   that  is  designated  by  such  Loan  Party  as
confidential; provided that nothing herein shall prevent any Agent or any Lender
from disclosing any such  information (a) to any Agent,  any other Lender or any
affiliate  of  any  Lender,   (b)  to  any  Participant  or  Assignee  (each,  a
"Transferee")  or  prospective  Transferee  which  agrees  to  comply  with  the
provisions  of  this  Section,  (c)  any of its  employees,  directors,  agents,
attorneys,  accountants and other professional advisors, (d) upon the request or
demand of any Governmental  Authority having jurisdiction over it, provided that
such Agent or Lender shall notify the  Borrower of any such  disclosure,  (e) in
response  to any order of any court or other  Governmental  Authority  or as may
otherwise be required  pursuant to any  Requirement  of Law, (f) if requested or
required to do so in connection with any litigation or similar  proceeding,  (g)
which has been publicly  disclosed  other than in breach of this Section  10.15,
(h) to the  National  Association  of  Insurance  Commissioners  or any  similar
organization or any nationally  recognized rating agency that requires access to
information about a Lender's investment portfolio in connection



<PAGE>


                                                                              87




with ratings  issued with respect to such Lender or (i) in  connection  with the
exercise of any remedy hereunder or under any other Loan Document.

          10.15  Release  of  Collateral  Security  and  Guarantee  Obligations.
Notwithstanding  anything to the contrary  contained  herein or in the Guarantee
and Collateral Agreement, upon request of the Borrower, the Administrative Agent
shall  (without  notice to or vote or consent of any Lender) take action  having
the effect of releasing any Collateral and/or guarantee obligations provided for
in the  Guarantee  and  Collateral  Agreement to the extent  necessary to permit
consummation,  by the  relevant  Person  in  accordance  with the  terms of this
Agreement  and the other  Loan  Documents,  of any  transaction  not  prohibited
hereunder.

          10.16 Accounting  Changes.  In the event that any "Accounting  Change"
(as defined below) shall occur and such change results in a change in the method
of calculation  of financial  covenants,  standards or terms in this  Agreement,
then the Borrower and the Administrative  Agent agree to enter into negotiations
in order to amend such  provisions of this Agreement so as to equitably  reflect
such Accounting Changes with the desired result that the criteria for evaluating
the  Borrower's  financial  condition  shall be the same after  such  Accounting
Changes as if such Accounting Changes had not been made. Until such time as such
an  amendment  shall have been  executed  and  delivered  by the  Borrower,  the
Administrative   Agent  and  the  Required  Lenders,  all  financial  covenants,
standards  and  terms in this  Agreement  shall  continue  to be  calculated  or
construed as if such Accounting Changes had not occurred.  "Accounting  Changes"
refers to changes in accounting  principles  required by the promulgation of any
rule, regulation, pronouncement or opinion by the Financial Accounting Standards
Board  of  the  American  Institute  of  Certified  Public  Accountants  or,  if
applicable, the SEC.


          10.17 Delivery of Lender  Addenda.  Each initial Lender shall become a
party to this  Agreement  by  delivering  to the  Administrative  Agent  and the
Syndication  Agent a Lender Addendum duly executed by such Lender,  the Borrower
and each Agent.

          10.18 WAIVERS OF JURY TRIAL. THE BORROWER,  THE AGENTS AND THE LENDERS
HEREBY IRREVOCABLY AND  UNCONDITIONALLY  WAIVE TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING  RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.





<PAGE>


                                                                              88




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

                                   POWERHOUSE TECHNOLOGIES, INC.


                                   By:  /S/ Susan J. Carstensen
                                        ---------------------------------------
                                       Name:  Susan J. Carstensen
                                       Title: CFO and Treasurer


                                   LEHMAN BROTHERS INC.,
                                   as Arranger


                                   By:  /S/ William J. Gallagher
                                        ---------------------------------------
                                        Name:  William J. Gallagher
                                        Title: Authorized Signatory


                                   LEHMAN COMMERCIAL PAPER INC., as
                                   Administrative Agent and as a Lender


                                   By:  /S/ William J. Gallagher
                                        ---------------------------------------
                                        Name:  William J. Gallagher
                                        Title: Authorized Signatory


                                   LEHMAN COMMERCIAL PAPER INC., as
                                   Syndication Agent


                                   By:  /S/ William J. Gallagher
                                        ---------------------------------------
                                        Name:  William J. Gallagher
                                        Title: Authorized Signatory










<PAGE>


                                                                              89





                                        CANADIAN IMPERIAL BANK OF
                                        COMMERCE, as Documentation Agent


                                        By:  /S/ Paul J. Chakmak
                                             ----------------------------------
                                             Name:  Paul J. Chakmak
                                             Title: Managing Director
                                             CIBC Oppenheimer Corp., AS AGENT

                                        CIBC Inc., as Lender


                                        By:  /S/ Paul J. Chakmak
                                             ----------------------------------
                                             Name:  Paul J. Chakmak
                                             Title: Managing Director
                                             CIBC Oppenheimer Corp., AS AGENT



<PAGE>


                                                                              90










<TABLE>
<CAPTION>

                                                                         Annex A


                                  PRICING GRID



                                     Applicable Margin for
  Consolidated Leverage               Tranche A Loans and                              Applicable Margin
        Ratio                        Revolving Credit Loans                           for Tranche B Loans
        -----                        ----------------------                           -------------------

                               Eurodollar              Base Rate              Eurodollar              Base Rate
                               ----------              ---------              ----------              ---------
<S>                               <C>                    <C>                    <C>                     <C>

    < 1.5 to 1.0                  1.75%                   .75%
  >/= 1.5 to 1.0 but              2.00%                  1.00%
    < 2.0 to 1.0
  >/= 2.0 to 1.0                  2.25%                  1.25%
=================================================================================================================
  </= 2.0 to 1.0                                                                2.50%                   1.50%
    > 2.0 to 1.0                                                                2.75%                   1.75%
=================================================================================================================
</TABLE>

Changes  in the  Applicable  Margin  with  respect to any Loans  resulting  from
changes in the  Consolidated  Leverage Ratio shall become  effective on the date
(the  "Adjustment  Date") on which  financial  statements  are  delivered to the
Lenders  pursuant  to Section  6.1 (but in any event not later than the 45th day
after the end of each of the first three  quarterly  periods of each fiscal year
or the 90th day after the end of each fiscal year, as the case may be) and shall
remain  in  effect  until  the  next  change  to be  effected  pursuant  to this
paragraph;  provided,  that the first Adjustment Date shall be the date which is
six months after the Closing Date, and any adjustment made on such date shall be
based on the financial  statements most recently  delivered  pursuant to Section
6.1. If any financial  statements referred to above are not delivered within the
time  periods  specified  above,  then,  until  such  financial  statements  are
delivered,  the  Consolidated  Leverage Ratio as at the end of the fiscal period
that would have been covered  thereby shall for the purposes of this  definition
be deemed to be greater  than 2.0 to 1.0.  In  addition,  at all times  while an
Event of  Default  shall  have  occurred  and be  continuing,  the  Consolidated
Leverage Ratio shall for the purposes of this definition be deemed to be greater
than 2.0 to 1.0. Each determination of the Consolidated  Leverage Ratio pursuant
to this definition  shall be made with respect to the period of four consecutive
fiscal  quarters of the Borrower  ending at the end of the period covered by the
relevant financial statements.



<PAGE>


                                                                              91











                                                                    SCHEDULE 1.1



                               MORTGAGED PROPERTY


New Mexico Property
-------------------

          Approximately  164 acres  located  in  Sections 5 and 8,  Township  29
South, Range 4 East, New Mexico Principal Meridian, Dona Ana County, New Mexico.

Texas Property
--------------

          Approximately 1.8 acres located in El Paso County, Texas.

Montana Property
----------------

          Tracts 1B and 2B of  Certificate  of Survey  No.  1393A,  said  survey
located in the Northeast Quarter of Section 24, Township 2 South,  Range 5 East,
P.M.M., City of Bozeman, Gallatin County, Montana according to the official plat
thereof on file and of record in the office of the  County  Clerk and  Recorder,
Gallatin County, Montana.







<PAGE>


                                                                              92











                                                                      SCHEDULE 2



Pledged Stock of Subsidiaries:


                                                                       Shares
Subsidiary                                      Incorporation        Outstanding

Automated Wagering International, Inc.          Delaware                 100
Automatic Music Service of Billings, Inc.       Montana                8,760
Automation First, Inc.                          Montana                1,000
Nuevo Sol Turf Club Inc.                        New Mexico            10,000
Piper Lance, Inc.                               Montana                5,000
 Raven's D&R Music, Inc.                        Montana                9,000
United Tote Company                             Montana                1,000
United Wagering Systems, Inc.                   Delaware               1,000






<PAGE>


                                                                              93











                                         SCHEDULE 3.9 Existing Letters of Credit



BENEFICIARY                                     BANK                      L/C
-------------------------------------------------------------------------------
AMOUNT                                          TERM                      REASON
--------------------------------------------------------------------------------
CNA SURETY CO.    US BANK, N.A.    $7,500,000      RENEWABLE          COLLATERAL
                                                                      AWI PERF
                                                                      BOND

T&L MFG, INC.     US BANK, N.A.    $  475,000      EXP 1/31/99        SECURE
                                                                      INTL.
                                                                      INVENTORY
                                                                      BUY




<PAGE>


                                                                              94











                                                                    SCHEDULE 4.4


                  CONSENTS, AUTHORIZATIONS, FILINGS AND NOTICES


                                     None.



<PAGE>


                                                                              95











                                                                   SCHEDULE 4.15



The  following   corporations  are  either  direct  or  indirect,   wholly-owned
subsidiaries of the Powerhouse Technologies, Inc.:


Subsidiary                                                         Incorporation

Automated Wagering International, Inc.                             Delaware
Automatic Music Service of Billings, Inc.                          Montana
Automation First, Inc.                                             Montana
Nuevo Sol Turf Club Inc.                                           New Mexico
Piper Lance, Inc.                                                  Montana
Raven's D&R Music, Inc.                                            Montana
United Tote Canada, Inc.                                           Canada
United Tote Company                                                Montana
United Wagering Systems, Inc.                                      Delaware
Video Lottery Consultants, Inc.                                    Montana
VLC of Nevada, Inc.                                                Nevada









<PAGE>


                                                                              96











                                                                SCHEDULE 4.19(a)


                            UCC FILING JURISDICTIONS


For Powerhouse Technologies, Inc.

          Montana Secretary of State
          Gallatin County, Montana, Clerk and Recorder
          Delaware Secretary of State
          Georgia Clerks Cooperative Authority
          DeKalb County, Georgia Clerk of Superior Court

For Automated Wagering International, Inc.

          Delaware Secretary of State
          New Jersey Secretary of State
          Bergen County, New Jersey, County Clerk
          Minnesota Secretary of State
          Ramsey County, Minnesota County Recorder
          Pennsylvania Secretary of the Commonwealth
          Florida Department of State
          Georgia Clerks Cooperative Authority
          Montana Secretary of State
          South Dakota Secretary of State
          Maryland State Department of Assessments and Taxation

For Automated Music Service of Billings, Inc.

          Montana Secretary of State
          Gallatin County, Montana, Clerk and Recorder
          Yellowstone County, Montana, Clerk and Recorder

For Automation First, Inc.

          Montana Secretary of State
          Gallatin County, Montana, Clerk and Recorder
          Park County, Montana, Clerk and Recorder

For Ravens D & R Music, Inc.

          Montana Secretary of State
          Gallatin County, Montana, Clerk and Recorder





<PAGE>


                                                                               1





                            UCC FILING JURISDICTIONS


For Video Lottery Consultants, Inc.

          Montana Secretary of State
          Gallatin County, Montana, Clerk and Recorder
          Delaware Secretary of State
          Kent County, Delaware, Recorder of Deeds
          New Castle County, Delaware, Recorder of Deeds
          New Jersey Secretary of State
          Mississippi Secretary of State
          Harrison County, Mssissippi, Chancery Clerk
          Texas Secretary of State
          Oregon Secretary of State
          Rhode Island Secretary of State
          Newport, Rhode Island, City Clerk
          Lincoln, Rhode Island, Town Clerk

For VLC of Nevada, Inc.

          Nevada Secretary f State
          Washoe County, Nevada, County Recorder
          Clark County, Nevada, County Recorder
          Rhode Island Secretary of State
          Newport, Rhode Island, City Clerk
          Providence, Rhode Island, Town Clerk
          Oregon Secretary of State
          Montana Secretary of State
          Multnomah County, Oregon, County Recorder

For United Wagering Systems, Inc.

          Montana Secretary of State
          Gallatin County, Montana, Clerk and Recorder
          Delaware Secretary of State
          Maryland Department of Assessments and Taxation
          Baltimore County, Maryland, County Clerk of the Circuit Court

For United Tote Company

          Montana Secretary of State
          Gallatin County, Montana, Clerk and Recorder
          California Secretary of State
          San Diego County, California, County Recorder
          Indiana Secretary of State
          Texas Secretary of State



<PAGE>


                                                                               2




          Marylnd Department of Assessments and Taxation
          New Mexico Secretary of State
          Kentucky Secretary of State

For Nuevo Sol Turf Club Inc.

          New Mexico Secretary of State
          Dona Ana County, New Mexico, County Clerk
          Texas Secretary of State
          El Paso County, Texas, Office of the Clerk of El Paso County

For Piper Lance Inc.

          Montana Secretary of State



<PAGE>


                                                                               3











                                                                SCHEDULE 4.19(b)


                          MORTGAGE FILING JURISDICTIONS

For Powerhouse Technologies, Inc.

          Montana Secretary of State
          Gallatin County, Montana, Clerk and Recorder

For Nuevo Sol Turf Club Inc.

          New Mexico Secretary of State
          Dona Ana County, New Mexico, County Clerk
          Texas Secretary of State
          El Paso County, Texas, Office of the Clerk of El Paso County




<PAGE>


                                                                               4




                               SCHEDULE 7.2(d)

                              EXISTING INDEBTEDNESS


<TABLE>
<CAPTION>

                                                                               Maturity         Note             June 30,
Co.    Lender                   Description       Security        Guarantor      Date          Amount            Balance
---    ------                   -----------       --------        ---------      ----          ------            -------
<S>    <C>                      <C>               <C>             <C>          <C>           <C>                <C>

PTI
---
       IBM                      Cap Lease         Computer        none         Nov-99           213,300             70,356
       Shelhamer Settlement     note payable      unsecured       none         Sep-01         6,157,000          4,589,810
AWI
---
       EDS                      Term Loan         various         PTI          1/1/04        27,000,000         25,645,832
VLC
---
       Prime Leasing            Term Loan         OR lease        PTI          Nov-98         9,450,956          1,930,503
UWS
---
       Sanwa Leasing            Cap lease         Equipment       PTI          Sep-97         1,837,632             42,946
       Sanwa Leasing            Cap lease         Equipment       PTI          Dec-97           303,896             18,735
       Wrightmar Industries     Purchase debt     Canada asset    none         Mar-01           300,000            109,349
       Rio Grande Bank          Installment       Sunland Trk     none         Sep-01           113,468             25,884
       Elephant Butte           Installment       Sunland Trk     none         Aug-99                                8,378
       Prime Capital            Installment       Equipment       none         Apr-02           672,964            517,830
                                                                                                                ----------
                                                                                                                32,959,623
                                                                                                                ==========
</TABLE>






<PAGE>


                                                                               5




                               SCHEDULE 7.3(f)

                              EXISTING PRIOR LIENS


<TABLE>
<CAPTION>
Debtor                            Secured Party                  Jurisdi            File No.        Description of
------                            -------------                  ction              --------        Collateral
                                                                 -----                              ----------
<S>                               <C>                              <C>              <C>             <C>
Automated Wagering Int'l          Canon Financial Services, Inc.   NJ               1788567         Equipment

Automated Wagering Int'l          Canon Financial Services, Inc.   NJ               1791670         Equipment

Automated Wagering Int'l          Canon Financial Services, Inc.   NJ               1805533         Equipment

Automated Wagering Int'l          Canon Financial Services, Inc.   NJ               1795244         Equipment

Automated Wagering Int'l          IBM Credit Corporation           NJ               1855976         Equipment

Powerhouse Technologies, Inc.     U.S. Bank of N.A.                GA-DeKalb Co.    44-97000124     Securities Acct (LOC)

Powerhouse Technologies, Inc.     U.S. Bank of N.A.                Montana          499318          Securities Acct (LOC)

Powerhouse Technologies, Inc.     U.S. Bank of N.A.                MT-Gallatin Co.  38656           Securities Acct (LOC)

Powerhouse Technologies, Inc.,    IBM Credit Corporation           MT               452613          Equipment
f/k/a Video Lottery Technol,
Inc.

Powerhouse Technologies, Inc.,    GE Capital                       MT               454605          Equipment
f/k/a Video Lottery Technol,
Inc.

United Tote Company               Sanwa Business Credit Corp.      TX               1955781*        Service Contracts

United Tote Company               Sanwa Business Credit Corp.      TX               200994*         Equipment

United Tote Company               Sanwa Business Credit Corp.      TX               100125*         Equipment

United Tote Company               Sanwa Business Credit Corp.      MT               394262*         Equipment

United Tote Company               Sanwa Business Credit Corp.      MT               508924*         Equipment

United Tote Company               Sanwa General Equipment          MT               392840*         Service Contracts
                                  Leasing Inc.

United Tote Company               Sanwa Business Credit Corp.      MT               389774*         Equipment
</TABLE>


OTHER

State Tax Lien on United Tote Company by State of California  dated July 6, 1998
in the amount of $201.75

State Tax Lien on Nuevo Sol Turf Club Inc. by State of New Mexico filed November
21, 1991 in the amount of $683.14

Lease of Real Property  between Nuevo Sol Turf Club Inc. and United Tote Co. and
Bank of the Rio  Grand,  N.A.,  recorded  October  10,  1996  (for ATM  machine)

----------

1.        Has been satisfied, however, release documentation is not available as
          of the date of the closing.  Company is in the process of having liens
          removed.



<PAGE>

                                                                       EXHIBIT A
















                       GUARANTEE AND COLLATERAL AGREEMENT


                                     made by


                          POWERHOUSE TECHNOLOGIES, INC.


                         and certain of its Subsidiaries


                                   in favor of


                          LEHMAN COMMERCIAL PAPER INC.,
                             as Administrative Agent



                           Dated as of October 9, 1998








<PAGE>











                                TABLE OF CONTENTS

                                                                            Page

SECTION 1.        DEFINED TERMS................................................2
         1.1      Definitions..................................................2
         1.2      Other Definitional Provisions................................6

SECTION 2.        GUARANTEE....................................................6
         2.1      Guarantee....................................................6
         2.2      Right of Contribution........................................7
         2.3      No Subrogation...............................................7
         2.4      Amendments, etc. with respect to the Borrower Obligations....8
         2.5      Guarantee Absolute and Unconditional.........................8
         2.6      Reinstatement................................................9
         2.7      Payments ....................................................9

SECTION 3.        GRANT OF SECURITY INTEREST...................................9

SECTION 4.        REPRESENTATIONS AND WARRANTIES..............................10
         4.1      Representations in Credit Agreement.........................10
         4.2      Title; No Other Liens.......................................10
         4.3      Perfected First Priority Liens..............................11
         4.4      Chief Executive Office......................................11
         4.5      Inventory and Equipment.....................................11
         4.6      Farm Products...............................................11
         4.7      Pledged Securities..........................................11
         4.8      Receivables.................................................12
         4.9      Contracts...................................................12
         4.10     Intellectual Property.......................................13
         4.11     Vehicles ...................................................13

SECTION 5.        COVENANTS...................................................13
         5.1      Covenants in Credit Agreement...............................13
         5.2      Delivery of Instruments and Chattel Paper...................13
         5.3      Maintenance of Insurance....................................13
         5.4      Payment of Obligations......................................14
         5.5      Maintenance of Perfected Security Interest; Further
                    Documentation.............................................14
         5.6      Changes in Locations, Name, etc.............................15
         5.7      Notices  ...................................................15
         5.8      Pledged Securities..........................................15
         5.9      Receivables.................................................16
         5.10     Contracts...................................................16
         5.11     Intellectual Property.......................................17


                                        i


<PAGE>


                                                                            Page



SECTION 6.        REMEDIAL PROVISIONS.........................................18
         6.1      Certain Matters Relating to Receivables.....................18
         6.2      Communications with Obligors; Grantors Remain Liable........19
         6.3      Pledged Stock...............................................19
         6.4      Proceeds to be Turned Over To Administrative Agent..........20
         6.5      Application of Proceeds.....................................21
         6.6      Code and Other Remedies.....................................21
         6.7      Registration Rights.........................................22
         6.8      Waiver; Deficiency..........................................23

SECTION 7.        THE ADMINISTRATIVE AGENT....................................23
         7.1      Administrative Agent's Appointment as Attorney-in-Fact, etc.23
         7.2      Duty of Administrative Agent................................25
         7.3      Execution of Financing Statements...........................25
         7.4      Authority of Administrative Agent...........................25

SECTION 8.        MISCELLANEOUS...............................................26
         8.1      Amendments in Writing.......................................26
         8.2      Notices  ...................................................26
         8.3      No Waiver by Course of Conduct; Cumulative Remedies.........26
         8.4      Enforcement Expenses; Indemnification.......................26
         8.5      Successors and Assigns......................................27
         8.6      Set-Off  ...................................................27
         8.7      Counterparts................................................27
         8.8      Severability................................................28
         8.9      Section Headings............................................28
         8.10     Integration.................................................28
         8.11     GOVERNING LAW...............................................28
         8.12     Submission To Jurisdiction; Waivers.........................28
         8.13     Acknowledgements............................................29
         8.14     Additional Grantors.........................................29
         8.15     Releases ...................................................29
         8.16     WAIVER OF JURY TRIAL........................................30


                                       ii


<PAGE>


                                                                               1










                                     FORM OF
                       GUARANTEE AND COLLATERAL AGREEMENT

          GUARANTEE AND COLLATERAL AGREEMENT,  dated as of October 9, 1998, made
by each of the  signatories  hereto  (together  with any other  entity  that may
become a party hereto as provided herein,  (the "Grantors" ), in favor of LEHMAN
COMMERCIAL  PAPER  INC.,  as  administrative   agent  (in  such  capacity,   the
"Administrative  Agent")  for the banks and other  financial  institutions  (the
"Lenders")  from  time to time  parties  to the  Credit  Agreement,  dated as of
October 9 (as supplemented or otherwise  modified from time to time, the "Credit
Agreement")  among  POWERHOUSE  TECHNOLOGIES,  INC, a Delaware  corporation (the
"Borrower"),  the several banks and other  financial  institutions  from time to
time parties to this Agreement (the "Lenders"), LEHMAN BROTHERS INC., as advisor
and arranger (in such capacity,  the "Arranger"),  LEHMAN COMMERCIAL PAPER INC.,
as administrative agent (in such capacity, the "Administrative  Agent"),  LEHMAN
COMMERCIAL PAPER INC., as syndication agent (in such capacity,  the "Syndication
Agent"),  and CANADIAN  IMPERIAL BANK OF COMMERCE.,  as Documentation  Agent (in
such capacity, the "Documentation Agent").

                              W I T N E S S E T H:

          WHEREAS,  pursuant to the Credit Agreement, the Lenders have severally
agreed to make  extensions  of credit to the Borrower upon the terms and subject
to the conditions set forth therein;

          WHEREAS,  the Borrower is a member of an affiliated group of companies
that includes each other Grantor;

          WHEREAS,  the  proceeds of the  extensions  of credit under the Credit
Agreement will be used in part to enable the Borrower to make valuable transfers
to one or more of the other  Grantors in connection  with the operation of their
respective businesses;

          WHEREAS,  the Borrower  and the other  Grantors are engaged in related
businesses, and each Grantor will derive substantial direct and indirect benefit
from the making of the extensions of credit under the Credit Agreement; and

          WHEREAS,  it is a condition precedent to the obligation of the Lenders
to make their  respective  extensions of credit to the Borrower under the Credit
Agreement  that the Grantors shall have executed and delivered this Agreement to
the Administrative Agent for the ratable benefit of the Lenders;

          NOW,  THEREFORE,  in  consideration  of the premises and to induce the
Administrative  Agent and the Lenders to enter into the Credit  Agreement and to
induce the Lenders to make their respective extensions of credit to the Borrower
thereunder,  each Grantor hereby agrees with the  Administrative  Agent, for the
ratable benefit of the Lenders, as follows:




<PAGE>


                                                                               2



                            SECTION 1. DEFINED TERMS

          1.1 Definitions. (a) Unless otherwise defined herein, terms defined in
the Credit  Agreement  and used herein shall have the meanings  given to them in
the Credit  Agreement,  and the following terms which are defined in the Uniform
Commercial  Code in effect in the State of New York on the date  hereof are used
herein as so  defined:  Accounts,  Chattel  Paper,  Documents,  Equipment,  Farm
Products, Instruments, Inventory and Investment Property.

          (b) The following terms shall have the following meanings:

          "Agreement":  this Guarantee and Collateral Agreement, as the same may
     be amended, supplemented or otherwise modified from time to time.

          "Borrower  Obligations":   the  collective  reference  to  the  unpaid
     principal of and interest on the Loans and  Reimbursement  Obligations  and
     all other obligations and liabilities of the Borrower  (including,  without
     limitation,  interest  accruing at the then applicable rate provided in the
     Credit  Agreement  after  the  maturity  of  the  Loans  and  Reimbursement
     Obligations  and interest  accruing at the then applicable rate provided in
     the Credit Agreement after the filing of any petition in bankruptcy, or the
     commencement of any insolvency, reorganization or like proceeding, relating
     to the Borrower,  whether or not a claim for  post-filing or  post-petition
     interest is allowed in such proceeding) to the Administrative  Agent or any
     Lender  (or,  in the case of any Hedge  Agreement  referred  to below,  any
     Affiliate  of  any  Lender),  whether  direct  or  indirect,   absolute  or
     contingent,  due or to become due, or now existing or  hereafter  incurred,
     which may arise under, out of, or in connection with, the Credit Agreement,
     this Agreement, the other Loan Documents, any Letter of Credit or any Hedge
     Agreement entered into by the Borrower with any Lender (or any Affiliate of
     any Lender) or any other  document  made,  delivered or given in connection
     therewith,  in  each  case  whether  on  account  of  principal,  interest,
     reimbursement obligations, fees, indemnities,  costs, expenses or otherwise
     (including,  without  limitation,  all fees and disbursements of counsel to
     the Administrative  Agent or to the Lenders that are required to be paid by
     the Borrower pursuant to the terms of any of the foregoing agreements).

          "Collateral": as defined in Section 3.

          "Collateral  Account":  any  collateral  account  established  by  the
     Administrative Agent as provided in Section 6.1 or 6.4.

          "Contracts": the contracts and agreements listed in Schedule 7, as the
     same may be amended,  supplemented or otherwise modified from time to time,
     including,  without  limitation,  (i) all rights of any  Grantor to receive
     moneys due and to become due to it thereunder  or in connection  therewith,
     (ii) all rights of any Grantor to damages arising  thereunder and (iii) all
     rights of any Grantor to perform and to exercise all  remedies  thereunder,
     in each case to the extent the grant by such Grantor of a security interest
     pursuant  to this  Agreement  in its  right,  title  and  interest  in such
     contract,  agreement,  instrument  or indenture is not  prohibited  by such
     contract, agreement, instrument or



<PAGE>


                                                                               3



     indenture  without the consent of any other party  thereto,  would not give
     any other party to such  contract,  agreement,  instrument or indenture the
     right to terminate its obligations thereunder, or is permitted with consent
     if all  necessary  consents to such grant of a security  interest have been
     obtained  from the other  parties  thereto  (it being  understood  that the
     foregoing  shall not be deemed to  obligate  such  Grantor  to obtain  such
     consents); provided, that the foregoing limitation shall not affect, limit,
     restrict  or  impair  the  grant by such  Grantor  of a  security  interest
     pursuant to this  Agreement in any Receivable or any money or other amounts
     due or to become  due under any such  contract,  agreement,  instrument  or
     indenture  to  the  extent  permitted  by  Section  9-318  of  the  Uniform
     Commercial  Code  in  effect  in  the  applicable   jurisdiction  or  other
     applicable law.

          "Copyrights":  (i) all copyrights arising under the laws of the United
     States,  any other country or any political  subdivision  thereof,  whether
     registered or unregistered and whether published or unpublished (including,
     without  limitation,  those  listed in Schedule 6), all  registrations  and
     recordings   thereof,   and  all  applications  in  connection   therewith,
     including,   without   limitation,   all   registrations,   recordings  and
     applications in the United States Copyright  Office,  and (ii) the right to
     obtain all renewals thereof.

          "Copyright  Licenses":  any  written  agreement  naming any Grantor as
     licensor  or  licensee  (including,  without  limitation,  those  listed in
     Schedule 6),  granting any right under any  Copyright,  including,  without
     limitation,  the grant of rights to  manufacture,  distribute,  exploit and
     sell materials derived from any Copyright.

          "Excluded Assets": collectively (i) the Capital Stock of Video Lottery
     Consultants,  Inc., a Montana  corporation,  (ii) the Capital  Stock of VLC
     Nevada,  Inc., a Nevada corporation (iii) "slot route agreements,"  "bucket
     sale agreements" and other agreements pursuant to which VLC of Nevada, Inc.
     receives a share or percentage  of the gaming  revenues and (iv) assets now
     owned or hereafter  acquired and used in  connection  with on-line  lottery
     systems, in each case to the extent that, and for so long as, the inclusion
     of such property in  Collateral  would  violate any  Requirement  of Law or
     Contractual Obligation binding on the Grantor which owns such property.

          "General  Intangibles":  all  "general  intangibles"  as such  term is
     defined in Section  9-106 of the Uniform  Commercial  Code in effect in the
     State of New York on the date hereof and, in any event, including,  without
     limitation,  with  respect  to  any  Grantor,  all  contracts,  agreements,
     instruments and indentures in any form, and portions thereof, to which such
     Grantor is a party or under  which  such  Grantor  has any right,  title or
     interest  or to which  such  Grantor  or any  property  of such  Grantor is
     subject,  as the same may from  time to time be  amended,  supplemented  or
     otherwise modified,  including,  without limitation, (i) all rights of such
     Grantor to receive  moneys  due and to become  due to it  thereunder  or in
     connection  therewith,  (ii) all rights of such Grantor to damages  arising
     thereunder  and (iii) all rights of such Grantor to perform and to exercise
     all  remedies  thereunder,  in each  case to the  extent  the grant by such
     Grantor of a security  interest  pursuant to this  Agreement  in its right,
     title and interest in such contract, agreement,  instrument or indenture is
     not prohibited by such contract, agreement, instrument or indenture without
     the consent of any other party thereto, would not give any other party



<PAGE>


                                                                               4



     to such contract, agreement, instrument or indenture the right to terminate
     its obligations  thereunder,  or is permitted with consent if all necessary
     consents to such grant of a security  interest  have been obtained from the
     other parties thereto (it being  understood that the foregoing shall not be
     deemed to obligate such Grantor to obtain such  consents);  provided,  that
     the foregoing  limitation shall not affect,  limit,  restrict or impair the
     grant by such Grantor of a security  interest pursuant to this Agreement in
     any Receivable or any money or other amounts due or to become due under any
     such contract, agreement, instrument or indenture.

          "Guarantor   Obligations":   with  respect  to  any   Guarantor,   all
     obligations  and  liabilities of such Guarantor which may arise under or in
     connection with this Agreement (including,  without limitation,  Section 2)
     or any other Loan Document to which such Guarantor is a party, in each case
     whether on account of  guarantee  obligations,  reimbursement  obligations,
     fees,  indemnities,   costs,  expenses  or  otherwise  (including,  without
     limitation,  all fees and  disbursements  of counsel to the  Administrative
     Agent or to the  Lenders  that are  required  to be paid by such  Guarantor
     pursuant to the terms of this Agreement or any other Loan Document).

          "Guarantors":  the collective reference to each Grantor other than the
     Borrower.

          "Hedge Agreements": as to any Person, all interest rate swaps, caps or
     collar  agreements  or similar  arrangements  entered  into by such  Person
     providing for protection against fluctuations in interest rates or currency
     exchange  rates or the  exchange of nominal  interest  obligations,  either
     generally or under specific contingencies.

          "Intellectual  Property":  the  collective  reference  to all  rights,
     priorities  and  privileges  relating  to  intellectual  property,  whether
     arising under United  States,  multinational  or foreign laws or otherwise,
     including,  without limitation, the Copyrights, the Copyright Licenses, the
     Patents,  the Patent Licenses,  the Trademarks and the Trademark  Licenses,
     and all  rights to sue at law or in equity  for any  infringement  or other
     impairment thereof, including the right to receive all proceeds and damages
     therefrom.

          "Intercompany  Note": any promissory note evidencing loans made by any
     Grantor to the Parent or any of its Subsidiaries.

          "Issuers":  the  collective  reference  to each  issuer  of a  Pledged
     Security.

          "Licenses":   any  license,   franchise  or  permit   granted  by  any
     Governmental Authority.

          "New York UCC":  the Uniform  Commercial  Code as from time to time in
     effect in the State of New York.

          "Obligations":   (i)  in  the  case  of  the  Borrower,  the  Borrower
     Obligations,  and  (ii)  in the  case  of  each  Guarantor,  its  Guarantor
     Obligations.




<PAGE>


                                                                               5



          "Patents":  (i) all  letters  patent of the United  States,  any other
     country or any political  subdivision  thereof, all reissues and extensions
     thereof  and  all  goodwill  associated   therewith,   including,   without
     limitation,  any of the  foregoing  referred  to in  Schedule  6,  (ii) all
     applications  for letters  patent of the United States or any other country
     and  all  divisions,   continuations  and  continuations-in-part   thereof,
     including, without limitation, any of the foregoing referred to in Schedule
     6, and  (iii) all  rights  to obtain  any  reissues  or  extensions  of the
     foregoing.

          "Patent License":  all agreements,  whether written or oral, providing
     for the grant by or to any Grantor of any right to manufacture, use or sell
     any invention covered in whole or in part by a Patent,  including,  without
     limitation, any of the foregoing referred to in Schedule 6.

          "Pledged  Notes":  all  Intercompany  Notes at any time  issued to any
     Grantor  and all other  promissory  notes  issued to or held by any Grantor
     (other than promissory  notes issued in connection with extensions of trade
     credit by any Grantor in the ordinary course of business).

          "Pledged  Securities":  the collective  reference to the Pledged Notes
     and the Pledged Stock.

          "Pledged  Stock":  the shares of Capital  Stock  listed on Schedule 2,
     together with any other shares,  stock  certificates,  options or rights of
     any nature  whatsoever  in respect of the Capital  Stock of any Person that
     may be issued or granted to, or held by, any Grantor  while this  Agreement
     is in effect to the extent the pledge of any such  Capital  Stock  acquired
     after the date hereof does not violate any Requirement of Law.

          "Proceeds": all "proceeds" as such term is defined in Section 9-306(1)
     of the  Uniform  Commercial  Code in effect in the State of New York on the
     date hereof and,  in any event,  shall  include,  without  limitation,  all
     dividends or other income from the Pledged Securities,  collections thereon
     or distributions or payments with respect thereto.

          "Receivable":  any right to  payment  for goods  sold or leased or for
     services rendered,  whether or not such right is evidenced by an Instrument
     or  Chattel  Paper and  whether  or not it has been  earned by  performance
     (including, without limitation, any Account).

          "Securities Act": the Securities Act of 1933, as amended.

          "Trademarks":  (i)  all  trademarks,  trade  names,  corporate  names,
     company names,  business names,  fictitious  business names,  trade styles,
     service  marks,  logos and other  source or business  identifiers,  and all
     goodwill  associated  therewith,  now  existing  or  hereafter  adopted  or
     acquired, all registrations and recordings thereof, and all applications in
     connection  therewith,  whether in the United  States  Patent and Trademark
     Office or in any similar office or agency of the United  States,  any State
     thereof  or any other  country or any  political  subdivision  thereof,  or
     otherwise, and all common-law rights related



<PAGE>


                                                                               6



     thereto, including, without limitation, any of the foregoing referred to in
     Schedule 6, and (ii) the right to obtain all renewals thereof.

          "Trademark License": any agreement, whether written or oral, providing
     for the  grant by or to any  Grantor  of any  right  to use any  Trademark,
     including, without limitation, any of the foregoing referred to in Schedule
     6.

          "Vehicles": all cars, trucks, trailers,  construction and earth moving
     equipment and other  vehicles  covered by a certificate of title law of any
     state and all tires and other appurtenances to any of the foregoing.

          1.2 Other Definitional  Provisions.  (a) The words "hereof," "herein",
"hereto" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular  provision of
this Agreement, and Section and Schedule references are to this Agreement unless
otherwise specified.

          (b) The  meanings  given  to terms  defined  herein  shall be  equally
applicable to both the singular and plural forms of such terms.

          (c) Where the context  requires,  terms  relating to the Collateral or
any part  thereof,  when used in  relation  to a  Grantor,  shall  refer to such
Grantor's Collateral or the relevant part thereof.


                              SECTION 2. GUARANTEE

          2.1  Guarantee.  (a)  Each  of  the  Guarantors  hereby,  jointly  and
severally,  unconditionally  and irrevocably,  guarantees to the  Administrative
Agent, for the ratable benefit of the Lenders and their  respective  successors,
indorsees,  transferees  and  assigns,  the  prompt  and  complete  payment  and
performance  by the  Borrower  when due  (whether  at the  stated  maturity,  by
acceleration or otherwise) of the Borrower Obligations.

          (b)  Anything  herein or in any other Loan  Document  to the  contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such  Guarantor  under  applicable  federal  and state laws  relating  to the
insolvency  of  debtors  (after  giving  effect  to the  right  of  contribution
established in Section 2.2).

          (c) Each  Guarantor  agrees that the Borrower  Obligations  may at any
time and from time to time exceed the amount of the liability of such  Guarantor
hereunder  without  impairing  the  guarantee  contained  in this  Section  2 or
affecting  the rights and  remedies  of the  Administrative  Agent or any Lender
hereunder.

          (d) The  guarantee  contained  in this  Section 2 shall remain in full
force and effect until all the Borrower  Obligations and the obligations of each
Guarantor  under the  guarantee  contained  in this  Section  2 shall  have been
satisfied by payment in full, no Letter of Credit shall



<PAGE>


                                                                               7



be outstanding and the  Commitments  shall be terminated,  notwithstanding  that
from time to time during the term of the Credit  Agreement  the  Borrower may be
free from any Borrower Obligations.

          (e) No payment made by the Borrower, any of the Guarantors,  any other
guarantor or any other  Person or received or  collected  by the  Administrative
Agent  or any  Lender  from  the  Borrower,  any of the  Guarantors,  any  other
guarantor  or any other  Person by virtue  of any  action or  proceeding  or any
set-off  or  appropriation  or  application  at any time or from time to time in
reduction  of or in  payment  of the  Borrower  Obligations  shall be  deemed to
modify,  reduce,  release or otherwise  affect the  liability  of any  Guarantor
hereunder which shall,  notwithstanding any such payment (other than any payment
made by such  Guarantor  in respect of the Borrower  Obligations  or any payment
received  or  collected   from  such   Guarantor  in  respect  of  the  Borrower
Obligations),  remain  liable for the  Borrower  Obligations  up to the  maximum
liability of such Guarantor hereunder until the Borrower Obligations are paid in
full,  no  Letter  of  Credit  shall  be  outstanding  and the  Commitments  are
terminated.

          2.2 Right of  Contribution.  Each Guarantor  hereby agrees that to the
extent that a Guarantor shall have paid more than its proportionate share of any
payment made  hereunder,  such  Guarantor  shall be entitled to seek and receive
contribution  from and against any other Guarantor  hereunder which has not paid
its proportionate share of such payment.  Each Guarantor's right of contribution
shall be subject to the terms and  conditions of Section 2.3. The  provisions of
this Section 2.2 shall in no respect limit the  obligations  and  liabilities of
any Guarantor to the  Administrative  Agent and the Lenders,  and each Guarantor
shall  remain  liable to the  Administrative  Agent and the Lenders for the full
amount guaranteed by such Guarantor hereunder.

          2.3 No Subrogation.  Notwithstanding any payment made by any Guarantor
hereunder  or any  set-off  or  application  of  funds of any  Guarantor  by the
Administrative  Agent  or any  Lender,  no  Guarantor  shall be  entitled  to be
subrogated  to any of the  rights  of the  Administrative  Agent  or any  Lender
against  the  Borrower  or any other  Guarantor  or any  collateral  security or
guarantee or right of offset held by the Administrative  Agent or any Lender for
the payment of the  Borrower  Obligations,  nor shall any  Guarantor  seek or be
entitled to seek any  contribution  or  reimbursement  from the  Borrower or any
other Guarantor in respect of payments made by such Guarantor  hereunder,  until
all amounts owing to the Administrative Agent and the Lenders by the Borrower on
account of the Borrower  Obligations are paid in full, no Letter of Credit shall
be outstanding and the  Commitments are terminated.  If any amount shall be paid
to any Guarantor on account of such  subrogation  rights at any time when all of
the Borrower  Obligations shall not have been paid in full, such amount shall be
held by such  Guarantor in trust for the  Administrative  Agent and the Lenders,
segregated from other funds of such Guarantor, and shall, forthwith upon receipt
by such Guarantor,  be turned over to the Administrative Agent in the exact form
received  by  such   Guarantor   (duly   indorsed  by  such   Guarantor  to  the
Administrative  Agent,  if  required),   to  be  applied  against  the  Borrower
Obligations,  whether matured or unmatured,  in such order as the Administrative
Agent may determine.




<PAGE>


                                                                               8



          2.4 Amendments,  etc. with respect to the Borrower  Obligations.  Each
Guarantor shall remain obligated  hereunder  notwithstanding  that,  without any
reservation  of rights  against any Guarantor  and without  notice to or further
assent  by any  Guarantor,  any  demand  for  payment  of  any  of the  Borrower
Obligations made by the  Administrative  Agent or any Lender may be rescinded by
the  Administrative  Agent or such  Lender and any of the  Borrower  Obligations
continued,  and the Borrower  Obligations,  or the liability of any other Person
upon or for any part thereof,  or any collateral  security or guarantee therefor
or right of offset with respect thereto,  may, from time to time, in whole or in
part, be renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered  or released  by the  Administrative  Agent or any  Lender,  and the
Credit  Agreement and the other Loan Documents and any other documents  executed
and delivered in connection therewith may be amended, modified,  supplemented or
terminated,  in whole or in part, as the  Administrative  Agent (or the Required
Lenders  or all  Lenders,  as the case may be) may deem  advisable  from time to
time, and any collateral security, guarantee or right of offset at any time held
by the  Administrative  Agent or any  Lender  for the  payment  of the  Borrower
Obligations may be sold, exchanged, waived, surrendered or released. Neither the
Administrative  Agent nor any  Lender  shall  have any  obligation  to  protect,
secure,  perfect or insure any Lien at any time held by it as  security  for the
Borrower  Obligations  or for the  guarantee  contained in this Section 2 or any
property subject thereto.

          2.5 Guarantee  Absolute and  Unconditional.  Each Guarantor waives any
and all  notice of the  creation,  renewal,  extension  or accrual of any of the
Borrower  Obligations  and notice of or proof of reliance by the  Administrative
Agent or any Lender upon the guarantee contained in this Section 2 or acceptance
of the guarantee contained in this Section 2; the Borrower Obligations,  and any
of them,  shall  conclusively  be  deemed to have been  created,  contracted  or
incurred,  or  renewed,  extended,  amended  or  waived,  in  reliance  upon the
guarantee contained in this Section 2; and all dealings between the Borrower and
any of the  Guarantors,  on the one hand, and the  Administrative  Agent and the
Lenders, on the other hand, likewise shall be conclusively presumed to have been
had or consummated  in reliance upon the guarantee  contained in this Section 2.
Each Guarantor waives diligence,  presentment,  protest,  demand for payment and
notice of default or nonpayment to or upon the Borrower or any of the Guarantors
with respect to the Borrower Obligations.  Each Guarantor understands and agrees
that  the  guarantee  contained  in this  Section  2  shall  be  construed  as a
continuing,  absolute and  unconditional  guarantee of payment without regard to
(a) the  validity or  enforceability  of the Credit  Agreement or any other Loan
Document,  any of the  Borrower  Obligations  or any other  collateral  security
therefor or  guarantee  or right of offset with  respect  thereto at any time or
from  time to time  held by the  Administrative  Agent  or any  Lender,  (b) any
defense,   set-off  or  counterclaim   (other  than  a  defense  of  payment  or
performance)  which  may at any  time  be  available  to or be  asserted  by the
Borrower or any other Person against the Administrative  Agent or any Lender, or
(c) any other circumstance whatsoever (with or without notice to or knowledge of
the  Borrower or such  Guarantor)  which  constitutes,  or might be construed to
constitute,  an  equitable  or legal  discharge of the Borrower for the Borrower
Obligations,  or of such Guarantor under the guarantee contained in this Section
2, in bankruptcy or in any other instance.  When making any demand  hereunder or
otherwise pursuing its rights and remedies hereunder against any Guarantor,  the
Administrative  Agent or any Lender may,  but shall be under no  obligation  to,
make a similar demand on or otherwise  pursue such rights and remedies as it may
have against the  Borrower,  any other  Guarantor or any other Person or against
any collateral security or



<PAGE>


                                                                               9



guarantee  for the  Borrower  Obligations  or any right of offset  with  respect
thereto,  and any failure by the Administrative  Agent or any Lender to make any
such demand,  to pursue such other rights or remedies or to collect any payments
from the  Borrower,  any other  Guarantor or any other Person or to realize upon
any such  collateral  security or  guarantee  or to  exercise  any such right of
offset, or any release of the Borrower,  any other Guarantor or any other Person
or any such collateral security, guarantee or right of offset, shall not relieve
any Guarantor of any obligation or liability hereunder,  and shall not impair or
affect the rights and  remedies,  whether  express,  implied or  available  as a
matter of law, of the Administrative  Agent or any Lender against any Guarantor.
For the purposes hereof "demand" shall include the  commencement and continuance
of any legal proceedings.

          2.6  Reinstatement.  The  guarantee  contained in this Section 2 shall
continue to be effective,  or be reinstated,  as the case may be, if at any time
payment, or any part thereof, of any of the Borrower Obligations is rescinded or
must otherwise be restored or returned by the Administrative Agent or any Lender
upon the insolvency, bankruptcy,  dissolution,  liquidation or reorganization of
the Borrower or any  Guarantor,  or upon or as a result of the  appointment of a
receiver,  intervenor or conservator  of, or trustee or similar officer for, the
Borrower or any Guarantor or any substantial part of its property, or otherwise,
all as though such payments had not been made.

          2.7 Payments. Each Guarantor hereby guarantees that payments hereunder
will be paid to the  Administrative  Agent without  set-off or  counterclaim  in
Dollars at the office of the Administrative  Agent located at the Payment Office
specified in the Credit Agreement.


                      SECTION 3. GRANT OF SECURITY INTEREST

          Each Grantor hereby assigns and transfers to the Administrative Agent,
and hereby grants to the  Administrative  Agent,  for the ratable benefit of the
Lenders,  a security interest in, all of the following  property now owned or at
any time hereafter  acquired by such Grantor or in which such Grantor now has or
at  any  time  in  the  future  may  acquire   any  right,   title  or  interest
(collectively,  the  "Collateral"),  as  collateral  security for the prompt and
complete payment and performance  when due (whether at the stated  maturity,  by
acceleration or otherwise) of such Grantor's Obligations,:

          (a) all Accounts;

          (b) all Chattel Paper;

          (c) all Contracts;

          (d) all Documents;

          (e) all Equipment;

          (f) all General Intangibles;



<PAGE>


                                                                              10



          (g) all Instruments;

          (h) all Intellectual Property;

          (i) all Inventory;

          (j) all Pledged Securities;

          (k) all Investment Property;

          (l) all deposit accounts and other bank accounts;

          (m) all Proceeds of all Licenses;

          (n) all books and records pertaining to the Collateral; and

          (o) to the extent not otherwise included, all Proceeds and products of
     any and all of the foregoing  and all  collateral  security and  guarantees
     given by any Person with respect to any of the foregoing;

provided,  that (i)  notwithstanding  the foregoing,  the  Collateral  shall not
include any  Excluded  Assets and (ii) if at any time after the Closing Date any
property which was previously an Excluded Asset ceases to be an Excluded  Asset,
such property shall immediately and automatically constitute Collateral, and the
Grantor which owns such property  shall  promptly take all actions  necessary to
cause  the  security  interest  created  hereby  in  such  property  to be  duly
perfected.


                    SECTION 4. REPRESENTATIONS AND WARRANTIES

          To induce the  Administrative  Agent and the Lenders to enter into the
Credit Agreement and to induce the Lenders to make their  respective  extensions
of credit  to the  Borrower  thereunder,  each  Grantor  hereby  represents  and
warrants to the Administrative Agent and each Lender that:

          4.1  Representations  in  Credit  Agreement.   In  the  case  of  each
Guarantor,  the  representations  and  warranties  set forth in Section 4 of the
Credit  Agreement as they relate to such  Guarantor or to the Loan  Documents to
which such Guarantor is a party, each of which is hereby  incorporated herein by
reference,  are true and correct,  and the Administrative  Agent and each Lender
shall  be  entitled  to rely on each of them as if they  were  fully  set  forth
herein, provided that each reference in each such representation and warranty to
the Borrower's  knowledge shall, for the purposes of this Section 4.1, be deemed
to be a reference to such Guarantor's knowledge.

          4.2 Title; No Other Liens. Except for the security interest granted to
the Administrative Agent for the ratable benefit of the Lenders pursuant to this
Agreement and the



<PAGE>


                                                                              11



other Liens permitted to exist on the Collateral by the Credit  Agreement,  such
Grantor owns each item of the Collateral  free and clear of any and all Liens or
claims of others. No financing  statement or other public notice with respect to
all or any part of the  Collateral is on file or of record in any public office,
except  such as have been filed in favor of the  Administrative  Agent,  for the
ratable  benefit of the Lenders,  pursuant to this Agreement or as are permitted
by the Credit Agreement.

          4.3 Perfected First Priority  Liens.  The security  interests  granted
pursuant to this Agreement (a) upon  completion of the filings and other actions
specified on Schedule 3 (which,  in the case of all filings and other  documents
referred to on said Schedule, have been delivered to the Administrative Agent in
completed and duly executed  form (other than the blocked  account  agreements))
will constitute valid perfected  security  interests in all of the Collateral in
favor of the  Administrative  Agent, for the ratable benefit of the Lenders,  as
collateral  security for such Grantor's  Obligations,  enforceable in accordance
with the terms  hereof  against all  creditors  of such  Grantor and any Persons
purporting to purchase any Collateral from such Grantor and (b) are prior to all
other Liens on the  Collateral  in existence  on the date hereof  except for (i)
unrecorded  Liens permitted by the Credit Agreement which have priority over the
Liens on the Collateral by operation of law and (ii) Liens described on Schedule
8.

          4.4  Chief  Executive  Office.  On the  date  hereof,  such  Grantor's
jurisdiction of organization  and the location of such Grantor's chief executive
office or sole place of business are specified on Schedule 4.

          4.5 Inventory and Equipment. On the date hereof, the Inventory and the
Equipment (other than mobile goods) are kept at the locations listed on Schedule
5.

          4.6  Farm  Products.  None of the  Collateral  constitutes,  or is the
Proceeds of, Farm Products.

          4.7 Pledged  Securities.  (a) The shares of Pledged  Stock  pledged by
such Grantor hereunder  constitute all the issued and outstanding  shares of all
classes of the Capital  Stock of each Issuer owned by such  Grantor  (other than
Capital Stock constituting Excluded Assets).

          (b) All the shares of the  Pledged  Stock  have been duly and  validly
issued and are fully paid and nonassessable.

          (c) Each of the Pledged Notes constitutes the legal, valid and binding
obligation of the obligor with respect  thereto,  enforceable in accordance with
its  terms,  subject  to  the  effects  of  bankruptcy,  insolvency,  fraudulent
conveyance,  reorganization,  moratorium  and other  similar laws relating to or
affecting  creditors' rights generally,  general equitable  principles  (whether
considered in a proceeding in equity or at law) and an implied  covenant of good
faith and fair dealing.

          (d) Such Grantor is the record and  beneficial  owner of, and has good
and marketable title to, the Pledged Securities pledged by it hereunder, free of
any and all Liens or



<PAGE>


                                                                              12



options  in favor of, or  claims  of,  any other  Person,  except  the  security
interest created by this Agreement.

          4.8  Receivables.  (a) No amount  payable to such Grantor  under or in
connection  with any  Receivable is evidenced by any Instrument or Chattel Paper
which has not been delivered to the Administrative Agent.

          (b) In respect of which any notice,  consent filing or other action is
required in order to create or perfect the security  interest  created hereby in
such Receivables.

          (c) The amounts  represented  by such Grantor to the Lenders from time
to time as owing to such  Grantor  in respect  of the  Receivables  will at such
times be accurate.

          4.9  Contracts.  (a) No consent of any party (other than such Grantor)
to any Contract is required,  or purports to be required, in connection with the
execution, delivery and performance of this Agreement.

          (b) Each Contract is in full force and effect and  constitutes a valid
and  legally  enforceable  obligation  of the  parties  thereto,  subject to the
effects  of  bankruptcy,  insolvency,  fraudulent  conveyance,   reorganization,
moratorium  and other  similar laws relating to or affecting  creditors'  rights
generally,  general equitable  principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.

          (c) No consent or authorization  of, filing with or other act by or in
respect  of any  Governmental  Authority  is  required  in  connection  with the
execution,  delivery,  performance,  validity  or  enforceability  of any of the
Contracts by any party thereto  other than those which have been duly  obtained,
made or performed,  are in full force and effect and do not subject the scope of
any such Contract to any material adverse limitation, either specific or general
in nature.

          (d) Neither such Grantor nor (to the best of such Grantor's knowledge)
any of the other  parties to the Contracts is in default in the  performance  or
observance  of any of the terms  thereof in any manner that,  in the  aggregate,
could  reasonably  be  expected to have a material  adverse  effect on the value
thereof as Collateral.

          (e) The right, title and interest of such Grantor in, to and under the
Contracts  are not subject to any  defenses,  offsets,  counterclaims  or claims
that, in the aggregate,  could reasonably be expected to have a material adverse
effect on the value thereof as Collateral.

          (f) Such Grantor has delivered to the Administrative  Agent a complete
and correct copy of each Contract,  including all  amendments,  supplements  and
other modifications thereto.

          (g) No amount payable to such Grantor under or in connection  with any
Contract is  evidenced  by any  Instrument  or Chattel  Paper which has not been
delivered to the Administrative Agent.




<PAGE>


                                                                              13



          4.10  Intellectual  Property.  (a)  Schedule 6 lists all  Intellectual
Property owned by such Grantor in its own name on the date hereof.

          (b) On the date hereof, all material  Intellectual  Property is valid,
subsisting,  unexpired  and  enforceable,  has not been  abandoned  and does not
infringe the intellectual property rights of any other Person.

          (c) Except as set forth in Schedule 6, on the date hereof, none of the
Intellectual  Property is the subject of any  licensing or  franchise  agreement
pursuant to which such Grantor is the licensor or franchisor.

          (d)  No  holding,  decision  or  judgment  has  been  rendered  by any
Governmental Authority which would limit, cancel or question the validity of, or
such Grantor's  rights in, any  Intellectual  Property in any respect that could
reasonably be expected to have a Material Adverse Effect.

          (e) No action or proceeding  is pending,  or, to the knowledge of such
Grantor, threatened, on the date hereof (i) seeking to limit, cancel or question
the validity of any Intellectual  Property or such Grantor's  ownership interest
therein, or (ii) which, if adversely  determined,  would have a material adverse
effect on the value of any Intellectual Property.

          4.11  Vehicles.  The aggregate book value of all Vehicles owned by all
Grantors does not exceed $200,000.


                              SECTION 5. COVENANTS

          Each Grantor  covenants and agrees with the  Administrative  Agent and
the  Lenders  that,  from  and  after  the  date of  this  Agreement  until  the
Obligations  shall  have  been  paid in  full,  no  Letter  of  Credit  shall be
outstanding and the Commitments shall have terminated:

          5.1 Covenants in Credit Agreement. In the case of each Guarantor, such
Guarantor  shall take,  or shall  refrain from taking,  as the case may be, each
action that is necessary  to be taken or not taken,  as the case may be, so that
no Default or Event of Default is caused by the  failure to take such  action or
to refrain from taking such action by such Guarantor or any of its Subsidiaries.

          5.2 Delivery of Instruments  and Chattel Paper.  If any amount payable
under or in connection with any of the Collateral  shall be or become  evidenced
by any  Instrument or Chattel Paper,  such  Instrument or Chattel Paper shall be
immediately  delivered to the  Administrative  Agent,  duly indorsed in a manner
satisfactory to the Administrative  Agent, to be held as Collateral  pursuant to
this Agreement.

          5.3  Maintenance of Insurance.  (a) Such Grantor will  maintain,  with
financially sound and reputable  companies,  insurance policies (i) insuring the
Inventory,  Equipment and Vehicles  against loss by fire,  explosion,  theft and
such other casualties as may be reasonably



<PAGE>


                                                                              14



satisfactory to the Administrative Agent and (ii) to the extent requested by the
Administrative  Agent,  insuring such Grantor,  the Administrative Agent and the
Lenders  against  liability for personal  injury and property damage relating to
such  Inventory,  Equipment and  Vehicles,  such policies to be in such form and
amounts  and having  such  coverage  as may be  reasonably  satisfactory  to the
Administrative Agent and the Lenders.

          (b) All  such  insurance  shall  (i)  provide  that  no  cancellation,
material  reduction in amount or material  change in coverage  thereof  shall be
effective  until at least 30 days after receipt by the  Administrative  Agent of
written notice thereof,  (ii) name the Administrative  Agent as insured party or
loss payee, (iii) if reasonably requested by the Administrative Agent, include a
breach of  warranty  clause  and (iv) be  reasonably  satisfactory  in all other
respects to the Administrative Agent.

          (c) The Borrower  shall  deliver to the  Administrative  Agent and the
Lenders a report of a reputable  insurance broker with respect to such insurance
substantially   concurrently   with  the   delivery  by  the   Borrower  to  the
Administrative  Agent of its audited  financial  statements for each fiscal year
and such supplemental  reports with respect thereto as the Administrative  Agent
may from time to time reasonably request.

          5.4 Payment of  Obligations.  Such Grantor  will pay and  discharge or
otherwise satisfy at or before maturity or before they become delinquent, as the
case may be, all taxes,  assessments and governmental  charges or levies imposed
upon the Collateral or in respect of income or profits therefrom, as well as all
claims of any kind (including,  without limitation,  claims for labor, materials
and  supplies)  against or with respect to the  Collateral,  except that no such
charge  need be paid if the  amount  or  validity  thereof  is  currently  being
contested in good faith by appropriate proceedings,  reserves in conformity with
GAAP with respect  thereto  have been  provided on the books of such Grantor and
such  proceedings  could  not  reasonably  be  expected  to  result in the sale,
forfeiture  or loss of any material  portion of the  Collateral  or any interest
therein.

          5.5 Maintenance of Perfected Security Interest; Further Documentation.
(a) Such Grantor shall maintain the security  interest created by this Agreement
as a perfected  security  interest  having at least the  priority  described  in
Section  4.3 and shall  defend  such  security  interest  against the claims and
demands of all Persons whomsoever.

          (b) Such  Grantor  will  furnish to the  Administrative  Agent and the
Lenders from time to time  statements  and  schedules  further  identifying  and
describing  the  Collateral  and  such  other  reports  in  connection  with the
Collateral as the Administrative Agent may reasonably request, all in reasonable
detail.

          (c) At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of such Grantor, such Grantor will
promptly  and  duly  execute  and  deliver,  and  have  recorded,  such  further
instruments  and documents and take such further  actions as the  Administrative
Agent may reasonably request for the purpose of obtaining or preserving the full
benefits  of  this  Agreement  and of the  rights  and  powers  herein  granted,
including,  without  limitation,  the filing of any  financing  or  continuation
statements



<PAGE>


                                                                              15



under  the  Uniform  Commercial  Code (or other  similar  laws) in effect in any
jurisdiction with respect to the security interests created hereby.

          5.6 Changes in Locations,  Name,  etc.  Such Grantor will not,  except
upon 15 days' prior written notice to the  Administrative  Agent and delivery to
the Administrative Agent of (a) all additional executed financing statements and
other documents reasonably requested by the Administrative Agent to maintain the
validity,  perfection and priority of the security interests provided for herein
and (b) if applicable, a written supplement to Schedule 5 showing any additional
location at which Inventory or Equipment shall be kept:

          (i) permit any of the  Inventory or Equipment to be kept at a location
     other than those listed on Schedule 5, provided;  however, that United Tote
     Company  may  temporarily  move a  non-material  portion of its assets to a
     location not listed on Schedule 5 in the ordinary course of business;

          (ii) change the location of its chief  executive  office or sole place
     of business from that referred to in Section 4.4; or

          (iii)  change its name,  identity or  corporate  structure  to such an
     extent that any financing  statement filed by the  Administrative  Agent in
     connection with this Agreement would become misleading.

          5.7 Notices. Such Grantor will advise the Administrative Agent and the
Lenders promptly, in reasonable detail, of:

          (a) any Lien (other than security  interests  created  hereby or Liens
permitted  under the Credit  Agreement)  on any of the  Collateral  which  would
adversely affect the ability of the Administrative  Agent to exercise any of its
remedies hereunder; and

          (b) of the  occurrence  of any other event which could  reasonably  be
expected  to have a  material  adverse  effect  on the  aggregate  value  of the
Collateral or on the security interests created hereby.

          5.8 Pledged  Securities.  (a) If such Grantor shall become entitled to
receive or shall receive any stock certificate  (including,  without limitation,
any  certificate  representing a stock dividend or a distribution  in connection
with any  reclassification,  increase or reduction of capital or any certificate
issued in connection  with any  reorganization),  option or rights in respect of
the Capital Stock of any Issuer,  whether in addition to, in substitution of, as
a  conversion  of, or in  exchange  for,  any shares of the  Pledged  Stock,  or
otherwise in respect thereof, such Grantor shall accept the same as the agent of
the  Administrative  Agent  and the  Lenders,  hold the  same in  trust  for the
Administrative  Agent and the  Lenders and  deliver  the same  forthwith  to the
Administrative  Agent in the exact form received,  duly indorsed by such Grantor
to the Administrative  Agent, if required,  together with an undated stock power
covering  such  certificate  duly executed in blank by such Grantor and with, if
the Administrative Agent so requests,  signature  guaranteed,  to be held by the
Administrative  Agent,  subject to the terms hereof,  as  additional  collateral
security for the Obligations. Any sums paid upon or in respect of the



<PAGE>


                                                                              16



Pledged  Securities  upon the  liquidation or dissolution of any Issuer shall be
paid over to the  Administrative  Agent to be held by it hereunder as additional
collateral security for the Obligations, and in case any distribution of capital
shall be made on or in respect of the Pledged  Securities or any property  shall
be distributed  upon or with respect to the Pledged  Securities  pursuant to the
recapitalization or reclassification of the capital of any Issuer or pursuant to
the reorganization  thereof, the property so distributed shall, unless otherwise
subject to a perfected security interest in favor of the  Administrative  Agent,
be  delivered  to  the  Administrative  Agent  to be  held  by it  hereunder  as
additional  collateral  security  for the  Obligations.  If any sums of money or
property so paid or  distributed in respect of the Pledged  Securities  shall be
received by such Grantor,  such Grantor  shall,  until such money or property is
paid or delivered to the  Administrative  Agent,  hold such money or property in
trust  for  the  Lenders,  segregated  from  other  funds  of such  Grantor,  as
additional collateral security for the Obligations.

          (b) Without the prior  written  consent of the  Administrative  Agent,
such  Grantor  will not (i) vote to enable,  or take any other action to permit,
any  Issuer to issue any stock or other  equity  securities  of any nature or to
issue any other securities convertible into or granting the right to purchase or
exchange for any stock or other equity  securities  of any nature of any Issuer,
(ii) sell,  assign,  transfer,  exchange,  or otherwise dispose of, or grant any
option with  respect  to, the Pledged  Securities  or Proceeds  thereof  (except
pursuant to a transaction  expressly  permitted by the Credit Agreement),  (iii)
create, incur or permit to exist any Lien or option in favor of, or any claim of
any Person with respect to, any of the Pledged  Securities or Proceeds  thereof,
or any  interest  therein,  except for the  security  interests  created by this
Agreement or (iv) enter into any agreement or undertaking  restricting the right
or  ability  of such  Grantor  or the  Administrative  Agent to sell,  assign or
transfer any of the Pledged Securities or Proceeds thereof.

          (c) In the case of each Grantor which is an Issuer, such Issuer agrees
that (i) it will be bound by the terms of this Agreement relating to the Pledged
Securities  issued by it and will comply  with such terms  insofar as such terms
are applicable to it, (ii) it will notify the  Administrative  Agent promptly in
writing of the occurrence of any of the events  described in Section 5.8(a) with
respect to the Pledged  Securities  issued by it and (iii) the terms of Sections
6.3(c) and 6.7 shall apply to it, mutatis mutandis,  with respect to all actions
that may be required of it pursuant to Section 6.3(c) or 6.7 with respect to the
Pledged Securities issued by it.

          5.9  Receivables.  (a) Other than in the  ordinary  course of business
consistent with its past practice, such Grantor will not (i) grant any extension
of the  time of  payment  of any  Receivable,  (ii)  compromise  or  settle  any
Receivable  for less than the full  amount  thereof,  (iii)  release,  wholly or
partially,  any Person liable for the payment of any Receivable,  (iv) allow any
credit or discount  whatsoever  on any  Receivable  or (v) amend,  supplement or
modify any  Receivable  in any  manner  that  could  adversely  affect the value
thereof.

          (b) Such Grantor will  deliver to the  Administrative  Agent a copy of
each material demand,  notice or document received by it that questions or calls
into  doubt the  validity  or  enforceability  of more than 5% of the  aggregate
amount of the then outstanding Receivables.

          5.10  Contracts.  (a) Such  Grantor  will  perform  and  comply in all
material respects with all its obligations under the Contracts.



<PAGE>


                                                                              17



          (b) Such  Grantor  will not  amend,  modify,  terminate  or waive  any
provision of any Contract in any manner  which could  reasonably  be expected to
materially adversely affect the value of such Contract as Collateral.

          (c) Such Grantor will exercise  promptly and diligently each and every
material  right which it may have under each  Contract  (other than any right of
termination).

          (d) Such Grantor will  deliver to the  Administrative  Agent a copy of
each material demand,  notice or document  received by it relating in any way to
any Contract that questions the validity or enforceability of such Contract.

          5.11 Intellectual Property. (a) Such Grantor (either itself or through
licensees)  will (i) continue to use each  material  Trademark on each and every
trademark  class of goods  applicable  to its current  line as  reflected in its
current catalogs,  brochures and price lists in order to maintain such Trademark
in full force free from any claim of abandonment  for non-use,  (ii) maintain as
in the past the quality of products and services  offered under such  Trademark,
(iii) use such Trademark with the  appropriate  notice of  registration  and all
other notices and legends  required by applicable  Requirements of Law, (iv) not
adopt or use any mark which is confusingly  similar or a colorable  imitation of
such Trademark unless the  Administrative  Agent, for the ratable benefit of the
Lenders,  shall obtain a perfected  security  interest in such mark  pursuant to
this Agreement,  and (v) not (and not permit any licensee or sublicensee thereof
to) do any act or knowingly omit to do any act whereby such Trademark may become
invalidated or impaired in any way.

          (b) Such Grantor (either itself or through  licensees) will not do any
act, or omit to do any act,  whereby any material  Patent may become  forfeited,
abandoned or dedicated to the public.

          (c) Such Grantor (either itself or through  licensees) (i) will employ
each  material  Copyright and (ii) will not (and will not permit any licensee or
sublicensee  thereof to) do any act or knowingly  omit to do any act whereby any
material portion of the Copyrights may become invalidated or otherwise impaired.
Such Grantor will not (either  itself or through  licensees)  do any act whereby
any material portion of the Copyrights may fall into the public domain.

          (d) Such Grantor (either itself or through  licensees) will not do any
act that  knowingly  uses any  material  Intellectual  Property to infringe  the
intellectual property rights of any other Person.

          (e) Such Grantor will notify the Administrative  Agent and the Lenders
immediately  if it  knows,  or has  reason  to  know,  that any  application  or
registration   relating  to  any  material   Intellectual  Property  may  become
forfeited, abandoned or dedicated to the public, or of any adverse determination
or development (including,  without limitation,  the institution of, or any such
determination  or development in, any proceeding in the United States Patent and
Trademark Office, the United States Copyright Office or any court or tribunal in
any country)  regarding  such  Grantor's  ownership  of, or the validity of, any
material  Intellectual  Property or such Grantor's right to register the same or
to own and maintain the same.



<PAGE>


                                                                              18



          (f)  Whenever  such  Grantor,  either by itself or through  any agent,
employee,  licensee or designee,  shall file an application for the registration
of any Intellectual Property with the United States Patent and Trademark Office,
the United States  Copyright Office or any similar office or agency in any other
country or any  political  subdivision  thereof,  such Grantor shall report such
filing to the Administrative  Agent within five Business Days after the last day
of the  fiscal  quarter  in  which  such  filing  occurs.  Upon  request  of the
Administrative Agent, such Grantor shall execute and deliver, and have recorded,
any and all agreements, instruments, documents, and papers as the Administrative
Agent may  request to  evidence  the  Administrative  Agent's  and the  Lenders'
security  interest in any  Copyright,  Patent or Trademark  and the goodwill and
general intangibles of such Grantor relating thereto or represented thereby.

          (g)  Such  Grantor  will  take all  reasonable  and  necessary  steps,
including, without limitation, in any proceeding before the United States Patent
and Trademark  Office,  the United States Copyright Office or any similar office
or agency in any other country or any political subdivision thereof, to maintain
and pursue each  application  (and to obtain the relevant  registration)  and to
maintain each  registration of the material  Intellectual  Property,  including,
without  limitation,  filing of applications for renewal,  affidavits of use and
affidavits of incontestability.

          (h) In the event that any material Intellectual Property is infringed,
misappropriated  or diluted by a third party,  such Grantor  shall (i) take such
actions  as  such  Grantor  shall   reasonably   deem   appropriate   under  the
circumstances   to  protect  such   Intellectual   Property  and  (ii)  if  such
Intellectual  Property  is of  material  economic  value,  promptly  notify  the
Administrative   Agent  after  it  learns  thereof  and  sue  for  infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and to
recover any and all damages for such infringement, misappropriation or dilution.


                         SECTION 6. REMEDIAL PROVISIONS

          6.1 Certain Matters  Relating to Receivables.  (a) The  Administrative
Agent shall have the right to make test  verifications of the Receivables in any
manner and through any medium that it reasonably considers  advisable,  and each
Grantor shall furnish all such assistance and information as the  Administrative
Agent may require in connection  with such test  verifications.  At any time and
from time to time, upon the Administrative Agent's request and at the expense of
the relevant Grantor, such Grantor shall cause independent public accountants or
others satisfactory to the Administrative Agent to furnish to the Administrative
Agent reports  showing  reconciliations,  aging and test  verifications  of, and
trial balances for, the Receivables.

          (b) The Administrative Agent hereby authorizes each Grantor to collect
such Grantor's Receivables,  subject to the Administrative Agent's direction and
control, and the Administrative Agent may curtail or terminate said authority at
any time after the occurrence and during the continuance of an Event of Default.
If required by the  Administrative  Agent at any time after the  occurrence  and
during the continuance of an Event of Default, any payments of Receivables, when
collected by any Grantor,  (i) shall be forthwith (and, in any event, within two
Business  Days)  deposited  by such  Grantor  in the exact form  received,  duly
indorsed by such



<PAGE>


                                                                              19



Grantor  to the  Administrative  Agent  if  required,  in a  Collateral  Account
maintained  under the sole  dominion  and control of the  Administrative  Agent,
subject to withdrawal by the Administrative Agent for the account of the Lenders
only as provided in Section 6.5, and (ii) until so turned over, shall be held by
such Grantor in trust for the Administrative  Agent and the Lenders,  segregated
from other funds of such Grantor.  Each such deposit of Proceeds of  Receivables
shall be accompanied by a report identifying in reasonable detail the nature and
source of the payments included in the deposit.

          (c) At the Administrative  Agent's request, each Grantor shall deliver
to the  Administrative  Agent all original and other documents  evidencing,  and
relating to, the agreements and transactions which gave rise to the Receivables,
including,  without  limitation,  all  original  orders,  invoices  and shipping
receipts.

          6.2  Communications  with Obligors;  Grantors  Remain Liable.  (a) The
Administrative  Agent in its own name or in the name of  others  may at any time
communicate  with obligors under the Receivables and parties to the Contracts to
verify  with them to the  Administrative  Agent's  satisfaction  the  existence,
amount and terms of any Receivables or Contracts.

          (b) Upon the request of the Administrative Agent at any time after the
occurrence and during the continuance of an Event of Default, each Grantor shall
notify  obligors  on the  Receivables  and  parties  to the  Contracts  that the
Receivables and the Contracts have been assigned to the Administrative Agent for
the ratable benefit of the Lenders and that payments in respect thereof shall be
made directly to the Administrative Agent.

          (c)  Anything  herein to the  contrary  notwithstanding,  each Grantor
shall remain liable under each of the  Receivables  and Contracts to observe and
perform all the  conditions  and  obligations to be observed and performed by it
thereunder,  all in  accordance  with the  terms of any  agreement  giving  rise
thereto.  Neither  the  Administrative  Agent  nor any  Lender  shall  have  any
obligation  or liability  under any  Receivable  (or any  agreement  giving rise
thereto)  or  Contract  by reason of or  arising  out of this  Agreement  or the
receipt  by the  Administrative  Agent or any  Lender  of any  payment  relating
thereto,  nor shall the  Administrative  Agent or any Lender be obligated in any
manner to perform any of the obligations of any Grantor under or pursuant to any
Receivable  (or any  agreement  giving rise  thereto) or  Contract,  to make any
payment,  to make any inquiry as to the nature or the sufficiency of any payment
received  by it or as to  the  sufficiency  of  any  performance  by  any  party
thereunder,  to  present or file any  claim,  to take any action to enforce  any
performance  or to  collect  the  payment  of any  amounts  which  may have been
assigned to it or to which it may be entitled at any time or times.

          6.3 Pledged Stock.  (a) Unless an Event of Default shall have occurred
and be continuing  and the  Administrative  Agent shall have given notice to the
relevant  Grantor  of  the   Administrative   Agent's  intent  to  exercise  its
corresponding rights pursuant to Section 6.3(b), each Grantor shall be permitted
to receive  all cash  dividends  paid in respect  of the  Pledged  Stock and all
payments made in respect of the Pledged  Notes,  in each case paid in the normal
course of business of the relevant  Issuer and consistent with past practice and
to  exercise  all voting  and  corporate  rights  with  respect  to the  Pledged
Securities; provided, however, that no vote shall be



<PAGE>


                                                                              20



cast  or  corporate  right  exercised  or  other  action  taken  which,  in  the
Administrative Agent's reasonable judgment, would impair the Collateral or which
would be  inconsistent  with or result in any  violation of any provision of the
Credit Agreement, this Agreement or any other Loan Document.

          (b) If an Event of  Default  shall  occur  and be  continuing  and the
Administrative  Agent shall give notice of its intent to exercise such rights to
the relevant Grantor or Grantors,  (i) the  Administrative  Agent shall have the
right to receive any and all cash dividends,  payments or other Proceeds paid in
respect  of  the  Pledged  Securities  and  make  application   thereof  to  the
Obligations  in the  order  set  forth  in  Section  6.5,  and,  subject  to the
requirements of applicable law (including without limitation  licensing approval
requirements  of  regulatory  authorities)  (ii)  any  or  all  of  the  Pledged
Securities  shall be registered in the name of the  Administrative  Agent or its
nominee, and the Administrative Agent or its nominee may thereafter exercise (x)
all voting,  corporate and other rights pertaining to such Pledged Securities at
any meeting of  shareholders  of the relevant Issuer or Issuers or otherwise and
(y) any and all rights of conversion,  exchange and  subscription  and any other
rights,  privileges or options  pertaining  to such Pledged  Securities as if it
were the absolute owner thereof  (including,  without  limitation,  the right to
exchange  at its  discretion  any and all of the  Pledged  Securities  upon  the
merger,  consolidation,  reorganization,  recapitalization  or other fundamental
change in the  corporate  structure  of any Issuer,  or upon the exercise by any
Grantor or the Administrative Agent of any right, privilege or option pertaining
to such Pledged Securities,  and in connection  therewith,  the right to deposit
and  deliver  any  and  all  of  the  Pledged  Securities  with  any  committee,
depositary, transfer agent, registrar or other designated agency upon such terms
and conditions as the Administrative Agent may determine), all without liability
except to account for property actually  received by it, but the  Administrative
Agent shall have no duty to any Grantor to exercise any such right, privilege or
option  and shall not be  responsible  for any  failure  to do so or delay in so
doing.

          (c) Each Grantor  hereby  authorizes  and instructs each Issuer of any
Pledged  Securities  pledged by such  Grantor  hereunder  to (i) comply with any
instruction  received by it from the  Administrative  Agent in writing  that (x)
states  that an Event of  Default  has  occurred  and is  continuing  and (y) is
otherwise in accordance with the terms of this  Agreement,  without any other or
further instructions from such Grantor, and each Grantor agrees that each Issuer
shall be fully protected in so complying,  and (ii) unless  otherwise  expressly
permitted  hereby,  pay any  dividends  or other  payments  with  respect to the
Pledged Securities directly to the Administrative Agent.

          6.4 Proceeds to be Turned Over To Administrative Agent. In addition to
the rights of the Administrative  Agent and the Lenders specified in Section 6.1
with respect to payments of Receivables,  if an Event of Default shall occur and
be continuing,  all Proceeds received by any Grantor  consisting of cash, checks
and  other  near-cash  items  shall be held by such  Grantor  in  trust  for the
Administrative  Agent  and the  Lenders,  segregated  from  other  funds of such
Grantor,  and shall,  forthwith upon receipt by such Grantor,  be turned over to
the  Administrative  Agent in the exact  form  received  by such  Grantor  (duly
indorsed by such Grantor to the Administrative Agent, if required). All Proceeds
received  by  the   Administrative   Agent   hereunder  shall  be  held  by  the
Administrative  Agent in a Collateral Account maintained under its sole dominion
and control. All Proceeds while held by the Administrative Agent in a Collateral



<PAGE>


                                                                              21



Account  (or by such  Grantor  in trust  for the  Administrative  Agent  and the
Lenders)  shall  continue  to  be  held  as  collateral  security  for  all  the
Obligations  and shall not constitute  payment thereof until applied as provided
in Section 6.5.

          6.5  Application of Proceeds.  At such intervals as may be agreed upon
by the Borrower and the  Administrative  Agent, or, if an Event of Default shall
have  occurred  and be  continuing,  at any time at the  Administrative  Agent's
election,  the  Administrative  Agent  may  apply  all or any  part of  Proceeds
constituting Collateral,  whether or not held in any Collateral Account, and any
proceeds of the guarantee set forth in Section 2, in payment of the  Obligations
in the following order:

          First,   to  pay   incurred  and  unpaid  fees  and  expenses  of  the
     Administrative Agent under the Loan Documents;

          Second,  to the  Administrative  Agent,  for application by it towards
     payment of amounts  then due and owing and  remaining  unpaid in respect of
     the Obligations, pro rata among the Lenders according to the amounts of the
     Obligations then due and owing and remaining unpaid to the Lenders;

          Third,  to the  Administrative  Agent,  for  application by it towards
     prepayment of the Obligations,  pro rata among the Lenders according to the
     amounts of the Obligations then held by the Lenders; and

          Fourth,  any balance of such Proceeds  remaining after the Obligations
     shall have been paid in full, no Letters of Credit shall be outstanding and
     the Commitments shall have terminated shall be paid over to the Borrower or
     to whomsoever may be lawfully entitled to receive the same.

          6.6 Code and Other Remedies. If an Event of Default shall occur and be
continuing,  the Administrative Agent, on behalf of the Lenders, may, subject to
applicable gaming laws,  exercise,  in addition to all other rights and remedies
granted  to them in this  Agreement  and in any other  instrument  or  agreement
securing,  evidencing or relating to the Obligations, all rights and remedies of
a secured  party  under the New York UCC or any other  applicable  law.  Without
limiting the  generality of the foregoing,  the  Administrative  Agent,  without
demand of performance or other demand,  presentment,  protest,  advertisement or
notice of any kind  (except any notice  required by law referred to below) to or
upon any Grantor or any other Person (all and each of which  demands,  defenses,
advertisements  and  notices  are  hereby  waived),  may in  such  circumstances
forthwith collect, receive,  appropriate and realize upon the Collateral, or any
part  thereof,  and/or  may  forthwith,  subject  to  regulatory  approvals  and
licensing requirements, sell, lease, assign, give option or options to purchase,
or  otherwise  dispose of and deliver  the  Collateral  or any part  thereof (or
contract  to do any of the  foregoing),  in one or more  parcels  at  public  or
private  sale or  sales,  at any  exchange,  broker's  board  or  office  of the
Administrative  Agent or any Lender or elsewhere  upon such terms and conditions
as it may deem  advisable and at such prices as it may deem best, for cash or on
credit or for  future  delivery  without  assumption  of any  credit  risk.  The
Administrative  Agent or any Lender  shall  have the right upon any such  public
sale or sales, and, to the extent permitted by law, upon any



<PAGE>


                                                                              22



such private sale or sales,  to purchase the whole or any part of the Collateral
so sold,  free of any right or equity of redemption in any Grantor,  which right
or equity is hereby waived and released.  Each Grantor  further  agrees,  at the
Administrative Agent's request, to assemble the Collateral and make it available
to the  Administrative  Agent at places  which the  Administrative  Agent  shall
reasonably  select,  whether  at  such  Grantor's  premises  or  elsewhere.  The
Administrative  Agent  shall apply the net  proceeds  of any action  taken by it
pursuant to this Section 6.6, after deducting all reasonable  costs and expenses
of every kind  incurred in  connection  therewith or  incidental  to the care or
safekeeping of any of the Collateral or in any way relating to the Collateral or
the rights of the  Administrative  Agent and the Lenders  hereunder,  including,
without limitation, reasonable attorneys' fees and disbursements, to the payment
in  whole or in part of the  Obligations,  in such  order as the  Administrative
Agent may elect,  and only after such  application  and after the payment by the
Administrative  Agent of any other  amount  required  by any  provision  of law,
including, without limitation, Section 9-504(1)(c) of the New York UCC, need the
Administrative  Agent  account for the surplus,  if any, to any Grantor.  To the
extent permitted by applicable law, each Grantor waives all claims,  damages and
demands it may acquire  against the  Administrative  Agent or any Lender arising
out of the exercise by them of any rights hereunder. If any notice of a proposed
sale or other  disposition  of Collateral  shall be required by law, such notice
shall be deemed reasonable and proper if given at least 10 days before such sale
or other disposition.

          6.7  Registration  Rights.  (a)  If  the  Administrative  Agent  shall
determine to exercise its right to sell any or all of the Pledged Stock pursuant
to  Section  6.6,  and  if in the  opinion  of the  Administrative  Agent  it is
necessary or advisable to have the Pledged Stock,  or that portion thereof to be
sold,  registered  under the  provisions  of the  Securities  Act,  the relevant
Grantor will subject to applicable  law, cause the Issuer thereof to (i) execute
and deliver,  and cause the directors and officers of such Issuer to execute and
deliver, all such instruments and documents, and do or cause to be done all such
other acts as may be, in the opinion of the Administrative  Agent,  necessary or
advisable to register  the Pledged  Stock,  or that portion  thereof to be sold,
under the provisions of the  Securities  Act, (ii) use its best efforts to cause
the  registration  statement  relating thereto to become effective and to remain
effective for a period of one year from the date of the first public offering of
the  Pledged  Stock,  or that  portion  thereof  to be sold,  and (iii) make all
amendments thereto and/or to the related prospectus which, in the opinion of the
Administrative  Agent,  are necessary or advisable,  all in conformity  with the
requirements  of the  Securities  Act  and  the  rules  and  regulations  of the
Securities and Exchange Commission  applicable  thereto.  Each Grantor agrees to
cause such Issuer to comply with the  provisions of the securities or "Blue Sky"
laws of any and all jurisdictions which the Administrative Agent shall designate
and to make  available  to its  security  holders,  as soon as  practicable,  an
earnings statement (which need not be audited) which will satisfy the provisions
of Section 11(a) of the Securities Act.

          (b) Each  Grantor  recognizes  that the  Administrative  Agent  may be
unable to effect a public  sale of any or all the  Pledged  Stock,  by reason of
certain  prohibitions  contained  in the  Securities  Act and  applicable  state
securities  laws or  otherwise,  and may be  compelled  to resort to one or more
private sales thereof to a restricted  group of purchasers which will be obliged
to agree,  among other things,  to acquire such securities for their own account
for investment and not with a view to the  distribution or resale thereof.  Each
Grantor acknowledges



<PAGE>


                                                                              23



and agrees that any such  private sale may result in prices and other terms less
favorable  than if such  sale  were a  public  sale  and,  notwithstanding  such
circumstances,  agrees that any such  private  sale shall be deemed to have been
made in a commercially  reasonable  manner.  The  Administrative  Agent shall be
under no  obligation  to delay a sale of any of the Pledged Stock for the period
of time necessary to permit the Issuer  thereof to register such  securities for
public sale under the Securities Act, or under applicable state securities laws,
even if such Issuer would agree to do so.

          (c) Each  Grantor  agrees to use its best efforts to do or cause to be
done all such other acts as may be  necessary  to make such sale or sales of all
or any  portion of the  Pledged  Stock  pursuant  to this  Section 6.7 valid and
binding and in compliance with any and all other applicable Requirements of Law.
Each Grantor  further agrees that a breach of any of the covenants  contained in
this Section 6.7 will cause irreparable injury to the  Administrative  Agent and
the  Lenders,  that the  Administrative  Agent and the Lenders  have no adequate
remedy at law in respect of such  breach and,  as a  consequence,  that each and
every covenant  contained in this Section 6.7 shall be specifically  enforceable
against such  Grantor,  and such Grantor  hereby waives and agrees not to assert
any defenses against an action for specific performance of such covenants except
for a defense that no Event of Default has occurred under the Credit Agreement.

          6.8 Waiver;  Deficiency.  Each Grantor waives and agrees not to assert
any rights or  privileges  which it may acquire  under  Section 9-112 of the New
York UCC. Each Grantor shall remain liable for any deficiency if the proceeds of
any sale or other  disposition  of the Collateral  are  insufficient  to pay its
Obligations  and the fees and  disbursements  of any  attorneys  employed by the
Administrative Agent or any Lender to collect such deficiency.


                       SECTION 7. THE ADMINISTRATIVE AGENT

          7.1 Administrative  Agent's Appointment as Attorney-in-Fact,  etc. (a)
Each Grantor  hereby  irrevocably  constitutes  and appoints the  Administrative
Agent and any officer or agent thereof, with full power of substitution,  as its
true and lawful  attorney-in-fact  with full irrevocable  power and authority in
the place and stead of such  Grantor  and in the name of such  Grantor or in its
own name, for the purpose of carrying out the terms of this  Agreement,  to take
any and all  appropriate  action  and to  execute  any  and  all  documents  and
instruments  which may be necessary or desirable to  accomplish  the purposes of
this  Agreement,  and,  without  limiting the generality of the foregoing,  each
Grantor hereby gives the Administrative  Agent the power and right, on behalf of
such Grantor,  subject to  applicable  regulatory  and  licensing  requirements,
without notice to or assent by such Grantor, to do any or all of the following:

          (i) in the name of such Grantor or its own name,  or  otherwise,  take
     possession  of  and  indorse  and  collect  any  checks,   drafts,   notes,
     acceptances  or other  instruments  for the payment of moneys due under any
     Receivable or Contract or with respect to any other Collateral and file any
     claim or take any other action or  proceeding in any court of law or equity
     or otherwise deemed appropriate by the Administrative Agent for the purpose
     of



<PAGE>


                                                                              24



     collecting  any and all such moneys due under any Receivable or Contract or
     with respect to any other Collateral whenever payable;

          (ii) in the case of any  Intellectual  Property,  execute and deliver,
     and have  recorded,  any and all  agreements,  instruments,  documents  and
     papers  as  the   Administrative   Agent  may  request  to   evidence   the
     Administrative   Agent's  and  the  Lenders'   security  interest  in  such
     Intellectual  Property  and the goodwill  and general  intangibles  of such
     Grantor relating thereto or represented thereby;

          (iii)  pay or  discharge  taxes  and  Liens  levied  or  placed  on or
     threatened  against the  Collateral,  effect any  repairs or any  insurance
     called  for by the terms of this  Agreement  and pay all or any part of the
     premiums therefor and the costs thereof;

          (iv) execute,  in connection with any sale provided for in Section 6.6
     or 6.7, any indorsements, assignments or other instruments of conveyance or
     transfer with respect to the Collateral; and

          (v) (1)  direct  any party  liable  for any  payment  under any of the
     Collateral  to make  payment  of any and all  moneys  due or to become  due
     thereunder  directly to the  Administrative  Agent or as the Administrative
     Agent shall direct; (2) ask or demand for, collect,  and receive payment of
     and receipt  for,  any and all moneys,  claims and other  amounts due or to
     become due at any time in respect of or arising out of any Collateral;  (3)
     sign and indorse any invoices,  freight or express bills,  bills of lading,
     storage  or  warehouse  receipts,  drafts  against  debtors,   assignments,
     verifications,  notices and other  documents in connection  with any of the
     Collateral; (4) commence and prosecute any suits, actions or proceedings at
     law or in equity in any court of  competent  jurisdiction  to  collect  the
     Collateral or any portion thereof and to enforce any other right in respect
     of any  Collateral;  (5)  defend  any suit,  action or  proceeding  brought
     against such Grantor with respect to any Collateral; (6) settle, compromise
     or adjust any such suit, action or proceeding and, in connection therewith,
     give such  discharges  or  releases  as the  Administrative  Agent may deem
     appropriate;  (7) assign any Copyright, Patent or Trademark (along with the
     goodwill of the business to which any such  Copyright,  Patent or Trademark
     pertains), throughout the world for such term or terms, on such conditions,
     and in  such  manner,  as  the  Administrative  Agent  shall  in  its  sole
     discretion determine;  and (8) generally,  sell, transfer,  pledge and make
     any agreement  with respect to or otherwise deal with any of the Collateral
     as fully  and  completely  as  though  the  Administrative  Agent  were the
     absolute  owner  thereof for all  purposes,  and do, at the  Administrative
     Agent's  option and such  Grantor's  expense,  at any time, or from time to
     time, all acts and things which the Administrative Agent deems necessary to
     protect,  preserve or realize upon the  Collateral  and the  Administrative
     Agent's  and the  Lenders'  security  interests  therein  and to effect the
     intent of this  Agreement,  all as fully and  effectively  as such  Grantor
     might do.

     Anything  in this  Section  7.1(a)  to the  contrary  notwithstanding,  the
Administrative Agent agrees that it will not exercise any rights under the power
of attorney provided for in this Section 7.1(a) unless an Event of Default shall
have occurred and be continuing.



<PAGE>


                                                                              25



          (b)  If any  Grantor  fails  to  perform  or  comply  with  any of its
agreements  contained  herein,  the  Administrative  Agent,  at its option,  but
without any  obligation  so to do, may  perform or comply,  or  otherwise  cause
performance or compliance, with such agreement.

          (c) The expenses of the  Administrative  Agent  incurred in connection
with actions  undertaken as provided in this Section 7.1, together with interest
thereon at a rate per annum equal to the rate per annum at which  interest would
then be  payable  on past due  Revolving  Credit  Loans that are Base Rate Loans
under the Credit Agreement, from the date of payment by the Administrative Agent
to the date reimbursed by the relevant Grantor, shall be payable by such Grantor
to the Administrative Agent on demand.

          (d) Each  Grantor  hereby  ratifies  all  that  said  attorneys  shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations and
agencies  contained  in this  Agreement  are coupled  with an  interest  and are
irrevocable  until this  Agreement  is  terminated  and the  security  interests
created hereby are released.

          7.2 Duty of Administrative Agent. The Administrative Agent's sole duty
with  respect to the  custody,  safekeeping  and  physical  preservation  of the
Collateral  in its  possession,  under  Section  9-207  of the New  York  UCC or
otherwise,  shall be to deal with it in the same  manner  as the  Administrative
Agent  deals  with  similar   property   for  its  own   account.   Neither  the
Administrative   Agent,  any  Lender  nor  any  of  their  respective  officers,
directors, employees or agents shall be liable for failure to demand, collect or
realize  upon  any of the  Collateral  or for any  delay in doing so or shall be
under any  obligation to sell or otherwise  dispose of any  Collateral  upon the
request  of any  Grantor  or any  other  Person  or to  take  any  other  action
whatsoever  with  regard  to the  Collateral  or any part  thereof.  The  powers
conferred on the  Administrative  Agent and the Lenders  hereunder are solely to
protect the Administrative  Agent's and the Lenders' interests in the Collateral
and shall not  impose  any duty upon the  Administrative  Agent or any Lender to
exercise  any such powers.  The  Administrative  Agent and the Lenders  shall be
accountable  only for  amounts  that they  actually  receive  as a result of the
exercise of such powers, and neither they nor any of their officers,  directors,
employees or agents shall be  responsible  to any Grantor for any act or failure
to act hereunder, except for their own gross negligence or willful misconduct.

          7.3  Execution of Financing  Statements.  Pursuant to Section 9-402 of
the New York UCC and any other  applicable  law,  each  Grantor  authorizes  the
Administrative  Agent to file or record financing statements and other filing or
recording  documents or instruments  with respect to the Collateral  without the
signature of such Grantor in such form and in such offices as the Administrative
Agent reasonably determines appropriate to perfect the security interests of the
Administrative Agent under this Agreement.  A photographic or other reproduction
of this Agreement  shall be sufficient as a financing  statement or other filing
or recording document or instrument for filing or recording in any jurisdiction.

          7.4 Authority of Administrative  Agent. Each Grantor acknowledges that
the rights and responsibilities of the Administrative Agent under this Agreement
with respect to any action taken by the Administrative  Agent or the exercise or
non-exercise by the Administrative Agent of any option,  voting right,  request,
judgment or other right or remedy provided for herein



<PAGE>


                                                                              26



or  resulting  or  arising  out  of  this  Agreement   shall,   as  between  the
Administrative Agent and the Lenders, be governed by the Credit Agreement and by
such other  agreements with respect thereto as may exist from time to time among
them,  but,  as  between  the  Administrative   Agent  and  the  Grantors,   the
Administrative  Agent shall be  conclusively  presumed to be acting as agent for
the Lenders with full and valid authority so to act or refrain from acting,  and
no Grantor shall be under any obligation,  or  entitlement,  to make any inquiry
respecting such authority.


                            SECTION 8. MISCELLANEOUS

          8.1  Amendments  in Writing.  None of the terms or  provisions of this
Agreement may be waived, amended, supplemented or otherwise modified except by a
written  instrument  executed by each  affected  Grantor and the  Administrative
Agent, provided that any provision of this Agreement imposing obligations on any
Grantor  may be  waived  by the  Administrative  Agent in a  written  instrument
executed by the  Administrative  Agent in  accordance  with  Section 10.1 of the
Credit Agreement.

          8.2  Notices.  All  notices,  requests  and  demands  to or  upon  the
Administrative  Agent or any Grantor  hereunder  shall be effected in the manner
provided for in Section  10.2 of the Credit  Agreement;  provided  that any such
notice,  request or demand to or upon any  Guarantor  shall be addressed to such
Guarantor at its notice address set forth on Schedule 1.

          8.3 No Waiver by Course of Conduct;  Cumulative Remedies.  Neither the
Administrative  Agent  nor any  Lender  shall by any act  (except  by a  written
instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in any
Default  or  Event  of  Default.  No  failure  to  exercise,  nor any  delay  in
exercising,  on the part of the  Administrative  Agent or any Lender, any right,
power or privilege  hereunder  shall operate as a waiver  thereof.  No single or
partial exercise of any right,  power or privilege  hereunder shall preclude any
other or further exercise  thereof or the exercise of any other right,  power or
privilege.  A waiver by the  Administrative  Agent or any Lender of any right or
remedy  hereunder  on any one  occasion  shall not be  construed as a bar to any
right or remedy which the  Administrative  Agent or such Lender would  otherwise
have on any future  occasion.  The  rights  and  remedies  herein  provided  are
cumulative, may be exercised singly or concurrently and are not exclusive of any
other rights or remedies provided by law.

          8.4 Enforcement Expenses;  Indemnification.  (a) Each Guarantor agrees
to pay or reimburse each Lender and the  Administrative  Agent for all its costs
and expenses  incurred in collecting  against such Guarantor under the guarantee
contained in Section 2 or otherwise  enforcing  or  preserving  any rights under
this  Agreement and the other Loan Documents to which such Guarantor is a party,
including,  without limitation, the fees and disbursements of counsel (including
the  allocated  fees and  expenses  of  in-house  counsel) to each Lender and of
counsel to the Administrative Agent.

          (b) Each Guarantor agrees to pay, and to save the Administrative Agent
and the Lenders  harmless  from,  any and all  liabilities  with  respect to, or
resulting from any delay in



<PAGE>


                                                                              27



paying, any and all stamp,  excise, sales or other taxes which may be payable or
determined to be payable with respect to any of the  Collateral or in connection
with any of the transactions contemplated by this Agreement.

          (c) Each Guarantor agrees to pay, and to save the Administrative Agent
and the Lenders  harmless from, any and all  liabilities,  obligations,  losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
of any kind or  nature  whatsoever  with  respect  to the  execution,  delivery,
enforcement,  performance and administration of this Agreement to the extent the
Borrower  would be  required  to do so  pursuant  to Section  10.5 of the Credit
Agreement.

          (d) The  agreements  in this Section  shall  survive  repayment of the
Obligations  and all other amounts  payable  under the Credit  Agreement and the
other Loan Documents.

          8.5 Successors and Assigns.  This Agreement  shall be binding upon the
successors  and  assigns of each  Grantor  and shall inure to the benefit of the
Administrative Agent and the Lenders and their successors and assigns;  provided
that  no  Grantor  may  assign,  transfer  or  delegate  any  of its  rights  or
obligations  under  this  Agreement  without  the prior  written  consent of the
Administrative Agent.

          8.6  Set-Off.   Each  Grantor   hereby   irrevocably   authorizes  the
Administrative  Agent and each Lender at any time and from time to time while an
Event of Default shall have occurred and be  continuing,  without notice to such
Grantor or any other  Grantor,  any such notice being  expressly  waived by each
Grantor,  to set-off and appropriate and apply any and all deposits  (general or
special, time or demand,  provisional or final), in any currency,  and any other
credits, indebtedness or claims, in any currency, in each case whether direct or
indirect,  absolute or  contingent,  matured or  unmatured,  at any time held or
owing by the  Administrative  Agent or such  Lender to or for the  credit or the
account  of  such  Grantor,   or  any  part  thereof  in  such  amounts  as  the
Administrative  Agent or such  Lender may elect,  against  and on account of the
obligations and liabilities of such Grantor to the Administrative  Agent or such
Lender   hereunder   and  claims  of  every  nature  and   description   of  the
Administrative  Agent or such Lender  against  such  Grantor,  in any  currency,
whether arising hereunder,  under the Credit Agreement,  any other Loan Document
or otherwise,  as the Administrative  Agent or such Lender may elect, whether or
not the  Administrative  Agent or any Lender has made any demand for payment and
although  such  obligations,   liabilities  and  claims  may  be  contingent  or
unmatured.  The  Administrative  Agent and each Lender shall notify such Grantor
promptly of any such  set-off  and the  application  made by the  Administrative
Agent or such Lender of the proceeds thereof,  provided that the failure to give
such notice shall not affect the validity of such set-off and  application.  The
rights of the  Administrative  Agent and each Lender  under this  Section are in
addition to other  rights and remedies  (including,  without  limitation,  other
rights of set-off) which the Administrative Agent or such Lender may have.

          8.7 Counterparts. This Agreement may be executed by one or more of the
parties to this Agreement on any number of separate  counterparts  (including by
telecopy),  and all of said  counterparts  taken  together  shall be  deemed  to
constitute one and the same instrument.




<PAGE>


                                                                              28



          8.8 Severability.  Any provision of this Agreement which is prohibited
or  unenforceable  in  any  jurisdiction  shall,  as to  such  jurisdiction,  be
ineffective  to the  extent  of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction.

          8.9 Section Headings.  The Section headings used in this Agreement are
for convenience of reference only and are not to affect the construction  hereof
or be taken into consideration in the interpretation hereof.

          8.10  Integration.   This  Agreement  and  the  other  Loan  Documents
represent  the  agreement  of the  Grantors,  the  Administrative  Agent and the
Lenders with respect to the subject matter hereof and thereof,  and there are no
promises,  undertakings,  representations  or warranties  by the  Administrative
Agent or any Lender  relative to subject matter hereof and thereof not expressly
set forth or referred to herein or in the other Loan Documents.

          8.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

          8.12  Submission  To  Jurisdiction;   Waivers.   Each  Grantor  hereby
irrevocably and unconditionally:

          (a)  submits  for  itself  and its  property  in any  legal  action or
     proceeding relating to this Agreement and the other Loan Documents to which
     it is a party,  or for  recognition  and  enforcement  of any  judgment  in
     respect thereof, to the non-exclusive general jurisdiction of the Courts of
     the State of New York,  the courts of the United  States of America for the
     Southern District of New York, and appellate courts from any thereof;

          (b) consents that any such action or proceeding may be brought in such
     courts and waives any  objection  that it may now or hereafter  have to the
     venue of any such  action  or  proceeding  in any such  court or that  such
     action or proceeding was brought in an inconvenient court and agrees not to
     plead or claim the same;

          (c) agrees that  service of process in any such  action or  proceeding
     may be effected by mailing a copy thereof by registered  or certified  mail
     (or any  substantially  similar  form of mail),  postage  prepaid,  to such
     Grantor at its address  referred to in Section 8.2 or at such other address
     of which  the  Administrative  Agent  shall  have  been  notified  pursuant
     thereto;

          (d)  agrees  that  nothing  herein  shall  affect  the right to effect
     service of process in any other manner  permitted by law or shall limit the
     right to sue in any other jurisdiction; and




<PAGE>


                                                                              29



          (e) waives,  to the maximum extent not prohibited by law, any right it
     may have to claim or recover in any legal action or proceeding  referred to
     in this Section any special, exemplary, punitive or consequential damages.

          8.13 Acknowledgements. Each Grantor hereby acknowledges that:

          (a) it has been advised by counsel in the  negotiation,  execution and
     delivery of this  Agreement  and the other Loan  Documents to which it is a
     party;

          (b) neither the Administrative  Agent nor any Lender has any fiduciary
     relationship  with or duty to any Grantor  arising out of or in  connection
     with  this  Agreement  or  any  of  the  other  Loan  Documents,   and  the
     relationship between the Grantors,  on the one hand, and the Administrative
     Agent and Lenders,  on the other hand, in connection  herewith or therewith
     is solely that of debtor and creditor; and

          (c) no joint venture is created  hereby or by the other Loan Documents
     or otherwise exists by virtue of the transactions contemplated hereby among
     the Lenders or among the Grantors and the Lenders.

          8.14  Additional  Grantors.  Each  Subsidiary  of the Borrower that is
required to become a party to this  Agreement  pursuant  to Section  6.10 of the
Credit  Agreement shall become a Grantor for all purposes of this Agreement upon
execution and delivery by such Subsidiary of an Assumption Agreement in the form
of Annex 1 hereto.

          8.15  Releases.  (a) At such  time  as the  Loans,  the  Reimbursement
Obligations  and the  other  Obligations  shall  have  been  paid in  full,  the
Commitments  have been terminated and no Letters of Credit shall be outstanding,
the  Collateral  shall be  released  from the  Liens  created  hereby,  and this
Agreement and all obligations (other than those expressly stated to survive such
termination)  of the  Administrative  Agent  and each  Grantor  hereunder  shall
terminate,  all without  delivery of any instrument or performance of any act by
any party, and all rights to the Collateral shall revert to the Grantors. At the
request and sole  expense of any Grantor  following  any such  termination,  the
Administrative  Agent shall deliver to such Grantor any  Collateral  held by the
Administrative  Agent  hereunder,  and execute and deliver to such  Grantor such
documents as such Grantor shall reasonably request to evidence such termination.

          (b) If any of the Collateral  shall be sold,  transferred or otherwise
disposed of by any Grantor in a transaction  permitted by the Credit  Agreement,
then the Administrative  Agent, at the request and sole expense of such Grantor,
shall  execute and  deliver to such  Grantor  all  releases  or other  documents
reasonably necessary or desirable for the release of the Liens created hereby on
such Collateral.  At the request and sole expense of the Borrower,  a Subsidiary
Guarantor shall be released from its obligations hereunder in the event that all
the Capital Stock of such  Subsidiary  Guarantor  shall be sold,  transferred or
otherwise  disposed  of in a  transaction  permitted  by the  Credit  Agreement;
provided that the Borrower shall have delivered to the Administrative  Agent, at
least ten  Business  Days prior to the date of the proposed  release,  a written
request for release identifying the relevant Subsidiary  Guarantor and the terms
of the sale or other  disposition  in  reasonable  detail,  including  the price
thereof and any expenses in



<PAGE>


                                                                              30



connection therewith, together with a certification by the Borrower stating that
such  transaction is in compliance with the Credit  Agreement and the other Loan
Documents.

          8.16  WAIVER  OF JURY  TRIAL.  EACH  GRANTOR  HEREBY  IRREVOCABLY  AND
UNCONDITIONALLY  WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.





<PAGE>


                                                                              31



          IN WITNESS WHEREOF,  each of the undersigned has caused this Guarantee
and Collateral  Agreement to be duly executed and delivered as of the date first
above written.


                                        POWERHOUSE TECHNOLOGIES, INC.

                                        By:  /S/ Susan J. Carstensen
                                             ----------------------------------
                                             Name:  Susan J. Carstensen
                                             Title: CFO and Treasurer



                                        AUTOMATED WAGERING INTERNATIONAL,
                                        INC.

                                        By:  /S/ Susan J. Carstensen
                                             ----------------------------------
                                             Name:  Susan J. Carstensen
                                             Title: Treasurer



                                        AUTOMATIC MUSIC SERVICE OF BILLINGS,
                                        INC.

                                        By:  /S/ Susan J. Carstensen
                                             ----------------------------------
                                             Name:  Susan J. Carstensen
                                             Title: Treasurer


                                        AUTOMATION FIRST, INC.

                                        By:  /S/ Susan J. Carstensen
                                             ----------------------------------
                                             Name:  Susan J. Carstensen
                                             Title: Treasurer



                                        NUEVO SOL TURF CLUB INC.

                                        By:  /S/ Susan J. Carstensen
                                             ----------------------------------
                                             Name:  Susan J. Carstensen
                                             Title: Treasurer








<PAGE>


                                                                              32



                                        PIPER LANCE, INC.

                                        By:  /S/ Susan J. Carstensen
                                             ----------------------------------
                                             Name:  Susan J. Carstensen
                                             Title: Treasurer





                                        RAVEN'S D & R MUSIC, INC.

                                        By:  /S/ Susan J. Carstensen
                                             ----------------------------------
                                             Name:  Susan J. Carstensen
                                             Title: Treasurer




                                        UNITED TOTE COMPANY, INC.

                                        By:  /S/ Susan J. Carstensen
                                             ----------------------------------
                                             Name:  Susan J. Carstensen
                                             Title: Treasurer



                                        UNITED WAGERING SYSTEMS, INC.

                                        By:  /S/ Susan J. Carstensen
                                             ----------------------------------
                                             Name:  Susan J. Carstensen
                                             Title: Treasurer





                                        VIDEO LOTTERY CONSULTANTS, INC.

                                        By:  /S/ Susan J. Carstensen
                                             ----------------------------------
                                             Name:  Susan J. Carstensen
                                             Title: Treasurer






<PAGE>


                                                                              33



                                        VLC OF NEVADA, INC.

                                        By:  /S/ Susan J. Carstensen
                                             ----------------------------------
                                             Name:  Richard M. Haddrill
                                             Title: Treasurer






<PAGE>




                                                                      Schedule 1









                         NOTICE ADDRESSES OF GUARANTORS


Automated Wagering International, Inc.
Automatic Music Service of Billings, Inc.
Automation First, Inc.
Nuevo Sol Turf Club Inc.
Raven's D&R Music, Inc.
United Tote Company
United Wagering Systems, Inc.
Video Lottery Consultants, Inc.
VLC of Nevada, Inc.
Piper Lance, Inc.


2311 South 7th Avenue
Bozeman, MT  59715
Attn.:  Chief Financial Officer

with a copy to:

115 Perimeter Center Place
Suite 911
Atlanta, GA  30346
Attn:  General Counsel




<PAGE>




                                                                      Schedule 2









                        DESCRIPTION OF PLEDGED SECURITIES


Pledged Stock of Subsidiaries:



                                                                          Shares
Subsidiary                                     Incorporation         Outstanding
----------                                     -------------         -----------
Automated Wagering International, Inc.         Delaware                      100
Automatic Music Service of Billings, Inc.      Montana                     8,760
Automation First, Inc.                         Montana                     1,000
Nuevo Sol Turf Club Inc.                       New Mexico                 10,000
Piper Lance, Inc.                              Montana                     5,000
Raven's D&R Music, Inc.                        Montana                     9,000
United Tote Company                            Montana                     1,000
United Wagering Systems, Inc.                  Delaware                    2,000


Pledged Note of Subsidiaries:

Promissory  Note between Video Lottery  Consultants,  Inc., as maker,  and World
Lottery  Consultants  Corporation  as  payee in the  principal  face  amount  of
$1,868,883.98 dated July 16, 1997, as amended from time to time.



<PAGE>




                                                                      Schedule 3









                            FILINGS AND OTHER ACTIONS
                     REQUIRED TO PERFECT SECURITY INTERESTS


                         Uniform Commercial Code Filings


For Powerhouse Technologies, Inc.

         Montana Secretary of State
         Gallatin County, Montana, Clerk and Recorder
         Delaware Secretary of State
         Georgia Clerks Cooperative Authority
         DeKalb County, Georgia Clerk of Superior Court

For Automated Wagering International, Inc.

         Delaware Secretary of State
         New Jersey Secretary of State
         Bergen County, New Jersey, County Clerk
         Minnesota Secretary of State
         Ramsey County, Minnesota County Recorder
         Pennsylvania Secretary of the Commonwealth
         Florida Department of State
         Georgia Clerks Cooperative Authority
         Montana Secretary of State
         South Dakota Secretary of State
         Maryland State Department of Assessments and Taxation

For Automated Music Service of Billings, Inc.

         Montana Secretary of State
         Gallatin County, Montana, Clerk and Recorder
         Yellowstone County, Montana, Clerk and Recorder

For Automation First, Inc.

         Montana Secretary of State
         Gallatin County, Montana, Clerk and Recorder
         Park County, Montana, Clerk and Recorder

For Ravens D & R Music, Inc.

         Montana Secretary of State



<PAGE>



         Gallatin County, Montana, Clerk and Recorder



For Video Lottery Consultants, Inc.

         Montana Secretary of State
         Gallatin County, Montana, Clerk and Recorder
         Delaware Secretary of State
         Kent County, Delaware, Recorder of Deeds
         New Castle County, Delaware, Recorder of Deeds
         New Jersey Secretary of State
         Mississippi Secretary of State
         Harrison County, Mississippi, Chancery Clerk
         Texas Secretary of State
         Oregon Secretary of State
         Rhode Island Secretary of State
         Newport, Rhode Island, City Clerk
         Lincoln, Rhode Island, Town Clerk

For VLC of Nevada, Inc.

         Nevada Secretary of State
         Washoe County, Nevada, County Recorder
         Clark County, Nevada, County Recorder
         Rhode Island Secretary of State
         Newport, Rhode Island, City Clerk
         Providence, Rhode Island, Town Clerk
         Oregon Secretary of State
         Montana Secretary of State
         Multnomah County, Oregon, County Recorder

For United Wagering Systems, Inc.

         Montana Secretary of State
         Gallatin County, Montana, Clerk and Recorder
         Delaware Secretary of State
         Maryland Department of Assessments and Taxation
         Baltimore County, Maryland, County Clerk of the Circuit Court

For United Tote Company

         Montana Secretary of State
         Gallatin County, Montana, Clerk and Recorder
         California Secretary of State
         San Diego County, California, County Recorder
         Indiana Secretary of State
         Texas Secretary of State
         Maryland Department of Assessments and Taxation



<PAGE>



         Baltimore County, Maryland, County Clerk of the Circuit Court
         New Mexico Secretary of State
         Kentucky Secretary of State

For Nuevo Sol Turf Club Inc.

         New Mexico Secretary of State
         Dona Ana County, New Mexico, County Clerk
         Texas Secretary of State
         El Paso County, Texas, Office of the Clerk of El Paso County

For Piper Lance Inc.

         Montana Secretary of State




                          Patent and Trademark Filings



                         U.S. Patent & Trademark Office




                      Actions with respect to Pledged Stock



                 Delivery of pledged stock certificates together
           with stock powers duly endorsed by the appropriate grantor.



                                  Other Actions


     Filing of the Aircraft  Mortgage with the Federal  Aviation  Administration
Office in Oklahoma City, Oklahoma maintained for the purpose of filing mortgages
on aircraft.





<PAGE>




                                                                      Schedule 4









      LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE




Company                                 Jurisdiction  Chief Executive Office

Automated Wagering International, Inc.  Delaware      115 Perimeter Center Place
                                                      Suite 911
                                                      Atlanta, GA  30346
Automatic Music Service of Billings,    Montana       2311 South 7th Avenue
Inc.                                                  Bozeman, MT  59715
Automation First, Inc.                  Montana       2311 South 7th Avenue
                                                      Bozeman, MT  59715
Nuevo Sol Turf Club Inc.                New Mexico    101 Futurity Drive
                                                      Sunland Park, NM  88063
Piper Lance, Inc.                       Montana       2311 South 7th Avenue
                                                      Bozeman, MT  59715
Powerhouse Technologies, Inc.           Delaware      115 Perimeter Center Place
                                                      Suite 911
                                                      Atlanta, GA 30346
Raven's D&R Music, Inc.                 Montana       2311 South 7th Avenue
                                                      Bozeman, MT  59715
United Tote Company                     Montana       9515 Deereco Road, Suite
                                                      200
                                                      Timonium, MD  21093-2153
United Wagering Systems, Inc.           Delaware      9515 Deereco Road, Suite
                                                      200
                                                      Timonium, MD  21093-2153
Video Lottery Consultants, Inc.         Montana       2311 South 7th Avenue
                                                      Bozeman, MT  59715
VLC of Nevada, Inc.                     Nevada        751 Pilot Road, Suite D
                                                      Las Vegas, NV  89119






<PAGE>




                                                                      Schedule 5









                       LOCATION OF INVENTORY AND EQUIPMENT



         GRANTOR                                 LOCATION OF
                                                 INVENTORY OR
                                                 EQUIPMENT
POWERHOUSE TECHNOLOGIES, INC.
(Including all wholly-owned subsidiaries)                          Subsidiary
                                                                   ----------
-Raw material, Work in Process, & FGI            Montana           AWI, UT, VLC,
-Assembly equipment                              Montana           VLN
-Computers, furniture and fixtures               Montana
-Route operations equipment                      Montana
-Lottery operations equipment                    Montana           AFI, AMS, D&R
                                                                   AWI
-Lottery operations equipment, furniture and     South Dakota      AWI
fixtures                                         Minnesota         AWI
-Lottery operations equipment, furniture and     Pennsylvania      AWI
fixtures                                         Maryland          AWI
-Lottery operations equipment, furniture and     Florida           AWI
fixtures
-Lottery operations equipment, furniture and
fixtures
-Lottery operations equipment, furniture and
fixtures
-Lottery operations equipment, furniture and     Delaware
fixtures                                         Delaware          VLC
-Gaming machines
Gaming machines                                  Oregon            VLC
Gaming machines                                  Rhode Island      VLC
Gaming machines/equipment, furniture and         Nevada            VLN
fixtures
Gaming machines/equipment, furniture and         Mississippi       VLC
fixtures
R&D equipment                                    New Jersey        AWI
R&D equipment                                    Minnesota         AWI
R&D equipment                                    California        UT




<PAGE>




Equipment for racetracks is rotable and held at  Alabama, Arizona, Colorado,
any point in time in these states:               Delaware
                                                 Florida, Idaho, Indiana, Iowa,
                                                 Kansas
                                                 Kentucky, Louisiana, Maine,
                                                 Michigan
                                                 Montana, New Hampshire, New
                                                 Mexico
                                                 New York, Ohio, Oklahoma,
                                                 Oregon
                                                 Rhode Island, South Dakota,
                                                 Texas, Vermont
                                                 Washington
Racetrack facility and equipment                 New Mexico

Legend:
AFI is Automation First Inc., AMS is Automatic Music Service of Billings,  Inc.,
AWI is Automated Wagering  International,  Inc., D&R is Raven's D&R Music, Inc.,
SP is Nuevo Sol Turf  Club,  UT is United  Tote  Company,  VLC is Video  Lottery
Consultants, Inc., VLN is Video Lottery Consultants of Nevada, Inc.




<PAGE>




                                                                      Schedule 6

<TABLE>
<CAPTION>
                      REGISTERED and APPLIED FOR TRADEMARKS
                                       AND
                            REGISTERED PATENT REPORT
            A report of all Registered Trademarks and Patents used or
          owned by Powerhouse Technologies, Inc. and its subsidiaries.

STATUS:  APPLIED FOR
========================== ================= ===============  ================== ===================== =========== ================
           NAME                 IP TYPE          COUNTRY            STATUS          APPLICATION #      REGISTER    REGISTRATION #
                                                                                                       DATE
========================== ================= ===============  ================== ===================== =========== ================
<S>                        <C>               <C>              <C>                <C>                   <C>         <C>


[INTENTIONALLY DELETED - SENSITIVE INFORMATION]





</TABLE>




<PAGE>


<TABLE>
<CAPTION>

                      REGISTERED and APPLIED FOR TRADEMARKS
                                       AND
                            REGISTERED PATENT REPORT
            A report of all Registered Trademarks and Patents used or
          owned by Powerhouse Technologies, Inc. and its subsidiaries.

STATUS:  REGISTERED CR
========================== ================= ===============  ================== ===================== =========== ================
           NAME                 IP TYPE          COUNTRY            STATUS           APPLICATION #     REGISTER    REGISTRATION #
                                                                                                       DATE
=========================== ================ ==============  ==================== ==================== =========== ================
<S>                         <C>              <C>             <C>                     <C>               <C>         <C>

MASTERLINK INSTANT          COPYRIGHT        U.S.A.          REGISTERED CR                             7/24/96     4,425,948
GAMING MODULE
MASTERLINK ONLINE           COPYRIGHT        U.S.A.          REGISTERED CR                             7/5/96      TX4332718
GAMING MODULE
MASTERLINK VIDEO            COPYRIGHT        U.S.A.          REGISTERED CR                             7/11/96     4,425,082
GAMING MODULE
=========================== ================ ==============  ==================== ==================== =========== ================
</TABLE>

<TABLE>
<CAPTION>

STATUS:  REGISTERED PATENT
=========================== ================ ==============  ==================== ==================== =========== ================
           NAME                IP TYPE        COUNTRY              STATUS            APPLICATION #     REGISTER    REGISTRATION #
                                                                                                       DATE
=========================== ============  ===============  ======================= =================== =========== ================
<S>                         <C>           <C>              <C>                     <C>                  <C>         <C>

DEVICE  & METHOD            PATENT        U.S.A.           REGISTERED              692,575              6/16/98     5,766,074
FOR DISPLAYING                                             PATENT
FINAL GAMING
RESULT
GRAPHICS PROCESSOR          PATENT        U.S.A.           REGISTERED                                   9/24/96     5,559,950
ENHANCEMENT                                                PATENT
SYSTEM HAVING A
PROCESSOR
CONNECTED THROUGH
DATA AND LOWER
ADDRESS LINES
METHOD &                    PATENT        U.S.A.           REGISTERED                                   4/30/96     5,511,784
APPARATUS FOR                                              PATENT
DIRECTLY
GENERATING A
RANDOM FINAL
OUTCOME OF A GAME
TRANSACTION                 PATENT        U.S.A.           REGISTERED              751,771              5/16/95     5,416,308
DOCUMENT READER                                            PATENT
VIDEO LOTTERY               PATENT        AUSTRALIA        REGISTERED              13379/95             12/13/94    678673
SYSTEM AND                                                 PATENT
VALIDATION UNIT
VIDEO LOTTERY               PATENT        U.S.A.           REGISTERED                                   4/6/96      5,505,449
SYSTEM W/IMPROVE D                                         PATENT
SITE CONTROLLER &
VALIDATION UNIT
VIDEO LOTTERY               PATENT        U.S.A.           REGISTERED              171,117              3/21/95     5,398,932
SYSTEM WITH                                                PATENT
IMPROVED SITE
CONTROLLER &
VALIDATION UNIT
-------------------------- ----------------- ---------------  ------------------ ------------------------- ----------- ------------
</TABLE>





<PAGE>

<TABLE>
<CAPTION>

========================== ================= ===============  ================== ===================== =========== ================
           NAME                IP TYPE        COUNTRY              STATUS           APPLICATION #      REGISTER    REGISTRATION #
                                                                                                       DATE
========================== ================= ===============  ================== ==================== =========== =================
<S>                         <C>           <C>              <C>                      <C>                 <C>         <C>

VLC ELECTRONIC              PATENT        U.S.A.           REGISTERED                                   2/9/93      333,164
GAME HOUSING                                               PATENT
=========================== ============  ===============  ======================= ==================== =========== ===============
</TABLE>





<PAGE>




<TABLE>
<CAPTION>

                      REGISTERED and APPLIED FOR TRADEMARKS
                                       AND
                            REGISTERED PATENT REPORT
            A report of all Registered Trademarks and Patents used or
           owned by Powerhouse Technologies, Inc. and its subsidiaries

STATUS:  REGISTERED TM
========================= ================= ===============  ================== ==================== =========== =================
          NAME                 IP TYPE          COUNTRY             STATUS          APPLICATION #      REGISTER    REGISTRATION #
                                                                                                       DATE
========================= ================= ===============  ================== ==================== =========== =================
<S>                       <C>               <C>              <C>                  <C>                  <C>         <C>

AGS ADVANCED              TRADEMARK         AUSTRALIA        REGISTERED TM                             8/19/97     715320
GAMING SYSTEM &
DESIGN (LOGO)
AGS ADVANCED              TRADEMARK         AUSTRALIA        REGISTERED TM        71530                8/19/97     715320
GAMING SYSTEM &
DESIGN (LOGO)
ALLEY CAT KENO            TRADEMARK         U.S.A.           REGISTERED TM        75/089,586           4/15/97     2,052,536
AWI                       TRADEMARK         EUROPE           REGISTERED TM        1558282 U.K.         1/4/94      1558252
AWI                       TRADEMARK         U.S.A.           REGISTERED TM        74/469,465           10/24/95    1,929,069
BLACK GOLD                TRADEMARK         NORWAY           REGISTERED TM        965498               7/24/97     183811
BONUS KENO                TRADEMARK         U.S.A.           REGISTERED TM        75/089,587           1/28/97     2,034,657
CATE                      TRADEMARK         U.S.A.           REGISTERED TM        73/698,505           12/12/89    1,570,684
HEARTS &                  TRADEMARK         U.S.A.           REGISTERED TM        74/534,283           5/12/98     2157089
DIAMONDS
IITAS                     TRADEMARK         U.S.A.           REGISTERED TM        74/450/657           8/15/95     1,911,163
JACKPOT FEVER             TRADEMARK         U.S.A.           REGISTERED TM        74/437,320           5/26/98     2160723
KENO WILD                 TRADEMARK         MONTANA          REGISTERED TM        O18969-T164(40)      6/24/96     018969
MASTERLINK                TRADEMARK         CANADA           REGISTERED TM        760458               8/21/97     481065
MASTERLINK                TRADEMARK         U.S.A.           REGISTERED TM        74/437/318           9/5/95      1,917,202
MICRO TOTE 1000           TRADEMARK         U.S.A.           REGISTERED TM        73/299,010           2/5/85      1,317,698
OVATION                   TRADEMARK         U.S.A.           REGISTERED TM        74/415/249           2/13/96     1,956,729
POKER DUEL                TRADEMARK         U.S.A.           REGISTERED TM        75/090,313           3/11/97     2,043,585
POLLY & ROGER             TRADEMARK         U.S.A.           REGISTERED TM                             11/18/97    748888
POWER KENO                TRADEMARK         MONTANA          REGISTERED TM        T018853(164-01)      4/22/96     T018853
========================= ================= ===============  ================== ==================== =========== =================
</TABLE>





<PAGE>


<TABLE>
<CAPTION>
                      REGISTERED and APPLIED FOR TRADEMARKS
                                       AND
                            REGISTERED PATENT REPORT
            A report of all Registered Trademarks and Patents used or
           owned by Powerhouse Technologies, Inc. and its subsidiaries

STATUS:  REGISTERED TM
======================== ================  ===============  =================== =================== =========== ===================
          NAME                IP TYPE          COUNTRY             STATUS          APPLICATION #    REGISTER     REGISTRATION #
                                                                                                    DATE
======================== ================  ===============  =================== =================== =========== ===================
<S>                      <C>               <C>              <C>                  <C>                  <C>         <C>

POWER KENO               TRADEMARK         U.S.A.           REGISTERED TM        75/089,590           4/22/97     2,054,922
POWER SERIES             TRADEMARK         U.S.A.           REGISTERED TM        75/089,585           1/27/98     2,133,222
UNITED                   TRADEMARK         U.S.A.           REGISTERED TM        73-298987            6/28/83     1,263,556
TOTALISATOR
MICRO TOTE 1000
UNITED TOTE              TRADEMARK         U.S.A.           REGISTERED TM        73-698312            4/25/89     1536143
SYSTEM 1000
VIDEO LOTTERY            TRADEMARK         AUSTRALIA        REGISTERED TM                             3/13/91     A551964
CONSULTANTS
VIDEO LOTTERY            TRADEMARK         AUSTRALIA        REGISTERED TM        551964               3/31/91     A551964
CONSULTANTS, INC.
VLC                      TRADEMARK         AUSTRALIA        REGISTERED TM        551,965              3/13/91     B551965
VLC                      TRADEMARK         U.S.A.           REGISTERED TM        74,465,266           12/20/94    1,868,466
VLC & DESIGN             TRADEMARK         AUSTRALIA        REGISTERED TM        551,966              3/13/91     A551966
(LOGO)
VLC & DESIGN             TRADEMARK         U.S.A.           REGISTERED TM        74/489,403           12/20/94    1,868,471
(LOGO)
VLCS                     TRADEMARK         NORWAY           REGISTERED TM                             5/15/97     182074
WININSTANT               TRADEMARK         U.S.A.           REGISTERED TM        74/246,615           12/3/96     2,020,088
WINNING TOUCH            TRADEMARK         AUSTRALIA        REGISTERED TM        649,489              12/29/94    649,489
WINNING TOUCH            TRADEMARK         NORWAY           REGISTERED TM        962973               6/12/97     182668
WINNING TOUCH            TRADEMARK         U.S.A.           REGISTERED TM        74/432,162           2/7/95      1,877,453
======================== ================  ===============  =================== =================== =========== ===================
</TABLE>




<PAGE>




                                                                      Schedule 7









                                    CONTRACTS




State of Delaware                   Contract to provide on-line lottery services
Delaware Lottery                    and video lottery central system
State of Florida                    Contract to provide on-line lottery services
Florida Lottery
State of Maryland                   Contract to provide on-line lottery services
Maryland Lottery
State of Minnesota                  Contract to provide on-line lottery services
Minnesota Lottery
State of Montana                    Contract to provide on-line lottery services
Montana Lottery
Commonwealth of Pennsylvania        Contract to provide on-line lottery services
Pennsylvania Lottery
State of South Dakota               Contract to provide on-line lottery services
South Dakota Lottery




<PAGE>




                                                                      Schedule 8








<TABLE>
<CAPTION>

                              EXISTING PRIOR LIENS



Debtor                                    Secured Party                         Jurisdiction    File No.   Description of Collateral
------                                    -------------                         ------------    --------   -------------------------
<S>                                       <C>                                   <C>             <C>          <C> 

Automated Wagering Int'l                  Canon Financial Services, Inc.        NJ              1788567      Equipment
Automated Wagering Int'l                  Canon Financial Services, Inc.        NJ              1791670      Equipment
Automated Wagering Int'l                  Canon Financial Services, Inc.        NJ              1805533      Equipment
Automated Wagering Int'l                  Canon Financial Services, Inc.        NJ              1795244      Equipment
Automated Wagering Int'l                  IBM Credit Corporation                NJ              1855976      Equipment
Powerhouse Technologies, Inc.             U.S. Bank of N.A.                     GA-DeKalb Co.   44-97000124  Securities Acct (LOC)
Powerhouse Technologies, Inc.             U.S. Bank of N.A.                     Montana         499318       Securities Acct (LOC)
Powerhouse Technologies, Inc.             U.S. Bank of N.A.                     MT-Gallatin Co. 38656        Securities Acct (LOC)
Powerhouse Technologies, Inc.             IBM Credit Corporation                MT              452613       Equipment
  f/k/a Video Lottery Technologies, Inc.
Powerhouse Technologies, Inc.             GE Capital                            MT              454605       Equipment
  f/k/a Video Lottery Technologies, Inc.
United Tote Company                       Sanwa Business Credit Corp.           TX              195578*      Service Contracts
United Tote Company                       Sanwa Business Credit Corp.           TX              200994*      Equipment
United Tote Company                       Sanwa Business Credit Corp.           TX              100125*      Equipment
United Tote Company                       Sanwa Business Credit Corp.           MT              394262*      Equipment
United Tote Company                       Sanwa Business Credit Corp.           MT              508924*      Equipment
United Tote Company                       Sanwa General Equipment Leasing Inc.  MT              392840*      Service Contracts
</TABLE>

---------- 

     *    Has been satisfied, however, release documentation is not available as
          of the date of the closing.  Company is in the process of having liens
          removed.



<PAGE>

<TABLE>
<CAPTION>


Debtor                                    Secured Party                         Jurisdiction    File No.   Description of Collateral
------                                    -------------                         ------------    --------   -------------------------
<S>                                       <C>                                   <C>             <C>          <C> 

United Tote Company                       Sanwa Business Credit Corp.           MT              389774*      Equipment
</TABLE>


OTHER


State Tax Lien on United Tote Company by State of California  dated July 6, 1998
in the amount of $201.75

State Tax Lien on Nuevo Sol Turf, Inc. by State of New Mexico filed November 21,
1991 in the amount of $683.14

Lease of Real Property  between Nuevo Sol Turf Club Inc. and United Tote Co. and
Bank of the Rio Grand, N.A., recorded October 10, 1996 (for ATM machine)






<PAGE>














                          ACKNOWLEDGEMENT AND CONSENT**


     The undersigned hereby acknowledges  receipt of a copy of the Guarantee and
Collateral Agreement dated as of October 9, 1998 (the "Agreement"),  made by the
Grantors  parties  thereto for the benefit of Lehman  Commercial  Paper Inc., as
Administrative   Agent.   The   undersigned   agrees  for  the  benefit  of  the
Administrative Agent and the Lenders as follows:

     1. The  undersigned  will be bound by the terms of the  Agreement  and will
comply with such terms insofar as such terms are applicable to the undersigned.

     2. The undersigned will notify the Administrative Agent promptly in writing
of the  occurrence  of any of the  events  described  in  Section  5.8(a) of the
Agreement.

     3. The terms of Sections 6.3(a) and 6.7 of the Agreement shall apply to it,
mutatis  mutandis,  with  respect  to all  actions  that may be  required  of it
pursuant to Section 6.3(a) or 6.7 of the Agreement.

                              [NAME OF ISSUER]



                              By -----------------------------------------------


                              Title  -------------------------------------------


                              Address for Notices:

                              --------------------------------------------------


                              --------------------------------------------------


                              Fax: ---------------------------------------------


----------

     **   This consent is necessary only with respect to any Issuer which is not
          also a Grantor.



<PAGE>













                                                                      Annex 1 to
                                              Guarantee and Collateral Agreement



          ASSUMPTION  AGREEMENT,  dated as of  ________________,  199_,  made by
______________________________,  a  ______________  corporation (the "Additional
Grantor"), in favor of Lehman Commercial Paper Inc., as administrative agent (in
such capacity,  the  "Administrative  Agent") for the banks and other  financial
institutions (the "Lenders")  parties to the Credit Agreement referred to below.
All capitalized terms not defined herein shall have the meaning ascribed to them
in such Credit Agreement.


                              W I T N E S S E T H :


          WHEREAS, Powerhouse Technologies,  Inc. (the "Borrower"),  the Lenders
and the Administrative  Agent have entered into a Credit Agreement,  dated as of
October 9, 1998 (as amended,  supplemented  or otherwise  modified  from time to
time, the "Credit Agreement");

          WHEREAS,  in connection  with the Credit  Agreement,  the Borrower and
certain of its Affiliates (other than the Additional  Grantor) have entered into
the Guarantee and Collateral Agreement, dated as of October 9, 1998 (as amended,
supplemented  or  otherwise  modified  from  time to time,  the  "Guarantee  and
Collateral  Agreement") in favor of the Administrative  Agent for the benefit of
the Lenders;

          WHEREAS,  the Credit  Agreement  requires  the  Additional  Grantor to
become a party to the Guarantee and Collateral Agreement; and

          WHEREAS, the Additional Grantor has agreed to execute and deliver this
Assumption  Agreement in order to become a party to the Guarantee and Collateral
Agreement;

          NOW, THEREFORE, IT IS AGREED:

          1.  Guarantee and  Collateral  Agreement.  By executing and delivering
this Assumption  Agreement,  the Additional Grantor, as provided in Section 8.15
of the  Guarantee  and  Collateral  Agreement,  hereby  becomes  a party  to the
Guarantee and Collateral  Agreement as a Grantor  thereunder with the same force
and effect as if originally named therein as a Grantor and, without limiting the
generality  of the  foregoing,  hereby  expressly  assumes all  obligations  and
liabilities  of a Grantor  thereunder.  The  information  set forth in Annex 1-A
hereto is hereby added to the information set forth in Schedules ____________***
to the  Guarantee  and  Collateral  Agreement.  The  Additional  Grantor  hereby
represents  and  warrants  that  each  of  the  representations  and  warranties
contained in Section 4 of the Guarantee and  Collateral  Agreement

--------

*** Refer to each Schedule which needs to be supplemented.



<PAGE>


                                                                               2



is true and  correct  on and as the date  hereof  (after  giving  effect to this
Assumption Agreement) as if made on and as of such date.

          2. GOVERNING LAW. THIS ASSUMPTION  AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.


          IN  WITNESS  WHEREOF,  the  undersigned  has  caused  this  Assumption
Agreement to be duly executed and delivered as of the date first above written.

                                   [ADDITIONAL GRANTOR]



                                   By:  
                                        ---------------------------------------
                                   Name:
                                   Title:




<PAGE>






                                                                       EXHIBIT B


                         FORM OF COMPLIANCE CERTIFICATE


          This  Compliance  Certificate  is delivered to you pursuant to Section
6.2  of  the  Credit  Agreement,  dated  as of  October  9,  1998,  as  amended,
supplemented  or  modified  from time to time (the  "Credit  Agreement"),  among
POWERHOUSE  TECHNOLOGIES,  INC., a Delaware  corporation (the  "Borrower"),  the
several banks and other financial institutions from time to time parties to this
Agreement  (the  "Lenders"),  LEHMAN  BROTHERS INC., as advisor and arranger (in
such capacity,  the  "Arranger"),  LEHMAN  COMMERCIAL PAPER INC., as syndication
agent (in such capacity, the "Syndication Agent"), LEHMAN COMMERCIAL PAPER INC.,
as  administrative  agent (in such  capacity,  the  "Administrative  Agent") and
CANADIAN IMPERIAL BANK OF COMMERCE.,  as Documentation  Agent (in such capacity,
the  "Documentation  Agent").  Terms  defined  in the Credit  Agreement  and not
otherwise defined herein are used herein with the meanings so defined.

          1. I am the  duly  elected,  qualified  and  acting  [Chief  Financial
Officer] [Vice President - Finance] of the Borrower.

          2. I have  reviewed  and  are  familiar  with  the  contents  of  this
Certificate.

          3. I have  reviewed  the terms of the  Credit  Agreement  and the Loan
Documents and have made or caused to be made under my  supervision,  a review in
reasonable  detail of the  transactions and condition of the Borrower during the
accounting  period  covered  by the  financial  statements  attached  hereto  as
Attachment  1 (the  "Financial  Statements").  Such review did not  disclose the
existence during or at the end of the accounting period covered by the Financial
Statements,  and I have no  knowledge of the  existence,  as of the date of this
Certificate,  of any condition or event which  constitutes a Default or Event of
Default [, except as set forth below].

          4.  Attached  hereto  as  Attachment  2 are the  computations  showing
compliance  with the  covenants set forth in Section 7.1, 7.2, 7.5 7.6, 7.7, 7.8
and 7.15 of the Credit Agreement.

          IN WITNESS  WHEREOF,  I execute this  Certificate  this               
                                                                  --------------
day of          ,
       ---------  ------.

                                   POWERHOUSE TECHNOLOGIES, INC.


                                   By:  _______________________________________
                                   Title:




<PAGE>






                                                                    Attachment 2
                                                                    to Exhibit B



          The information  described herein is as of , 199_, and pertains to the
period from , 19_ to ________________ __, 19__.


                        [Set forth Covenant Calculations]




<PAGE>






                                                                       EXHIBIT C


                           CLOSING CERTIFICATE


     Pursuant to subsection  5.1(__) of the Credit Agreement dated as of October
9, 1998 (the "Credit  Agreement";  terms  defined  therein  being used herein as
therein defined),  among POWERHOUSE  TECHNOLOGIES,  INC., a Delaware corporation
(the "Borrower"),  the several banks and other financial  institutions from time
to time parties to the Credit Agreement (the  "Lenders"),  LEHMAN BROTHERS INC.,
as advisor and arranger (in such capacity,  the "Arranger"),  LEHMAN  COMMERCIAL
PAPER INC., as syndication  agent (in such capacity,  the "Syndication  Agent"),
LEHMAN  COMMERCIAL PAPER INC., as  administrative  agent (in such capacity,  the
"Administrative   Agent")  and  CANADIAN   IMPERIAL   BANK  OF   COMMERCE.,   as
Documentation  Agent  (in  such  capacity,   the  "Documentation   Agent"),  the
undersigned  CEO/President  of  AUTOMATED  WAGERING  INTERNATIONAL,   INC.  (the
"Company") hereby certifies as follows:


     1. The  representations  and warranties of the Company set forth in each of
the  Loan  Documents  to  which it is a party  or  which  are  contained  in any
certificate furnished by or on behalf of the Company pursuant to any of the Loan
Documents to which it is a party are true and correct in all  material  respects
on and as of the date hereof with the same effect as if made on the date hereof,
except  for  representations  and  warranties  expressly  stated  to relate to a
specific  earlier date, in which case such  representations  and warranties were
true and correct in all material respects as of such earlier date.

     2. Susan J.  Carstensen is the duly elected and qualified  Treasurer of the
Company and the  signature  set forth for such officer  below is such  officer's
true and genuine signature.

     3. No Default or Event of Default has occurred and is  continuing as of the
date hereof or after  giving  effect to the Loans to be made on the date hereof.
[Borrower only]

     4.  The  conditions  precedent  set  forth  in  Section  5.1 of the  Credit
Agreement  were satisfied as of the Closing Date except as set forth on Schedule
I hereto.

     5. No Default or Event of Default has occurred and is  continuing as of the
date hereof or after  giving  effect to the Loans to be made on the date hereof.
[Borrower only]

     6.  The  conditions  precedent  set  forth  in  Section  5.1 of the  Credit
Agreement  were satisfied as of the Closing Date except as set forth on Schedule
I hereto.

     The undersigned Corporate Treasurer of the Company certifies as follows:

     7. There are no  liquidation or  dissolution  proceedings  pending or to my
knowledge  threatened  against the  Company,  nor has any other  event  occurred
adversely  affecting or  threatening  the continued  corporate  existence of the
Company.

     8. The Company is a corporation duly incorporated,  validly existing and in
good standing under the laws of the jurisdiction of its organization.

     9. Attached  hereto as Annex 1 is a true and complete  copy of  resolutions
duly

<PAGE>






adopted by the Board of  Directors  of the  Company  on  October  9, 1998,  such
resolutions  have not in any way been amended,  modified,  revoked or rescinded,
have been in full force and effect since their adoption to an including the date
hereof  and are  now in full  force  and  effect  (and  are the  only  corporate
proceedings  of the Company now in force  relating to or  affecting  the matters
referred to therein.)

     10.  Attached  hereto as Annex 2 is a true and complete copy of the By-Laws
of the Company as in effect on the date hereof.

     11.  Attached  hereto  as  Annex  3 is a  true  and  complete  copy  of the
Certificate of Incorporation of the Company as in effect on the date hereof, and
such certificate has not been amended, repealed, modified or restated.

     11. The following  persons are now duly elected and  qualified  officers of
the Company holding the offices  indicated next to their respective names below,
and such

<PAGE>

officers  have held such  offices  with the  Company at all times since the date
indicated next to their respective titles to and including the date hereof,  and
the signatures  appearing opposite their respective names below are the true and
genuine  signatures  of  such  officers,  and  each  of  such  officers  is duly
authorized  to execute  and  deliver on behalf of the  Company  each of the Loan
Documents  to which it is a party and any  certificate  or other  document to be
delivered by the Company pursuant to the Loan Documents to which it is a party:

     Name                  Office           Date             Signature
     ----                  ------           ----             ---------

Richard M. Haddrill      CEO/President     10/01/98      /S/ Richard M. Haddrill
                                                         -----------------------

Susan J. Carstensen      CFO/Treasurer      9/30/98      /S/ Susan J. Carstensen
                                                         -----------------------

     IN WITNESS  WHEREOF,  the undersigned have hereunto set our names as of the
date set forth below.

/S/ Richard M. Haddrill                     /S/ Susan J. Carstensen
----------------------------------          ------------------------------------
Richard M. Haddrill, CEO/President          Susan J. Carstensen, CFO/Treasurer


Date:  _______________, 199__



<PAGE>




                                                                    Schedule D-1




                                                                       [Montana]


                                  DEED OF TRUST


                                      from


                         POWERHOUSE TECHNOLOGIES, INC.,
           formerly known as Video Lottery Technologies, Inc., Grantor


                                       to


               SECURITY TITLE COMPANY OF GALLATIN COUNTY, Trustee


                           for the use and benefit of


                          LEHMAN COMMERCIAL PAPER INC.,
           as Administrative Agent and Syndication Agent, Beneficiary


                          DATED AS OF OCTOBER __, 1998



                       After recording, please return to:

                           Simpson Thacher & Bartlett
                              425 Lexington Avenue
                            New York, New York 10017

                           ATTN: Daniel E. Karp, Esq.




<PAGE>
















                                  DEED OF TRUST
                                  -------------


          THIS  DEED  OF  TRUST,  dated  as of  October  __,  1998,  is  made by
POWERHOUSE  TECHNOLOGIES,  INC., a Delaware  corporation formerly known as Video
Lottery  Technologies,  Inc.  ("Grantor"),  whose  address is 2311 South Seventh
Avenue, Bozeman,  Montana 59715, to SECURITY TITLE COMPANY OF GALLATIN COUNTY, a
Montana  Corporation  ("Trustee"),  whose  address  is 600  South  19th  Avenue,
Bozeman,  Montana 59771, for the use and benefit of LEHMAN COMMERCIAL PAPER INC.
("Beneficiary"),  whose address is 3 World Financial Center,  New York, New York
10285. References to this "Deed of Trust" shall mean this instrument and any and
all    renewals,    modifications,    amendments,    supplements,    extensions,
consolidations, substitutions, spreaders and replacements of this instrument.


                                   Background
                                   ----------

          A. Grantor is the owner of the real  property  described in Schedule A
attached   hereto  (such  real  property,   together  with  all  the  buildings,
improvements,  structures and fixtures now or subsequently  located thereon (the
"Improvements") being collectively referred to as the "Real Estate").

          B. Pursuant to that certain Credit  Agreement  dated as of October __,
1998 (as the same may be amended, restated,  replaced,  substituted or otherwise
modified  from  time to  time,  the  "Credit  Agreement")  among  Mortgagor,  as
borrower, the several lenders from time to time parties thereto (the "Lenders"),
Lehman  Brothers Inc., as arranger,  Beneficiary,  as  administrative  agent and
syndication  agent,  and Canadian  Imperial Bank of Commerce,  as  documentation
agent,  the  Lenders  have  agreed to make  certain  loans to  Borrower  as more
particularly described therein. Capitalized terms used and not otherwise defined
herein  shall  have the  meanings  assigned  thereto  in the  Credit  Agreement.
References  in this Deed of Trust to the "Default  Rate" shall mean the interest
rate provided for in Section 2.13(c) of the Credit Agreement.

          C. Borrower,  the administrative  agent and the Lenders are willing to
effectuate the Credit Agreement,  if, among other things, Grantor grants a first
lien on and  security  interest  in the Real  Estate and the Trust  Property  to
secure  Grantor's   obligations   under  the  Credit  Agreement  and  the  other
obligations secured thereby.






                                                 Granting Clauses

<PAGE>


                                                                               2



          For good and valuable  consideration,  the receipt and  sufficiency of
which are hereby acknowledged, Grantor agrees that to secure:

          (a)  (i)  the  repayment  of  principal  in  the  maximum   amount  of
     $100,000,000,   which  amount  is  the  total   indebtedness  that  may  be
     outstanding and secured hereby at any given time the indebtedness evidenced
     by the Notes, and (ii) all interest and fees payable thereon (the items set
     forth in  clauses  (i) and  (ii)  being  referred  to  collectively  as the
     "Indebtedness"); and

          (b) the  performance of all  covenants,  agreements,  obligations  and
     liabilities  of  Grantor  (the  "Obligations")  under  or  pursuant  to the
     provisions  of the Notes,  this Deed of Trust,  the Credit  Agreement,  any
     other  document   securing  payment  of  the  Indebtedness  (the  "Security
     Documents")  and  any  amendments,   supplements,   extensions,   renewals,
     restatements,  replacements or  modifications  of any of the foregoing (the
     Notes, the Credit Agreement, the Security Documents and all other documents
     and instruments from time to time evidencing,  securing or guaranteeing the
     payment of the Indebtedness or the performance of the  Obligations,  as any
     of the same may be  amended,  supplemented,  extended,  renewed,  restated,
     replaced or modified from time to time, are collectively referred to as the
     "Loan Documents");

GRANTOR HEREBY CONVEYS TO TRUSTEE AND HEREBY GRANTS, ASSIGNS, TRANSFERS AND SETS
OVER TO  TRUSTEE,  IN  TRUST  WITH  POWER  OF SALE  FOR THE USE AND  BENEFIT  OF
BENEFICIARY, AND GRANTS BENEFICIARY AND TRUSTEE A SECURITY INTEREST IN:

          (A) the Real Estate;

          (B) all the  estate,  right,  title,  claim or  demand  whatsoever  of
     Grantor, in possession or expectancy, in and to the Real Estate or any part
     thereof, whether now owned or hereafter acquired;

          (C) all right,  title and  interest  of  Grantor  in, to and under all
     easements,  rights of way, gores of land, streets, ways, alleys,  passages,
     sewer rights, waters, water courses, water and riparian rights, development
     rights,  air rights,  mineral rights,  sand, gravel and aggregate,  and all
     estates,  rights,  titles,  interests,   privileges,  licenses,  tenements,
     hereditaments and appurtenances belonging,  relating or appertaining to the
     Real Estate, and any reversions,  remainders,  rents,  issues,  profits and
     revenue  thereof  and all  land  lying  in the bed of any  street,  road or
     avenue,  in front  of or  adjoining  the Real  Estate  to the  center  line
     thereof;

          (D)  all of the  fixtures,  chattels,  business  machines,  machinery,
     apparatus,  equipment,  furnishings,  fittings  and  articles  of  personal
     property of every kind and nature  whatsoever,  and all  appurtenances  and
     additions thereto and substitutions or replacements thereof (together with,
     in each case,  attachments,  components,  parts and accessories)  currently
     owned or subsequently  acquired by Grantor and now or subsequently attached
     to, or  contained  in or used or usable in any way in  connection  with any
     operation or



<PAGE>


                                                                               3



     letting of the Real Estate,  including but without  limiting the generality
     of  the  foregoing,   all  screens,   awnings,  shades,  blinds,  curtains,
     draperies,  artwork, carpets, rugs, storm doors and windows,  furniture and
     furnishings,  heating,  electrical,  and  mechanical  equipment,  lighting,
     switchboards,  plumbing,  ventilating,  air  conditioning  and  air-cooling
     apparatus,   refrigerating,   and   incinerating   equipment,   escalators,
     elevators,  loading and unloading  equipment and systems,  stoves,  ranges,
     laundry equipment,  cleaning systems (including window cleaning apparatus),
     telephones,   communication   systems   (including   satellite  dishes  and
     antennae),  televisions,   computers,  sprinkler  systems  and  other  fire
     prevention and  extinguishing  apparatus and materials,  security  systems,
     motors,  engines,  machinery,  pipes, pumps, tanks,  conduits,  appliances,
     fittings and fixtures of every kind and  description  (all of the foregoing
     in this paragraph (D) being referred to as the "Equipment");

          (E) all right, title and interest of Grantor in and to all substitutes
     and replacements of, and all additions and improvements to, the Real Estate
     and the  Equipment,  subsequently  acquired  by or  released  to Grantor or
     constructed, assembled or placed by Grantor on the Real Estate, immediately
     upon such  acquisition,  release,  construction,  assembling  or placement,
     including,  without  limitation,  any and all  building  materials  whether
     stored at the Real Estate or offsite,  and, in each such case,  without any
     further mortgage, conveyance, assignment or other act by Grantor;

          (F) all right,  title and  interest  of  Grantor  in, to and under all
     leases,  subleases,   underlettings,   concession  agreements,   management
     agreements,  licenses and other agreements relating to the use or occupancy
     of the Real Estate or the  Equipment or any part  thereof,  now existing or
     subsequently  entered  into by Grantor and whether  written or oral and all
     guarantees of any of the foregoing  (collectively,  as any of the foregoing
     may be amended, restated,  extended, renewed or modified from time to time,
     the ("Leases"), and all rights of Grantor in respect of cash and securities
     deposited  thereunder  and the right to receive and  collect the  revenues,
     income,  rents, issues and profits thereof,  together with all other rents,
     royalties, issues, profits, revenue, income and other benefits arising from
     the  use  and   enjoyment  of  the  Trust   Property  (as  defined   below)
     (collectively, the "Leases");

          (G) all trade names,  trade marks,  logos,  copyrights,  good will and
     books  and  records  owned  or  held  by  Grantor  relating  to or  used in
     connection  with the  operation of the Real Estate or the  Equipment or any
     part  thereof;  all general  intangibles  related to the  operation  of the
     Improvements now existing or hereafter arising;

          (H) all unearned premiums under insurance policies now or subsequently
     obtained by Grantor  relating to the Real Estate or Equipment and Grantor's
     interest in and to all proceeds of any such insurance  policies  (including
     title insurance  policies)  including the right to collect and receive such
     proceeds,  subject to the  provisions  relating to insurance  generally set
     forth below; and all awards and other compensation,  including the interest
     payable  thereon and the right to collect and receive the same, made to the
     present or any  subsequent  owner of the Real Estate or  Equipment  for the
     taking by



<PAGE>


                                                                               4



     eminent domain,  condemnation or otherwise,  of all or any part of the Real
     Estate or any easement or other right therein;

          (I)  all  right,  title  and  interest  of  Grantor  in and to (i) all
     contracts  from time to time executed by Grantor or any manager or agent on
     its behalf relating to the ownership,  construction,  maintenance,  repair,
     operation,  occupancy, sale or financing of the Real Estate or Equipment or
     any part  thereof and all  agreements  relating to the purchase or lease of
     any  portion  of the Real  Estate  or any  property  which is  adjacent  or
     peripheral  to the Real Estate,  together  with the right to exercise  such
     options and all leases of Equipment (collectively,  the "Contracts"),  (ii)
     to the extent  permitted  under  applicable  law, all  consents,  licenses,
     building  permits,   certificates  of  occupancy  and  other   governmental
     approvals relating to construction, completion, occupancy, use or operation
     of the Real Estate or any part thereof  (collectively,  the  "Permits") and
     (iii) all  drawings,  plans,  specifications  and similar or related  items
     relating to the Real Estate (collectively, the "Plans");

          (J) any and all monies now or  subsequently on deposit for the payment
     of real estate taxes or special  assessments against the Real Estate or for
     the  payment of premiums  on  insurance  policies  covering  the  foregoing
     property or otherwise on deposit with or held by Beneficiary as provided in
     this Deed of Trust;  all capital,  operating,  reserve or similar  accounts
     held by or on behalf of Grantor and related to the  operation  of the Trust
     Property,  whether now existing or hereafter arising and all monies held in
     any of the foregoing  accounts and any certificates or instruments  related
     to or evidencing such accounts;

          (K) all  accounts  and  revenues  arising  from the  operation  of the
     Improvements  including,  without  limitation,  any  right to  payment  now
     existing  or  hereafter  arising  for  rental of space or for goods sold or
     leased or for services rendered,  whether or not yet earned by performance,
     arising from the operation of the Improvements or any other facility on the
     Trust Property; and

          (L) all proceeds, both cash and noncash, of the foregoing;

          (All of the  foregoing  property and rights and interests now owned or
held or subsequently  acquired by Grantor and described in the foregoing clauses
(A)  through  (E) are  collectively  referred  to as the  "Premises",  and those
described in the foregoing clauses (A) through (L) are collectively  referred to
as the "Trust Property").

          TO HAVE AND TO HOLD the Trust  Property and the rights and  privileges
hereby  granted  unto  Trustee,  its  successors  and  assigns  for the uses and
purposes set forth,  until the  Indebtedness  is fully paid and the  Obligations
fully performed.

                              Terms and Conditions
                              --------------------

          Grantor  further  represents,  warrants,  covenants  and  agrees  with
Trustee and Beneficiary as follows:



<PAGE>


                                                                               5




          1. Warranty of Title.  Grantor warrants that Grantor has good title to
the Real Estate in fee simple and good title to the rest of the Trust  Property,
subject only to the matters that are set forth in the title insurance  policy or
policies  being issued to  Beneficiary  to insure the lien of this Deed of Trust
(the "Permitted Exceptions") and Grantor shall warrant, defend and preserve such
title and the rights granted by this Deed of Trust thereon against all claims of
all persons and  entities.  Grantor  further  warrants  that it has the right to
grant the Trust Property.

          2. Payment of Indebtedness.  Grantor shall pay the Indebtedness at the
times and  places  and in the  manner  specified  in the  Notes  and the  Credit
Agreement and shall perform all the Obligations.

          3. Requirements.

          (a) Grantor shall promptly  comply with, or cause to be complied with,
and conform to all present and future laws, statutes, codes, ordinances, orders,
judgments,  decrees,  rules,  regulations and requirements  (including,  without
limitation, the Americans with Disabilities Act or similar local regulation (the
"ADA"),  and  irrespective  of the nature of the work to be done, of each of the
United States of America,  any State and any  municipality,  local government or
other political subdivision thereof and any agency,  department,  bureau, board,
commission or other instrumentality of any of them, now existing or subsequently
created (collectively, "Governmental Authority") which has jurisdiction over the
Trust  Property and all covenants,  restrictions  and conditions now or later of
record  which may be  applicable  to any of the Trust  Property,  or to the use,
manner of use, occupancy, possession, operation, maintenance, alteration, repair
or  reconstruction  of any of the Trust  Property.  All present and future laws,
statutes, codes, ordinances,  orders, judgments, decrees, rules, regulations and
requirements of every Governmental  Authority applicable to Grantor or to any of
the Trust Property and all covenants,  restrictions, and conditions which now or
later may be applicable to any of the Trust Property are  collectively  referred
to as the "Legal Requirements".

          (b) From and after the date of this Deed of Trust,  Grantor  shall not
by act or omission permit any building or other  improvement on any premises not
subject  to the lien of this Deed of Trust to rely on the  Premises  or any part
thereof or any interest  therein to fulfill any Legal  Requirement,  and Grantor
hereby assigns to Beneficiary  any and all rights to give consent for all or any
portion of the Premises or any interest therein to be so used. Grantor shall not
by act or omission  impair the  integrity  of any of the Real Estate as a single
zoning lot separate and apart from all other premises.  Grantor  represents that
each  parcel  of the Real  Estate  constitutes  a  legally  subdivided  lot,  in
compliance with all applicable  subdivision laws and similar Legal Requirements.
Any act or omission by Grantor  which would  result in a violation of any of the
provisions of this subsection shall be void.

          4. Payment of Taxes and Other Impositions.  (a) Except as permitted by
subsection 6.3 of the Credit Agreement, promptly when due, Grantor shall pay and
discharge all taxes of every kind and nature (including, without limitation, all
real and personal property,  income,  franchise,  withholding,  transfer, gains,
profits and gross  receipts  taxes),  all charges for any  easement or agreement
maintained for the benefit of any of the Trust Property, all general and special
assessments,  levies, permits,  inspection and license fees, all water and sewer
rents




<PAGE>

                                                                               6

and charges and all other public  charges even if unforeseen  or  extraordinary,
imposed upon or assessed  against or which may become a lien on any of the Trust
Property,  or arising in respect of the  occupancy,  use or possession  thereof,
together  with any  penalties  or interest on any of the  foregoing  (all of the
foregoing  are  collectively  referred to as the  "Impositions").  Grantor shall
within 30 days after each due date deliver to Beneficiary (i) original or copies
of receipted bills and cancelled checks evidencing payment of such Imposition if
it is a real estate tax or other public charge and (ii)  evidence  acceptable to
Beneficiary  showing  the  payment of any other such  Imposition.  If by law any
Imposition,  at Grantor's  option,  may be paid in installments  (whether or not
interest  shall accrue on the unpaid  balance of such  Imposition),  Grantor may
elect to pay such Imposition in such  installments  and shall be responsible for
the payment of such installments with interest, if any.

          (b)  Nothing  herein  shall  affect  any right or remedy of Trustee or
Beneficiary  under this Deed of Trust or otherwise,  without notice or demand to
Grantor,  to pay any Imposition after the date such Imposition shall have become
due, and to add to the Indebtedness  the amount so paid,  together with interest
from the time of  payment  at the  Default  Rate.  Any sums paid by  Trustee  or
Beneficiary in discharge of any Impositions  shall be (i) a lien on the Premises
secured  hereby  prior to any right or title to,  interest in, or claim upon the
Premises  subordinate  to the lien of this Deed of Trust,  and (ii)  payable  on
demand by Grantor to Trustee or  Beneficiary,  as the case may be, together with
interest at the Default Rate as set forth above.

          (c)  Grantor  shall not claim,  demand or be  entitled  to receive any
credit  or  credits  toward  the  satisfaction  of this  Deed of Trust or on any
interest  payable  thereon for any taxes assessed  against the Trust Property or
any part thereof,  and shall not claim any  deduction  from the taxable value of
the Trust Property by reason of this Deed of Trust.

          (d) After an Event of Default (as defined below), Beneficiary shall be
entitled  to require  Grantor to pay  monthly  in  advance  to  Beneficiary  the
equivalent  of 1/12th  of the  estimated  annual  Impositions.  Beneficiary  may
commingle  such funds with its own funds and  Grantor  shall not be  entitled to
interest thereon.

          (e) Grantor shall have the right to contest or object in good faith to
the amount or validity of any Imposition by appropriate legal  proceedings,  but
such right shall not be deemed or construed in any way as relieving or modifying
Grantor's  covenant to pay any such  Imposition  in the manner  provided in this
Section  unless (i) Grantor has given prior  written  notice to  Beneficiary  of
Grantor's  intent so to contest or object to an  Imposition,  (ii) Grantor shall
demonstrate  to  Beneficiary's  satisfaction  that the legal  proceedings  shall
operate  conclusively  to prevent  the sale of the Trust  Property,  or any part
thereof,  to  satisfy  such  Imposition  prior  to final  determination  of such
proceedings,  (iii) such proceeding shall be permitted under and be conducted in
accordance  with the  provisions  of any other  instrument  to which  Grantor is
subject and shall not  constitute a default  thereunder  and (iv) Grantor  shall
have set aside  adequate  reserves for the payment of the  Impositions  together
with all interest and penalties thereon.

          5. Insurance.  (a) Grantor shall maintain or cause to be maintained on
all of the Premises the  insurance  required by the Credit  Agreement and in any
event shall also maintain or cause to be maintained




<PAGE>

                                                                               7

          (i) during the course of any  construction or repair of  Improvements,
     comprehensive  general  liability  insurance  under a policy  including the
     "broad form CGL  endorsement"  (or which  incorporates the language of such
     endorsement),  (including  coverage for elevators and escalators,  if any).
     The policy shall include coverage for independent contractors and completed
     operations.  The completed operations coverage shall stay in effect for two
     years after construction of any Improvements has been completed. The policy
     shall provide  coverage on an occurrence  basis against claims for personal
     injury,  including,  without limitation,  bodily injury,  death or property
     damage  occurring on, in or about the Premises and the  adjoining  streets,
     sidewalks  and  passageways,  such  insurance to afford  immediate  minimum
     protection  to a limit of not less than that required by  Beneficiary  with
     respect  to  personal  injury,  bodily  injury  or death to any one or more
     persons or damage to property;

          (ii)  during  the  course  of  any   construction  or  repair  of  the
     Improvements,   workers'   compensation   insurance  (including  employer's
     liability  insurance)  for all  employees  of  Grantor  engaged  on or with
     respect to the Premises in such amounts as are reasonably  satisfactory  to
     Beneficiary, but in no event less than the limits established by law;

          (iii) during the course of any construction,  addition,  alteration or
     repair of the  Improvements,  builder's risk completed value form insurance
     against "all risks of physical  loss,"  including  collapse,  water damage,
     flood and earthquake and transit coverage,  during  construction or repairs
     of  the  Improvements,   with  deductible   approved  by  Beneficiary,   in
     nonreporting  form,   covering  the  total  value  of  work  performed  and
     equipment,  supplies and materials furnished (with an appropriate limit for
     soft costs in the case of construction);

          (iv) if any portion of the  Premises is located in an area  identified
     as a special flood hazard area by the Federal  Emergency  Management Agency
     or other applicable  agency,  flood insurance in an amount  satisfactory to
     Beneficiary,  but in no event  less  than  the  maximum  limit of  coverage
     available under the National Flood Insurance Act of 1968, as amended;

          (v) such other  insurance  in such  amounts as Grantor may  reasonably
     request from time to time.

Each  insurance  policy (other than flood  insurance  written under the National
Flood Insurance Act of 1968, as amended,  in which case to the extent available)
shall (i) provide  that it shall not be  cancelled,  non-renewed  or  materially
amended  without 30 days' prior  written  notice to  Beneficiary,  and (ii) with
respect  to  all  property  insurance,   provide  for  loss  payable  solely  to
Beneficiary as its interest may appear.  Liability insurance policies shall name
Beneficiary as (and Trustee,  if Trustee shall so request) an additional insured
and contain a waiver of subrogation against Beneficiary (and Trustee, if Trustee
shall so request);  all such policies shall indemnify and hold  Beneficiary (and
Trustee,  if  Trusee  shall  so  request)  harmless  from all  liability  claims
occurring on, in or about the Premises and the adjoining streets,  sidewalks and
passageways.  The  amounts  of each  insurance  policy and the form of each such
policy  shall at all

<PAGE>

                                                                               8

times be satisfactory to Beneficiary.  Each policy shall expressly  provide that
any proceeds which are payable to Beneficiary  shall be paid by check payable to
the order of Beneficiary only and requiring the endorsement of Beneficiary only.
If any required  insurance shall expire, be withdrawn,  become void by breach of
any  condition  thereof  by  Grantor  or by any  lessee of any part of the Trust
Property or become void or unsafe by reason of the failure or  impairment of the
capital of any insurer,  or if for any other reason  whatsoever  such  insurance
shall become unsatisfactory to Beneficiary, Beneficiary shall immediately obtain
new or additional insurance satisfactory to Beneficiary.  Grantor shall not take
out any separate or additional  insurance  which is contributing in the event of
loss unless it is properly endorsed and otherwise satisfactory to Beneficiary in
all respects.

          (b) Grantor shall deliver to Beneficiary an original of each insurance
policy required to be maintained,  or a certificate of such insurance acceptable
to  Beneficiary,  together  with a copy of the  declaration  page for each  such
policy.  Grantor  shall  (i)  pay as  they  become  due all  premiums  for  such
insurance, (ii) not later than 15 days prior to the expiration of each policy to
be  furnished  pursuant to the  provisions  of this  Section,  deliver a renewed
policy or policies, or duplicate original or originals thereof,  marked "premium
paid,"  or  accompanied  by such  other  evidence  of  payment  satisfactory  to
Beneficiary  with  standard  non-contributory  mortgage  clauses in favor of and
acceptable to Beneficiary. Upon request of Beneficiary,  Grantor shall cause its
insurance  underwriter  or broker to certify to  Beneficiary in writing that all
the requirements of this Deed of Trust governing insurance have been satisfied.

          (c) If Grantor is in default of its  obligations  to insure or deliver
any such prepaid policy or policies, then Beneficiary, at its option and without
notice,  may effect  such  insurance  from year to year,  and pay the premium or
premiums  therefor,  and Grantor shall pay to Beneficiary on demand such premium
or premiums so paid by Beneficiary with interest from the time of payment at the
Default  Rate and the same  shall be deemed to be  secured by this Deed of Trust
and shall be collectible in the same manner as the Indebtedness  secured by this
Deed of Trust.

          (d) Grantor shall increase the amount of property  insurance  required
to equal 100% replacement cost pursuant to the provisions of this Section at the
time of each  renewal of each policy (but not later than 12 months from the date
of this Deed of Trust and each  successive 12 month period to occur  thereafter)
by using the F.W.  Dodge  Building  Index to determine  whether there shall have
been an increase in the replacement  value since the most recent adjustment and,
if there  shall have been such an  increase,  the amount of  insurance  required
shall be adjusted accordingly.

          (e)  Grantor  promptly  shall  comply  with  and  conform  to (i)  all
provisions  of each such  insurance  policy,  and (ii) all  requirements  of the
insurers  applicable  to Grantor or to any of the Trust  Property or to the use,
manner of use,  occupancy,  possession,  operation,  maintenance,  alteration or
repair of any of the Trust Property.  Grantor shall not use or permit the use of
the Trust  Property in any manner  which would  permit any insurer to cancel any
insurance  policy or void  coverage  required to be  maintained  by this Deed of
Trust.


<PAGE>

                                                                               9

          (f) If the Trust Property, or any part thereof,  shall be destroyed or
damaged by fire or any other casualty,  whether insured or uninsured,  or in the
event any claim is made against Grantor for any personal  injury,  bodily injury
or  property  damage  incurred  on or about the  Premises,  Grantor  shall  give
immediate  notice  thereof to  Beneficiary.  If the Trust Property is damaged by
fire or other  casualty  and the cost to  repair  such  damage  is less than the
lesser of (i) 25% of the  replacement  cost of the  Improvements at the affected
Real Estate site and (ii) $500,000, then provided that no Event of Default shall
have  occurred and be  continuing,  Grantor  shall have the right to adjust such
loss,  and the  insurance  proceeds  relating  to such  loss may be paid over to
Grantor; provided that Grantor shall, promptly after any such damage, repair all
such damage  regardless of whether any insurance  proceeds have been received or
whether such  proceeds,  if  received,  are  sufficient  to pay for the costs of
repair. If the Trust Property is damaged by fire or other casualty, and the cost
to repair such damage  exceeds the above limit,  or if an Event of Default shall
have  occurred  and  be  continuing,   then  Grantor   authorizes  and  empowers
Beneficiary,  at Beneficiary's  option and in Beneficiary's sole discretion,  as
attorney-in-fact  for Grantor,  to make proof of loss, to adjust and  compromise
any claim under any  insurance  policy,  to appear in and  prosecute  any action
arising from any policy, to collect and receive insurance proceeds and to deduct
therefrom  Beneficiary's  expenses  incurred  in the  collection  process.  Each
insurance  company  concerned is hereby  authorized and directed to make payment
for such loss  directly  to  Beneficiary.  Beneficiary  shall  have the right to
require Grantor to repair or restore the Trust  Property,  in which event, if no
Event of Default has  occurred  and is  continuing,  Beneficiary  will apply the
insurance  proceeds  (after  deducting the costs of collecting such proceeds) to
the reimbursement of the costs of such repair or restoration, and Grantor hereby
designates  Beneficiary  as its  attorney-in-fact  for the purpose of making any
election  required or permitted under any insurance policy relating to repair or
restoration.  The insurance proceeds or any part thereof received by Beneficiary
may be applied by Beneficiary toward  reimbursement of all costs and expenses of
Beneficiary  in collecting  such  proceeds,  and the balance,  at  Beneficiary's
option  in  its  sole  and  absolute  discretion,   to  the  principal  (to  the
installments  in inverse  order of  maturity,  if payable in  installments)  and
interest due or to become due under the Notes,  to fulfill any other  Obligation
of Grantor. Application by Beneficiary of any insurance proceeds toward the last
maturing  installments  of principal and interest due or to become due under the
Notes shall not excuse Grantor from making any regularly  scheduled payments due
thereunder,  nor shall  such  application  extend or reduce  the  amount of such
payments.

          (g) In the  event  of  foreclosure  of this  Deed of  Trust  or  other
transfer of title to the Trust Property in  extinguishment  of the Indebtedness,
all right,  title and interest of Grantor in and to any insurance  policies then
in force shall pass to the  purchaser  or grantee and  Grantor  hereby  appoints
Beneficiary its attorney-in-fact,  in Grantor's name, to assign and transfer all
such policies and proceeds to such purchaser or grantee.

          6. Restrictions on Liens and Encumbrances. Except for the lien of this
Deed of Trust and the  Permitted  Exceptions,  and  except as  permitted  by the
Credit Agreement, Grantor shall not further mortgage, nor otherwise encumber the
Trust Property nor create or suffer to exist any lien,  charge or encumbrance on
the Trust  Property,  or any part  thereof  superior to the lien of this Deed of
Trust, whether recourse or non-recourse.



<PAGE>


                                                                              10


          7.  Sale and  Other  Transfer  Restrictions.  Grantor  shall not sell,
transfer,  convey or assign all or any portion of, or any interest in, the Trust
Property except as permitted by the Credit Agreement.

          8.  Limitation  on  Fundamental  Changes.  Except as  permitted by the
Credit Agreement, Grantor agrees that:

          (i)  Grantor  shall  not  enter  into any  transaction  of  merger  or
     consolidation,  or liquidate or dissolve  itself (or suffer any liquidation
     or  dissolution),  or acquire by purchase or otherwise all or substantially
     all the business or assets of, or any stock or other evidence of beneficial
     ownership of, any entity; and

          (ii) Grantor  shall not engage in any  business on the Premises  other
     than the business in which it is presently engaged.

          9.  Maintenance;  No Alteration;  Inspection;  Utilities.  (a) Grantor
shall maintain or cause to be maintained all the  Improvements in good condition
and repair and shall not commit or suffer any waste of the Improvements. Grantor
shall repair,  restore,  replace or rebuild promptly, in each case in accordance
with the  Credit  Agreement,  any part of the  Premises  which may be damaged or
destroyed by any casualty  whatsoever.  The Improvements shall not be demolished
or, except in compliance with the Credit  Agreement,  materially  altered,  nor,
except in compliance with the Credit  Agreement,  any material  additions built,
without the prior  written  consent of  Beneficiary,  which consent shall not be
unreasonably withheld or delayed.

          (b) Beneficiary and any persons  authorized by Beneficiary  shall have
the right to enter and  inspect the  Premises  and the right to inspect all work
done, labor performed and materials  furnished in and about the Improvements and
the right to inspect  and make  copies of all books,  contracts  and  records of
Grantor relating to the Trust Property.

          (c) Grantor shall pay or cause to be paid when due all utility charges
which are incurred for gas,  electricity,  water or sewer services  furnished to
the Premises and all other  assessments or charges of a similar nature,  whether
public or private, affecting the Premises or any portion thereof, whether or not
such assessments or charges are liens thereon.

          10. Condemnation/Eminent  Domain. Immediately upon obtaining knowledge
of  the  institution  of any  proceedings  for  the  condemnation  of the  Trust
Property,  or any  portion  thereof,  Grantor  will  notify  Beneficiary  of the
pendency of such proceedings.  Grantor authorizes Beneficiary,  at Beneficiary's
option and in Beneficiary's sole discretion, as attorney-in-fact for Grantor, to
commence,  appear in and  prosecute,  in  Beneficiary's  or Grantor's  name, any
action or proceeding relating to any condemnation of the Trust Property,  or any
portion  thereof,  and to settle or compromise any claim in connection with such
condemnation.  If Beneficiary  elects not to  participate  in such  condemnation
proceeding,  then Grantor shall, at its expense,  diligently  prosecute any such
proceeding  and shall  consult with  Beneficiary,  its attorneys and experts and
cooperate  with them in any  defense  of any such  proceedings.  All  awards and
proceeds of  condemnation  shall be assigned to Beneficiary to be applied in the
same manner as insurance


<PAGE>


                                                                              11



proceeds,  as provided above, and Grantor agrees to execute any such assignments
of all such awards as Beneficiary may request.

          11. Restoration. If Beneficiary elects to release funds to Grantor for
restoration  of any of the  Trust  Property,  then  such  restoration  shall  be
performed only in accordance with the following conditions:

          (i)  prior to the  commencement  of any  restoration,  the  plans  and
     specifications  for such  restoration,  and the  budgeted  costs,  shall be
     submitted  for  approval  by  Beneficiary,  which  approval  shall  not  be
     unreasonably withheld or delayed;

          (ii) prior to making any  advance of  restoration  funds,  Beneficiary
     shall be satisfied that the remaining  restoration  funds are sufficient to
     complete  the  restoration  and  to pay  all  related  expenses,  including
     interest on the Indebtedness and real estate taxes on the Premises,  during
     restoration;

          (iii) at the time of any disbursement of the restoration funds, (A) no
     Event of Default (as defined below) shall then exist,  (B) no mechanics' or
     materialmen's liens shall have been filed and remain  undischarged,  except
     those discharged by the disbursement of the requested restoration funds and
     (C) a satisfactory  bring-down or  continuation  of title  insurance on the
     Premises  shall be delivered to  Beneficiary,  upon  reasonable  request by
     Beneficiary therefor;

          (iv)  disbursements  shall be made from time to time in an amount  not
     exceeding the cost of the work completed since the last disbursement,  upon
     receipt  of  satisfactory  evidence  of  the  stage  of  completion  and of
     performance of the work in a good and workmanlike  manner and in accordance
     with the contracts, plans and specifications acceptable to Beneficiary;

          (v) with respect to each advance of restoration funds, Beneficiary may
     retain  10%  of  the  amount  of  such  advance  as a  holdback  until  the
     restoration is fully completed;

          (vi)  the  restoration  funds  shall  bear  no  interest  and  may  be
     commingled with Beneficiary's other funds;

          (vii)  Beneficiary may impose such other conditions as are customarily
     imposed by construction lenders; and

          (viii)  any   restoration   funds   remaining  shall  be  retained  by
     Beneficiary and may be applied by Beneficiary,  in its sole discretion,  to
     the Indebtedness in the inverse order of maturity.

          12. Leases.  (a) Grantor shall not (i) execute an assignment or pledge
of any Lease  relating to all or any portion of the Trust Property other than in
favor of Beneficiary,  or (ii) without the prior written consent of Beneficiary,
which consent shall not  unreasonably be withheld or delayed,  execute or permit
to exist any Lease of any of the Trust Property.


<PAGE>


                                                                              12





          (b) As to any Lease consented to by Beneficiary, Grantor shall:

          (i) promptly perform all of the provisions of the Lease on the part of
     the lessor thereunder to be performed;

          (ii) promptly  enforce all of the  provisions of the Lease on the part
     of the lessee thereunder to be performed;

          (iii) appear in and defend any action or  proceeding  arising under or
     in any manner  connected  with the Lease or the  obligations  of Grantor as
     lessor or of the lessee thereunder;

          (iv)  exercise,  within five (5) days after a request by  Beneficiary,
     any right to request  from the  lessee a  certificate  with  respect to the
     status thereof;

          (v)  simultaneously  deliver to  Beneficiary  copies of any notices of
     default  which  Grantor  may at any time  forward  to or  receive  from the
     lessee;

          (vi) promptly  deliver to Beneficiary a fully executed  counterpart of
     the Lease;

          (vii)  promptly,  upon request of  Beneficiary,  record the Lease or a
     memorandum thereof, as provided by applicable law; and

          (viii) promptly deliver to Beneficiary, upon Beneficiary's request, an
     assignment of the Grantor's interest under such Lease.

          (c) Grantor shall deliver to Beneficiary, within ten (10) days after a
request by Beneficiary, a written statement, certified by Grantor as being true,
correct and complete, containing the names of all lessees and other occupants of
the Trust Property,  the terms of all Leases and the spaces occupied and rentals
payable  thereunder,  and a list  of all  Leases  which  are  then  in  default,
including  the nature and  magnitude of the  default;  such  statement  shall be
accompanied  by credit  information  with  respect to the lessees and such other
information as Beneficiary may request.

          (d) All Leases entered into by Grantor after the date hereof,  if any,
and all rights of any lessees thereunder shall be subject and subordinate in all
respects to the lien and  provisions  of this Deed of Trust  unless  Beneficiary
shall otherwise elect in writing.

          (e) As to any Lease now in existence or  subsequently  consented to by
Beneficiary, Grantor shall not accept a surrender or terminate, cancel, rescind,
supplement,  alter, revise, modify or amend such Lease or permit any such action
to be taken nor shall  Grantor  accept the payment of rent more than thirty (30)
days in advance of its due date.

          (f) If any act or omission of Grantor  would give any lessee under any
Lease the right,  immediately  or after lapse of a period of time,  to cancel or
terminate  such Lease,  or to abate or offset  against the payment of rent or to
claim a partial or total eviction, such lessee shall

<PAGE>


                                                                              13



not  exercise  such  right  until it has  given  written  notice  of such act or
omission to  Beneficiary  and until a 10-day  period for  remedying  such act or
omission shall have elapsed following the giving of such notice without a remedy
being effected.

          (g) In the event of the enforcement by Beneficiary of any remedy under
this Deed of  Trust,  the  lessee  under  each  Lease  shall,  if  requested  by
Beneficiary  or any other person  succeeding to the interest of Beneficiary as a
result of such  enforcement,  attorn to  Beneficiary or to such person and shall
recognize  Beneficiary  or such  successor in interest as lessor under the Lease
without change in the provisions thereof;  provided however, that Beneficiary or
such  successor  in  interest  shall  not be:  (i)  bound by any  payment  of an
installment  of rent or  additional  rent  which may have been made more than 30
days before the due date of such  installment;  (ii) bound by any  amendment  or
modification  to the Lease  made  without  the  consent of  Beneficiary  or such
successor in  interest,  which  consent  shall not be  unreasonably  withheld or
delayed;  (iii)  liable for any  previous  act or  omission  of Grantor  (or its
predecessors in interest);  (iv)  responsible for any monies owing by Grantor to
the  credit  of  such  lessee  or  subject  to  any  credits,  offsets,  claims,
counterclaims, demands or defenses which the lessee may have against Grantor (or
its  predecessors  in  interest);  (v) bound by any  covenant  to  undertake  or
complete  any  construction  of the  Premises  or any portion  thereof;  or (vi)
obligated  to make any payment to such lessee  other than any  security  deposit
actually delivered to Beneficiary or such successor in interest.  Each lessee or
other occupant, upon request by Beneficiary or such successor in interest, shall
execute and deliver an instrument or instruments confirming such attornment.  In
addition,  Grantor  agrees that each Lease  entered  into after the date of this
Deed of Trust shall  include  language to the effect of  subsections  (d)-(g) of
this  Section;  provided  that  the  provisions  of such  subsections  shall  be
self-operative  and any failure of any Lease to include such language  shall not
impair the binding effect of such provisions on any lessee under such Lease.

          13.  Further  Assurances/Estoppel   Certificates.  To  further  assure
Beneficiary's and Trustee's rights under this Deed of Trust, Grantor agrees upon
demand  of  Beneficiary  or  Trustee  to do any act or  execute  any  additional
documents (including,  but not limited to, security agreements on any personalty
included or to be included in the Trust  Property and a separate  assignment  of
each Lease in recordable  form) as may be required by Beneficiary to confirm the
lien of this  Deed of Trust  and all  other  rights  or  benefits  conferred  on
Beneficiary. Within ten (10) days after Beneficiary has made a request therefor,
Grantor shall deliver,  in form and substance  satisfactory  to  Beneficiary,  a
written  statement,   duly  acknowledged,   setting  forth  the  amount  of  the
Indebtedness,  and whether any offsets, claims,  counterclaims or defenses exist
against the  Indebtedness and certifying as to such other matters as Beneficiary
shall reasonably request.

          14. Beneficiary's Right to Perform. If Grantor fails to perform any of
the covenants or agreements of Grantor, then, after any required notice and cure
periods,  Beneficiary or Trustee,  without waiving or releasing Grantor from any
obligation or default  under this Deed of Trust,  may, at any time (but shall be
under no obligation to) pay or perform the same, and the amount or cost thereof,
with  interest at the Default  Rate,  shall  immediately  be due from Grantor to
Beneficiary or Trusee (as the case may be) and the same shall be secured by this
Deed of Trust and shall be an  encumbrance  on the Trust  Property  prior to any
right,  title  to,  interest  in or claim  upon  the  Trust  Property  attaching
subsequent to the lien of this Deed of Trust.


<PAGE>


                                                                              14



No  payment or advance of money by  Beneficiary  or Trustee  under this  Section
shall be deemed or  construed  to cure  Grantor's  default or waive any right or
remedy of Beneficiary or Trustee.

          15. Grantor's Existence, etc. Grantor shall do all things necessary to
preserve and keep in full force and effect its existence, franchises, rights and
privileges  under the laws of the state in which it was  formed and its right to
own  property  and  transact  business in each state in which the Real Estate is
located.  Grantor  represents  and  warrants  that  this  Deed of Trust has been
executed by a duly authorized  officer thereof.  This Deed of Trust  constitutes
the legal, valid and binding obligation of Grantor,  enforceable against Grantor
in  accordance  with its  terms,  except as  enforceability  may be  limited  by
applicable bankruptcy,  insolvency,  reorganization,  moratorium or similar laws
affecting the enforcement of creditors' rights generally.

          16. Financial  Statements;  Certificates;  Other Information.  Grantor
shall deliver to Beneficiary the financial  statements required under the Credit
Agreement.

          17. Hazardous  Material.  (a) Grantor shall comply with the provisions
of Sections  4.17 and 6.8 of the Credit  Agreement  in respect of  Materials  of
Environmental Concern (as defined in the Credit Agreement). In the event Grantor
fails to do so, after five (5) days' notice to Grantor and the expiration of the
cure period  permitted under the applicable Legal  Requirement,  Beneficiary may
declare  such failure an Event of Default or cause the Premises to be freed from
the Hazardous  Material and the cost of the removal with interest at the Default
Rate shall  immediately be due from Grantor to Beneficiary and the same shall be
added to the  Indebtedness  and be secured by this Deed of Trust.  Grantor shall
give  Beneficiary and its agents and employees  access to the Premises to remove
Hazardous Material. Grantor agrees to defend, indemnify and hold Beneficiary and
Trustee free and harmless from and against all loss,  costs,  damage and expense
(including attorneys' fees and costs and consequential  damages) Beneficiary may
sustain  by  reason  of  (i)  the  imposition  or  recording  of a  lien  by any
Governmental  Authority pursuant to any Legal Requirement  relating to hazardous
or toxic  wastes or  substances  or the  removal  thereof  ("Hazardous  Material
Laws");  (ii) claims of any private  parties  regarding  violations of Hazardous
Material  Laws;  (iii)  costs  and  expenses  (including,   without  limitation,
attorneys'  fees and fees  incidental to the securing of repayment of such costs
and expenses) incurred by Grantor, Beneficiary or Trustee in connection with the
removal of any such lien or in connection  with  Grantor's or  Beneficiary's  or
Trustee's  compliance  with any Hazardous  Material Laws; and (iv) the assertion
against  Beneficiary  or  Trustee by any party of any claim in  connection  with
Hazardous  Material.  It is intended that the foregoing  agreement of Grantor to
indemnify  Beneficiary  include,  without limitation,  indemnification for loss,
costs,  damage and expense  Beneficiary may sustain as a result of Beneficiary's
own negligence.

          (b) The foregoing  indemnification  shall be a recourse  obligation of
Grantor  and  shall  survive  repayment  of  the  Notes,   notwithstanding   any
limitations on recourse  which may be contained  herein or in any Loan Documents
or the delivery of any satisfaction,  release or release deed, discharge or deed
of  reconveyance,  or the assignment of this Deed of Trust by Beneficiary or the
replacement of Trustee by a substitute trustee.


<PAGE>


                                                                              15





          (c) For the purposes of this Deed of Trust, "Hazardous Material" means
and includes any  hazardous,  nuclear,  toxic or dangerous  waste,  substance or
material defined as such in (or for purposes of) the Comprehensive Environmental
Response,   Compensation,  and  Liability  Act,  any  so-called  "Superfund"  or
"Superlien"  law, or any other Legal  Requirement  regulating,  relating  to, or
imposing liability or standards of conduct concerning,  any hazardous,  nuclear,
toxic  or  dangerous  waste,  substance  or  material,  as now or at any time in
effect.

          18.  Asbestos.  Grantor shall not install or permit to be installed in
the Premises  friable asbestos or any substance  containing  asbestos and deemed
hazardous  by any  Legal  Requirement  respecting  such  material,  or any other
building material deemed to be harmful, hazardous or injurious by relevant Legal
Requirements. Grantor shall give Beneficiary and its agents and employees access
to the Premises to remove such  asbestos or  substances.  Grantor  shall defend,
indemnify,  and save  Beneficiary  and Trustee  harmless  from all loss,  costs,
damages  and  expense  (including  attorneys'  fees and costs and  consequential
damages)  asserted or proven against  Beneficiary or Trustee by any party,  as a
result of the presence of such substances or any removal or compliance with such
Legal  Requirements.  It is intended that the foregoing  agreement of Grantor to
indemnify  Beneficiary  include,  without limitation,  indemnification for loss,
costs,  damage and expense  Beneficiary may sustain as a result of Beneficiary's
own negligence.  Furthermore, the indemnification shall be a recourse obligation
of  Grantor  and shall  survive  repayment  of the  Notes,  notwithstanding  any
limitation  on  recourse  which  may be  contained  herein or in any of the Loan
Documents  or the  delivery  of  any  satisfaction,  release  or  release  deed,
discharge or deed of  reconveyance,  or the  assignment of this Deed of Trust by
Beneficiary or the replacement of Trustee with a substitute trustee..

          19. Event of Default.  The occurrence of an Event of Default under the
Credit Agreement shall constitute an Event of Default hereunder.

          20. Remedies.

          (a) Upon the  occurrence  of any Event of Default,  in addition to any
other rights and remedies  Beneficiary  may have pursuant to the Loan Documents,
or as provided by law, and without limitation,  (x) if such event is an Event of
Default under Section 8 of the Credit Agreement,  automatically the Indebtedness
and all other  amounts  owing under the Notes,  this Deed of Trust and the other
Security  Documents  immediately  shall become due and payable,  and (y) if such
event is any other  Event of  Default,  by notice to  Grantor,  Beneficiary  may
declare the Indebtedness  (together with accrued interest thereon) and all other
amounts  payable  under the  Notes,  this  Deed of Trust and the other  Security
Documents to be immediately due and payable.  Except as expressly provided above
in this Section or in the Credit Agreement, presentment, demand, protest and all
other notices of any kind are hereby  expressly  waived.  In addition,  upon the
occurrence  of any  Event of  Default,  Beneficiary  may  immediately  take such
action,  without notice or demand,  as it deems advisable to protect and enforce
its rights against Grantor and in and to the Trust Property,  including, but not
limited to, the following actions,  each of which may be pursued concurrently or
otherwise,  at such time and in such manner as Beneficiary may determine, in its
sole discretion,  without impairing or otherwise  affecting the other rights and
remedies of Beneficiary:



<PAGE>


                                                                              16




          (i)  Beneficiary  may, to the extent  permitted by applicable law, (A)
     institute and maintain an action of foreclosure  against all or any part of
     the Trust Property,  (B) institute and maintain an action on the Notes, (C)
     sell all or part of the  Trust  Property  (Grantor  expressly  granting  to
     Beneficiary the power of sale) pursuant to MCA ss.ss.  71-1-111,  71-1- 223
     and  71-1-224,  as it may be amended or modified  from time to time, or (D)
     take such other action at law or in equity for the enforcement of this Deed
     of Trust or any of the Loan Documents as the law may allow. Beneficiary may
     proceed in any such action to final judgment and execution  thereon for all
     sums due hereunder,  together with interest thereon at the Default Rate and
     all costs of suit,  including,  without limitation,  reasonable  attorneys'
     fees and  disbursements.  Interest at the Default  Rate shall be due on any
     judgment  obtained by  Beneficiary  from the date of judgment  until actual
     payment is made of the full amount of the judgment.

          (ii)  Beneficiary  may  personally,  or by its agents,  attorneys  and
     employees  and without  regard to the adequacy or  inadequacy  of the Trust
     Property or any other  collateral  as  security  for the  Indebtedness  and
     Obligations  enter into and upon the Trust Property and each and every part
     thereof and exclude Grantor and its agents and employees  therefrom without
     liability for trespass,  damage or otherwise  (Grantor  hereby  agreeing to
     surrender  possession of the Trust Property to  Beneficiary  upon demand at
     any such time) and use,  operate,  manage,  maintain  and control the Trust
     Property  and every  part  thereof.  Following  such  entry  and  taking of
     possession, Beneficiary shall be entitled, without limitation, (x) to lease
     all or any part or parts of the Trust Property for such periods of time and
     upon such conditions as Beneficiary  may, in its  discretion,  deem proper,
     (y) to enforce, cancel or modify any Lease and (z) generally to execute, do
     and  perform  any other act,  deed,  matter or thing  concerning  the Trust
     Property as  Beneficiary  shall deem  appropriate as fully as Grantor might
     do.

          (b)  Beneficiary,  in any action to foreclose  this Deed of Trust in a
judicial  procedure or in connection with the exercise of any non-judicial power
of sale by Trustee,  shall be entitled to the appointment of a receiver. In case
of a foreclosure  sale, the Real Estate may be sold, at Beneficiary's  election,
in one  parcel  or in more  than one  parcel  and  Beneficiary  is  specifically
empowered,  (without  being  required  to do so,  and in its sole  and  absolute
discretion)  to cause  successive  sales of portions of the Trust Property to be
held.

          (c) In the event of any breach, beyond any applicable grace period, of
any of the covenants,  agreements,  terms or conditions  contained in this , and
notwithstanding  to the contrary any exculpatory or non-recourse  language which
may be contained herein, Beneficiary shall be entitled to enjoin such breach and
obtain specific  performance of any covenant,  agreement,  term or condition and
Beneficiary  and Trustee shall have the right to invoke any  equitable  right or
remedy as though other remedies were not provided for in this Deed of Trust.

          21. Right of  Beneficiary  to Credit Sale.  Upon the occurrence of any
sale made under this Deed of Trust,  whether  made under the power of sale or by
virtue of judicial  proceedings  or of a judgment or decree of  foreclosure  and
sale,  Beneficiary  may bid for and  acquire  the  Trust  Property  or any  part
thereof.  In lieu of paying cash therefor,  Beneficiary  may make settlement for
the purchase price by crediting upon the Indebtedness or other sums secured


<PAGE>


                                                                              17



by this Deed of Trust the net sales price after deducting therefrom the expenses
of sale and the cost of the  action  and any other  sums  which  Beneficiary  is
authorized  to deduct  under  this Deed of Trust.  In such  event,  this Deed of
Trust,  the Notes and documents  evidencing  expenditures  secured hereby may be
presented to the person or persons  conducting the sale in order that the amount
so used or applied may be credited upon the Indebtedness as having been paid.

          22.  Appointment  of  Receiver.  If an Event  of  Default  shall  have
occurred and be continuing,  Beneficiary as a matter of right and without notice
to Grantor,  unless otherwise  required by applicable law, and without regard to
the adequacy or  inadequacy  of the Trust  Property or any other  collateral  as
security  for the  Indebtedness  and  Obligations  or the  interest  of  Grantor
therein,  shall  have the right to apply to any  court  having  jurisdiction  to
appoint a receiver or  receivers  or other  manager of the Trust  Property,  and
Grantor hereby irrevocably consents to such appointment and waives notice of any
application  therefor  (except as may be required by law).  Any such receiver or
receivers  shall have all the usual  powers and duties of  receivers  in like or
similar cases and all the powers and duties of  Beneficiary  in case of entry as
provided in this Deed of Trust, including,  without limitation and to the extent
permitted by law, the right to enter into leases of all or any part of the Trust
Property, and shall continue as such and exercise all such powers until the date
of confirmation of sale of the Trust Property unless such receivership is sooner
terminated.

          23. Extension,  Release, etc. (a) Without affecting the lien or charge
of this  Deed of Trust  upon  any  portion  of the  Trust  Property  not then or
theretofore  released  as  security  for the full  amount  of the  Indebtedness,
Beneficiary may, from time to time and without notice,  agree to (i) release any
person liable for the Indebtedness, (ii) extend the maturity or alter any of the
terms  of  the  Indebtedness  or  any  guaranty   thereof,   (iii)  grant  other
indulgences,  (iv) release or reconvey, or cause to be released or reconveyed at
any  time at  Beneficiary's  option  any  parcel,  portion  or all of the  Trust
Property,  (v)  take  or  release  any  other  or  additional  security  for any
obligation  herein mentioned,  or (vi) make  compositions or other  arrangements
with debtors in relation thereto. If at any time this Deed of Trust shall secure
less than all of the  principal  amount  of the  Indebtedness,  it is  expressly
agreed that any repayments of the principal amount of the Indebtedness shall not
reduce the amount of the lien of this Deed of Trust until the lien amount  shall
equal the principal amount of the Indebtedness outstanding.

          (b) No  recovery  of any  judgment  by  Beneficiary  and no levy of an
execution  under any judgment upon the Trust Property or upon any other property
of Grantor  shall  affect  the lien of this Deed of Trust or any liens,  rights,
powers or remedies of Beneficiary hereunder,  and such liens, rights, powers and
remedies shall continue unimpaired.

          (c) If  Beneficiary  shall  have the right to  foreclose  this Deed of
Trust (or direct the  Trustee to sell the Trust  Property,  as the case may be),
Grantor authorizes  Beneficiary at its option to foreclose the lien of this Deed
of Trust subject to the rights of any tenants of the Trust Property. The failure
to make any such tenants parties  defendant to any such  foreclosure  proceeding
and to  foreclose  their  rights will not be asserted by Grantor as a defense to
any  proceeding  instituted by  Beneficiary  to collect the  Indebtedness  or to
foreclose the lien of this Deed of Trust.


<PAGE>


                                                                              18





          (d) Unless expressly provided  otherwise,  in the event that ownership
of this  Deed of Trust and title to the Trust  Property  or any  estate  therein
shall become  vested in the same person or entity,  this Deed of Trust shall not
merge in such title but shall continue as a valid lien on the Trust Property for
the amount secured hereby.

          24. Security  Agreement under Uniform  Commercial  Code. (a) It is the
intention  of the  parties  hereto that this Deed of Trust  shall  constitute  a
Security  Agreement  within the  meaning  of the  Uniform  Commercial  Code (the
"Code")  of the State in which the Trust  Property  is  located.  If an Event of
Default  shall  occur  under this Deed of Trust,  then in addition to having any
other right or remedy available at law or in equity,  Beneficiary shall have the
option of either (i) proceeding  under the Code and  exercising  such rights and
remedies as may be provided to a secured  party by the Code with  respect to all
or any  portion of the Trust  Property  which is personal  property  (including,
without  limitation,  taking  possession  of and selling such  property) or (ii)
treating such property as real property and proceeding  with respect to both the
real and personal  property  constituting  the Trust Property in accordance with
Beneficiary's  rights, powers and remedies with respect to the real property (in
which event the default  provisions of the Code shall not apply). If Beneficiary
shall  elect to  proceed  under  the  Code,  then 8 days'  notice of sale of the
personal property shall be deemed reasonable notice and the reasonable  expenses
of  retaking,  holding,  preparing  for sale,  selling and the like  incurred by
Beneficiary  shall  include,  but not be limited to,  attorneys'  fees and legal
expenses. At Beneficiary's request, Grantor shall assemble the personal property
and make it available to Beneficiary at a place designated by Beneficiary  which
is reasonably convenient to both parties.

          (b) Grantor and  Beneficiary  agree,  to the extent  permitted by law,
that:  (i)  all of  the  goods  described  within  the  definition  of the  word
"Equipment" are or are to become fixtures on the Real Estate;  (ii) this Deed of
Trust upon  recording or  registration  in the real estate records of the proper
office shall constitute a financing statement filed as a "fixture filing" within
the meaning of Sections 9-313 and 9-402 of the Code; (iii) Grantor is the record
owner of the Real Estate;  and (iv) the addresses of Grantor and Beneficiary are
as set forth on the first page of this Deed of Trust.

          (c) Grantor,  upon  request by  Beneficiary  from time to time,  shall
execute,  acknowledge and deliver to Beneficiary  one or more separate  security
agreements, in form satisfactory to Beneficiary, covering all or any part of the
Trust Property and will further execute, acknowledge and deliver, or cause to be
executed,  acknowledged  and  delivered,  any  financing  statement,  affidavit,
continuation  statement or  certificate  or other  document as  Beneficiary  may
request in order to perfect, preserve, maintain, continue or extend the security
interest  under  and the  priority  of this  Deed of  Trust  and  such  security
instrument. Grantor further agrees to pay to Beneficiary on demand all costs and
expenses incurred by Beneficiary in connection with the preparation,  execution,
recording,  filing and re-filing of any such document and all  reasonable  costs
and expenses of any record searches for financing  statements  Beneficiary shall
reasonably require.  Grantor shall from time to time, on request of Beneficiary,
deliver to  Beneficiary  an inventory in  reasonable  detail of any of the Trust
Property which constitutes  personal property.  If Grantor shall fail to furnish
any financing or  continuation  statement  within ten (10) days after request by
Beneficiary,  then  pursuant  to the  provisions  of the  Code,  Grantor  hereby
authorizes  Beneficiary,  without the signature of Grantor,  to execute and file
any such financing and


<PAGE>


                                                                              19



continuation statements.  The filing of any financing or continuation statements
in the records relating to personal  property or chattels shall not be construed
as in any way impairing the right of Beneficiary to proceed against any personal
property encumbered by this Deed of Trust as real property, as set forth above.

          25.  Assignment of Rents.  Grantor hereby assigns to Trustee,  for the
benefit of  Beneficiary,  the Rents as further  security  for the payment of the
Indebtedness  and  performance  of  the  Obligations,   and  Grantor  grants  to
Beneficiary  the right to enter the Trust Property for the purpose of collecting
the same and to let the Trust  Property  or any part  thereof,  and to apply the
Rents on account of the  Indebtedness.  The  foregoing  assignment  and grant is
present and absolute and shall continue in effect until the Indebtedness is paid
in full, but Beneficiary hereby waives the right to enter the Trust Property for
the purpose of  collecting  the Rents and Grantor  shall be entitled to collect,
receive,  use and retain the Rents until the  occurrence  of an Event of Default
under this Deed of Trust;  such right of Grantor to  collect,  receive,  use and
retain the Rents may be revoked by Beneficiary  upon the occurrence of any Event
of  Default  under  this  Deed of Trust by  giving  not less than five (5) days'
written notice of such revocation to Grantor; in the event such notice is given,
Grantor shall pay over to Beneficiary,  or to any receiver  appointed to collect
the Rents,  any lease  security  deposits,  and shall pay  monthly in advance to
Beneficiary,  or to any such receiver,  the fair and reasonable  rental value as
determined by Beneficiary  for the use and occupancy of the Trust Property or of
such part  thereof as may be in the  possession  of Grantor or any  affiliate of
Grantor,  and upon  default in any such payment  Grantor and any such  affiliate
will vacate and surrender the possession of the Trust Property to Beneficiary or
to such receiver,  and in default thereof may be evicted by summary  proceedings
or otherwise.  Grantor shall not accept  prepayments of  installments of Rent to
become due for a period of more than one month in advance  (except for  security
deposits and estimated payments of percentage rent, if any).

          26. Trust Funds. All lease security  deposits of the Real Estate shall
be treated as trust funds not to be commingled  with any other funds of Grantor.
Within  ten (10) days  after  request  by  Beneficiary,  Grantor  shall  furnish
Beneficiary  satisfactory evidence of compliance with this subsection,  together
with a  statement  of all lease  security  deposits by lessees and copies of all
Leases  not  previously  delivered  to  Beneficiary,  which  statement  shall be
certified by Grantor.

          27. Additional Rights. The holder of any subordinate lien on the Trust
Property shall have no right to terminate any Lease whether or not such Lease is
subordinate to this Deed of Trust nor shall any holder of any  subordinate  lien
join any tenant under any Lease in any action to  foreclose  the lien or modify,
interfere  with,  disturb or terminate the rights of any tenant under any Lease.
By  recordation  of this  Deed of  Trust  all  subordinate  lienholders  and the
trustees and  beneficiaries  under subordinate deeds of trust are subject to and
notified of this provision, and any action taken by any such lienholder contrary
to this  provision  shall be null and void.  Upon the occurrence of any Event of
Default,  Beneficiary  may, in its sole  discretion  and  without  regard to the
adequacy of its security under this Deed of Trust,  apply all or any part of any
amounts on deposit with Beneficiary  under this Deed of Trust against all or any
part of the Indebtedness. Any such application shall not be construed to cure or
waive any Default or Event



<PAGE>


                                                                              20



of Default or invalidate any act taken by Beneficiary on account of such Default
or Event of Default.

          28.  Changes in Method of Taxation.  In the event of the passage after
the date  hereof of any law of any  Governmental  Authority  deducting  from the
value of the Premises for the purposes of taxation any lien thereon, or changing
in any way the laws for the taxation of deeds of trust or debts secured  thereby
for federal,  state or local  purposes,  or the manner of collection of any such
taxes, and imposing a tax, either directly or indirectly,  on mortgages or deeds
of trust or debts secured  thereby,  the holder of this Deed of Trust shall have
the right to declare the  Indebtedness due on a date to be specified by not less
than 30 days'  written  notice to be given to Grantor  unless within such 30-day
period Grantor shall assume as an Obligation hereunder the payment of any tax so
imposed  until full payment of the  Indebtedness  and such  assumption  shall be
permitted by law.

          29. Notices. All notices,  requests,  demands and other communications
hereunder shall be given in accordance with the provisions of subsection 10.2 of
the Credit Agreement to Grantor and to Beneficiary as specified thereunder.

          30. No Oral  Modification.  This Deed of Trust may not be  changed  or
terminated  orally. Any agreement made by Grantor and Beneficiary after the date
of this Deed of Trust  relating  to this Deed of Trust  shall be superior to the
rights of the holder of any  intervening  or  subordinate  lien or  encumbrance.
Trustee's  execution of any written  agreement  between  Grantor and Beneficiary
shall not be  required  for the  effectiveness  thereof as between  Grantor  and
Beneficiary.

          31. Partial Invalidity. In the event any one or more of the provisions
contained  in this  Deed of Trust  shall for any  reason be held to be  invalid,
illegal  or  unenforceable  in  any  respect,  such  invalidity,  illegality  or
unenforceability  shall not affect any other provision hereof, but each shall be
construed as if such invalid,  illegal or unenforceable provision had never been
included.  Notwithstanding  to the contrary  anything  contained in this Deed of
Trust  or  in  any  provisions  of  the  Indebtedness  or  Loan  Documents,  the
obligations of Grantor and of any other obligor under the  Indebtedness  or Loan
Documents shall be subject to the limitation that Beneficiary  shall not charge,
take or receive,  nor shall  Grantor or any other obligor be obligated to pay to
Beneficiary,  any amounts  constituting  interest in excess of the maximum  rate
permitted by law to be charged by Beneficiary.

          32.  Grantor's  Waiver of Rights.  To the fullest extent  permitted by
law,  Grantor  waives  the  benefit  of  all  laws  now  existing  or  that  may
subsequently be enacted  providing for (i) any  appraisement  before sale of any
portion  of the  Trust  Property,  (ii)  any  extension  of  the  time  for  the
enforcement of the collection of the  Indebtedness  or the creation or extension
of a period of redemption  from any sale made in collecting  such debt and (iii)
exemption of the Trust Property from attachment, levy or sale under execution or
exemption  from civil  process.  To the full extent  Grantor may do so,  Grantor
agrees that Grantor will not at any time insist upon,  plead,  claim or take the
benefit or  advantage of any law now or  hereafter  in force  providing  for any
appraisement,  valuation, stay, exemption, extension or redemption, or requiring
foreclosure  of this Deed of Trust before  exercising  any other remedy  granted
hereunder and Grantor, for


<PAGE>


                                                                              21



Grantor  and its  successors  and  assigns,  and for  any and all  persons  ever
claiming any  interest in the Trust  Property,  to the extent  permitted by law,
hereby waives and releases all rights of  redemption,  valuation,  appraisement,
stay of execution,  notice of election to mature or declare due the whole of the
secured  indebtedness  and  marshalling  in the event of  exercise by Trustee or
Beneficiary of the power of sale or other rights hereby created.

          33. Remedies Not Exclusive.  Beneficiary and Trustee shall be entitled
to enforce payment of the Indebtedness and performance of the Obligations and to
exercise  all  rights  and  powers  under this Deed of Trust or under any of the
other Loan  Documents or other  agreement or any laws now or hereafter in force,
notwithstanding  some  or all of the  Indebtedness  and  Obligations  may now or
hereafter be otherwise  secured,  whether by deed of trust,  mortgage,  security
agreement, pledge, lien, assignment or otherwise. Neither the acceptance of this
Deed of Trust nor its  enforcement,  shall  prejudice  or in any  manner  affect
Beneficiary's  or Trustee's  right to realize upon or enforce any other security
now  or  hereafter  held  by  Beneficiary  or  Trustee,  it  being  agreed  that
Beneficiary  and Trustee shall be entitled to enforce this Deed of Trust and any
other security now or hereafter held by Beneficiary or Trustee in such order and
manner as Beneficiary may determine in its absolute discretion. No remedy herein
conferred upon or reserved to Beneficiary or Trustee is intended to be exclusive
of any other remedy  herein or by law provided or  permitted,  but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter  existing at law or in equity or by statute.  Every power or remedy
given by any of the Loan  Documents to Beneficiary or Trustee or to which it may
otherwise be entitled,  may be exercised,  concurrently or  independently,  from
time to time and as often as may be deemed  expedient by Beneficiary or Trustee,
as the case may be. In no event shall Beneficiary or Trustee, in the exercise of
the remedies provided in this Deed of Trust (including,  without limitation,  in
connection with the assignment of Rents to Beneficiary,  or the appointment of a
receiver  and the  entry of such  receiver  on to all or any  part of the  Trust
Property),  be deemed a "mortgagee in possession,"  and neither  Beneficiary nor
Trustee  shall in any way be made liable for any act,  either of  commission  or
omission, in connection with the exercise of such remedies.

          34.  Multiple  Security.  If (a) the Premises  shall consist of one or
more parcels,  whether or not  contiguous and whether or not located in the same
county,  or (b) in  addition  to this  Deed of Trust,  Beneficiary  shall now or
hereafter hold or be the beneficiary of one or more additional mortgages, liens,
deeds of trust or other security  (directly or indirectly) for the  Indebtedness
upon other  property in the State in which the Premises are located  (whether or
not  such  property  is  owned  by  Grantor  or  by  others)  or  (c)  both  the
circumstances  described  in  clauses  (a) and (b)  shall be  true,  then to the
fullest extent permitted by law,  Beneficiary may, at its election,  commence or
consolidate in a single trustee's sale or foreclosure  action all trustee's sale
or foreclosure proceedings against all such collateral securing the Indebtedness
(including the Trust  Property),  which action may be brought or consolidated in
the courts of any county in which any of such  collateral  is  located.  Grantor
acknowledges  that the  right  to  maintain  a  consolidated  trustee's  sale or
foreclosure  action is a  specific  inducement  to  Beneficiary  to  extend  the
Indebtedness, and Grantor expressly and irrevocably waives any objections to the
commencement or consolidation of the foreclosure  proceedings in a single action
and any  objections  to the laying of venue or based on the grounds of forum non
conveniens  which it may now or hereafter  have.  Grantor further agrees that if
Trustee or Beneficiary shall be prosecuting


<PAGE>


                                                                              22



one or more  foreclosure  or other  proceedings  against a portion  of the Trust
Property  or  against  any  collateral  other  than the  Trust  Property,  which
collateral  directly or indirectly  secures the Indebtedness,  or if Beneficiary
shall have  obtained  a judgment  of  foreclosure  and sale or similar  judgment
against such collateral (or, in the case of a trustee's sale, shall have met the
statutory requirements therefor with respect to such collateral),  then, whether
or not such  proceedings  are being  maintained or judgments were obtained in or
outside the State in which the Premises are located, Beneficiary may commence or
continue foreclosure proceedings and exercise its other remedies granted in this
Deed of Trust against all or any part of the Trust  Property and Grantor  waives
any objections to the commencement or continuation of a foreclosure of this Deed
of Trust  or  exercise  of any  other  remedies  hereunder  based on such  other
proceedings or judgments, and waives any right to seek to dismiss, stay, remove,
transfer or consolidate either any action under this Deed of Trust or such other
proceedings on such basis.  The  commencement nor continuation of proceedings to
sell the Trust Property in a trustee's  sale, to foreclose this Deed of Trust or
the exercise of any other rights  hereunder  nor the recovery of any judgment by
Beneficiary or the occurrence of any sale by the Trustee in any such proceedings
shall not  prejudice,  limit or  preclude  Beneficiary's  right to  commence  or
continue one or more trustee's sale,  foreclosure or other proceedings or obtain
a judgment  against (or, in the case of a trustee's  sale, to meet the statutory
requirements  for, any such sale of) any other collateral  (either in or outside
the State in which the  Premises  are  located)  which  directly  or  indirectly
secures the  Indebtedness,  and Grantor  expressly  waives any objections to the
commencement  of,  continuation  of,  or  entry  of a  judgment  in  such  other
proceedings  or exercise  of any  remedies  in such  proceedings  based upon any
action or judgment  connected to this Deed of Trust, and Grantor also waives any
right to seek to dismiss,  stay,  remove,  transfer or  consolidate  either such
other  proceedings  or any action under this Deed of Trust on such basis.  It is
expressly  understood  and agreed that to the fullest  extent  permitted by law,
Beneficiary may, at its election,  or foreclosure action at either a single sale
or at multiple sales  conducted  simultaneously  and take such other measures as
are  appropriate  in order to effect the  agreement of the parties to dispose of
and administer all collateral securing the Indebtedness (directly or indirectly)
in the most economical and least time-consuming manner.

          35.  Expenses;  Indemnification.  (a) Grantor  shall pay or  reimburse
Trustee and  Beneficiary  for all expenses  incurred by  Beneficiary  or Trustee
before  and  after the date of this Deed of Trust  with  respect  to any and all
transactions  contemplated by this Deed of Trust including  without  limitation,
the preparation of any document  reasonably required hereunder or any amendment,
modification,  restatement or supplement to this Deed of Trust,  the delivery of
any consent,  non-disturbance  agreement or similar  document in connection with
this  Deed of Trust or the  enforcement  of any of  Beneficiary's  or  Trustee's
rights.  Such  expenses  shall  include,  without  limitation,   all  title  and
conveyancing  charges,  recording  and filing  fees and taxes,  mortgage  taxes,
intangible personal property taxes, escrow fees, revenue and tax stamp expenses,
insurance premiums (including title insurance premiums),  title search and title
rundown charges,  brokerage  commissions,  finders' fees,  placement fees, court
costs,  surveyors',   photographers',   appraisers',   architects',  engineers',
consulting  professional's,  accountants' and attorneys' fees and disbursements.
Grantor  acknowledges that from time to time Grantor may receive  statements for
such expenses,  including without limitation  attorneys' fees and disbursements.
Grantor shall pay such statements promptly upon receipt.


<PAGE>


                                                                              23



          (b) If (i) any  sale  (or  any  prerequisite  to a  sale),  action  or
proceeding  shall be  commenced by  Beneficiary  or Trustee  (including  but not
limited to any action to any sale of the Trust  Property,  or any foreclose this
Deed of Trust or to collect the  Indebtedness),  or any action or  proceeding is
commenced  to which  Beneficiary  or  Trustee  is made a  party,  or in which it
becomes  necessary  to defend or  uphold  the lien of this Deed of Trust,  or in
which Beneficiary or Trustee is served with any legal process,  discovery notice
or  subpoena  and  (ii)  in each  of the  foregoing  instances  such  action  or
proceeding  in any  manner  relates  to or  arises  out of this Deed of Trust or
Beneficiary's lending to Grantor, then Grantor will immediately reimburse or pay
to  Beneficiary  and  Trustee  all of the  expenses  which  have  been or may be
incurred by Beneficiary and Trustee, respectively, with respect to the foregoing
(including  reasonable counsel fees and  disbursements),  together with interest
thereon at the Default Rate, and any such sum and the interest  thereon shall be
a lien on the Trust  Property,  prior to any right,  or title to, interest in or
claim upon the Trust  Property  attaching or accruing  subsequent to the lien of
this Deed of Trust,  and shall be deemed to be secured by this Deed of Trust. In
any action or proceeding to sell the Trust  Property,  to foreclose this Deed of
Trust,  or to  recover  or  collect  the  Indebtedness,  the  provisions  of law
respecting the recovering of costs,  disbursements  and allowances shall prevail
unaffected by this covenant.

          (c) Grantor shall  indemnify and hold harmless each of Beneficiary and
Trustee and each of their respective  affiliates,  and the respective directors,
officers,  agents and employees of each of  Beneficiary  and Trustee and each of
their  respective   affiliates  (all  of  the  foregoing   indemnified   parties
collectively,  the "Obligees") from and against all claims,  damages, losses and
liabilities  (including,  without  limitation,  reasonable  attorneys'  fees and
expenses) arising out of or based upon any matter related to this Deed of Trust,
the Trust Property or the occupancy, ownership, maintenance or management of the
Trust Property by Grantor,  including,  without limitation,  any claims based on
the  alleged  acts or  omissions  of any  employee  or agent of  Grantor.  It is
intended  that the  foregoing  agreement  of Grantor to  indemnify  the Obligees
include,  without limitation,  indemnification for claims,  damages,  losses and
liabilities the Obligees may sustain as a result of the Obligees' own negligence
and this  indemnification  shall be in  addition  to any other  liability  which
Grantor may otherwise have to Beneficiary or Trustee.

          36. Successors and Assigns. All covenants of Grantor contained in this
Deed of Trust are imposed solely and  exclusively for the benefit of Beneficiary
and Trustee and their respective  successors and assigns, and no other person or
entity  shall have  standing to require  compliance  with such  covenants  or be
deemed, under any circumstances,  to be a beneficiary of such covenants,  any or
all of which may be freely waived in whole or in part by  Beneficiary or Trustee
at any time if in its sole discretion it deems such waiver  advisable.  All such
covenants of Grantor  shall run with the land and bind Grantor,  the  successors
and  assigns  of  Grantor  (and  each  of  them)  and  all  subsequent   owners,
encumbrancers and tenants of the Trust Property,  and shall inure to the benefit
of  Beneficiary,  its  successors  and  assigns.  The  word  "Grantor"  shall be
construed as if it read  "Grantors"  whenever the sense of this Deed of Trust so
requires and if there shall be more than one  Grantor,  the  obligations  of the
Grantors shall be joint and several.

          37. No Waivers,  etc.  Any failure by  Beneficiary  to insist upon the
strict performance by Grantor of any of the terms and provisions of this Deed of
Trust  shall not be  deemed  to be a waiver  of any of the terms and  provisions
hereof, and Beneficiary or Trustee,


<PAGE>


                                                                              24



notwithstanding any such failure, shall have the right thereafter to insist upon
the strict  performance by Grantor of any and all of the terms and provisions of
this  Deed of  Trust  to be  performed  by  Grantor.  Beneficiary  may  release,
regardless  of  consideration  and  without the  necessity  for any notice to or
consent by the beneficiary of any subordinate deed of trust or the holder of any
subordinate  lien on the Trust  Property,  any part of the security held for the
obligations  secured by this Deed of Trust  without,  as to the remainder of the
security,  in any way  impairing or affecting  the lien of this Deed of Trust or
the priority of such lien over any subordinate lien.

          38.  Governing  Law,  etc. This Deed of Trust shall be governed by and
construed  in  accordance  with the laws of the State of  Montana,  except  that
Grantor expressly acknowledges that by its terms the Notes shall be governed and
construed in accordance  with the laws of the State of New York,  without regard
to  principles  of conflict of law,  and for  purposes of  consistency,  Grantor
agrees  that in any in  personam  proceeding  related  to this Deed of Trust the
rights  of the  parties  to this Deed of Trust  shall  also be  governed  by and
construed  in  accordance  with  the laws of the  State  of New  York  governing
contracts  made and to be performed in that State,  without regard to principles
of conflict of law.

          39. Waiver of Trial by Jury.  Grantor,  Trustee and  Beneficiary  each
hereby irrevocably and unconditionally waive trial by jury in any action, claim,
suit or  proceeding  relating  to this  Deed of Trust  and for any  counterclaim
brought therein.  Grantor hereby waives all rights to interpose any counterclaim
in any suit  brought by  Beneficiary  hereunder  and all rights to have any such
suit consolidated with any separate suit, action or proceeding.

          40.  Certain  Definitions.  Unless the  context  clearly  indicates  a
contrary intent or unless otherwise  specifically provided herein, words used in
this Deed of Trust shall be used  interchangeably in singular or plural form and
the word "Grantor" shall mean "each Grantor or any subsequent owner or owners of
the  Trust  Property  or  any  part  thereof  or  interest  therein,"  the  word
"Beneficiary"  shall mean  "Beneficiary or any subsequent  holder of the Notes,"
the word  "Notes"  shall mean "the Notes or any other  evidence of  indebtedness
secured by this Deed of Trust," the word "person" shall include any  individual,
corporation,   partnership,   trust,  unincorporated  association,   government,
governmental  authority,  or other entity,  and the words "Trust Property" shall
include any portion of the Trust  Property or  interest  therein.  Whenever  the
context may require,  any pronouns used herein shall  include the  corresponding
masculine, feminine or neuter forms, and the singular form of nouns and pronouns
shall include the plural and vice versa.  The captions in this Deed of Trust are
for  convenience or reference only and in no way limit or amplify the provisions
hereof.

          41.  Revolving  Credit;  Future  Advances.  The Loans  secured  hereby
include  revolving lines of credit extended by the Banks to Grantor  pursuant to
the Credit Agreement.  The outstanding balance of such revolving lines of credit
may increase and decrease  from time to time,  and sums may be advanced,  repaid
and readvanced  thereunder  until the final maturity of the Loans.  This Deed of
Trust is intended to secure all  indebtedness of Grantor under the Loans so long
as the Credit Agreement  continues in effect,  regardless of such repayments and
readvances of the proceeds of the Loans,  and  regardless of whether the balance
of such  obligations may be reduced,  from time to time, to zero. In addition to
all other indebtedness secured by this Deed of


<PAGE>


                                                                              25



Trust,  this Deed of Trust shall secure also and constitute a first lien subject
only to the Permitted  Exceptions on the Trust Property for all future  advances
made by the Banks to Grantor for any purpose  within six (6) years from the date
of this Deed of Trust to the same  extent as if such  advances  were made on the
date  of  the  execution  of  this  Deed  of  Trust.  The  total  amount  of the
indebtedness,  including future advances, that is secured by this Deed of Trust,
may  increase  or decrease  from time to time,  but shall not exceed the maximum
principal  amount of the Loans as set forth in the Credit  Agreement  at any one
time,  together  with  interest  thereon  at the rates  provided  in the  Credit
Agreement,  and plus any disbursement made by Beneficiary or any of the Banks to
protect the security of this Deed of Trust,  with interest on such  disbursement
at the Default Rate.

          42. Last Dollars Secured;  Priority. This Deed of Trust secures only a
portion of the  Indebtedness  owing or which may become  owing by the Grantor to
the  Banks.   The  parties  agree  that  any  payments  or  repayments  of  such
Indebtedness  shall be and be deemed to be applied  first to the  portion of the
Indebtedness  that is not secured hereby,  it being the parties' intent that the
portion of the Indebtedness last remaining unpaid shall be secured hereby.

          43. Receipt of Copy. Grantor  acknowledges that it has received a true
copy of this Deed of Trust.




<PAGE>


                                                                              26








          This Deed of Trust has been duly  executed  by  Grantor as of the date
first above written.

                                   POWERHOUSE TECHNOLOGIES, INC.,
                                   formerly known as Video Lottery Technologies,
                                   Inc.


                                   By: /S/ Susan J. Carstensen
                                       -----------------------------------------
                                       Name:  Susan J. Carstensen
                                       Title: Treasurer and CFO





<PAGE>

                                                                              27









STATE OF MONTANA   )
                   )  ss.
COUNTY OF GALLATIN )



          On this 8th day of October, 1998, before me, the undersigned, a Notary
Public for the State of Montana, personally appeared Susan J. Carstensen,  known
to me to be the  Treasurer and CFO of the  corporation  that executed the within
instrument and acknowledged to me that such corporation executed the same.


                                          /S/ Vicki L. Consoli
                                          --------------------------------------
                                          Notary Public for the State of Montana
                                          Residing at Bozeman, MT
                                          My Commission Expires 2/12/02



                                          [SEAL]





<PAGE>




                                   SCHEDULE A

PARCEL I:

Tract 1B of Certificate of Survey No. 1393A, said survey located in the NE1/4 of
Section 24, Township 2 South,  Range 5 East, P.M.M.,  City of Bozeman,  Gallatin
County, Montana, according to the official plat thereof on file and of record in
the office of the County Clerk and Recorder, Gallatin County, Montana.

PARCEL II:

Tract 2B of Certificate of Survey No. 1393A, said survey located in the NE1/4 of
Section 24, Township 2 South,  Range 5 East, P.M.M.,  City of Bozeman,  Gallatin
County, Montana, according to the official plat thereof on file and of record in
the office of the County Clerk and Recorder, Gallatin County, Montana.

PARCEL III:

Easement  as granted  to use the  existing  Museum of the  Rockies  entry  drive
immediately  South of the  intersection of Kagy Avenue and South 7th Avenue (the
"7th Avenue Access Drive") in Grant of Conditional Easement recorded January 22,
1993 in Film 129, Page 1504 and  rerecorded  February 25, 1993 in Film 130, Page
452, Records of Gallatin County, Montana.




<PAGE>












                                                                    [New Mexico]


                             LINE OF CREDIT MORTGAGE


                                      from


                      NUEVO SOL TURF CLUB, INC., Mortgagor


                                       to


                          LEHMAN COMMERCIAL PAPER INC.,
            as Administrative Agent and Syndication Agent, Mortgagee


                          DATED AS OF OCTOBER __, 1998



                       After recording, please return to:

                           Simpson Thacher & Bartlett
                              425 Lexington Avenue
                            New York, New York 10017

                           ATTN: Daniel E. Karp, Esq.




<PAGE>




                             LINE OF CREDIT MORTGAGE
                             -----------------------


          THIS MORTGAGE, dated as of October __, 1998, is made by NUEVO SOL TURF
CLUB INC., a New Mexico  corporation  ("Mortgagor")  whose address is 2311 South
Seventh  Avenue,  Bozeman,   Montana  59715  to  LEHMAN  COMMERCIAL  PAPER  INC.
("Mortgagee"),  whose address is 3 World  Financial  Center,  New York, New York
10285.  References to this "Mortgage" shall mean this instrument and any and all
renewals, modifications,  amendments, supplements,  extensions,  consolidations,
substitutions and replacements of this instrument.


                                   Background
                                   ----------

          A. Mortgagor is the owner of the real property described in Schedule A
attached   hereto  (such  real  property,   together  with  all  the  buildings,
improvements,  structures and fixtures now or subsequently  located thereon (the
"Improvements") being collectively referred to as the "Real Estate").

          B. Mortgagor is a wholly-owned subsidiary of Powerhouse  Technologies,
Inc., a Delaware corporation ("Powerhouse").

          C. Pursuant to that certain Credit  Agreement  dated as of October __,
1998 (as the same may be amended, restated,  replaced,  substituted or otherwise
modified  from  time to time,  the  "Credit  Agreement")  among  Powerhouse,  as
borrower, the several lenders from time to time parties thereto (the "Lenders"),
Lehman  Brothers  Inc.,  as arranger,  Mortgagee,  as  administrative  agent and
syndication  agent,  and Canadian  Imperial Bank of Commerce,  as  documentation
agent,  the Lenders have agreed to make certain loans to Powerhouse  all as more
particularly described therein. Capitalized terms used and not otherwise defined
herein  shall  have the  meanings  assigned  thereto  in the  Credit  Agreement.
References in this  Mortgage to the "Default  Rate" shall mean the interest rate
provided for in Section 2.13(c) of the Credit Agreement.

          D. Powerhouse, the administrative agent and the Lenders are willing to
effectuate  the Credit  Agreement,  if, among other things,  Mortgagor  grants a
first  mortgage  lien  on and  security  interest  in the  Real  Estate  and the
Mortgaged Property to secure Mortgagor's  obligations under the Credit Agreement
and the other obligations secured thereby.







<PAGE>

                                                                               2




                                Granting Clauses
                                ----------------

          For good and valuable  consideration,  the receipt and  sufficiency of
which are hereby acknowledged, Mortgagor agrees that to secure:

          (a) (i) the repayment of the indebtedness  evidenced by the Notes, and
     (ii) all interest and fees payable  thereon (the items set forth in clauses
     (i) and (ii) being referred to collectively as the "Indebtedness"); and

          (b) the  performance of all  covenants,  agreements,  obligations  and
     liabilities  of  Mortgagor  (the  "Obligations")  under or  pursuant to the
     provisions of the Notes,  this Mortgage,  the Credit  Agreement,  any other
     document  securing payment of the Indebtedness  (the "Security  Documents")
     and  any  amendments,  supplements,   extensions,  renewals,  restatements,
     replacements  or  modifications  of any of the  foregoing  (the Notes,  the
     Credit  Agreement,  the  Security  Documents  and all other  documents  and
     instruments  from time to time  evidencing,  securing or  guaranteeing  the
     payment of the Indebtedness or the performance of the  Obligations,  as any
     of the same may be  amended,  supplemented,  extended,  renewed,  restated,
     replaced or modified from time to time, are collectively referred to as the
     "Loan Documents");

MORTGAGOR HEREBY GRANTS TO MORTGAGEE A LIEN UPON AND A SECURITY INTEREST IN, AND
HEREBY MORTGAGES, GRANTS, ASSIGNS, TRANSFERS AND SETS OVER TO MORTGAGEE:

          (A) the Real Estate;

          (B) all the  estate,  right,  title,  claim or  demand  whatsoever  of
     Mortgagor,  in possession or  expectancy,  in and to the Real Estate or any
     part thereof, whether now owned or hereafter acquired;

          (C) all right,  title and interest of  Mortgagor  in, to and under all
     easements,  rights of way, gores of land, streets, ways, alleys,  passages,
     sewer rights,  waters,  water rights including,  without limitation,  those
     referred to in the  documents  identified  on Schedule B attached  hererto,
     water courses,  riparian rights (if any),  development  rights, air rights,
     mineral  rights,  sand,  gravel and  aggregate,  and all  estates,  rights,
     titles,  interests,  privileges,  licenses,  tenements,  hereditaments  and
     appurtenances  belonging,  relating or appertaining to the Real Estate, and
     any reversions,  remainders, rents, issues, profits and revenue thereof and
     all land lying in the bed of any  street,  road or  avenue,  in front of or
     adjoining the Real Estate to the center line thereof;

          (D)  all of the  fixtures,  chattels,  business  machines,  machinery,
     apparatus,  equipment,  furnishings,  fittings  and  articles  of  personal
     property of every kind and nature  whatsoever,  and all  appurtenances  and
     additions thereto and substitutions or replacements thereof (together with,
     in each case,  attachments,  components,  parts and accessories)  currently
     owned  or  subsequently  acquired  by  Mortgagor  and  now or  subsequently
     attached  to, or  contained  in or used or usable in any way in  connection
     with any operation



<PAGE>

                                                                               3




     or  letting  of  the  Real  Estate,  including  but  without  limiting  the
     generality  of  the  foregoing,  all  screens,   awnings,  shades,  blinds,
     curtains,  draperies,  artwork,  carpets,  rugs,  storm doors and  windows,
     furniture and furnishings,  heating,  electrical, and mechanical equipment,
     lighting,   switchboards,   plumbing,  ventilating,  air  conditioning  and
     air-cooling   apparatus,   refrigerating,   and   incinerating   equipment,
     escalators, elevators, loading and unloading equipment and systems, stoves,
     ranges,  laundry  equipment,  cleaning systems  (including  window cleaning
     apparatus),  telephones,  communication systems (including satellite dishes
     and antennae),  televisions,  computers,  sprinkler  systems and other fire
     prevention and  extinguishing  apparatus and materials,  security  systems,
     motors,  engines,  machinery,  pipes, pumps, tanks,  conduits,  appliances,
     fittings and fixtures of every kind and  description  (all of the foregoing
     in this paragraph (D) being referred to as the "Equipment");

          (E)  all  right,  title  and  interest  of  Mortgagor  in  and  to all
     substitutes and replacements of, and all additions and improvements to, the
     Real  Estate and the  Equipment,  subsequently  acquired  by or released to
     Mortgagor  or  constructed,  assembled  or placed by  Mortgagor on the Real
     Estate,   immediately  upon  such   acquisition,   release,   construction,
     assembling  or  placement,  including,  without  limitation,  any  and  all
     building  materials  whether stored at the Real Estate or offsite,  and, in
     each such case,  without any further  mortgage,  conveyance,  assignment or
     other act by Mortgagor;

          (F) all right,  title and interest of  Mortgagor  in, to and under all
     leases,  subleases,   underlettings,   concession  agreements,   management
     agreements,  licenses and other agreements relating to the use or occupancy
     of the Real Estate or the  Equipment or any part  thereof,  now existing or
     subsequently  entered into by Mortgagor and whether written or oral and all
     guarantees of any of the foregoing  (collectively,  as any of the foregoing
     may be amended, restated,  extended, renewed or modified from time to time,
     the  ("Leases"),  and all  rights  of  Mortgagor  in  respect  of cash  and
     securities  deposited  thereunder  and the right to receive and collect the
     revenues,  income,  rents,  issues and profits  thereof,  together with all
     other rents, royalties, issues, profits, revenue, income and other benefits
     arising from the use and  enjoyment of the  Mortgaged  Property (as defined
     below) (collectively, the "Leases");

          (G) all trade names,  trade marks,  logos,  copyrights,  good will and
     books  and  records  owned  or held  by  Mortgagor  relating  to or used in
     connection  with the  operation of the Real Estate or the  Equipment or any
     part  thereof;  all general  intangibles  related to the  operation  of the
     Improvements now existing or hereafter arising;

          (H) all unearned premiums under insurance policies now or subsequently
     obtained  by  Mortgagor  relating  to the  Real  Estate  or  Equipment  and
     Mortgagor's  interest in and to all proceeds of any such insurance policies
     (including  title  insurance  policies)  including the right to collect and
     receive  such  proceeds,  subject to the  provisions  relating to insurance
     generally set forth below; and all awards and other compensation, including
     the interest payable thereon and the right to collect and receive the same,
     made to the present or any subsequent owner of the Real Estate or Equipment
     for the taking by



<PAGE>

                                                                               4




     eminent domain,  condemnation or otherwise,  of all or any part of the Real
     Estate or any easement or other right therein;

          (I) all  right,  title and  interest  of  Mortgagor  in and to (i) all
     contracts  from time to time  executed by Mortgagor or any manager or agent
     on its behalf relating to the ownership, construction, maintenance, repair,
     operation,  occupancy, sale or financing of the Real Estate or Equipment or
     any part  thereof and all  agreements  relating to the purchase or lease of
     any  portion  of the Real  Estate  or any  property  which is  adjacent  or
     peripheral  to the Real Estate,  together  with the right to exercise  such
     options and all leases of Equipment (collectively,  the "Contracts"),  (ii)
     to the extent  permitted  under  applicable  law, all  consents,  licenses,
     building  permits,   certificates  of  occupancy  and  other   governmental
     approvals relating to construction, completion, occupancy, use or operation
     of the Real Estate or any part thereof  (collectively,  the  "Permits") and
     (iii) all  drawings,  plans,  specifications  and similar or related  items
     relating to the Real Estate (collectively, the "Plans");

          (J) any and all monies now or  subsequently on deposit for the payment
     of real estate taxes or special  assessments against the Real Estate or for
     the  payment of premiums  on  insurance  policies  covering  the  foregoing
     property or  otherwise  on deposit with or held by Mortgagee as provided in
     this Mortgage; all capital, operating,  reserve or similar accounts held by
     or on behalf of Mortgagor  and related to the  operation  of the  Mortgaged
     Property,  whether now existing or hereafter arising and all monies held in
     any of the foregoing  accounts and any certificates or instruments  related
     to or evidencing such accounts;

          (K) all  accounts  and  revenues  arising  from the  operation  of the
     Improvements  including,  without  limitation,  any  right to  payment  now
     existing  or  hereafter  arising  for  rental of space or for goods sold or
     leased or for services rendered,  whether or not yet earned by performance,
     arising from the operation of the Improvements or any other facility on the
     Mortgaged Property; and

          (L) all proceeds, both cash and noncash, of the foregoing;

          (All of the  foregoing  property and rights and interests now owned or
held or  subsequently  acquired by  Mortgagor  and  described  in the  foregoing
clauses (A)  through (E) are  collectively  referred to as the  "Premises",  and
those  described  in the  foregoing  clauses (A)  through  (L) are  collectively
referred to as the "Mortgaged Property").

          TO  HAVE  AND TO HOLD  the  Mortgaged  Property  and  the  rights  and
privileges  hereby mortgaged unto Mortgagee,  its successors and assigns for the
uses and  purposes  set  forth,  until the  Indebtedness  is fully  paid and the
Obligations fully performed.

                              Terms and Conditions
                              --------------------

          Mortgagor  further  represents,  warrants,  covenants  and agrees with
Mortgagee as follows:



<PAGE>

                                                                               5




          1. Warranty of Title. Mortgagor warrants that Mortgagor has good title
to the Real  Estate in fee simple  and good  title to the rest of the  Mortgaged
Property,  subject only to the matters that are set forth in the title insurance
policy or policies being issued to Mortgagee to insure the lien of this Mortgage
(the "Permitted  Exceptions")  and Mortgagor shall warrant,  defend and preserve
such  title  and the lien of the  Mortgage  thereon  against  all  claims of all
persons  and  entities.  Mortgagor  further  warrants  that it has the  right to
mortgage the Mortgaged Property.

          2. Payment of  Indebtedness.  Mortgagor shall pay the  Indebtedness at
the times and  places and in the  manner  specified  in the Notes and the Credit
Agreement and shall perform all the Obligations.

          3. Requirements.

          (a)  Mortgagor  shall  promptly  comply with,  or cause to be complied
with, and conform to all present and future laws, statutes,  codes,  ordinances,
orders,  judgments,  decrees,  rules,  regulations and requirements  (including,
without  limitation,  the  Americans  with  Disabilities  Act or  similar  local
regulation (the "ADA"),  and  irrespective of the nature of the work to be done,
of each of the United States of America,  any State and any municipality,  local
government or other political  subdivision  thereof and any agency,  department,
bureau, board,  commission or other instrumentality of any of them, now existing
or  subsequently  created  (collectively,  "Governmental  Authority")  which has
jurisdiction  over the Mortgaged  Property and all covenants,  restrictions  and
conditions  now  or  later  of  record  which  may be  applicable  to any of the
Mortgaged  Property,  or to the  use,  manner  of  use,  occupancy,  possession,
operation,  maintenance,  alteration,  repair  or  reconstruction  of any of the
Mortgaged Property.  All present and future laws, statutes,  codes,  ordinances,
orders,  judgments,  decrees,  rules,  regulations  and  requirements  of  every
Governmental  Authority  applicable  to  Mortgagor  or to any  of the  Mortgaged
Property and all covenants,  restrictions, and conditions which now or later may
be applicable to any of the Mortgaged  Property are collectively  referred to as
the "Legal Requirements".

          (b) From and after the date of this Mortgage,  Mortgagor  shall not by
act or omission  permit any  building or other  improvement  on any premises not
subject to the lien of this Mortgage to rely on the Premises or any part thereof
or any interest therein to fulfill any Legal  Requirement,  and Mortgagor hereby
assigns to  Mortgagee  any and all rights to give consent for all or any portion
of the Premises or any interest  therein to be so used.  Mortgagor  shall not by
act or  omission  impair  the  integrity  of any of the Real  Estate as a single
zoning lot separate and apart from all other premises. Mortgagor represents that
each parcel of the Real Estate is not in violation of any applicable subdivision
law or similar Legal  Requirement.  Any act or omission by Mortgagor which would
result in a violation of any of the provisions of this subsection shall be void.

          4. Payment of Taxes and Other Impositions.  (a) Except as permitted by
subsection 6.3 of the Credit Agreement,  promptly when due,  Mortgagor shall pay
and discharge all taxes of every kind and nature (including, without limitation,
all real and personal property, income, franchise, withholding, transfer, gains,
profits and gross receipts taxes), all charges for



<PAGE>

                                                                               6




any easement or  agreement  maintained  for the benefit of any of the  Mortgaged
Property, all general and special assessments,  levies, permits,  inspection and
license fees, all water and sewer rents and charges and all other public charges
even if unforeseen or  extraordinary,  imposed upon or assessed against or which
may become a lien on any of the Mortgaged Property, or arising in respect of the
occupancy, use or possession thereof, together with any penalties or interest on
any of the foregoing (all of the foregoing are  collectively  referred to as the
"Impositions").  Mortgagor  shall  within 30 days after each due date deliver to
Mortgagee  (i)  original  or copies of  receipted  bills  and  cancelled  checks
evidencing payment of such Imposition if it is a real estate tax or other public
charge and (ii)  evidence  acceptable  to  Mortgagee  showing the payment of any
other such Imposition.  If by law any Imposition,  at Mortgagor's option, may be
paid in installments (whether or not interest shall accrue on the unpaid balance
of  such  Imposition),  Mortgagor  may  elect  to pay  such  Imposition  in such
installments and shall be responsible for the payment of such  installments with
interest, if any.

          (b) Nothing herein shall affect any right or remedy of Mortgagee under
this Mortgage or otherwise,  without  notice or demand to Mortgagor,  to pay any
Imposition  after the date such Imposition  shall have become due, and to add to
the  Indebtedness  the amount so paid,  together  with interest from the time of
payment at the Default  Rate.  Any sums paid by  Mortgagee  in  discharge of any
Impositions  shall be (i) a lien on the  Premises  secured  hereby  prior to any
right or title to,  interest in, or claim upon the Premises  subordinate  to the
lien of this  Mortgage,  and (ii)  payable on demand by  Mortgagor  to Mortgagee
together with interest at the Default Rate as set forth above.

          (c)  Mortgagor  shall not claim,  demand or be entitled to receive any
credit or credits  toward the  satisfaction  of this Mortgage or on any interest
payable  thereon for any taxes  assessed  against the Mortgaged  Property or any
part thereof,  and shall not claim any  deduction  from the taxable value of the
Mortgaged Property by reason of this Mortgage.

          (d) After an Event of Default (as defined  below),  Mortgagee shall be
entitled  to require  Mortgagor  to pay  monthly in  advance  to  Mortgagee  the
equivalent  of  1/12th  of  the  estimated  annual  Impositions.  Mortgagee  may
commingle  such funds with its own funds and Mortgagor  shall not be entitled to
interest thereon.

          (e) Mortgagor  shall have the right to contest or object in good faith
to the amount or validity of any  Imposition by appropriate  legal  proceedings,
but such  right  shall not be deemed or  construed  in any way as  relieving  or
modifying Mortgagor's covenant to pay any such Imposition in the manner provided
in this Section unless (i) Mortgagor has given prior written notice to Mortgagee
of Mortgagor's  intent so to contest or object to an Imposition,  (ii) Mortgagor
shall  demonstrate to Mortgagee's  satisfaction that the legal proceedings shall
operate conclusively to prevent the sale of the Mortgaged Property,  or any part
thereof,  to  satisfy  such  Imposition  prior  to final  determination  of such
proceedings,  (iii) such proceeding shall be permitted under and be conducted in
accordance  with the  provisions of any other  instrument to which  Mortgagor is
subject and shall not constitute a default  thereunder and (iv) Mortgagor  shall
have set aside  adequate  reserves for the payment of the  Impositions  together
with all interest and penalties thereon.




<PAGE>

                                                                               7




          5.  Insurance.  (a) Mortgagor shall maintain or cause to be maintained
on all of the Premises the insurance required by the Credit Agreement and in any
event shall also maintain or cause to be maintained

          (i) during the course of any  construction or repair of  Improvements,
     comprehensive  general  liability  insurance  under a policy  including the
     "broad form CGL  endorsement"  (or which  incorporates the language of such
     endorsement),  (including  coverage for elevators and escalators,  if any).
     The policy shall include coverage for independent contractors and completed
     operations.  The completed operations coverage shall stay in effect for two
     years after construction of any Improvements has been completed. The policy
     shall provide  coverage on an occurrence  basis against claims for personal
     injury,  including,  without limitation,  bodily injury,  death or property
     damage  occurring on, in or about the Premises and the  adjoining  streets,
     sidewalks  and  passageways,  such  insurance to afford  immediate  minimum
     protection  to a limit of not less than that  required  by  Mortgagee  with
     respect  to  personal  injury,  bodily  injury  or death to any one or more
     persons or damage to property;

          (ii)  during  the  course  of  any   construction  or  repair  of  the
     Improvements,   workers'   compensation   insurance  (including  employer's
     liability  insurance)  for all  employees of  Mortgagor  engaged on or with
     respect to the Premises in such amounts as are reasonably  satisfactory  to
     Mortgagee, but in no event less than the limits established by law;

          (iii) during the course of any construction,  addition,  alteration or
     repair of the  Improvements,  builder's risk completed value form insurance
     against "all risks of physical  loss,"  including  collapse,  water damage,
     flood and earthquake and transit coverage,  during  construction or repairs
     of the Improvements, with deductible approved by Mortgagee, in nonreporting
     form,  covering the total value of work performed and  equipment,  supplies
     and materials  furnished  (with an appropriate  limit for soft costs in the
     case of construction);

          (iv) if any portion of the  Premises is located in an area  identified
     as a special flood hazard area by the Federal  Emergency  Management Agency
     or other applicable  agency,  in amounts not less than the maximum limit of
     coverage  available  under the National  Flood  Insurance  Act of 1968,  as
     amended;

          (v) such other  insurance in such amounts as Mortgagor may  reasonably
     request from time to time.

Each  insurance  policy (other than flood  insurance  written under the National
Flood Insurance Act of 1968, as amended,  in which case to the extent available)
shall (i) provide  that it shall not be  cancelled,  non-renewed  or  materially
amended  without  30 days'  prior  written  notice to  Mortgagee,  and (ii) with
respect to all property insurance,  provide for loss payable solely to Mortgagee
as its interest may appear. Liability insurance policies shall name Mortgagee as
an additional insured and contain a waiver of subrogation against Mortgagee; all
such policies  shall  indemnify and hold  Mortgagee  harmless from all liability
claims  occurring  on,  in or about  the  Premises  and the  adjoining  streets,
sidewalks and passageways. The amounts of each insurance



<PAGE>

                                                                               8




policy and the form of each such policy  shall at all times be  satisfactory  to
Mortgagee.  Each policy shall  expressly  provide  that any  proceeds  which are
payable to  Mortgagee  shall be paid by check  payable to the order of Mortgagee
only and requiring the endorsement of Mortgagee only. If any required  insurance
shall expire,  be withdrawn,  become void by breach of any condition  thereof by
Mortgagor or by any lessee of any part of the Mortgaged  Property or become void
or unsafe by reason of the failure or  impairment of the capital of any insurer,
or if for any other reason whatsoever such insurance shall become unsatisfactory
to Mortgagee,  Mortgagee shall  immediately  obtain new or additional  insurance
satisfactory  to  Mortgagee.  Mortgagor  shall  not  take  out any  separate  or
additional  insurance  which is  contributing  in the event of loss unless it is
properly endorsed and otherwise satisfactory to Mortgagee in all respects.

          (b) Mortgagor shall deliver to Mortgagee an original of each insurance
policy required to be maintained,  or a certificate of such insurance acceptable
to Mortgagee, together with a copy of the declaration page for each such policy.
Mortgagor shall (i) pay as they become due all premiums for such insurance, (ii)
not later than 15 days prior to the  expiration  of each policy to be  furnished
pursuant  to the  provisions  of this  Section,  deliver  a  renewed  policy  or
policies, or duplicate original or originals thereof,  marked "premium paid," or
accompanied  by such other  evidence of payment  satisfactory  to Mortgagee with
standard  non-contributory  mortgage  clauses  in  favor  of and  acceptable  to
Mortgagee.  Upon  request of  Mortgagee,  Mortgagor  shall  cause its  insurance
underwriter  or  broker  to  certify  to  Mortgagee  in  writing  that  all  the
requirements of this Mortgage governing insurance have been satisfied.

          (c) If Mortgagor is in default of its obligations to insure or deliver
any such prepaid policy or policies,  then Mortgagee,  at its option and without
notice,  may effect  such  insurance  from year to year,  and pay the premium or
premiums  therefor,  and Mortgagor shall pay to Mortgagee on demand such premium
or premiums so paid by Mortgagee  with  interest from the time of payment at the
Default  Rate and the same shall be deemed to be secured  by this  Mortgage  and
shall be  collectible  in the same  manner as the  Indebtedness  secured by this
Mortgage.

          (d) Mortgagor shall increase the amount of property insurance required
to equal 100% replacement cost pursuant to the provisions of this Section at the
time of each  renewal of each policy (but not later than 12 months from the date
of this  Mortgage and each  successive 12 month period to occur  thereafter)  by
using the F.W. Dodge  Building Index to determine  whether there shall have been
an increase in the  replacement  value since the most recent  adjustment and, if
there shall have been such an increase,  the amount of insurance  required shall
be adjusted accordingly.

          (e)  Mortgagor  promptly  shall  comply  with and  conform  to (i) all
provisions  of each such  insurance  policy,  and (ii) all  requirements  of the
insurers  applicable to Mortgagor or to any of the Mortgaged  Property or to the
use, manner of use, occupancy, possession, operation, maintenance, alteration or
repair of any of the Mortgaged  Property.  Mortgagor shall not use or permit the
use of the  Mortgaged  Property in any manner  which would permit any insurer to
cancel any insurance  policy or void coverage  required to be maintained by this
Mortgage.




<PAGE>

                                                                               9




          (f) If the Mortgaged Property, or any part thereof, shall be destroyed
or damaged by fire or any other casualty,  whether  insured or uninsured,  or in
the event any claim is made against  Mortgagor for any personal  injury,  bodily
injury or property  damage  incurred on or about the Premises,  Mortgagor  shall
give immediate notice thereof to Mortgagee. If the Mortgaged Property is damaged
by fire or other  casualty  and the cost to repair  such damage is less than the
lesser of (i) 25% of the  replacement  cost of the  Improvements at the affected
Real Estate site and (ii) $500,000, then provided that no Event of Default shall
have occurred and be continuing,  Mortgagor  shall have the right to adjust such
loss,  and the  insurance  proceeds  relating  to such  loss may be paid over to
Mortgagor; provided that Mortgagor shall, promptly after any such damage, repair
all such damage regardless of whether any insurance  proceeds have been received
or whether such  proceeds,  if received,  are sufficient to pay for the costs of
repair. If the Mortgaged Property is damaged by fire or other casualty,  and the
cost to repair such damage  exceeds the above  limit,  or if an Event of Default
shall have occurred and be continuing,  then  Mortgagor  authorizes and empowers
Mortgagee,  at  Mortgagee's  option  and  in  Mortgagee's  sole  discretion,  as
attorney-in-fact for Mortgagor,  to make proof of loss, to adjust and compromise
any claim under any  insurance  policy,  to appear in and  prosecute  any action
arising from any policy, to collect and receive insurance proceeds and to deduct
therefrom   Mortgagee's  expenses  incurred  in  the  collection  process.  Each
insurance  company  concerned is hereby  authorized and directed to make payment
for such loss directly to Mortgagee.  Mortgagee  shall have the right to require
Mortgagor to repair or restore the  Mortgaged  Property,  in which event,  if no
Event of  Default  has  occurred  and is  continuing,  Mortgagee  will apply the
insurance  proceeds  (after  deducting the costs of collecting such proceeds) to
the  reimbursement  of the costs of such repair or  restoration,  and  Mortgagor
hereby designates  Mortgagee as its  attorney-in-fact  for the purpose of making
any election required or permitted under any insurance policy relating to repair
or restoration. The insurance proceeds or any part thereof received by Mortgagee
may be applied by Mortgagee  toward  reimbursement  of all costs and expenses of
Mortgagee in collecting such proceeds, and the balance, at Mortgagee's option in
its sole and absolute  discretion,  to the  principal  (to the  installments  in
inverse order of maturity,  if payable in  installments)  and interest due or to
become  due under the Notes,  to  fulfill  any other  Obligation  of  Mortgagor.
Application  by Mortgagee of any  insurance  proceeds  toward the last  maturing
installments  of  principal  and  interest  due or to become due under the Notes
shall not excuse  Mortgagor  from making any  regularly  scheduled  payments due
thereunder,  nor shall  such  application  extend or reduce  the  amount of such
payments.

          (g) In the event of  foreclosure of this Mortgage or other transfer of
title to the  Mortgaged  Property in  extinguishment  of the  Indebtedness,  all
right,  title and interest of Mortgagor in and to any insurance policies then in
force shall pass to the  purchaser  or grantee  and  Mortgagor  hereby  appoints
Mortgagee its attorney-in-fact,  in Mortgagor's name, to assign and transfer all
such policies and proceeds to such purchaser or grantee.

          6. Restrictions on Liens and Encumbrances. Except for the lien of this
Mortgage  and the  Permitted  Exceptions,  and except as permitted by the Credit
Agreement,  Mortgagor  shall not further  mortgage,  nor otherwise  encumber the
Mortgaged Property nor create or suffer to exist any lien, charge or encumbrance
on the  Mortgaged  Property,  or any part  thereof  superior to the lien of this
Mortgage, whether recourse or non-recourse.




<PAGE>

                                                                              10




          7. Sale and Other  Transfer  Restrictions.  Mortgagor  shall not sell,
transfer,  convey or assign  all or any  portion  of, or any  interest  in,  the
Mortgaged Property except as permitted by the Credit Agreement.

          8.  Limitation  on  Fundamental  Changes.  Except as  permitted by the
Credit Agreement, Mortgagor agrees that:

          (i)  Mortgagor  shall  not  enter  into any  transaction  of merger or
     consolidation,  or liquidate or dissolve  itself (or suffer any liquidation
     or  dissolution),  or acquire by purchase or otherwise all or substantially
     all the business or assets of, or any stock or other evidence of beneficial
     ownership of, any entity; and

          (ii) Mortgagor  shall not engage in any business on the Premises other
     than the business in which it is presently engaged.

          9. Maintenance;  No Alteration;  Inspection;  Utilities. (a) Mortgagor
shall maintain or cause to be maintained all the  Improvements in good condition
and  repair  and shall  not  commit  or  suffer  any waste of the  Improvements.
Mortgagor shall repair,  restore,  replace or rebuild promptly,  in each case in
accordance  with the Credit  Agreement,  any part of the  Premises  which may be
damaged or destroyed by any casualty  whatsoever.  The Improvements shall not be
demolished  or,  except in  compliance  with the  Credit  Agreement,  materially
altered,  nor,  except in  compliance  with the Credit  Agreement,  any material
additions built,  without the prior written consent of Mortgagee,  which consent
shall not be unreasonably withheld or delayed.

          (b) Mortgagee and any persons  authorized by Mortgagee  shall have the
right to enter and inspect the  Premises and the right to inspect all work done,
labor performed and materials  furnished in and about the  Improvements  and the
right to  inspect  and make  copies  of all  books,  contracts  and  records  of
Mortgagor relating to the Mortgaged Property.

          (c)  Mortgagor  shall  pay or  cause to be paid  when due all  utility
charges  which  are  incurred  for gas,  electricity,  water  or sewer  services
furnished  to the  Premises  and all other  assessments  or charges of a similar
nature,  whether  public or  private,  affecting  the  Premises  or any  portion
thereof, whether or not such assessments or charges are liens thereon.

          10. Condemnation/Eminent  Domain. Immediately upon obtaining knowledge
of the  institution of any  proceedings  for the  condemnation  of the Mortgaged
Property,  or any  portion  thereof,  Mortgagor  will  notify  Mortgagee  of the
pendency of such proceedings.  Mortgagor  authorizes  Mortgagee,  at Mortgagee's
option and in Mortgagee's sole discretion, as attorney-in-fact for Mortgagor, to
commence,  appear in and prosecute,  in  Mortgagee's  or  Mortgagor's  name, any
action or proceeding relating to any condemnation of the Mortgaged Property,  or
any portion  thereof,  and to settle or compromise any claim in connection  with
such  condemnation.  If Mortgagee elects not to participate in such condemnation
proceeding,  then Mortgagor shall, at its expense, diligently prosecute any such
proceeding  and shall  consult with  Mortgagee,  its  attorneys  and experts and
cooperate  with them in any  defense  of any such  proceedings.  All  awards and
proceeds of condemnation shall be assigned to Mortgagee to be



<PAGE>

                                                                              11




applied  in the same  manner as  insurance  proceeds,  as  provided  above,  and
Mortgagor agrees to execute any such assignments of all such awards as Mortgagee
may request.

          11. Restoration. If Mortgagee elects to release funds to Mortgagor for
restoration of any of the Mortgaged  Property,  then such  restoration  shall be
performed only in accordance with the following conditions:

          (i)  prior to the  commencement  of any  restoration,  the  plans  and
     specifications  for such  restoration,  and the  budgeted  costs,  shall be
     submitted  for  approval  by  Mortgagee,   which   approval  shall  not  be
     unreasonably withheld or delayed;

          (ii) prior to making any advance of restoration funds, Mortgagee shall
     be  satisfied  that the  remaining  restoration  funds  are  sufficient  to
     complete  the  restoration  and  to pay  all  related  expenses,  including
     interest on the Indebtedness and real estate taxes on the Premises,  during
     restoration;

          (iii) at the time of any disbursement of the restoration funds, (A) no
     Event of Default (as defined below) shall then exist,  (B) no mechanics' or
     materialmen's liens shall have been filed and remain  undischarged,  except
     those discharged by the disbursement of the requested restoration funds and
     (C) a satisfactory  bring-down or  continuation  of title  insurance on the
     Premises  shall be  delivered  to  Mortgagee,  upon  reasonable  request by
     Mortgagee therefor;

          (iv)  disbursements  shall be made from time to time in an amount  not
     exceeding the cost of the work completed since the last disbursement,  upon
     receipt  of  satisfactory  evidence  of  the  stage  of  completion  and of
     performance of the work in a good and workmanlike  manner and in accordance
     with the contracts, plans and specifications acceptable to Mortgagee;

          (v) with respect to each advance of restoration  funds,  Mortgagee may
     retain  10%  of  the  amount  of  such  advance  as a  holdback  until  the
     restoration is fully completed;

          (vi)  the  restoration  funds  shall  bear  no  interest  and  may  be
     commingled with Mortgagee's other funds;

          (vii)  Mortgagee may impose such other  conditions as are  customarily
     imposed by construction lenders; and

          (viii) any restoration  funds remaining shall be retained by Mortgagee
     and  may  be  applied  by  Mortgagee,  in  its  sole  discretion,   to  the
     Indebtedness in the inverse order of maturity.

          12.  Leases.  (a)  Mortgagor  shall not (i) execute an  assignment  or
pledge of any Lease  relating  to all or any portion of the  Mortgaged  Property
other than in favor of Mortgagee,  or (ii) without the prior written  consent of
Mortgagee,  which consent shall not unreasonably be withheld or delayed, execute
or permit to exist any Lease of any of the Mortgaged Property.



<PAGE>

                                                                              12




          (b) As to any Lease consented to by Mortgagee, Mortgagor shall:

          (i) promptly perform all of the provisions of the Lease on the part of
     the lessor thereunder to be performed;

          (ii) promptly  enforce all of the  provisions of the Lease on the part
     of the lessee thereunder to be performed;

          (iii) appear in and defend any action or  proceeding  arising under or
     in any manner  connected with the Lease or the  obligations of Mortgagor as
     lessor or of the lessee thereunder;

          (iv) exercise,  within five (5) days after a request by Mortgagee, any
     right to request from the lessee a  certificate  with respect to the status
     thereof;

          (v)  simultaneously  deliver  to  Mortgagee  copies of any  notices of
     default  which  Mortgagor  may at any time  forward to or receive  from the
     lessee;

          (vi) promptly deliver to Mortgagee a fully executed counterpart of the
     Lease;

          (vii)  promptly,  upon  request  of  Mortgagee,  record the Lease or a
     memorandum thereof, as provided by applicable law; and

          (viii) promptly  deliver to Mortgagee,  upon Mortgagee's  request,  an
     assignment of the Mortgagor's interest under such Lease.

          (c) Mortgagor shall deliver to Mortgagee, within ten (10) days after a
request by Mortgagee, a written statement, certified by Mortgagor as being true,
correct and complete, containing the names of all lessees and other occupants of
the  Mortgaged  Property,  the terms of all Leases and the spaces  occupied  and
rentals payable thereunder,  and a list of all Leases which are then in default,
including  the nature and  magnitude of the  default;  such  statement  shall be
accompanied  by credit  information  with  respect to the lessees and such other
information as Mortgagee may request.

          (d) All Leases  entered  into by Mortgagor  after the date hereof,  if
any, and all rights of any lessees  thereunder  shall be subject and subordinate
in all respects to the lien and  provisions  of this Mortgage  unless  Mortgagee
shall otherwise elect in writing.

          (e) As to any Lease now in existence or  subsequently  consented to by
Mortgagee, Mortgagor shall not accept a surrender or terminate, cancel, rescind,
supplement,  alter, revise, modify or amend such Lease or permit any such action
to be taken nor shall Mortgagor accept the payment of rent more than thirty (30)
days in advance of its due date.

          (f) If any act or omission of  Mortgagor  would give any lessee  under
any Lease the right,  immediately  or after lapse of a period of time, to cancel
or terminate such Lease, or to abate or offset against the payment of rent or to
claim a partial or total eviction, such lessee



<PAGE>

                                                                              13




shall not exercise such right until it has given  written  notice of such act or
omission  to  Mortgagee  and until a 10-day  period  for  remedying  such act or
omission shall have elapsed following the giving of such notice without a remedy
being effected.

          (g) In the event of the  enforcement  by Mortgagee of any remedy under
this Mortgage,  the lessee under each Lease shall,  if requested by Mortgagee or
any other  person  succeeding  to the  interest of Mortgagee as a result of such
enforcement, attorn to Mortgagee or to such person and shall recognize Mortgagee
or such  successor in interest as lessor under the Lease  without  change in the
provisions  thereof;  provided  however,  that  Mortgagee  or such  successor in
interest  shall not be: (i) bound by any  payment of an  installment  of rent or
additional  rent which may have been made more than 30 days  before the due date
of such  installment;  (ii) bound by any amendment or  modification to the Lease
made  without the consent of Mortgagee  or such  successor  in  interest,  which
consent  shall not be  unreasonably  withheld or delayed;  (iii)  liable for any
previous act or omission of Mortgagor (or its  predecessors  in interest);  (iv)
responsible  for any monies  owing by  Mortgagor to the credit of such lessee or
subject to any  credits,  offsets,  claims,  counterclaims,  demands or defenses
which the lessee may have against  Mortgagor (or its  predecessors in interest);
(v) bound by any  covenant to  undertake  or complete  any  construction  of the
Premises or any portion  thereof;  or (vi) obligated to make any payment to such
lessee other than any security deposit  actually  delivered to Mortgagee or such
successor in interest.  Each lessee or other occupant, upon request by Mortgagee
or such  successor  in  interest,  shall  execute and deliver an  instrument  or
instruments confirming such attornment. In addition,  Mortgagor agrees that each
Lease entered into after the date of this Mortgage shall include language to the
effect of subsections  (d)-(g) of this Section;  provided that the provisions of
such subsections shall be self-operative and any failure of any Lease to include
such  language  shall not impair the binding  effect of such  provisions  on any
lessee under such Lease.

          13.  Further  Assurances/Estoppel   Certificates.  To  further  assure
Mortgagee's  rights  under  this  Mortgage,  Mortgagor  agrees  upon  demand  of
Mortgagee to do any act or execute any additional documents (including,  but not
limited to, security  agreements on any personalty included or to be included in
the  Mortgaged  Property and a separate  assignment  of each Lease in recordable
form) as may be required by Mortgagee  to confirm the lien of this  Mortgage and
all other rights or benefits conferred on Mortgagee.

          14. Mortgagee's Right to Perform. If Mortgagor fails to perform any of
the covenants or agreements of Mortgagor,  then,  after any required  notice and
cure  periods,  Mortgagee,  without  waiving  or  releasing  Mortgagor  from any
obligation or default under this Mortgage,  may, at any time (but shall be under
no obligation to) pay or perform the same, and the amount or cost thereof,  with
interest  at the  Default  Rate,  shall  immediately  be due from  Mortgagor  to
Mortgagee  and the same shall be secured by this Mortgage and shall be a lien on
the Mortgaged  Property prior to any right,  title to, interest in or claim upon
the Mortgaged  Property  attaching  subsequent to the lien of this Mortgage.  No
payment or advance of money by Mortgagee  under this Section  shall be deemed or
construed to cure Mortgagor's default or waive any right or remedy of Mortgagee.

          15.  Mortgagor's  Existence,   etc.  Mortgagor  shall  do  all  things
necessary  to  preserve  and  keep in  full  force  and  effect  its  existence,
franchises, rights and privileges under the



<PAGE>

                                                                              14




laws of the  state in which it was  formed  and its  right to own  property  and
transact  business in each state in which the Real Estate is located.  Mortgagor
represents  and  warrants  that  this  Mortgage  has  been  executed  by a  duly
authorized  officer  thereof.  This Mortgage  constitutes  the legal,  valid and
binding  obligation of Mortgagor,  enforceable  against  Mortgagor in accordance
with  its  terms,   except  as  enforceability  may  be  limited  by  applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally.

          16. Financial Statements;  Certificates; Other Information.  Mortgagor
shall deliver to Mortgagee the financial  statements  required  under the Credit
Agreement.

          17. Hazardous Material. (a) Mortgagor shall comply with the provisions
of Sections  4.17 and 6.8 of the Credit  Agreement  in respect of  Materials  of
Environmental  Concern  (as  defined  in the  Credit  Agreement).  In the  event
Mortgagor  fails to do so,  after  five (5) days'  notice to  Mortgagor  and the
expiration of the cure period permitted under the applicable Legal  Requirement,
Mortgagee  may declare such failure an Event of Default or cause the Premises to
be freed from the  Hazardous  Material and the cost of the removal with interest
at the Default Rate shall immediately be due from Mortgagor to Mortgagee and the
same  shall  be added  to the  Indebtedness  and be  secured  by this  Mortgage.
Mortgagor  shall  give  Mortgagee  and its agents  and  employees  access to the
Premises to remove Hazardous Material. Mortgagor agrees to defend, indemnify and
hold  Mortgagee free and harmless from and against all loss,  costs,  damage and
expense  (including  attorneys'  fees  and  costs  and  consequential   damages)
Mortgagee may sustain by reason of (i) the  imposition or recording of a lien by
any  Governmental  Authority  pursuant  to any  Legal  Requirement  relating  to
hazardous  or toxic  wastes or  substances  or the removal  thereof  ("Hazardous
Material  Laws");  (ii) claims of any private  parties  regarding  violations of
Hazardous   Material  Laws;  (iii)  costs  and  expenses   (including,   without
limitation,  attorneys' fees and fees incidental to the securing of repayment of
such costs and expenses)  incurred by Mortgagor or Mortgagee in connection  with
the removal of any such lien or in connection  with  Mortgagor's  or Mortgagee's
compliance  with any Hazardous  Material  Laws;  and (iv) the assertion  against
Mortgagee by any party of any claim in connection with Hazardous Material. It is
intended  that the  foregoing  agreement of  Mortgagor  to  indemnify  Mortgagee
include, without limitation, indemnification for loss, costs, damage and expense
Mortgagee may sustain as a result of Mortgagee's own negligence.

          (b) The foregoing  indemnification  shall be a recourse  obligation of
Mortgagor  and  shall  survive  repayment  of  the  Notes,  notwithstanding  any
limitations on recourse  which may be contained  herein or in any Loan Documents
or the delivery of any satisfaction,  release or release deed, discharge or deed
of reconveyance, or the assignment of this Mortgage by Mortgagee.

          (c) For the purposes of this Mortgage,  "Hazardous Material" means and
includes any hazardous, nuclear, toxic or dangerous waste, substance or material
defined  as  such  in (or  for  purposes  of)  the  Comprehensive  Environmental
Response,   Compensation,  and  Liability  Act,  any  so-called  "Superfund"  or
"Superlien"  law, or any other Legal  Requirement  regulating,  relating  to, or
imposing liability or standards of conduct concerning,  any hazardous,  nuclear,
toxic  or  dangerous  waste,  substance  or  material,  as now or at any time in
effect.


<PAGE>

                                                                              15





          18. Asbestos. Mortgagor shall not install or permit to be installed in
the Premises  friable asbestos or any substance  containing  asbestos and deemed
hazardous  by any  Legal  Requirement  respecting  such  material,  or any other
building material deemed to be harmful, hazardous or injurious by relevant Legal
Requirements. Mortgagor shall give Mortgagee and its agents and employees access
to the Premises to remove such asbestos or substances.  Mortgagor  shall defend,
indemnify, and save Mortgagee harmless from all loss, costs, damages and expense
(including  attorneys'  fees and costs and  consequential  damages)  asserted or
proven  against  Mortgagee  by any party,  as a result of the  presence  of such
substances  or any removal or  compliance  with such Legal  Requirements.  It is
intended  that the  foregoing  agreement of  Mortgagor  to  indemnify  Mortgagee
include, without limitation, indemnification for loss, costs, damage and expense
Mortgagee may sustain as a result of Mortgagee's  own  negligence.  Furthermore,
the  indemnification  shall be a  recourse  obligation  of  Mortgagor  and shall
survive repayment of the Notes, notwithstanding any limitation on recourse which
may be contained  herein or in any of the Loan  Documents or the delivery of any
satisfaction, release or release deed, discharge or deed of reconveyance, or the
assignment of this Mortgage by Mortgagee.

          19. Event of Default.  The occurrence of an Event of Default under the
Credit Agreement shall constitute an Event of Default hereunder.

          20. Remedies.

          (a) Upon the  occurrence  of any Event of Default,  in addition to any
other rights and remedies Mortgagee may have pursuant to the Loan Documents,  or
as provided by law,  and  without  limitation,  (x) if such event is an Event of
Default under Section 8 of the Credit Agreement,  automatically the Indebtedness
and all  other  amounts  owing  under the  Notes,  this  Mortgage  and the other
Security  Documents  immediately  shall become due and payable,  and (y) if such
event is any other  Event of  Default,  by notice to  Mortgagor,  Mortgagee  may
declare the Indebtedness  (together with accrued interest thereon) and all other
amounts payable under the Notes, this Mortgage and the other Security  Documents
to be immediately  due and payable.  Except as expressly  provided above in this
Section or in the Credit Agreement,  presentment,  demand, protest and all other
notices  of any  kind  are  hereby  expressly  waived.  In  addition,  upon  the
occurrence of any Event of Default,  Mortgagee may immediately take such action,
without  notice or demand,  as it deems  advisable  to protect  and  enforce its
rights against Mortgagor and in and to the Mortgaged  Property,  including,  but
not limited to, the following actions, each of which may be pursued concurrently
or otherwise, at such time and in such manner as Mortgagee may determine, in its
sole discretion,  without impairing or otherwise  affecting the other rights and
remedies of Mortgagee:

          (i)  Mortgagee  may, to the extent  permitted by  applicable  law, (A)
     institute and maintain an action of mortgage foreclosure against all or any
     part of the Mortgaged Property, (B) institute and maintain an action on the
     Notes,  or  (C)  take  such  other  action  at  law or in  equity  for  the
     enforcement  of this  Mortgage or any of the Loan  Documents as the law may
     allow.  Mortgagee  may  proceed in any such  action to final  judgment  and
     execution  thereon  for all  sums due  hereunder,  together  with  interest
     thereon  at the  Default  Rate and all  costs of suit,  including,  without
     limitation, reasonable attorneys' fees and



<PAGE>

                                                                              16




     disbursements.  Interest at the Default  Rate shall be due on any  judgment
     obtained by Mortgagee  from the date of judgment  until  actual  payment is
     made of the full amount of the judgment.

          (ii)  Mortgagee  may  personally,  or by  its  agents,  attorneys  and
     employees and without regard to the adequacy or inadequacy of the Mortgaged
     Property or any other  collateral  as  security  for the  Indebtedness  and
     Obligations  enter into and upon the Mortgaged  Property and each and every
     part thereof and exclude  Mortgagor and its agents and employees  therefrom
     without  liability  for  trespass,  damage or otherwise  (Mortgagor  hereby
     agreeing to surrender  possession  of the  Mortgaged  Property to Mortgagee
     upon  demand  at any such  time) and use,  operate,  manage,  maintain  and
     control the Mortgaged Property and every part thereof. Following such entry
     and taking of possession,  Mortgagee shall be entitled, without limitation,
     (x) to lease all or any part or parts of the  Mortgaged  Property  for such
     periods  of  time  and  upon  such  conditions  as  Mortgagee  may,  in its
     discretion, deem proper, (y) to enforce, cancel or modify any Lease and (z)
     generally to execute,  do and perform any other act, deed,  matter or thing
     concerning the Mortgaged  Property as Mortgagee  shall deem  appropriate as
     fully as Mortgagor might do.

          (b) The holder of this Mortgage,  in any action to foreclose it, shall
be entitled to the appointment of a receiver. In case of a foreclosure sale, the
Real Estate may be sold, at Mortgagee's  election, in one parcel or in more than
one parcel and Mortgagee is specifically  empowered,  (without being required to
do so, and in its sole and absolute  discretion)  to cause  successive  sales of
portions of the Mortgaged Property to be held.

          (c) In the event of any breach, beyond any applicable grace period, of
any  of the  covenants,  agreements,  terms  or  conditions  contained  in  this
Mortgage,  and  notwithstanding  to the contrary any exculpatory or non-recourse
language which may be contained  herein,  Mortgagee  shall be entitled to enjoin
such breach and obtain specific performance of any covenant,  agreement, term or
condition  and Mortgagee  shall have the right to invoke any equitable  right or
remedy as though other remedies were not provided for in this Mortgage.

          21. Right of Mortgagee to Credit Sale. Upon the occurrence of any sale
made under this Mortgage, whether made by virtue of judicial proceedings or of a
judgment or decree of  foreclosure  and sale,  Mortgagee may bid for and acquire
the  Mortgaged  Property or any part thereof.  In lieu of paying cash  therefor,
Mortgagee  may make  settlement  for the purchase  price by  crediting  upon the
Indebtedness  or other sums  secured by this  Mortgage the net sales price after
deducting  therefrom  the  expenses  of sale and the cost of the  action and any
other sums which Mortgagee is authorized to deduct under this Mortgage.  In such
event, this Mortgage,  the Notes and documents  evidencing  expenditures secured
hereby may be  presented to the person or persons  conducting  the sale in order
that the amount so used or applied  may be  credited  upon the  Indebtedness  as
having been paid.

          22.  Appointment  of  Receiver.  If an Event  of  Default  shall  have
occurred and be continuing, Mortgagee as a matter of right and without notice to
Mortgagor,  unless  otherwise  required by applicable law, and without regard to
the adequacy or inadequacy of the Mortgaged  Property or any other collateral as
security for the Indebtedness and Obligations or the interest of



<PAGE>

                                                                              17




Mortgagor  therein,   shall  have  the  right  to  apply  to  any  court  having
jurisdiction  to  appoint  a  receiver  or  receivers  or other  manager  of the
Mortgaged   Property,   and  Mortgagor  hereby  irrevocably   consents  to  such
appointment  and waives  notice of any  application  therefor  (except as may be
required by law). Any such receiver or receivers shall have all the usual powers
and duties of receivers  in like or similar  cases and all the powers and duties
of Mortgagee in case of entry as provided in this Mortgage,  including,  without
limitation and to the extent permitted by law, the right to enter into leases of
all or any  part of the  Mortgaged  Property,  and  shall  continue  as such and
exercise all such powers until the date of confirmation of sale of the Mortgaged
Property unless such receivership is sooner terminated.

                  23. Extension, Release, etc. (a) Without affecting the lien or
charge of this Mortgage  upon any portion of the Mortgaged  Property not then or
theretofore  released  as  security  for the full  amount  of the  Indebtedness,
Mortgagee  may, from time to time and without  notice,  agree to (i) release any
person liable for the Indebtedness, (ii) extend the maturity or alter any of the
terms  of  the  Indebtedness  or  any  guaranty   thereof,   (iii)  grant  other
indulgences,  (iv) release or reconvey, or cause to be released or reconveyed at
any time at  Mortgagee's  option any  parcel,  portion  or all of the  Mortgaged
Property,  (v)  take  or  release  any  other  or  additional  security  for any
obligation  herein mentioned,  or (vi) make  compositions or other  arrangements
with debtors in relation thereto. If at any time this Mortgage shall secure less
than all of the principal  amount of the  Indebtedness,  it is expressly  agreed
that any repayments of the principal amount of the Indebtedness shall not reduce
the amount of the lien of this  Mortgage  until the lien amount  shall equal the
principal amount of the Indebtedness outstanding.

          (b) No  recovery  of any  judgment  by  Mortgagee  and no  levy  of an
execution  under any  judgment  upon the  Mortgaged  Property  or upon any other
property  of  Mortgagor  shall  affect the lien of this  Mortgage  or any liens,
rights,  powers or  remedies of  Mortgagee  hereunder,  and such liens,  rights,
powers and remedies shall continue unimpaired.

          (c) If  Mortgagee  shall have the right to  foreclose  this  Mortgage,
Mortgagor  authorizes  Mortgagee  at its  option to  foreclose  the lien of this
Mortgage  subject to the rights of any tenants of the  Mortgaged  Property.  The
failure  to make any such  tenants  parties  defendant  to any such  foreclosure
proceeding and to foreclose  their rights will not be asserted by Mortgagor as a
defense to any proceeding instituted by Mortgagee to collect the Indebtedness or
to foreclose the lien of this Mortgage.

          (d) Unless expressly provided  otherwise,  in the event that ownership
of this Mortgage and title to the Mortgaged Property or any estate therein shall
become  vested in the same person or entity,  this  Mortgage  shall not merge in
such title but shall continue as a valid lien on the Mortgaged  Property for the
amount secured hereby.

          24. Security  Agreement under Uniform  Commercial  Code. (a) It is the
intention of the parties hereto that this Mortgage  shall  constitute a Security
Agreement within the meaning of the Uniform  Commercial Code (the "Code") of the
State in which the Mortgaged  Property is located.  If an Event of Default shall
occur under this Mortgage,  then in addition to having any other right or remedy
available  at law or in  equity,  Mortgagee  shall have the option of either (i)
proceeding  under the Code and  exercising  such  rights and  remedies as may be
provided to a



<PAGE>

                                                                              18




secured  party by the Code with  respect to all or any portion of the  Mortgaged
Property  which is personal  property  (including,  without  limitation,  taking
possession of and selling such  property) or (ii) treating such property as real
property and  proceeding  with  respect to both the real and  personal  property
constituting  the Mortgaged  Property in  accordance  with  Mortgagee's  rights,
powers and  remedies  with  respect  to the real  property  (in which  event the
default  provisions  of the Code shall not apply).  If Mortgagee  shall elect to
proceed  under the Code,  then 8 days' notice of sale of the  personal  property
shall be deemed  reasonable  notice and the  reasonable  expenses  of  retaking,
holding,  preparing for sale,  selling and the like incurred by Mortgagee  shall
include,  but  not be  limited  to,  attorneys'  fees  and  legal  expenses.  At
Mortgagee's request,  Mortgagor shall assemble the personal property and make it
available to Mortgagee at a place  designated  by Mortgagee  which is reasonably
convenient to both parties.

          (b)  Mortgagor and Mortgagee  agree,  to the extent  permitted by law,
that:  (i)  all of  the  goods  described  within  the  definition  of the  word
"Equipment" are or are to become fixtures on the Real Estate; (ii) this Mortgage
upon recording or  registration  in the real estate records of the proper office
shall  constitute a financing  statement filed as a "fixture  filing" within the
meaning of Sections 9-313 and 9-402 of the Code;  (iii)  Mortgagor is the record
owner of the Real Estate;  and (iv) the addresses of Mortgagor and Mortgagee are
as set forth on the first page of this Mortgage.

          (c)  Mortgagor,  upon  request by Mortgagee  from time to time,  shall
execute,  acknowledge  and deliver to Mortgagee  one or more  separate  security
agreements,  in form satisfactory to Mortgagee,  covering all or any part of the
Mortgaged Property and will further execute,  acknowledge and deliver,  or cause
to be executed,  acknowledged and delivered, any financing statement, affidavit,
continuation statement or certificate or other document as Mortgagee may request
in order to  perfect,  preserve,  maintain,  continue  or  extend  the  security
interest  under and the priority of this Mortgage and such security  instrument.
Mortgagor  further  agrees to pay to  Mortgagee on demand all costs and expenses
incurred by Mortgagee in connection with the preparation,  execution, recording,
filing and re-filing of any such document and all reasonable  costs and expenses
of any record  searches for  financing  statements  Mortgagee  shall  reasonably
require. Mortgagor shall from time to time, on request of Mortgagee,  deliver to
Mortgagee an inventory in  reasonable  detail of any of the  Mortgaged  Property
which  constitutes  personal  property.  If Mortgagor  shall fail to furnish any
financing  or  continuation  statement  within  ten (10) days  after  request by
Mortgagee,  then  pursuant  to the  provisions  of the  Code,  Mortgagor  hereby
authorizes  Mortgagee,  without the signature of Mortgagor,  to execute and file
any such financing and continuation  statements.  The filing of any financing or
continuation statements in the records relating to personal property or chattels
shall not be construed as in any way impairing the right of Mortgagee to proceed
against any personal property  encumbered by this Mortgage as real property,  as
set forth above.

          25.  Assignment of Rents.  Mortgagor  hereby  assigns to Mortgagee the
Rents as further security for the payment of the Indebtedness and performance of
the  Obligations,  and  Mortgagor  grants  to  Mortgagee  the right to enter the
Mortgaged  Property  for the  purpose  of  collecting  the  same  and to let the
Mortgaged Property or any part thereof, and to apply the Rents on account of the
Indebtedness.  The  foregoing  assignment  and grant is present and absolute and
shall continue in effect until the  Indebtedness  is paid in full, but Mortgagee
hereby waives the



<PAGE>

                                                                              19




right to enter the Mortgaged  Property for the purpose of  collecting  the Rents
and Mortgagor  shall be entitled to collect,  receive,  use and retain the Rents
until the occurrence of an Event of Default under this  Mortgage;  such right of
Mortgagor  to  collect,  receive,  use and  retain  the Rents may be  revoked by
Mortgagee  upon the  occurrence  of any Event of Default  under this Mortgage by
giving  not less than  five (5)  days'  written  notice  of such  revocation  to
Mortgagor;  in the  event  such  notice is  given,  Mortgagor  shall pay over to
Mortgagee, or to any receiver appointed to collect the Rents, any lease security
deposits,  and  shall  pay  monthly  in  advance  to  Mortgagee,  or to any such
receiver,  the fair and  reasonable  rental value as determined by Mortgagee for
the use and occupancy of the  Mortgaged  Property or of such part thereof as may
be in the  possession  of Mortgagor  or any  affiliate  of  Mortgagor,  and upon
default in any such payment  Mortgagor  and any such  affiliate  will vacate and
surrender  the  possession  of the  Mortgaged  Property to  Mortgagee or to such
receiver,  and in default  thereof  may be evicted  by  summary  proceedings  or
otherwise.  Mortgagor  shall not accept  prepayments of  installments of Rent to
become due for a period of more than one month in advance  (except for  security
deposits and estimated payments of percentage rent, if any).

          26. Trust Funds. All lease security  deposits of the Real Estate shall
be  treated  as  trust  funds  not to be  commingled  with  any  other  funds of
Mortgagor.  Within ten (10) days after  request by  Mortgagee,  Mortgagor  shall
furnish  Mortgagee  satisfactory  evidence of compliance  with this  subsection,
together with a statement of all lease  security  deposits by lessees and copies
of all Leases not previously  delivered to Mortgagee,  which  statement shall be
certified by Mortgagor.

          27.  Additional  Rights.  The  holder of any  subordinate  lien on the
Mortgaged  Property  shall have no right to terminate  any Lease  whether or not
such  Lease  is  subordinate  to this  Mortgage  nor  shall  any  holder  of any
subordinate  lien join any tenant under any Lease in any action to foreclose the
lien or modify,  interfere  with,  disturb or terminate the rights of any tenant
under any Lease. By recordation of this Mortgage all subordinate lienholders are
subject to and  notified  of this  provision,  and any action  taken by any such
lienholder  contrary  to  this  provision  shall  be null  and  void.  Upon  the
occurrence of any Event of Default,  Mortgagee  may, in its sole  discretion and
without regard to the adequacy of its security under this Mortgage, apply all or
any part of any amounts on deposit with  Mortgagee  under this Mortgage  against
all or any part of the Indebtedness. Any such application shall not be construed
to cure or waive any Default or Event of Default or invalidate  any act taken by
Mortgagee on account of such Default or Event of Default.

          28.  Changes in Method of Taxation.  In the event of the passage after
the date  hereof of any law of any  Governmental  Authority  deducting  from the
value of the Premises for the purposes of taxation any lien thereon, or changing
in any way the laws for the taxation of mortgages or debts  secured  thereby for
federal, state or local purposes, or the manner of collection of any such taxes,
and imposing a tax, either directly or indirectly, on mortgages or debts secured
thereby,  the  holder  of this  Mortgage  shall  have the right to  declare  the
Indebtedness  due on a date to be  specified  by not less than 30 days'  written
notice to be given to Mortgagor unless within such 30-day period Mortgagor shall
assume as an  Obligation  hereunder the payment of any tax so imposed until full
payment of the Indebtedness and such assumption shall be permitted by law.



<PAGE>

                                                                              20




          29. Notices. All notices,  requests,  demands and other communications
hereunder shall be given in accordance with the provisions of subsection 10.2 of
the Credit Agreement to Mortgagor and to Mortgagee as specified thereunder.

          30.  No  Oral  Modification.  This  Mortgage  may  not be  changed  or
terminated  orally. Any agreement made by Mortgagor and Mortgagee after the date
of this Mortgage  relating to this  Mortgage  shall be superior to the rights of
the holder of any intervening or subordinate lien or encumbrance.

          31. Partial Invalidity. In the event any one or more of the provisions
contained in this Mortgage  shall for any reason be held to be invalid,  illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision  hereof,  but each shall be construed as if
such  invalid,  illegal or  unenforceable  provision  had never  been  included.
Notwithstanding  to the contrary  anything  contained in this Mortgage or in any
provisions of the  Indebtedness or Loan Documents,  the obligations of Mortgagor
and of any other  obligor  under the  Indebtedness  or Loan  Documents  shall be
subject to the limitation that Mortgagee shall not charge, take or receive,  nor
shall  Mortgagor  or any other  obligor be obligated  to pay to  Mortgagee,  any
amounts constituting  interest in excess of the maximum rate permitted by law to
be charged by Mortgagee.

          32.  Mortgagor's  Waiver of Rights. To the fullest extent permitted by
law,  Mortgagor  waives  the  benefit  of all  laws  now  existing  or that  may
subsequently be enacted  providing for (i) any  appraisement  before sale of any
portion  of the  Mortgaged  Property,  (ii)  any  extension  of the time for the
enforcement of the collection of the  Indebtedness  or the creation or extension
of a period of redemption  from any sale made in collecting  such debt and (iii)
exemption  of the  Mortgaged  Property  from  attachment,  levy  or  sale  under
execution or exemption from civil process.  To the full extent  Mortgagor may do
so,  Mortgagor  agrees that Mortgagor  will not at any time insist upon,  plead,
claim or take the  benefit or  advantage  of any law now or  hereafter  in force
providing  for  any  appraisement,  valuation,  stay,  exemption,  extension  or
redemption,  or requiring  foreclosure  of this Mortgage  before  exercising any
other remedy granted  hereunder and Mortgagor,  for Mortgagor and its successors
and  assigns,  and for any and all persons  ever  claiming  any  interest in the
Mortgaged  Property,  to the extent permitted by law, hereby waives and releases
all rights of redemption, valuation,  appraisement, stay of execution, notice of
election  to mature or declare  due the whole of the  secured  indebtedness  and
marshalling in the event of foreclosure of the liens hereby created.

          33.  Remedies Not  Exclusive.  Mortgagee  shall be entitled to enforce
payment of the  Indebtedness  and performance of the Obligations and to exercise
all  rights  and  powers  under  this  Mortgage  or under any of the other  Loan
Documents   or  other   agreement  or  any  laws  now  or  hereafter  in  force,
notwithstanding  some  or all of the  Indebtedness  and  Obligations  may now or
hereafter be otherwise secured, whether by mortgage, security agreement, pledge,
lien,  assignment or otherwise.  Neither the acceptance of this Mortgage nor its
enforcement,  shall  prejudice  or in any  manner  affect  Mortgagee's  right to
realize upon or enforce any other  security now or hereafter  held by Mortgagee,
it being agreed that  Mortgagee  shall be entitled to enforce this  Mortgage and
any other  security now or hereafter  held by Mortgagee in such order and manner
as  Mortgagee  may  determine  in its  absolute  discretion.  No  remedy  herein
conferred



<PAGE>

                                                                              21




upon or reserved to  Mortgagee  is intended to be  exclusive of any other remedy
herein or by law provided or permitted,  but each shall be cumulative  and shall
be in  addition  to every  other  remedy  given  hereunder  or now or  hereafter
existing at law or in equity or by statute.  Every power or remedy  given by any
of the Loan Documents to Mortgagee or to which it may otherwise be entitled, may
be exercised,  concurrently or independently,  from time to time and as often as
may be deemed  expedient  by  Mortgagee.  In no event  shall  Mortgagee,  in the
exercise  of  the  remedies  provided  in  this  Mortgage  (including,   without
limitation,  in connection  with the  assignment  of Rents to Mortgagee,  or the
appointment  of a receiver and the entry of such  receiver on to all or any part
of the Mortgaged Property), be deemed a "mortgagee in possession," and Mortgagee
shall  not in any way be made  liable  for any  act,  either  of  commission  or
omission, in connection with the exercise of such remedies.

          34.  Multiple  Security.  If (a) the Premises  shall consist of one or
more parcels,  whether or not  contiguous and whether or not located in the same
county,  or (b) in addition to this Mortgage,  Mortgagee  shall now or hereafter
hold one or more additional  mortgages,  liens, deeds of trust or other security
(directly or indirectly) for the  Indebtedness  upon other property in the State
in which the  Premises  are located  (whether  or not such  property is owned by
Mortgagor or by others) or (c) both the  circumstances  described in clauses (a)
and (b) shall be true,  then to the fullest extent  permitted by law,  Mortgagee
may, at its election, commence or consolidate in a single foreclosure action all
foreclosure  proceedings  against all such collateral  securing the Indebtedness
(including the Mortgaged Property),  which action may be brought or consolidated
in the  courts  of any  county  in  which  any of such  collateral  is  located.
Mortgagor  acknowledges  that the right to maintain a  consolidated  foreclosure
action is a specific  inducement  to Mortgagee to extend the  Indebtedness,  and
Mortgagor expressly and irrevocably waives any objections to the commencement or
consolidation  of  the  foreclosure  proceedings  in a  single  action  and  any
objections  to the  laying  of  venue  or based  on the  grounds  of  forum  non
conveniens which it may now or hereafter have.  Mortgagor further agrees that if
Mortgagee  shall be prosecuting  one or more  foreclosure  or other  proceedings
against a portion of the Mortgaged Property or against any collateral other than
the Mortgaged  Property,  which  collateral  directly or indirectly  secures the
Indebtedness,  or if Mortgagee shall have obtained a judgment of foreclosure and
sale or similar  judgment  against such  collateral,  then,  whether or not such
proceedings  are being  maintained or judgments  were obtained in or outside the
State in which the  Premises  are  located,  Mortgagee  may commence or continue
foreclosure proceedings and exercise its other remedies granted in this Mortgage
against  all or any part of the  Mortgaged  Property  and  Mortgagor  waives any
objections to the commencement or continuation of a foreclosure of this Mortgage
or exercise of any other remedies  hereunder based on such other  proceedings or
judgments,  and waives any right to seek to dismiss,  stay, remove,  transfer or
consolidate  either any action under this Mortgage or such other  proceedings on
such  basis.  Neither  the  commencement  nor  continuation  of  proceedings  to
foreclose  this Mortgage nor the exercise of any other rights  hereunder nor the
recovery of any judgment by Mortgagee in any such  proceedings  shall prejudice,
limit  or  preclude  Mortgagee's  right  to  commence  or  continue  one or more
foreclosure  or  other  proceedings  or  obtain a  judgment  against  any  other
collateral  (either in or outside the State in which the  Premises  are located)
which directly or indirectly secures the Indebtedness,  and Mortgagor  expressly
waives any objections to the  commencement  of,  continuation  of, or entry of a
judgment  in  such  other  proceedings  or  exercise  of any  remedies  in  such
proceedings  based upon any action or judgment  connected to this Mortgage,  and
Mortgagor also waives any right to



<PAGE>

                                                                              22




seek to  dismiss,  stay,  remove,  transfer  or  consolidate  either  such other
proceedings  or any action  under this  Mortgage on such basis.  It is expressly
understood  and agreed that to the fullest  extent  permitted by law,  Mortgagee
may, at its election, cause the sale of all collateral which is the subject of a
single foreclosure action at either a single sale or at multiple sales conducted
simultaneously  and take such  other  measures  as are  appropriate  in order to
effect the agreement of the parties to dispose of and  administer all collateral
securing the  Indebtedness  (directly or indirectly) in the most  economical and
least time-consuming manner.

          35.  Expenses;  Indemnification.  (a) Mortgagor shall pay or reimburse
Mortgagee  for all expenses  incurred by Mortgagee  before and after the date of
this  Mortgage  with respect to any and all  transactions  contemplated  by this
Mortgage  including  without   limitation,   the  preparation  of  any  document
reasonably  required  hereunder or any amendment,  modification,  restatement or
supplement  to this  Mortgage,  the  delivery  of any  consent,  non-disturbance
agreement  or  similar   document  in  connection  with  this  Mortgage  or  the
enforcement of any of Mortgagee's rights.  Such expenses shall include,  without
limitation,  all title and conveyancing  charges,  recording and filing fees and
taxes, mortgage taxes,  intangible personal property taxes, escrow fees, revenue
and tax stamp expenses, insurance premiums (including title insurance premiums),
title search and title rundown charges,  brokerage  commissions,  finders' fees,
placement   fees,   court  costs,   surveyors',   photographers',   appraisers',
architects', engineers', consulting professional's,  accountants' and attorneys'
fees and disbursements.  Mortgagor acknowledges that from time to time Mortgagor
may  receive   statements  for  such  expenses,   including  without  limitation
attorneys' fees and disbursements.  Mortgagor shall pay such statements promptly
upon receipt.

          (b) If (i) any action or  proceeding  shall be  commenced by Mortgagee
(including  but not  limited  to any action to  foreclose  this  Mortgage  or to
collect the  Indebtedness),  or any action or  proceeding  is commenced to which
Mortgagee is made a party, or in which it becomes  necessary to defend or uphold
the lien of this  Mortgage,  or in which  Mortgagee  is  served  with any  legal
process,  discovery  notice  or  subpoena  and  (ii) in  each  of the  foregoing
instances  such action or proceeding  in any manner  relates to or arises out of
this  Mortgage  or  Mortgagee's  lending  to  Mortgagor,   then  Mortgagor  will
immediately reimburse or pay to Mortgagee all of the expenses which have been or
may be incurred by Mortgagee with respect to the foregoing (including reasonable
counsel fees and  disbursements),  together with interest thereon at the Default
Rate, and any such sum and the interest thereon shall be a lien on the Mortgaged
Property,  prior  to any  right,  or title  to,  interest  in or claim  upon the
Mortgaged  Property  attaching  or  accruing  subsequent  to the  lien  of  this
Mortgage,  and shall be deemed to be secured by this Mortgage.  In any action or
proceeding  to  foreclose   this   Mortgage,   or  to  recover  or  collect  the
Indebtedness,  the  provisions  of  law  respecting  the  recovering  of  costs,
disbursements and allowances shall prevail unaffected by this covenant.

          (c)  Mortgagor  shall  indemnify  and  hold  harmless   Mortgagee  and
Mortgagee's  affiliates,  and the  respective  directors,  officers,  agents and
employees of Mortgagee  and its  affiliates  (all of the  foregoing  indemnified
parties  collectively,  the  "Obligees"  from and against  all claims,  damages,
losses and liabilities  (including,  without limitation,  reasonable  attorneys'
fees and  expenses)  arising  out of or based  upon any  matter  related to this
Mortgage,  the Mortgaged  Property or the occupancy,  ownership,  maintenance or
management of the Mortgaged



<PAGE>

                                                                              23




Property by Mortgagor,  including,  without limitation,  any claims based on the
alleged acts or omissions of any employee or agent of Mortgagor.  It is intended
that the  foregoing  agreement of Mortgagor to indemnify  the Obligees  include,
without limitation,  indemnification for claims, damages, losses and liabilities
the Obligees may sustain as a result of the  Obligees' own  negligence  and this
indemnification  shall be in addition to any other liability which Mortgagor may
otherwise have to Mortgagee.

          36.  Successors and Assigns.  All covenants of Mortgagor  contained in
this Mortgage are imposed  solely and  exclusively  for the benefit of Mortgagee
and its  successors  and  assigns,  and no other  person  or entity  shall  have
standing  to require  compliance  with such  covenants  or be deemed,  under any
circumstances, to be a beneficiary of such covenants, any or all of which may be
freely  waived  in  whole  or in part by  Mortgagee  at any  time if in its sole
discretion it deems such waiver advisable. All such covenants of Mortgagor shall
run with the land and bind  Mortgagor,  the  successors and assigns of Mortgagor
(and each of them) and all subsequent  owners,  encumbrancers and tenants of the
Mortgaged Property, and shall inure to the benefit of Mortgagee,  its successors
and assigns.  The word "Mortgagor" shall be construed as if it read "Mortgagors"
whenever the sense of this  Mortgage so requires and if there shall be more than
one Mortgagor, the obligations of the Mortgagors shall be joint and several.

          37. No  Waivers,  etc.  Any  failure by  Mortgagee  to insist upon the
strict  performance  by  Mortgagor  of any of the terms and  provisions  of this
Mortgage  shall not be deemed to be a waiver of any of the terms and  provisions
hereof, and Mortgagee,  notwithstanding  any such failure,  shall have the right
thereafter to insist upon the strict  performance by Mortgagor of any and all of
the  terms  and  provisions  of this  Mortgage  to be  performed  by  Mortgagor.
Mortgagee may release, regardless of consideration and without the necessity for
any notice to or consent by the holder of any subordinate  lien on the Mortgaged
Property,  any part of the  security  held for the  obligations  secured by this
Mortgage without,  as to the remainder of the security,  in any way impairing or
affecting  the lien of this  Mortgage  or the  priority  of such  lien  over any
subordinate lien.

          38.  Governing  Law,  etc.  This  Mortgage  shall be  governed  by and
construed in  accordance  with the laws of the State of New Mexico,  except that
Mortgagor  expressly  acknowledges that by its terms the Notes shall be governed
and  construed  in  accordance  with the laws of the State of New York,  without
regard to  principles  of conflict  of law,  and for  purposes  of  consistency,
Mortgagor agrees that in any in personam proceeding related to this Mortgage the
rights of the parties to this  Mortgage  shall also be governed by and construed
in accordance  with the laws of the State of New York  governing  contracts made
and to be performed in that State,  without  regard to principles of conflict of
law.

          39.  Waiver of Trial by Jury.  Mortgagor  and  Mortgagee  each  hereby
irrevocably and unconditionally  waive trial by jury in any action,  claim, suit
or  proceeding  relating  to this  Mortgage  and for  any  counterclaim  brought
therein. Mortgagor hereby waives all rights to interpose any counterclaim in any
suit  brought  by  Mortgagee  hereunder  and all  rights  to have any such  suit
consolidated with any separate suit, action or proceeding.




<PAGE>

                                                                              24




          40.  Certain  Definitions.  Unless the  context  clearly  indicates  a
contrary intent or unless otherwise  specifically provided herein, words used in
this Mortgage shall be used  interchangeably  in singular or plural form and the
word "Mortgagor" shall mean "each Mortgagor or any subsequent owner or owners of
the  Mortgaged  Property  or any part  thereof or  interest  therein,"  the word
"Mortgagee"  shall mean  "Mortgagee or any subsequent  holder of the Notes," the
word "Notes" shall mean "the Notes or any other evidence of indebtedness secured
by this Mortgage," the word "person" shall include any individual,  corporation,
partnership,   trust,  unincorporated  association,   government,   governmental
authority, or other entity, and the words "Mortgaged Property" shall include any
portion of the Mortgaged Property or interest therein.  Whenever the context may
require,  any pronouns  used herein shall include the  corresponding  masculine,
feminine or neuter  forms,  and the singular  form of nouns and  pronouns  shall
include  the  plural and vice  versa.  The  captions  in this  Mortgage  are for
convenience  or  reference  only and in no way limit or amplify  the  provisions
hereof.

          41.  Revolving  Credit;  Future  Advances.  The Loans  secured  hereby
include revolving lines of credit extended by the Banks to Mortgagor pursuant to
the Credit Agreement.  The outstanding balance of such revolving lines of credit
may increase and decrease  from time to time,  and sums may be advanced,  repaid
and readvanced  thereunder until the final maturity of the Loans.  This Mortgage
is  intended  to secure all  indebtedness  of  Mortgagor  under the Loans in the
maximum  principal  amount  of  $100,000,000  so  long as the  Credit  Agreement
continues  in  effect,  regardless  of such  repayments  and  readvances  of the
proceeds of the Loans, and regardless of whether the balance of such obligations
may be  reduced,  from  time  to  time,  to  zero.  In  addition  to  all  other
indebtedness  secured by this  Mortgage,  this  Mortgage  shall  secure also and
constitute  a  first  lien  subject  only  to the  Permitted  Exceptions  on the
Mortgaged  Property for all future  advances  made by the Banks to Mortgagor for
any  purpose  within  six (6) years from the date of this  Mortgage  to the same
extent  as if such  advances  were  made on the  date of the  execution  of this
Mortgage. The total amount of the indebtedness,  including future advances, that
is secured by this  Mortgage,  may increase or decrease  from time to time,  but
shall not exceed $100,000,000 at any one time, together with interest thereon at
the rates provided in the Credit  Agreement,  and plus any disbursement  made by
Mortgagee  or any of the Banks to protect the  security of this  Mortgage,  with
interest on such disbursement at the Default Rate.

          42. Last  Dollars  Secured;  Priority.  This  Mortgage  secures only a
portion of the Indebtedness  owing or which may become owing by the Mortgagor to
the  Banks.   The  parties  agree  that  any  payments  or  repayments  of  such
Indebtedness  shall be and be deemed to be applied  first to the  portion of the
Indebtedness  that is not secured hereby,  it being the parties' intent that the
portion of the Indebtedness last remaining unpaid shall be secured hereby.





<PAGE>

                                                                              25








          This Mortgage has been duly executed by Mortgagor as of the date first
above written.

                                   NUEVO SOL TURF CLUB INC.


                                   By:  /S/ Susan J. Carstensen
                                        ----------------------------------------
                                        Name:  Susan J. Carstensen
                                        Title: Treasurer





<PAGE>

                                                                              26





STATE OF MONTANA    )
                    )  ss.:
COUNTY OF GALLATIN  )

          This  instrument was  acknowledged  before me this 8th day of October,
1998 by Susan J. Carstensen.


                                          /S/  Vicki L. Consoli
                                          --------------------------------------
                                          Notary Public for the State of Montana
                                          Residing at:  Bozeman, MT

My Commission Expires: 2/12/02



<PAGE>

                                                                              27




                                   Schedule A

                           [Attach legal description]




<PAGE>

                                                                              28




                                   Schedule B

                                  Water Rights

1.   Declaration  of Owner of  Underground  Water Right dated  December 26, 1989
     (Declaration No. LRG-7358-S)

2.   Declaration  of Owner of  Underground  Water Right dated  December 26, 1989
     (Declaration No. LRG-7358)

3.   Warranty  Deed and Transfer of Water  Rights  dated  December 11, 1986 from
     Ruidoso-Sunland, Inc. ("RDI") to Grantor

4.   Assignment of Easement dated as of December 12, 1986 from RDI to Grantor

5.   Undated  letter from Elephant  Butte  Irrigation  District of New Mexico to
     Grantor regarding fees for purchase of water in excess of acreage allotment






<PAGE>









                                                                         [Texas]


                                  DEED OF TRUST


                                      from


                       NUEVO SOL TURF CLUB, INC., Grantor


                                       to


                           HUGHES BUTTERWORTH, Trustee


                           for the use and benefit of


                          LEHMAN COMMERCIAL PAPER INC.,
           as Administrative Agent and Syndication Agent, Beneficiary


                          DATED AS OF OCTOBER 14, 1998



                       After recording, please return to:

                           Simpson Thacher & Bartlett
                              425 Lexington Avenue
                            New York, New York 10017

                           ATTN: Daniel E. Karp, Esq.




<PAGE>




                                                                         [Texas]


                                  DEED OF TRUST
                                  -------------


          THIS DEED OF TRUST, dated as of October 14, 1998, is made by NUEVO SOL
TURF CLUB INC., a Delaware corporation ("Grantor"),  whose address is 2311 South
Seventh Avenue, Bozeman, Montana 59715, to Hughes Butterworth,  a Texas resident
("Trustee"),  whose address is 301 East Yandell,  El Paso,  Texas 79902, for the
use and benefit of LEHMAN COMMERCIAL PAPER INC.  ("Beneficiary"),  whose address
is 3 World Financial Center, New York, New York 10285.  References to this "Deed
of Trust" shall mean this  instrument  and any and all renewals,  modifications,
amendments, supplements, extensions,  consolidations,  substitutions,  spreaders
and replacements of this instrument.


                                   Background
                                   ----------

          A. Grantor is the owner of the real  property  described in Schedule A
attached   hereto  (such  real  property,   together  with  all  the  buildings,
improvements,  structures and fixtures now or subsequently  located thereon (the
"Improvements") being collectively referred to as the "Real Estate").

          B. Grantor is a  wholly-owned  subsidiary of Powerhouse  Technologies,
Inc., a Delaware corporation ("Powerhouse").

          C. Pursuant to that certain Credit  Agreement  dated as of October __,
1998 (as the same may be amended, restated,  replaced,  substituted or otherwise
modified  from  time to time,  the  "Credit  Agreement")  among  Powerhouse,  as
borrower, the several lenders from time to time parties thereto (the "Lenders"),
Lehman  Brothers Inc., as arranger,  Beneficiary,  as  administrative  agent and
syndication  agent,  and Canadian  Imperial Bank of Commerce,  as  documentation
agent,  the Lenders  have agreed to make  certain  loans to  Powerhouse  as more
particularly described therein. Capitalized terms used and not otherwise defined
herein  shall  have the  meanings  assigned  thereto  in the  Credit  Agreement.
References  in this Deed of Trust to the "Default  Rate" shall mean the interest
rate provided for in Section 2.13(c) of the Credit Agreement.

          D. Borrower,  the administrative  agent and the Lenders are willing to
effectuate the Credit Agreement,  if, among other things, Grantor grants a first
lien on and  security  interest  in the Real  Estate and the Trust  Property  to
secure  Grantor's   obligations   under  the  Credit  Agreement  and  the  other
obligations secured thereby.





<PAGE>


                                                                               2




                                Granting Clauses
                                ----------------

          For good and valuable  consideration,  the receipt and  sufficiency of
which are hereby acknowledged, Grantor agrees that to secure:

          (a)  (i)  the  repayment  of  principal  in  the  maximum   amount  of
$100,000,000, which amount is the total indebtedness that may be outstanding and
secured  hereby at any  given  time the  indebtedness  evidenced  by the  Credit
Agreement,  and (ii) all interest and fees payable  thereon (the items set forth
in clauses (i) and (ii) being referred to collectively  as the  "Indebtedness");
and

          (b) the  performance of all  covenants,  agreements,  obligations  and
liabilities of Grantor (the  "Obligations")  under or pursuant to the provisions
of the Credit  Agreement,  this Deed of Trust, the Credit  Agreement,  any other
document securing payment of the Indebtedness (the "Security Documents") and any
amendments,  supplements,  extensions, renewals,  restatements,  replacements or
modifications  of any of the  foregoing  (the  Credit  Agreement,  the  Security
Documents and all other documents and instruments  from time to time evidencing,
securing or guaranteeing  the payment of the  Indebtedness or the performance of
the  Obligations,  as any of the same may be  amended,  supplemented,  extended,
renewed,  restated,  replaced or modified  from time to time,  are  collectively
referred to as the "Loan Documents");

GRANTOR HEREBY CONVEYS TO TRUSTEE AND HEREBY GRANTS, ASSIGNS, TRANSFERS AND SETS
OVER TO  TRUSTEE,  IN  TRUST  WITH  POWER  OF SALE  FOR THE USE AND  BENEFIT  OF
BENEFICIARY, AND GRANTS BENEFICIARY AND TRUSTEE A SECURITY INTEREST IN:

          (A) the Real Estate;

          (B) all the  estate,  right,  title,  claim or  demand  whatsoever  of
     Grantor, in possession or expectancy, in and to the Real Estate or any part
     thereof, whether now owned or hereafter acquired;

          (C) all right,  title and  interest  of  Grantor  in, to and under all
     easements,  rights of way, gores of land, streets, ways, alleys,  passages,
     sewer rights, waters, water courses, water and riparian rights, development
     rights,  air rights,  mineral rights,  sand, gravel and aggregate,  and all
     estates,  rights,  titles,  interests,   privileges,  licenses,  tenements,
     hereditaments and appurtenances belonging,  relating or appertaining to the
     Real Estate, and any reversions,  remainders,  rents,  issues,  profits and
     revenue  thereof  and all  land  lying  in the bed of any  street,  road or
     avenue,  in front  of or  adjoining  the Real  Estate  to the  center  line
     thereof;

          (D)  all of the  fixtures,  chattels,  business  machines,  machinery,
     apparatus,  equipment,  furnishings,  fittings  and  articles  of  personal
     property of every kind and nature  whatsoever,  and all  appurtenances  and
     additions thereto and substitutions or replacements thereof (together with,
     in each case, attachments, components, parts and accessories)


<PAGE>


                                                                               3



     currently owned or subsequently acquired by Grantor and now or subsequently
     attached  to, or  contained  in or used or usable in any way in  connection
     with any  operation  or letting of the Real Estate,  including  but without
     limiting the generality of the  foregoing,  all screens,  awnings,  shades,
     blinds,  curtains,  draperies,  artwork,  carpets,  rugs,  storm  doors and
     windows,  furniture and furnishings,  heating,  electrical,  and mechanical
     equipment, lighting, switchboards,  plumbing, ventilating, air conditioning
     and  air-cooling  apparatus,  refrigerating,  and  incinerating  equipment,
     escalators, elevators, loading and unloading equipment and systems, stoves,
     ranges,  laundry  equipment,  cleaning systems  (including  window cleaning
     apparatus),  telephones,  communication systems (including satellite dishes
     and antennae),  televisions,  computers,  sprinkler  systems and other fire
     prevention and  extinguishing  apparatus and materials,  security  systems,
     motors,  engines,  machinery,  pipes, pumps, tanks,  conduits,  appliances,
     fittings and fixtures of every kind and  description  (all of the foregoing
     in this paragraph (D) being referred to as the "Equipment");

          (E) all right, title and interest of Grantor in and to all substitutes
     and replacements of, and all additions and improvements to, the Real Estate
     and the  Equipment,  subsequently  acquired  by or  released  to Grantor or
     constructed, assembled or placed by Grantor on the Real Estate, immediately
     upon such  acquisition,  release,  construction,  assembling  or placement,
     including,  without  limitation,  any and all  building  materials  whether
     stored at the Real Estate or offsite,  and, in each such case,  without any
     further mortgage, conveyance, assignment or other act by Grantor;

          (F) all right,  title and  interest  of  Grantor  in, to and under all
     leases,  subleases,   underlettings,   concession  agreements,   management
     agreements,  licenses and other agreements relating to the use or occupancy
     of the Real Estate or the  Equipment or any part  thereof,  now existing or
     subsequently  entered  into by Grantor and whether  written or oral and all
     guarantees of any of the foregoing  (collectively,  as any of the foregoing
     may be amended, restated,  extended, renewed or modified from time to time,
     the ("Leases"), and all rights of Grantor in respect of cash and securities
     deposited  thereunder  and the right to receive and  collect the  revenues,
     income,  rents, issues and profits thereof,  together with all other rents,
     royalties, issues, profits, revenue, income and other benefits arising from
     the  use  and   enjoyment  of  the  Trust   Property  (as  defined   below)
     (collectively, the "Leases");

          (G) all trade names,  trade marks,  logos,  copyrights,  good will and
     books  and  records  owned  or  held  by  Grantor  relating  to or  used in
     connection  with the  operation of the Real Estate or the  Equipment or any
     part  thereof;  all general  intangibles  related to the  operation  of the
     Improvements now existing or hereafter arising;

          (H) all unearned premiums under insurance policies now or subsequently
     obtained by Grantor  relating to the Real Estate or Equipment and Grantor's
     interest in and to all proceeds of any such insurance  policies  (including
     title insurance  policies)  including the right to collect and receive such
     proceeds,  subject to the  provisions  relating to insurance  generally set
     forth below; and all awards and other compensation,  including the interest
     payable thereon and the right to collect and receive the same, made to the


<PAGE>


                                                                               4



     present or any  subsequent  owner of the Real Estate or  Equipment  for the
     taking by eminent domain,  condemnation or otherwise, of all or any part of
     the Real Estate or any easement or other right therein;

          (I)  all  right,  title  and  interest  of  Grantor  in and to (i) all
     contracts  from time to time executed by Grantor or any manager or agent on
     its behalf relating to the ownership,  construction,  maintenance,  repair,
     operation,  occupancy, sale or financing of the Real Estate or Equipment or
     any part  thereof and all  agreements  relating to the purchase or lease of
     any  portion  of the Real  Estate  or any  property  which is  adjacent  or
     peripheral  to the Real Estate,  together  with the right to exercise  such
     options and all leases of Equipment (collectively,  the "Contracts"),  (ii)
     to the extent  permitted  under  applicable  law, all  consents,  licenses,
     building  permits,   certificates  of  occupancy  and  other   governmental
     approvals relating to construction, completion, occupancy, use or operation
     of the Real Estate or any part thereof  (collectively,  the  "Permits") and
     (iii) all  drawings,  plans,  specifications  and similar or related  items
     relating to the Real Estate (collectively, the "Plans");

          (J) any and all monies now or  subsequently on deposit for the payment
     of real estate taxes or special  assessments against the Real Estate or for
     the  payment of premiums  on  insurance  policies  covering  the  foregoing
     property or otherwise on deposit with or held by Beneficiary as provided in
     this Deed of Trust;  all capital,  operating,  reserve or similar  accounts
     held by or on behalf of Grantor and related to the  operation  of the Trust
     Property,  whether now existing or hereafter arising and all monies held in
     any of the foregoing  accounts and any certificates or instruments  related
     to or evidencing such accounts;

          (K) all  accounts  and  revenues  arising  from the  operation  of the
     Improvements  including,  without  limitation,  any  right to  payment  now
     existing  or  hereafter  arising  for  rental of space or for goods sold or
     leased or for services rendered,  whether or not yet earned by performance,
     arising from the operation of the Improvements or any other facility on the
     Trust Property; and

          (L) all proceeds, both cash and noncash, of the foregoing;

          (All of the  foregoing  property and rights and interests now owned or
held or subsequently  acquired by Grantor and described in the foregoing clauses
(A)  through  (E) are  collectively  referred  to as the  "Premises",  and those
described in the foregoing clauses (A) through (L) are collectively  referred to
as the "Trust Property").

          TO HAVE AND TO HOLD the Trust  Property and the rights and  privileges
hereby  granted  unto  Trustee,  its  successors  and  assigns  for the uses and
purposes set forth,  until the  Indebtedness  is fully paid and the  Obligations
fully performed.

                              Terms and Conditions
                              --------------------



<PAGE>


                                                                               5




          Grantor  further  represents,  warrants,  covenants  and  agrees  with
Trustee and Beneficiary as follows:

          1. Warranty of Title.  Grantor warrants that Grantor has good title to
the Real Estate in fee simple and good title to the rest of the Trust  Property,
subject only to the matters that are set forth in the title insurance  policy or
policies  being issued to  Beneficiary  to insure the lien of this Deed of Trust
(the "Permitted Exceptions") and Grantor shall warrant, defend and preserve such
title and the rights granted by this Deed of Trust thereon against all claims of
all persons and  entities.  Grantor  further  warrants  that it has the right to
grant the Trust Property.

          2. Payment of Indebtedness.  Grantor shall pay the Indebtedness at the
times and places and in the manner  specified in the Credit  Agreement and shall
perform all the Obligations.

          3. Requirements.

          (a) Grantor shall promptly  comply with, or cause to be complied with,
and conform to all present and future laws, statutes, codes, ordinances, orders,
judgments,  decrees,  rules,  regulations and requirements  (including,  without
limitation, the Americans with Disabilities Act or similar local regulation (the
"ADA"),  and  irrespective  of the nature of the work to be done, of each of the
United States of America,  any State and any  municipality,  local government or
other political subdivision thereof and any agency,  department,  bureau, board,
commission or other instrumentality of any of them, now existing or subsequently
created (collectively, "Governmental Authority") which has jurisdiction over the
Trust  Property and all covenants,  restrictions  and conditions now or later of
record  which may be  applicable  to any of the Trust  Property,  or to the use,
manner of use, occupancy, possession, operation, maintenance, alteration, repair
or  reconstruction  of any of the Trust  Property.  All present and future laws,
statutes, codes, ordinances,  orders, judgments, decrees, rules, regulations and
requirements of every Governmental  Authority applicable to Grantor or to any of
the Trust Property and all covenants,  restrictions, and conditions which now or
later may be applicable to any of the Trust Property are  collectively  referred
to as the "Legal Requirements".

          (b) From and after the date of this Deed of Trust,  Grantor  shall not
by act or omission permit any building or other  improvement on any premises not
subject  to the lien of this Deed of Trust to rely on the  Premises  or any part
thereof or any interest  therein to fulfill any Legal  Requirement,  and Grantor
hereby assigns to Beneficiary  any and all rights to give consent for all or any
portion of the Premises or any interest therein to be so used. Grantor shall not
by act or omission  impair the  integrity  of any of the Real Estate as a single
zoning lot separate and apart from all other premises.  Grantor  represents that
each  parcel  of the Real  Estate  constitutes  a  legally  subdivided  lot,  in
compliance with all applicable  subdivision laws and similar Legal Requirements.
Any act or omission by Grantor  which would  result in a violation of any of the
provisions of this subsection shall be void.

          4. Payment of Taxes and Other Impositions.  (a) Except as permitted by
subsection 6.3 of the Credit Agreement, promptly when due, Grantor shall pay and
discharge all taxes of every kind and nature (including, without limitation, all
real and personal property,  income,  franchise,  withholding,  transfer, gains,
profits and gross receipts taxes), all charges for



<PAGE>


                                                                               6



any  easement  or  agreement  maintained  for the  benefit  of any of the  Trust
Property, all general and special assessments,  levies, permits,  inspection and
license fees, all water and sewer rents and charges and all other public charges
even if unforeseen or  extraordinary,  imposed upon or assessed against or which
may  become a lien on any of the Trust  Property,  or  arising in respect of the
occupancy, use or possession thereof, together with any penalties or interest on
any of the foregoing (all of the foregoing are  collectively  referred to as the
"Impositions").  Grantor  shall  within 30 days after  each due date  deliver to
Beneficiary  (i)  original or copies of  receipted  bills and  cancelled  checks
evidencing payment of such Imposition if it is a real estate tax or other public
charge and (ii) evidence  acceptable to  Beneficiary  showing the payment of any
other such Imposition.  If by law any Imposition,  at Grantor's  option,  may be
paid in installments (whether or not interest shall accrue on the unpaid balance
of  such  Imposition),  Grantor  may  elect  to  pay  such  Imposition  in  such
installments and shall be responsible for the payment of such  installments with
interest, if any.

          (b)  Nothing  herein  shall  affect  any right or remedy of Trustee or
Beneficiary  under this Deed of Trust or otherwise,  without notice or demand to
Grantor,  to pay any Imposition after the date such Imposition shall have become
due, and to add to the Indebtedness  the amount so paid,  together with interest
from the time of  payment  at the  Default  Rate.  Any sums paid by  Trustee  or
Beneficiary in discharge of any Impositions  shall be (i) a lien on the Premises
secured  hereby  prior to any right or title to,  interest in, or claim upon the
Premises  subordinate  to the lien of this Deed of Trust,  and (ii)  payable  on
demand by Grantor to Trustee or  Beneficiary,  as the case may be, together with
interest at the Default Rate as set forth above.

          (c)  Grantor  shall not claim,  demand or be  entitled  to receive any
credit  or  credits  toward  the  satisfaction  of this  Deed of Trust or on any
interest  payable  thereon for any taxes assessed  against the Trust Property or
any part thereof,  and shall not claim any  deduction  from the taxable value of
the Trust Property by reason of this Deed of Trust.

          (d) After an Event of Default (as defined below), Beneficiary shall be
entitled  to require  Grantor to pay  monthly  in  advance  to  Beneficiary  the
equivalent  of 1/12th  of the  estimated  annual  Impositions.  Beneficiary  may
commingle  such funds with its own funds and  Grantor  shall not be  entitled to
interest thereon.

          (e) Grantor shall have the right to contest or object in good faith to
the amount or validity of any Imposition by appropriate legal  proceedings,  but
such right shall not be deemed or construed in any way as relieving or modifying
Grantor's  covenant to pay any such  Imposition  in the manner  provided in this
Section  unless (i) Grantor has given prior  written  notice to  Beneficiary  of
Grantor's  intent so to contest or object to an  Imposition,  (ii) Grantor shall
demonstrate  to  Beneficiary's  satisfaction  that the legal  proceedings  shall
operate  conclusively  to prevent  the sale of the Trust  Property,  or any part
thereof,  to  satisfy  such  Imposition  prior  to final  determination  of such
proceedings,  (iii) such proceeding shall be permitted under and be conducted in
accordance  with the  provisions  of any other  instrument  to which  Grantor is
subject and shall not  constitute a default  thereunder  and (iv) Grantor  shall
have set aside  adequate  reserves for the payment of the  Impositions  together
with all interest and penalties thereon.


<PAGE>


                                                                               7





          5. Insurance.  (a) Grantor shall maintain or cause to be maintained on
all of the Premises the  insurance  required by the Credit  Agreement and in any
event shall also maintain or cause to be maintained

          (i) during the course of any  construction or repair of  Improvements,
     comprehensive  general  liability  insurance  under a policy  including the
     "broad form CGL  endorsement"  (or which  incorporates the language of such
     endorsement),  (including  coverage for elevators and escalators,  if any).
     The policy shall include coverage for independent contractors and completed
     operations.  The completed operations coverage shall stay in effect for two
     years after construction of any Improvements has been completed. The policy
     shall provide  coverage on an occurrence  basis against claims for personal
     injury,  including,  without limitation,  bodily injury,  death or property
     damage  occurring on, in or about the Premises and the  adjoining  streets,
     sidewalks  and  passageways,  such  insurance to afford  immediate  minimum
     protection  to a limit of not less than that required by  Beneficiary  with
     respect  to  personal  injury,  bodily  injury  or death to any one or more
     persons or damage to property;

          (ii)  during  the  course  of  any   construction  or  repair  of  the
     Improvements,   workers'   compensation   insurance  (including  employer's
     liability  insurance)  for all  employees  of  Grantor  engaged  on or with
     respect to the Premises in such amounts as are reasonably  satisfactory  to
     Beneficiary, but in no event less than the limits established by law;

          (iii) during the course of any construction,  addition,  alteration or
     repair of the  Improvements,  builder's risk completed value form insurance
     against "all risks of physical  loss,"  including  collapse,  water damage,
     flood and earthquake and transit coverage,  during  construction or repairs
     of  the  Improvements,   with  deductible   approved  by  Beneficiary,   in
     nonreporting  form,   covering  the  total  value  of  work  performed  and
     equipment,  supplies and materials furnished (with an appropriate limit for
     soft costs in the case of construction);

          (iv) if any portion of the Premises are located in an area  identified
     as a special flood hazard area by the Federal  Emergency  Management Agency
     or other applicable  agency,  flood insurance in an amount  satisfactory to
     Beneficiary,  but in no event  less  than  the  maximum  limit of  coverage
     available under the National Flood Insurance Act of 1968, as amended;

          (v) such other  insurance  in such  amounts as Grantor may  reasonably
     request from time to time.

Each  insurance  policy (other than flood  insurance  written under the National
Flood Insurance Act of 1968, as amended,  in which case to the extent available)
shall (i) provide  that it shall not be  cancelled,  non-renewed  or  materially
amended  without 30 days' prior  written  notice to  Beneficiary,  and (ii) with
respect  to  all  property  insurance,   provide  for  loss  payable  solely  to
Beneficiary as its interest may appear.  Liability insurance policies shall name
Beneficiary as (and Trustee,  if Trustee shall so request) an additional insured
and contain a waiver of subrogation against Beneficiary (and Trustee, if Trustee
shall so request); all such policies shall


<PAGE>


                                                                               8




indemnify  and hold  Beneficiary  (and  Trustee,  if  Trusee  shall so  request)
harmless  from all liability  claims  occurring on, in or about the Premises and
the adjoining streets, sidewalks and passageways.  The amounts of each insurance
policy and the form of each such policy  shall at all times be  satisfactory  to
Beneficiary.  Each policy shall  expressly  provide that any proceeds  which are
payable  to  Beneficiary  shall  be  paid  by  check  payable  to the  order  of
Beneficiary  only and  requiring the  endorsement  of  Beneficiary  only. If any
required  insurance  shall expire,  be  withdrawn,  become void by breach of any
condition  thereof by Grantor or by any lessee of any part of the Trust Property
or become void or unsafe by reason of the failure or  impairment  of the capital
of any  insurer,  or if for any other reason  whatsoever  such  insurance  shall
become  unsatisfactory to Beneficiary,  Beneficiary shall immediately obtain new
or additional insurance satisfactory to Beneficiary.  Grantor shall not take out
any separate or additional  insurance which is contributing in the event of loss
unless it is properly endorsed and otherwise  satisfactory to Beneficiary in all
respects.

          (b) Grantor shall deliver to Beneficiary an original of each insurance
policy required to be maintained,  or a certificate of such insurance acceptable
to  Beneficiary,  together  with a copy of the  declaration  page for each  such
policy.  Grantor  shall  (i)  pay as  they  become  due all  premiums  for  such
insurance, (ii) not later than 15 days prior to the expiration of each policy to
be  furnished  pursuant to the  provisions  of this  Section,  deliver a renewed
policy or policies, or duplicate original or originals thereof,  marked "premium
paid,"  or  accompanied  by such  other  evidence  of  payment  satisfactory  to
Beneficiary  with  standard  non-contributory  mortgage  clauses in favor of and
acceptable to Beneficiary. Upon request of Beneficiary,  Grantor shall cause its
insurance  underwriter  or broker to certify to  Beneficiary in writing that all
the requirements of this Deed of Trust governing insurance have been satisfied.

          (c) If Grantor is in default of its  obligations  to insure or deliver
any such prepaid policy or policies, then Beneficiary, at its option and without
notice,  may effect  such  insurance  from year to year,  and pay the premium or
premiums  therefor,  and Grantor shall pay to Beneficiary on demand such premium
or premiums so paid by Beneficiary with interest from the time of payment at the
Default  Rate and the same  shall be deemed to be  secured by this Deed of Trust
and shall be collectible in the same manner as the Indebtedness  secured by this
Deed of Trust.

          (d) Grantor shall increase the amount of property  insurance  required
to equal 100% replacement cost pursuant to the provisions of this Section at the
time of each  renewal of each policy (but not later than 12 months from the date
of this Deed of Trust and each  successive 12 month period to occur  thereafter)
by using the F.W.  Dodge  Building  Index to determine  whether there shall have
been an increase in the replacement  value since the most recent adjustment and,
if there  shall have been such an  increase,  the amount of  insurance  required
shall be adjusted accordingly.

          (e)  Grantor  promptly  shall  comply  with  and  conform  to (i)  all
provisions  of each such  insurance  policy,  and (ii) all  requirements  of the
insurers  applicable  to Grantor or to any of the Trust  Property or to the use,
manner of use,  occupancy,  possession,  operation,  maintenance,  alteration or
repair of any of the Trust Property.  Grantor shall not use or permit the use of
the

<PAGE>


                                                                               9



Trust  Property  in any manner  which  would  permit  any  insurer to cancel any
insurance  policy or void  coverage  required to be  maintained  by this Deed of
Trust.

          (f) If the Trust Property, or any part thereof,  shall be destroyed or
damaged by fire or any other casualty,  whether insured or uninsured,  or in the
event any claim is made against Grantor for any personal  injury,  bodily injury
or  property  damage  incurred  on or about the  Premises,  Grantor  shall  give
immediate  notice  thereof to  Beneficiary.  If the Trust Property is damaged by
fire or other  casualty  and the cost to  repair  such  damage  is less than the
lesser of (i) [25%] of the replacement  cost of the Improvements at the affected
Real Estate site and (ii)  [$500,000,]  then  provided  that no Event of Default
shall have  occurred and be  continuing,  Grantor shall have the right to adjust
such loss, and the insurance  proceeds relating to such loss may be paid over to
Grantor; provided that Grantor shall, promptly after any such damage, repair all
such damage  regardless of whether any insurance  proceeds have been received or
whether such  proceeds,  if  received,  are  sufficient  to pay for the costs of
repair. If the Trust Property is damaged by fire or other casualty, and the cost
to repair such damage  exceeds the above limit,  or if an Event of Default shall
have  occurred  and  be  continuing,   then  Grantor   authorizes  and  empowers
Beneficiary,  at Beneficiary's  option and in Beneficiary's sole discretion,  as
attorney-in-fact  for Grantor,  to make proof of loss, to adjust and  compromise
any claim under any  insurance  policy,  to appear in and  prosecute  any action
arising from any policy, to collect and receive insurance proceeds and to deduct
therefrom  Beneficiary's  expenses  incurred  in the  collection  process.  Each
insurance  company  concerned is hereby  authorized and directed to make payment
for such loss  directly  to  Beneficiary.  Beneficiary  shall  have the right to
require Grantor to repair or restore the Trust  Property,  in which event, if no
Event of Default has  occurred  and is  continuing,  Beneficiary  will apply the
insurance  proceeds  (after  deducting the costs of collecting such proceeds) to
the reimbursement of the costs of such repair or restoration, and Grantor hereby
designates  Beneficiary  as its  attorney-in-fact  for the purpose of making any
election  required or permitted under any insurance policy relating to repair or
restoration.  The insurance proceeds or any part thereof received by Beneficiary
may be applied by Beneficiary toward  reimbursement of all costs and expenses of
Beneficiary  in collecting  such  proceeds,  and the balance,  at  Beneficiary's
option  in  its  sole  and  absolute  discretion,   to  the  principal  (to  the
installments  in inverse  order of  maturity,  if payable in  installments)  and
interest due or to become due under the Credit  Agreement,  to fulfill any other
Obligation of Grantor.  Application  by  Beneficiary  of any insurance  proceeds
toward the last maturing installments of principal and interest due or to become
due under the  Credit  Agreement  shall  not  excuse  Grantor  from  making  any
regularly  scheduled payments due thereunder,  nor shall such application extend
or reduce the amount of such payments.

          (g) In the  event  of  foreclosure  of this  Deed of  Trust  or  other
transfer of title to the Trust Property in  extinguishment  of the Indebtedness,
all right,  title and interest of Grantor in and to any insurance  policies then
in force shall pass to the  purchaser  or grantee and  Grantor  hereby  appoints
Beneficiary its attorney-in-fact,  in Grantor's name, to assign and transfer all
such policies and proceeds to such purchaser or grantee.

          6. Restrictions on Liens and Encumbrances. Except for the lien of this
Deed of Trust and the  Permitted  Exceptions,  and  except as  permitted  by the
Credit Agreement, Grantor shall not further mortgage, nor otherwise encumber the
Trust Property nor create or suffer to


<PAGE>


                                                                              10



exist any lien, charge or encumbrance on the Trust Property, or any part thereof
superior to the lien of this Deed of Trust, whether recourse or non-recourse.

          7.  Sale and  Other  Transfer  Restrictions.  Grantor  shall not sell,
transfer,  convey or assign all or any portion of, or any interest in, the Trust
Property except as permitted by the Credit Agreement.

          8.  Limitation  on  Fundamental  Changes.  Except as  permitted by the
Credit Agreement, Grantor agrees that:

          (i)  Grantor  shall  not  enter  into any  transaction  of  merger  or
     consolidation,  or liquidate or dissolve  itself (or suffer any liquidation
     or  dissolution),  or acquire by purchase or otherwise all or substantially
     all the business or assets of, or any stock or other evidence of beneficial
     ownership of, any entity; and

          (ii) Grantor  shall not engage in any  business on the Premises  other
     than the business in which it is presently engaged.

          9.  Maintenance;  No Alteration;  Inspection;  Utilities.  (a) Grantor
shall maintain or cause to be maintained all the  Improvements in good condition
and repair and shall not commit or suffer any waste of the Improvements. Grantor
shall repair,  restore,  replace or rebuild promptly, in each case in accordance
with the  Credit  Agreement,  any part of the  Premises  which may be damaged or
destroyed by any casualty  whatsoever.  The Improvements shall not be demolished
or, except in compliance with the Credit  Agreement,  materially  altered,  nor,
except in compliance with the Credit  Agreement,  any material  additions built,
without the prior  written  consent of  Beneficiary,  which consent shall not be
unreasonably withheld or delayed.

          (b) Beneficiary and any persons  authorized by Beneficiary  shall have
the right to enter and  inspect the  Premises  and the right to inspect all work
done, labor performed and materials  furnished in and about the Improvements and
the right to inspect  and make  copies of all books,  contracts  and  records of
Grantor relating to the Trust Property.

          (c) Grantor shall pay or cause to be paid when due all utility charges
which are incurred for gas,  electricity,  water or sewer services  furnished to
the Premises and all other  assessments or charges of a similar nature,  whether
public or private, affecting the Premises or any portion thereof, whether or not
such assessments or charges are liens thereon.

          10. Condemnation/Eminent  Domain. Immediately upon obtaining knowledge
of  the  institution  of any  proceedings  for  the  condemnation  of the  Trust
Property,  or any  portion  thereof,  Grantor  will  notify  Beneficiary  of the
pendency of such proceedings.  Grantor authorizes Beneficiary,  at Beneficiary's
option and in Beneficiary's sole discretion, as attorney-in-fact for Grantor, to
commence,  appear in and  prosecute,  in  Beneficiary's  or Grantor's  name, any
action or proceeding relating to any condemnation of the Trust Property,  or any
portion  thereof,  and to settle or compromise any claim in connection with such
condemnation.  If Beneficiary  elects not to  participate  in such  condemnation
proceeding,  then Grantor shall, at its expense,  diligently  prosecute any such
proceeding and shall consult with Beneficiary, its attorneys and experts and


<PAGE>


                                                                              11



cooperate  with them in any  defense  of any such  proceedings.  All  awards and
proceeds of  condemnation  shall be assigned to Beneficiary to be applied in the
same manner as insurance  proceeds,  as provided  above,  and Grantor  agrees to
execute any such assignments of all such awards as Beneficiary may request.

          11. Restoration. If Beneficiary elects to release funds to Grantor for
restoration  of any of the  Trust  Property,  then  such  restoration  shall  be
performed only in accordance with the following conditions:

          (i)  prior to the  commencement  of any  restoration,  the  plans  and
     specifications  for such  restoration,  and the  budgeted  costs,  shall be
     submitted  for  approval  by  Beneficiary,  which  approval  shall  not  be
     unreasonably withheld or delayed;

          (ii) prior to making any  advance of  restoration  funds,  Beneficiary
     shall be satisfied that the remaining  restoration  funds are sufficient to
     complete  the  restoration  and  to pay  all  related  expenses,  including
     interest on the Indebtedness and real estate taxes on the Premises,  during
     restoration;

          (iii) at the time of any disbursement of the restoration funds, (A) no
     Event of Default (as defined below) shall then exist,  (B) no mechanics' or
     materialmen's liens shall have been filed and remain  undischarged,  except
     those discharged by the disbursement of the requested restoration funds and
     (C) a satisfactory  bring-down or  continuation  of title  insurance on the
     Premises  shall be delivered to  Beneficiary,  upon  reasonable  request by
     Beneficiary therefor;

          (iv)  disbursements  shall be made from time to time in an amount  not
     exceeding the cost of the work completed since the last disbursement,  upon
     receipt  of  satisfactory  evidence  of  the  stage  of  completion  and of
     performance of the work in a good and workmanlike  manner and in accordance
     with the contracts, plans and specifications acceptable to Beneficiary;

          (v) with respect to each advance of restoration funds, Beneficiary may
     retain  10%  of  the  amount  of  such  advance  as a  holdback  until  the
     restoration is fully completed;

          (vi)  the  restoration  funds  shall  bear  no  interest  and  may  be
     commingled with Beneficiary's other funds;

          (vii)  Beneficiary may impose such other conditions as are customarily
     imposed by construction lenders; and

          (viii)  any   restoration   funds   remaining  shall  be  retained  by
     Beneficiary and may be applied by Beneficiary,  in its sole discretion,  to
     the Indebtedness in the inverse order of maturity.

          12. Leases.  (a) Grantor shall not (i) execute an assignment or pledge
of any Lease  relating to all or any portion of the Trust Property other than in
favor of Beneficiary, or (ii)


<PAGE>


                                                                              12




without  the prior  written  consent of  Beneficiary,  which  consent  shall not
unreasonably be withheld or delayed, execute or permit to exist any Lease of any
of the Trust Property.

          (b) As to any Lease consented to by Beneficiary, Grantor shall:

          (i) promptly perform all of the provisions of the Lease on the part of
     the lessor thereunder to be performed;

          (ii) promptly  enforce all of the  provisions of the Lease on the part
     of the lessee thereunder to be performed;

          (iii) appear in and defend any action or  proceeding  arising under or
     in any manner  connected  with the Lease or the  obligations  of Grantor as
     lessor or of the lessee thereunder;

          (iv)  exercise,  within five (5) days after a request by  Beneficiary,
     any right to request  from the  lessee a  certificate  with  respect to the
     status thereof;

          (v)  simultaneously  deliver to  Beneficiary  copies of any notices of
     default  which  Grantor  may at any time  forward  to or  receive  from the
     lessee;

          (vi) promptly  deliver to Beneficiary a fully executed  counterpart of
     the Lease;

          (vii)  promptly,  upon request of  Beneficiary,  record the Lease or a
     memorandum thereof, as provided by applicable law; and

          (viii) promptly deliver to Beneficiary, upon Beneficiary's request, an
     assignment of the Grantor's interest under such Lease.

          (c) Grantor shall deliver to Beneficiary, within ten (10) days after a
request by Beneficiary, a written statement, certified by Grantor as being true,
correct and complete, containing the names of all lessees and other occupants of
the Trust Property,  the terms of all Leases and the spaces occupied and rentals
payable  thereunder,  and a list  of all  Leases  which  are  then  in  default,
including  the nature and  magnitude of the  default;  such  statement  shall be
accompanied  by credit  information  with  respect to the lessees and such other
information as Beneficiary may request.

          (d) All Leases entered into by Grantor after the date hereof,  if any,
and all rights of any lessees thereunder shall be subject and subordinate in all
respects to the lien and  provisions  of this Deed of Trust  unless  Beneficiary
shall otherwise elect in writing.

          (e) As to any Lease now in existence or  subsequently  consented to by
Beneficiary, Grantor shall not accept a surrender or terminate, cancel, rescind,
supplement,  alter, revise, modify or amend such Lease or permit any such action
to be taken nor shall  Grantor  accept the payment of rent more than thirty (30)
days in advance of its due date.


<PAGE>


                                                                              13



 

          (f) If any act or omission of Grantor  would give any lessee under any
Lease the right,  immediately  or after lapse of a period of time,  to cancel or
terminate  such Lease,  or to abate or offset  against the payment of rent or to
claim a partial or total  eviction,  such lessee shall not  exercise  such right
until it has given  written  notice of such act or omission to  Beneficiary  and
until a 10-day  period for  remedying  such act or omission  shall have  elapsed
following the giving of such notice without a remedy being effected.

          (g) In the event of the enforcement by Beneficiary of any remedy under
this Deed of  Trust,  the  lessee  under  each  Lease  shall,  if  requested  by
Beneficiary  or any other person  succeeding to the interest of Beneficiary as a
result of such  enforcement,  attorn to  Beneficiary or to such person and shall
recognize  Beneficiary  or such  successor in interest as lessor under the Lease
without change in the provisions thereof;  provided however, that Beneficiary or
such  successor  in  interest  shall  not be:  (i)  bound by any  payment  of an
installment  of rent or  additional  rent  which may have been made more than 30
days before the due date of such  installment;  (ii) bound by any  amendment  or
modification  to the Lease  made  without  the  consent of  Beneficiary  or such
successor in  interest,  which  consent  shall not be  unreasonably  withheld or
delayed;  (iii)  liable for any  previous  act or  omission  of Grantor  (or its
predecessors in interest);  (iv)  responsible for any monies owing by Grantor to
the  credit  of  such  lessee  or  subject  to  any  credits,  offsets,  claims,
counterclaims, demands or defenses which the lessee may have against Grantor (or
its  predecessors  in  interest);  (v) bound by any  covenant  to  undertake  or
complete  any  construction  of the  Premises  or any portion  thereof;  or (vi)
obligated  to make any payment to such lessee  other than any  security  deposit
actually delivered to Beneficiary or such successor in interest.  Each lessee or
other occupant, upon request by Beneficiary or such successor in interest, shall
execute and deliver an instrument or instruments confirming such attornment.  In
addition,  Grantor  agrees that each Lease  entered  into after the date of this
Deed of Trust shall  include  language to the effect of  subsections  (d)-(g) of
this  Section;  provided  that  the  provisions  of such  subsections  shall  be
self-operative  and any failure of any Lease to include such language  shall not
impair the binding effect of such provisions on any lessee under such Lease.

          13.  Further  Assurances/Estoppel   Certificates.  To  further  assure
Beneficiary's and Trustee's rights under this Deed of Trust, Grantor agrees upon
demand  of  Beneficiary  or  Trustee  to do any act or  execute  any  additional
documents (including,  but not limited to, security agreements on any personalty
included or to be included in the Trust  Property and a separate  assignment  of
each Lease in recordable  form) as may be required by Beneficiary to confirm the
lien of this  Deed of Trust  and all  other  rights  or  benefits  conferred  on
Beneficiary. Within ten (10) days after Beneficiary has made a request therefor,
Grantor shall deliver,  in form and substance  satisfactory  to  Beneficiary,  a
written  statement,   duly  acknowledged,   setting  forth  the  amount  of  the
Indebtedness,  and whether any offsets, claims,  counterclaims or defenses exist
against the  Indebtedness and certifying as to such other matters as Beneficiary
shall reasonably request.

          14. Beneficiary's Right to Perform. If Grantor fails to perform any of
the covenants or agreements of Grantor,  Beneficiary or Trustee, without waiving
or releasing  Grantor from any  obligation  or default under this Deed of Trust,
may, at any time (but shall be under no obligation  to) pay or perform the same,
and the  amount or cost  thereof,  with  interest  at the  Default  Rate,  shall
immediately be due from Grantor to Beneficiary or Trusee (as the case


<PAGE>


                                                                              14



may be) and the same  shall be  secured  by this  Deed of Trust  and shall be an
encumbrance on the Trust Property prior to any right,  title to,  interest in or
claim upon the Trust Property  attaching  subsequent to the lien of this Deed of
Trust.  No  payment or advance  of money by  Beneficiary  or Trustee  under this
Section  shall be deemed or  construed  to cure  Grantor's  default or waive any
right or remedy of Beneficiary or Trustee.

          15. Grantor's Existence, etc. Grantor shall do all things necessary to
preserve and keep in full force and effect its existence, franchises, rights and
privileges  under the laws of the state in which it was  formed and its right to
own  property  and  transact  business in each state in which the Real Estate is
located.  Grantor  represents  and  warrants  that  this  Deed of Trust has been
executed by a duly authorized  officer thereof.  This Deed of Trust  constitutes
the legal, valid and binding obligation of Grantor,  enforceable against Grantor
in  accordance  with its  terms,  except as  enforceability  may be  limited  by
applicable bankruptcy,  insolvency,  reorganization,  moratorium or similar laws
affecting the enforcement of creditors' rights generally.

          16. Financial  Statements;  Certificates;  Other Information.  Grantor
shall deliver to Beneficiary the financial  statements required under the Credit
Agreement.

          17. Hazardous  Material.  (a) Grantor shall comply with the provisions
of Sections  4.17 and 6.8 of the Credit  Agreement  in respect of  Materials  of
Environmental Concern (as defined in the Credit Agreement). In the event Grantor
fails to do so, after five (5) days' notice to Grantor and the expiration of the
cure period  permitted under the applicable Legal  Requirement,  Beneficiary may
declare  such failure an Event of Default or cause the Premises to be freed from
the Hazardous  Material and the cost of the removal with interest at the Default
Rate shall  immediately be due from Grantor to Beneficiary and the same shall be
added to the  Indebtedness  and be secured by this Deed of Trust.  Grantor shall
give  Beneficiary and its agents and employees  access to the Premises to remove
Hazardous Material. Grantor agrees to defend, indemnify and hold Beneficiary and
Trustee free and harmless from and against all loss,  costs,  damage and expense
(including attorneys' fees and costs and consequential  damages) Beneficiary may
sustain  by  reason  of  (i)  the  imposition  or  recording  of a  lien  by any
Governmental  Authority pursuant to any Legal Requirement  relating to hazardous
or toxic  wastes or  substances  or the  removal  thereof  ("Hazardous  Material
Laws");  (ii) claims of any private  parties  regarding  violations of Hazardous
Material  Laws;  (iii)  costs  and  expenses  (including,   without  limitation,
attorneys'  fees and fees  incidental to the securing of repayment of such costs
and expenses) incurred by Grantor, Beneficiary or Trustee in connection with the
removal of any such lien or in connection  with  Grantor's or  Beneficiary's  or
Trustee's  compliance  with any Hazardous  Material Laws; and (iv) the assertion
against  Beneficiary  or  Trustee by any party of any claim in  connection  with
Hazardous  Material.  It is intended that the foregoing  agreement of Grantor to
indemnify  Beneficiary  include,  without limitation,  indemnification for loss,
costs,  damage and expense  Beneficiary may sustain as a result of Beneficiary's
own negligence.

                  (b)  The  foregoing   indemnification   shall  be  a  recourse
obligation of Grantor and shall survive  repayment of the loans under the Credit
Agreement,  notwithstanding  any  limitations on recourse which may be contained
herein or in any Loan Documents or the delivery 


<PAGE>


                                                                              15



of any satisfaction, release or release deed, discharge or deed of reconveyance,
or the  assignment of this Deed of Trust by  Beneficiary  or the  replacement of
Trustee by a substitute trustee.

          (c) For the purposes of this Deed of Trust, "Hazardous Material" means
and includes any  hazardous,  nuclear,  toxic or dangerous  waste,  substance or
material defined as such in (or for purposes of) the Comprehensive Environmental
Response,   Compensation,  and  Liability  Act,  any  so-called  "Superfund"  or
"Superlien"  law, or any other Legal  Requirement  regulating,  relating  to, or
imposing liability or standards of conduct concerning,  any hazardous,  nuclear,
toxic  or  dangerous  waste,  substance  or  material,  as now or at any time in
effect.

          18.  Asbestos.  Grantor shall not install or permit to be installed in
the Premises  friable asbestos or any substance  containing  asbestos and deemed
hazardous  by any  Legal  Requirement  respecting  such  material,  or any other
building material deemed to be harmful, hazardous or injurious by relevant Legal
Requirements. Grantor shall give Beneficiary and its agents and employees access
to the Premises to remove such  asbestos or  substances.  Grantor  shall defend,
indemnify,  and save  Beneficiary  and Trustee  harmless  from all loss,  costs,
damages  and  expense  (including  attorneys'  fees and costs and  consequential
damages)  asserted or proven against  Beneficiary or Trustee by any party,  as a
result of the presence of such substances or any removal or compliance with such
Legal  Requirements.  It is intended that the foregoing  agreement of Grantor to
indemnify  Beneficiary  include,  without limitation,  indemnification for loss,
costs,  damage and expense  Beneficiary may sustain as a result of Beneficiary's
own negligence.  Furthermore, the indemnification shall be a recourse obligation
of Grantor and shall survive repayment of the loans under the Credit Agreeement,
notwithstanding  any limitation on recourse which may be contained  herein or in
any of the Loan  Documents  or the  delivery  of any  satisfaction,  release  or
release deed, discharge or deed of reconveyance,  or the assignment of this Deed
of  Trust  by  Beneficiary  or the  replacement  of  Trustee  with a  substitute
trustee..

          19. Event of Default.  The occurrence of an Event of Default under the
Credit Agreement shall constitute an Event of Default hereunder.

          20. Remedies.

          (a) Upon the  occurrence  of any Event of Default,  in addition to any
other rights and remedies  Beneficiary  may have pursuant to the Loan Documents,
or as provided by law, and without limitation,  (x) if such event is an Event of
Default under Section 8 of the Credit Agreement,  automatically the Indebtedness
and all other amounts owing under the Credit  Agreement,  this Deed of Trust and
the other Security Documents  immediately shall become due and payable,  and (y)
if such event is any other Event of Default,  by notice to Grantor,  Beneficiary
may declare the Indebtedness  (together with accrued  interest  thereon) and all
other  amounts  payable under the Credit  Agreement,  this Deed of Trust and the
other Security Documents to be immediately due and payable.  Except as expressly
provided above in this Section or in the Credit Agreement,  presentment, demand,
protest  and all other  notices  of any kind are  hereby  expressly  waived.  In
addition,  upon  the  occurrence  of  any  Event  of  Default,  Beneficiary  may
immediately take such action, without notice or demand, as it deems advisable to
protect and enforce its rights against Grantor and in and to the Trust Property,
including,  but not  limited  to, the  following  actions,  each of which may be
pursued concurrently or otherwise, at


<PAGE>


                                                                              16



such  time  and in  such  manner  as  Beneficiary  may  determine,  in its  sole
discretion,  without  impairing  or  otherwise  affecting  the other  rights and
remedies of Beneficiary:



          (i) Beneficiary may direct Trustee to sell or offer for sale the Trust
     Property in such portions,  order and parcels as Beneficiary may determine,
     with or without  having first taken  possession of the same, to the highest
     bidder  for  cash  at  public  auction.  Such  sale  shall  be  made at the
     courthouse  door of the  County  wherein  the Real  Estate  (or any of that
     portion  thereof  to be sold) is  situated  (whether  the parts or  parcels
     thereof,  if any, in different  counties are contiguous or not, and without
     the necessity of having any personal  property hereby mortgaged  present at
     such  sale) on the first  Tuesday of any month  between  the hours of 10:00
     a.m. and 4:00 p.m.  after posting a written or printed notice or notices of
     the place,  time and terms of the sale of the Trust Property for twenty-one
     (21)  days  prior  to the date of the  sale at the  courthouse  door of the
     county  in which the sale is to be made and at the  courthouse  door of any
     other  county in which a portion of the Trust  Property may be situated and
     filing a copy of such  notice(s)  in the office of the county clerk in each
     of such  counties,  and by serving  written  notice of the proposed sale at
     least  twenty-one (21) days preceding the date of sale by certified mail on
     Grantor and on each debtor obligated to pay the  Indebtedness  according to
     the  records  of  the  Beneficiary.  It is  agreed  that  the  posting  and
     transmittal of notices may be performed by the Trustee,  Beneficiary, or by
     any person acting for them. The sale shall be accomplished by following the
     procedures  permitted or required by Tex.  Prop.  Code Ann.  51.002 (Vernon
     1984),  as same may be amended  from time to time,  relating to the sale of
     real  estate  and/or  by  Chapter 9 of the Texas  Uniform  Commercial  Code
     relating to the sale of personal  property  collateral  after  default by a
     debtor (as said  Section  and  Chapter  may now exist or may  hereafter  be
     amended or  succeeded),  or by any other present or subsequent  articles or
     enactments  relating to the same.  Nothing contained in this subsection (d)
     shall be construed to limit in any way  Trustee's  rights to sell the Trust
     Property by private  sale if, and to the extent,  that such private sale is
     permitted under the laws of the State of Texas or by public or private sale
     after entry of judgment by any court of competent jurisdiction ordering the
     same. At any such sale (i) whether made under power herein  contained,  the
     aforesaid  51.002,  the Texas  Uniform  Commercial  Code,  any other  legal
     requirement  or by  virtue of any  judicial  procedure  or any other  legal
     right,  remedy or recourse,  it shall not be necessary  for Trustee to have
     physically  present,  or to have  constructive  possession  of,  the  Trust
     Property (Grantor hereby covenanting and agreeing to deliver to Trustee any
     portion of the Trust Property not actually or  constructively  possessed by
     Trustee immediately upon demand by Trustee),  and the title to and right of
     possession  of any such  property  shall pass to the  purchaser  thereof as
     completely  as if the same had  been  actually  present  and  delivered  to
     purchaser at such sale,  (ii) each  instrument  of  conveyance  executed by
     Trustee  shall  contain a special  warranty of title,  subject to Permitted
     Encumbrances,  binding upon Grantor, (iii) each and every recital contained
     in any instrument of conveyance  made by Trustee shall be prima facie proof
     of the  truth and  accuracy  of the  matters  recited  therein,  including,
     without  limitation,  nonpayment  of the  Indebtedness,  advertisement  and
     conduct of such sale in the manner provided herein and otherwise by law and
     appointment of any


<PAGE>


                                                                              17



     successor Trustee hereunder,  (iv) there shall be a prima facie presumption
     that any and all  prerequisites  to the  validity  thereof  shall have been
     performed,  (v) the  receipt of  Trustee or of such other  party or officer
     making  the sale  shall  be a  sufficient  discharge  to the  purchaser  or
     purchasers  for  his or  their  purchase  money  and no such  purchaser  or
     purchasers,  or his or their  assigns or  personal  representatives,  shall
     thereafter be obligated to see to the application of such purchase money or
     be in any way answerable  for any loss,  misapplication  or  nonapplication
     thereof,  (vi) to the fullest  extent  permitted by law,  Grantor  shall be
     completely and irrevocably  divested of all of its right, title,  interest,
     claim and  demand  whatsoever,  either at law or in  equity,  in and to the
     property  sold and such sale shall be a perpetual  bar,  both at law and in
     equity,  against Grantor, and against any and all other persons claiming or
     to claim  the  property  sold or any part  thereof,  by,  through  or under
     Grantor,  and (vii) to the  extent  and  under  such  circumstances  as are
     permitted by law, Beneficiary may be a purchaser at any such sale;


          (ii)  Beneficiary  may, to the extent permitted by applicable law, (A)
     institute and maintain an action of foreclosure  against all or any part of
     the Trust  Property,  (B)  institute  and  maintain an action on the Credit
     Agreement,  or (C) take  such  other  action  at law or in  equity  for the
     enforcement  of this Deed of Trust or any of the Loan  Documents as the law
     may allow. Beneficiary may proceed in any such action to final judgment and
     execution  thereon  for all  sums due  hereunder,  together  with  interest
     thereon  at the  Default  Rate and all  costs of suit,  including,  without
     limitation,  reasonable attorneys' fees and disbursements.  Interest at the
     Default Rate shall be due on any judgment  obtained by Beneficiary from the
     date of  judgment  until  actual  payment is made of the full amount of the
     judgment.

          (ii)  Beneficiary  may  personally,  or by its agents,  attorneys  and
     employees  and without  regard to the adequacy or  inadequacy  of the Trust
     Property or any other  collateral  as  security  for the  Indebtedness  and
     Obligations  enter into and upon the Trust Property and each and every part
     thereof and exclude Grantor and its agents and employees  therefrom without
     liability for trespass,  damage or otherwise  (Grantor  hereby  agreeing to
     surrender  possession of the Trust Property to  Beneficiary  upon demand at
     any such time) and use,  operate,  manage,  maintain  and control the Trust
     Property  and every  part  thereof.  Following  such  entry  and  taking of
     possession, Beneficiary shall be entitled, without limitation, (x) to lease
     all or any part or parts of the Trust Property for such periods of time and
     upon such conditions as Beneficiary  may, in its  discretion,  deem proper,
     (y) to enforce, cancel or modify any Lease and (z) generally to execute, do
     and  perform  any other act,  deed,  matter or thing  concerning  the Trust
     Property as  Beneficiary  shall deem  appropriate as fully as Grantor might
     do.

          (b)  Beneficiary,  in any action to foreclose  this Deed of Trust in a
judicial  procedure or in connection with the exercise of any non-judicial power
of sale by Trustee,  shall be entitled to the appointment of a receiver. In case
of a foreclosure  sale, the Real Estate may be sold, at Beneficiary's  election,
in one  parcel  or in more  than one  parcel  and  Beneficiary  is  specifically
empowered,  (without  being  required  to do so,  and in its sole  and  absolute
discretion)  to cause  successive  sales of portions of the Trust Property to be
held.


<PAGE>


                                                                              18





          (c) In the event of any breach, beyond any applicable grace period, of
any of the covenants,  agreements,  terms or conditions  contained in this , and
notwithstanding  to the contrary any exculpatory or non-recourse  language which
may be contained herein, Beneficiary shall be entitled to enjoin such breach and
obtain specific  performance of any covenant,  agreement,  term or condition and
Beneficiary  and Trustee shall have the right to invoke any  equitable  right or
remedy as though other remedies were not provided for in this Deed of Trust.

          (d)  Following  any sale of the Trust  Property,  or any part  hereof,
under the provisions of this  instrument,  all persons and parties in possession
of the  property  sold shall be divested of any and all interest in and claim to
the Trust Property,  and shall be obligated to immediately  vacate the premises,
and prior to such  vacation  shall be tenants at  sufferance of the purchaser of
the  property  sold and shall be subject to  eviction  in an action of  forcible
detainer;  provided, the provisions of this subparagraph shall be subject to any
agreements made in writing by Beneficiary  with reference to any existing and/or
future leases;  provided,  further,  the purchaser at any foreclosure sale shall
have the option but not the  obligation  to affirm any then  existing  leases or
tenancies or otherwise succeed to the rights of Grantor thereunder.

          21. Right of  Beneficiary  to Credit Sale.  Upon the occurrence of any
sale made under this Deed of Trust,  whether  made under the power of sale or by
virtue of judicial  proceedings  or of a judgment or decree of  foreclosure  and
sale,  Beneficiary  may bid for and  acquire  the  Trust  Property  or any  part
thereof.  In lieu of paying cash therefor,  Beneficiary  may make settlement for
the purchase price by crediting upon the  Indebtedness  or other sums secured by
this Deed of Trust the net sales price after deducting therefrom the expenses of
sale  and the  cost of the  action  and any  other  sums  which  Beneficiary  is
authorized  to deduct  under  this Deed of Trust.  In such  event,  this Deed of
Trust, the Credit Agreement and documents evidencing expenditures secured hereby
may be presented to the person or persons  conducting the sale in order that the
amount so used or applied may be credited upon the  Indebtedness  as having been
paid.

          22.  Appointment  of  Receiver.  If an Event  of  Default  shall  have
occurred and be continuing,  Beneficiary as a matter of right and without notice
to Grantor,  unless otherwise  required by applicable law, and without regard to
the adequacy or  inadequacy  of the Trust  Property or any other  collateral  as
security  for the  Indebtedness  and  Obligations  or the  interest  of  Grantor
therein,  shall  have the right to apply to any  court  having  jurisdiction  to
appoint a receiver or  receivers  or other  manager of the Trust  Property,  and
Grantor hereby irrevocably consents to such appointment and waives notice of any
application  therefor  (except as may be required by law).  Any such receiver or
receivers  shall have all the usual  powers and duties of  receivers  in like or
similar cases and all the powers and duties of  Beneficiary  in case of entry as
provided in this Deed of Trust, including,  without limitation and to the extent
permitted by law, the right to enter into leases of all or any part of the Trust
Property, and shall continue as such and exercise all such powers until the date
of confirmation of sale of the Trust Property unless such receivership is sooner
terminated.

          23. Extension,  Release, etc. (a) Without affecting the lien or charge
of this  Deed of Trust  upon  any  portion  of the  Trust  Property  not then or
theretofore  released  as  security  for the full  amount  of the  Indebtedness,
Beneficiary may, from time to time and without notice, agree to


<PAGE>


                                                                              19



(i) release any person liable for the Indebtedness,  (ii) extend the maturity or
alter any of the terms of the Indebtedness or any guaranty thereof,  (iii) grant
other  indulgences,  (iv)  release  or  reconvey,  or  cause to be  released  or
reconveyed at any time at Beneficiary's option any parcel, portion or all of the
Trust  Property,  (v) take or release any other or  additional  security for any
obligation  herein mentioned,  or (vi) make  compositions or other  arrangements
with debtors in relation thereto. If at any time this Deed of Trust shall secure
less than all of the  principal  amount  of the  Indebtedness,  it is  expressly
agreed that any repayments of the principal amount of the Indebtedness shall not
reduce the amount of the lien of this Deed of Trust until the lien amount  shall
equal the principal amount of the Indebtedness outstanding.

          (b) No  recovery  of any  judgment  by  Beneficiary  and no levy of an
execution  under any judgment upon the Trust Property or upon any other property
of Grantor  shall  affect  the lien of this Deed of Trust or any liens,  rights,
powers or remedies of Beneficiary hereunder,  and such liens, rights, powers and
remedies shall continue unimpaired.

          (c) If  Beneficiary  shall  have the right to  foreclose  this Deed of
Trust (or direct the  Trustee to sell the Trust  Property,  as the case may be),
Grantor authorizes  Beneficiary at its option to foreclose the lien of this Deed
of Trust subject to the rights of any tenants of the Trust Property. The failure
to make any such tenants parties  defendant to any such  foreclosure  proceeding
and to  foreclose  their  rights will not be asserted by Grantor as a defense to
any  proceeding  instituted by  Beneficiary  to collect the  Indebtedness  or to
foreclose the lien of this Deed of Trust.

          (d) Unless expressly provided  otherwise,  in the event that ownership
of this  Deed of Trust and title to the Trust  Property  or any  estate  therein
shall become  vested in the same person or entity,  this Deed of Trust shall not
merge in such title but shall continue as a valid lien on the Trust Property for
the amount secured hereby.

          24. Security  Agreement under Uniform  Commercial  Code. (a) It is the
intention  of the  parties  hereto that this Deed of Trust  shall  constitute  a
Security  Agreement  within the  meaning  of the  Uniform  Commercial  Code (the
"Code")  of the State in which the Trust  Property  is  located.  If an Event of
Default  shall  occur  under this Deed of Trust,  then in addition to having any
other right or remedy available at law or in equity,  Beneficiary shall have the
option of either (i) proceeding  under the Code and  exercising  such rights and
remedies as may be provided to a secured  party by the Code with  respect to all
or any  portion of the Trust  Property  which is personal  property  (including,
without  limitation,  taking  possession  of and selling such  property) or (ii)
treating such property as real property and proceeding  with respect to both the
real and personal  property  constituting  the Trust Property in accordance with
Beneficiary's  rights, powers and remedies with respect to the real property (in
which event the default  provisions of the Code shall not apply). If Beneficiary
shall  elect to  proceed  under  the  Code,  then 8 days'  notice of sale of the
personal property shall be deemed reasonable notice and the reasonable  expenses
of  retaking,  holding,  preparing  for sale,  selling and the like  incurred by
Beneficiary  shall  include,  but not be limited to,  attorneys'  fees and legal
expenses. At Beneficiary's request, Grantor shall assemble the personal property
and make it available to Beneficiary at a place designated by Beneficiary  which
is reasonably convenient to both parties.


<PAGE>


                                                                              20





          (b) Grantor and  Beneficiary  agree,  to the extent  permitted by law,
that:  (i)  all of  the  goods  described  within  the  definition  of the  word
"Equipment" are or are to become fixtures on the Real Estate;  (ii) this Deed of
Trust upon  recording or  registration  in the real estate records of the proper
office shall constitute a financing statement filed as a "fixture filing" within
the meaning of Sections 9-313 and 9-402 of the Code; (iii) Grantor is the record
owner of the Real Estate;  and (iv) the addresses of Grantor and Beneficiary are
as set forth on the first page of this Deed of Trust.

          (c) Grantor,  upon  request by  Beneficiary  from time to time,  shall
execute,  acknowledge and deliver to Beneficiary  one or more separate  security
agreements, in form satisfactory to Beneficiary, covering all or any part of the
Trust Property and will further execute, acknowledge and deliver, or cause to be
executed,  acknowledged  and  delivered,  any  financing  statement,  affidavit,
continuation  statement or  certificate  or other  document as  Beneficiary  may
request in order to perfect, preserve, maintain, continue or extend the security
interest  under  and the  priority  of this  Deed of  Trust  and  such  security
instrument. Grantor further agrees to pay to Beneficiary on demand all costs and
expenses incurred by Beneficiary in connection with the preparation,  execution,
recording,  filing and re-filing of any such document and all  reasonable  costs
and expenses of any record searches for financing  statements  Beneficiary shall
reasonably require.  Grantor shall from time to time, on request of Beneficiary,
deliver to  Beneficiary  an inventory in  reasonable  detail of any of the Trust
Property which constitutes  personal property.  If Grantor shall fail to furnish
any financing or  continuation  statement  within ten (10) days after request by
Beneficiary,  then  pursuant  to the  provisions  of the  Code,  Grantor  hereby
authorizes  Beneficiary,  without the signature of Grantor,  to execute and file
any such financing and continuation  statements.  The filing of any financing or
continuation statements in the records relating to personal property or chattels
shall not be  construed  as in any way  impairing  the right of  Beneficiary  to
proceed against any personal  property  encumbered by this Deed of Trust as real
property, as set forth above.

          25.  Assignment of Rents.  Grantor hereby assigns to Trustee,  for the
benefit of  Beneficiary,  the Rents as further  security  for the payment of the
Indebtedness  and  performance  of  the  Obligations,   and  Grantor  grants  to
Beneficiary  the right to enter the Trust Property for the purpose of collecting
the same and to let the Trust  Property  or any part  thereof,  and to apply the
Rents on account of the  Indebtedness.  The  foregoing  assignment  and grant is
present and absolute and shall continue in effect until the Indebtedness is paid
in full, but Beneficiary hereby waives the right to enter the Trust Property for
the purpose of  collecting  the Rents and Grantor  shall be entitled to collect,
receive,  use and retain the Rents until the  occurrence  of an Event of Default
under this Deed of Trust;  such right of Grantor to  collect,  receive,  use and
retain the Rents may be revoked by Beneficiary  upon the occurrence of any Event
of  Default  under  this  Deed of Trust by  giving  not less than five (5) days'
written notice of such revocation to Grantor; in the event such notice is given,
Grantor shall pay over to Beneficiary,  or to any receiver  appointed to collect
the Rents,  any lease  security  deposits,  and shall pay  monthly in advance to
Beneficiary,  or to any such receiver,  the fair and reasonable  rental value as
determined by Beneficiary  for the use and occupancy of the Trust Property or of
such part  thereof as may be in the  possession  of Grantor or any  affiliate of
Grantor,  and upon  default in any such payment  Grantor and any such  affiliate
will vacate and surrender the possession of the Trust Property to Beneficiary or
to such receiver, and in default thereof may be evicted by summary proceedings


<PAGE>


                                                                              21



or otherwise.  Grantor shall not accept  prepayments of  installments of Rent to
become due for a period of more than one month in advance  (except for  security
deposits and estimated payments of percentage rent, if any).

          26. Trust Funds. All lease security  deposits of the Real Estate shall
be treated as trust funds not to be commingled  with any other funds of Grantor.
Within  ten (10) days  after  request  by  Beneficiary,  Grantor  shall  furnish
Beneficiary  satisfactory evidence of compliance with this subsection,  together
with a  statement  of all lease  security  deposits by lessees and copies of all
Leases  not  previously  delivered  to  Beneficiary,  which  statement  shall be
certified by Grantor.

          27. Additional Rights. The holder of any subordinate lien on the Trust
Property shall have no right to terminate any Lease whether or not such Lease is
subordinate to this Deed of Trust nor shall any holder of any  subordinate  lien
join any tenant under any Lease in any action to  foreclose  the lien or modify,
interfere  with,  disturb or terminate the rights of any tenant under any Lease.
By  recordation  of this  Deed of  Trust  all  subordinate  lienholders  and the
trustees and  beneficiaries  under subordinate deeds of trust are subject to and
notified of this provision, and any action taken by any such lienholder contrary
to this  provision  shall be null and void.  Upon the occurrence of any Event of
Default,  Beneficiary  may, in its sole  discretion  and  without  regard to the
adequacy of its security under this Deed of Trust,  apply all or any part of any
amounts on deposit with Beneficiary  under this Deed of Trust against all or any
part of the Indebtedness. Any such application shall not be construed to cure or
waive any Default or Event of Default or invalidate any act taken by Beneficiary
on account of such Default or Event of Default.

          28.  Changes in Method of Taxation.  In the event of the passage after
the date  hereof of any law of any  Governmental  Authority  deducting  from the
value of the Premises for the purposes of taxation any lien thereon, or changing
in any way the laws for the taxation of deeds of trust or debts secured  thereby
for federal,  state or local  purposes,  or the manner of collection of any such
taxes, and imposing a tax, either directly or indirectly,  on mortgages or deeds
of trust or debts secured  thereby,  the holder of this Deed of Trust shall have
the right to declare the  Indebtedness due on a date to be specified by not less
than 30 days'  written  notice to be given to Grantor  unless within such 30-day
period Grantor shall assume as an Obligation hereunder the payment of any tax so
imposed  until full payment of the  Indebtedness  and such  assumption  shall be
permitted by law.

          29. Notices. All notices,  requests,  demands and other communications
hereunder shall be given in accordance with the provisions of subsection 10.2 of
the Credit Agreement to Grantor and to Beneficiary as specified thereunder.

          30. No Oral  Modification.  This Deed of Trust may not be  changed  or
terminated  orally. Any agreement made by Grantor and Beneficiary after the date
of this Deed of Trust  relating  to this Deed of Trust  shall be superior to the
rights of the holder of any  intervening  or  subordinate  lien or  encumbrance.
Trustee's  execution of any written  agreement  between  Grantor and Beneficiary
shall not be  required  for the  effectiveness  thereof as between  Grantor  and
Beneficiary.


<PAGE>


                                                                              22





          31. Partial Invalidity. In the event any one or more of the provisions
contained  in this  Deed of Trust  shall for any  reason be held to be  invalid,
illegal  or  unenforceable  in  any  respect,  such  invalidity,  illegality  or
unenforceability  shall not affect any other provision hereof, but each shall be
construed as if such invalid,  illegal or unenforceable provision had never been
included.  Notwithstanding  to the contrary  anything  contained in this Deed of
Trust  or  in  any  provisions  of  the  Indebtedness  or  Loan  Documents,  the
obligations of Grantor and of any other obligor under the  Indebtedness  or Loan
Documents shall be subject to the limitation that Beneficiary  shall not charge,
take or receive,  nor shall  Grantor or any other obligor be obligated to pay to
Beneficiary,  any amounts  constituting  interest in excess of the maximum  rate
permitted by law to be charged by Beneficiary.

          32.  Grantor's  Waiver of Rights.  To the fullest extent  permitted by
law,  Grantor  waives  the  benefit  of  all  laws  now  existing  or  that  may
subsequently be enacted  providing for (i) any  appraisement  before sale of any
portion  of the  Trust  Property,  (ii)  any  extension  of  the  time  for  the
enforcement of the collection of the  Indebtedness  or the creation or extension
of a period of redemption  from any sale made in collecting  such debt and (iii)
exemption of the Trust Property from attachment, levy or sale under execution or
exemption  from civil  process.  To the full extent  Grantor may do so,  Grantor
agrees that Grantor will not at any time insist upon,  plead,  claim or take the
benefit or  advantage of any law now or  hereafter  in force  providing  for any
appraisement,  valuation, stay, exemption, extension or redemption, or requiring
foreclosure  of this Deed of Trust before  exercising  any other remedy  granted
hereunder and Grantor,  for Grantor and its successors and assigns,  and for any
and all persons ever claiming any interest in the Trust Property,  to the extent
permitted  by  law,  hereby  waives  and  releases  all  rights  of  redemption,
valuation,  appraisement,  stay of  execution,  notice of  election to mature or
declare due the whole of the secured  indebtedness  and marshalling in the event
of  exercise  by Trustee  or  Beneficiary  of the power of sale or other  rights
hereby created.

          33. Remedies Not Exclusive.  Beneficiary and Trustee shall be entitled
to enforce payment of the Indebtedness and performance of the Obligations and to
exercise  all  rights  and  powers  under this Deed of Trust or under any of the
other Loan  Documents or other  agreement or any laws now or hereafter in force,
notwithstanding  some  or all of the  Indebtedness  and  Obligations  may now or
hereafter be otherwise  secured,  whether by deed of trust,  mortgage,  security
agreement, pledge, lien, assignment or otherwise. Neither the acceptance of this
Deed of Trust nor its  enforcement,  shall  prejudice  or in any  manner  affect
Beneficiary's  or Trustee's  right to realize upon or enforce any other security
now  or  hereafter  held  by  Beneficiary  or  Trustee,  it  being  agreed  that
Beneficiary  and Trustee shall be entitled to enforce this Deed of Trust and any
other security now or hereafter held by Beneficiary or Trustee in such order and
manner as Beneficiary may determine in its absolute discretion. No remedy herein
conferred upon or reserved to Beneficiary or Trustee is intended to be exclusive
of any other remedy  herein or by law provided or  permitted,  but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter  existing at law or in equity or by statute.  Every power or remedy
given by any of the Loan  Documents to Beneficiary or Trustee or to which it may
otherwise be entitled,  may be exercised,  concurrently or  independently,  from
time to time and as often as may be deemed  expedient by Beneficiary or Trustee,
as the case may be. In no event shall Beneficiary or Trustee, in the exercise of
the remedies provided in this Deed of Trust (including,  without limitation,  in
connection with the assignment of Rents to Beneficiary, or the


<PAGE>


                                                                              23


appointment  of a receiver and the entry of such  receiver on to all or any part
of the Trust  Property),  be deemed a  "mortgagee  in  possession,"  and neither
Beneficiary  nor Trustee shall in any way be made liable for any act,  either of
commission or omission, in connection with the exercise of such remedies.

          34.  Multiple  Security.  If (a) the Premises  shall consist of one or
more parcels,  whether or not  contiguous and whether or not located in the same
county,  or (b) in  addition  to this  Deed of Trust,  Beneficiary  shall now or
hereafter hold or be the beneficiary of one or more additional mortgages, liens,
deeds of trust or other security  (directly or indirectly) for the  Indebtedness
upon other  property in the State in which the Premises are located  (whether or
not  such  property  is  owned  by  Grantor  or  by  others)  or  (c)  both  the
circumstances  described  in  clauses  (a) and (b)  shall be  true,  then to the
fullest extent permitted by law,  Beneficiary may, at its election,  commence or
consolidate in a single trustee's sale or foreclosure  action all trustee's sale
or foreclosure proceedings against all such collateral securing the Indebtedness
(including the Trust  Property),  which action may be brought or consolidated in
the courts of any county in which any of such  collateral  is  located.  Grantor
acknowledges  that the  right  to  maintain  a  consolidated  trustee's  sale or
foreclosure  action is a  specific  inducement  to  Beneficiary  to  extend  the
Indebtedness, and Grantor expressly and irrevocably waives any objections to the
commencement or consolidation of the foreclosure  proceedings in a single action
and any  objections  to the laying of venue or based on the grounds of forum non
conveniens  which it may now or hereafter  have.  Grantor further agrees that if
Trustee or  Beneficiary  shall be prosecuting  one or more  foreclosure or other
proceedings  against a portion of the Trust  Property or against any  collateral
other than the Trust Property,  which collateral  directly or indirectly secures
the  Indebtedness,   or  if  Beneficiary  shall  have  obtained  a  judgment  of
foreclosure  and sale or similar  judgment  against such  collateral (or, in the
case of a trustee's  sale,  shall have met the statutory  requirements  therefor
with respect to such  collateral),  then,  whether or not such  proceedings  are
being maintained or judgments were obtained in or outside the State in which the
Premises  are  located,   Beneficiary  may  commence  or  continue   foreclosure
proceedings  and  exercise  its  other  remedies  granted  in this Deed of Trust
against all or any part of the Trust  Property and Grantor waives any objections
to the  commencement  or  continuation of a foreclosure of this Deed of Trust or
exercise of any other  remedies  hereunder  based on such other  proceedings  or
judgments,  and waives any right to seek to dismiss,  stay, remove,  transfer or
consolidate either any action under this Deed of Trust or such other proceedings
on such basis.  The  commencement  nor  continuation  of proceedings to sell the
Trust  Property  in a trustee's  sale,  to  foreclose  this Deed of Trust or the
exercise of any other  rights  hereunder  nor the  recovery  of any  judgment by
Beneficiary or the occurrence of any sale by the Trustee in any such proceedings
shall not  prejudice,  limit or  preclude  Beneficiary's  right to  commence  or
continue one or more trustee's sale,  foreclosure or other proceedings or obtain
a judgment  against (or, in the case of a trustee's  sale, to meet the statutory
requirements  for, any such sale of) any other collateral  (either in or outside
the State in which the  Premises  are  located)  which  directly  or  indirectly
secures the  Indebtedness,  and Grantor  expressly  waives any objections to the
commencement  of,  continuation  of,  or  entry  of a  judgment  in  such  other
proceedings  or exercise  of any  remedies  in such  proceedings  based upon any
action or judgment  connected to this Deed of Trust, and Grantor also waives any
right to seek to dismiss,  stay,  remove,  transfer or  consolidate  either such
other  proceedings  or any action under this Deed of Trust on such basis.  It is
expressly  understood  and agreed that to the fullest  extent  permitted by law,
Beneficiary may, at its election,


<PAGE>


                                                                              24



cause the sale of all collateral which is the subject of a single trustee's sale
or  foreclosure  action at either a single sale or at multiple  sales  conducted
simultaneously  and take such  other  measures  as are  appropriate  in order to
effect the agreement of the parties to dispose of and  administer all collateral
securing the  Indebtedness  (directly or indirectly) in the most  economical and
least time-consuming manner.

          35.  Expenses;  Indemnification.  (a) Grantor  shall pay or  reimburse
Trustee and  Beneficiary  for all expenses  incurred by  Beneficiary  or Trustee
before  and  after the date of this Deed of Trust  with  respect  to any and all
transactions  contemplated by this Deed of Trust including  without  limitation,
the preparation of any document  reasonably required hereunder or any amendment,
modification,  restatement or supplement to this Deed of Trust,  the delivery of
any consent,  non-disturbance  agreement or similar  document in connection with
this  Deed of Trust or the  enforcement  of any of  Beneficiary's  or  Trustee's
rights.  Such  expenses  shall  include,  without  limitation,   all  title  and
conveyancing  charges,  recording  and filing  fees and taxes,  mortgage  taxes,
intangible personal property taxes, escrow fees, revenue and tax stamp expenses,
insurance premiums (including title insurance premiums),  title search and title
rundown charges,  brokerage  commissions,  finders' fees,  placement fees, court
costs,  surveyors',   photographers',   appraisers',   architects',  engineers',
consulting  professional's,  accountants' and attorneys' fees and disbursements.
Grantor  acknowledges that from time to time Grantor may receive  statements for
such expenses,  including without limitation  attorneys' fees and disbursements.
Grantor shall pay such statements promptly upon receipt.

          (b) If (i) any  sale  (or  any  prerequisite  to a  sale),  action  or
proceeding  shall be  commenced by  Beneficiary  or Trustee  (including  but not
limited to any action to any sale of the Trust  Property,  or any foreclose this
Deed of Trust or to collect the Indebtedness), or any action
or proceeding is commenced to which  Beneficiary or Trustee is made a party,  or
in which it  becomes  necessary  to defend  or  uphold  the lien of this Deed of
Trust,  or in which  Beneficiary  or Trustee is served  with any legal  process,
discovery  notice or subpoena and (ii) in each of the foregoing  instances  such
action or  proceeding  in any  manner  relates  to or arises out of this Deed of
Trust or  Beneficiary's  lending  to  Grantor,  then  Grantor  will  immediately
reimburse or pay to Beneficiary  and Trustee all of the expenses which have been
or may be incurred by Beneficiary and Trustee, respectively, with respect to the
foregoing (including  reasonable counsel fees and disbursements),  together with
interest  thereon at the Default Rate, and any such sum and the interest thereon
shall be a lien on the Trust Property, prior to any right, or title to, interest
in or claim upon the Trust Property attaching or accruing subsequent to the lien
of this Deed of Trust,  and shall be deemed to be secured by this Deed of Trust.
In any action or proceeding to sell the Trust  Property,  to foreclose this Deed
of Trust,  or to recover or collect  the  Indebtedness,  the  provisions  of law
respecting the recovering of costs,  disbursements  and allowances shall prevail
unaffected by this covenant.

          (c) Grantor shall  indemnify and hold harmless each of Beneficiary and
Trustee and each of their respective  affiliates,  and the respective directors,
officers,  agents and employees of each of  Beneficiary  and Trustee and each of
their  respective   affiliates  (all  of  the  foregoing   indemnified   parties
collectively,  the "Obligees") from and against all claims,  damages, losses and
liabilities  (including,  without  limitation,  reasonable  attorneys'  fees and
expenses) arising out of or based upon any matter related to this Deed of Trust,
the Trust Property or the


<PAGE>


                                                                              25



occupancy,  ownership,  maintenance  or  management  of the  Trust  Property  by
Grantor, including,  without limitation, any claims based on the alleged acts or
omissions of any employee or agent of Grantor. It is intended that the foregoing
agreement of Grantor to  indemnify  the Obligees  include,  without  limitation,
indemnification  for claims,  damages,  losses and  liabilities the Obligees may
sustain as a result of the Obligees'  own  negligence  and this  indemnification
shall be in addition to any other  liability which Grantor may otherwise have to
Beneficiary or Trustee.

          36. Successors and Assigns. All covenants of Grantor contained in this
Deed of Trust are imposed solely and  exclusively for the benefit of Beneficiary
and Trustee and their respective  successors and assigns, and no other person or
entity  shall have  standing to require  compliance  with such  covenants  or be
deemed, under any circumstances,  to be a beneficiary of such covenants,  any or
all of which may be freely waived in whole or in part by  Beneficiary or Trustee
at any time if in its sole discretion it deems such waiver  advisable.  All such
covenants of Grantor  shall run with the land and bind Grantor,  the  successors
and  assigns  of  Grantor  (and  each  of  them)  and  all  subsequent   owners,
encumbrancers and tenants of the Trust Property,  and shall inure to the benefit
of  Beneficiary,  its  successors  and  assigns.  The  word  "Grantor"  shall be
construed as if it read  "Grantors"  whenever the sense of this Deed of Trust so
requires and if there shall be more than one  Grantor,  the  obligations  of the
Grantors shall be joint and several.

          37. No Waivers,  etc.  Any failure by  Beneficiary  to insist upon the
strict performance by Grantor of any of the terms and provisions of this Deed of
Trust  shall not be  deemed  to be a waiver  of any of the terms and  provisions
hereof, and Beneficiary or Trustee, notwithstanding any such failure, shall have
the right thereafter to insist upon the strict performance by Grantor of any and
all of the  terms  and  provisions  of this  Deed of  Trust to be  performed  by
Grantor.  Beneficiary may release,  regardless of consideration  and without the
necessity  for any notice to or consent by the  beneficiary  of any  subordinate
deed of trust or the holder of any subordinate  lien on the Trust Property,  any
part of the  security  held for the  obligations  secured  by this Deed of Trust
without, as to the remainder of the security,  in any way impairing or affecting
the lien of this Deed of Trust or the priority of such lien over any subordinate
lien.

          38.  GOVERNING  LAW,  ETC. THIS DEED OF TRUST SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, EXCEPT THAT GRANTOR
EXPRESSLY  ACKNOWLEDGES THAT BY ITS TERMS THE CREDIT AGREEMENT SHALL BE GOVERNED
IN  ACCORDANCE  WITH  THE LAWS OF THE  STATE  OF NEW  YORK,  WITHOUT  REGARD  TO
PRINCIPLES OF CONFLICT OF LAW, AND FOR PURPOSES OF  CONSISTENCY,  GRANTOR AGREES
THAT IN ANY IN PERSONAM  PROCEEDING  RELATED TO THIS DEED OF TRUST THE RIGHTS OF
THE PARTIES TO THIS DEED OF TRUST SHALL ALSO BE  GOVERNED  BY AND  CONSTRUED  IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK GOVERNING CONTRACT MADE AND TO
BE PERFORMED IN THAT STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAW.


<PAGE>


                                                                              26





          39. Waiver of Trial by Jury.  Grantor,  Trustee and  Beneficiary  each
hereby irrevocably and unconditionally waive trial by jury in any action, claim,
suit or  proceeding  relating  to this  Deed of Trust  and for any  counterclaim
brought therein.  Grantor hereby waives all rights to interpose any counterclaim
in any suit  brought by  Beneficiary  hereunder  and all rights to have any such
suit consolidated with any separate suit, action or proceeding.

          40.  Certain  Definitions.  Unless the  context  clearly  indicates  a
contrary intent or unless otherwise  specifically provided herein, words used in
this Deed of Trust shall be used  interchangeably in singular or plural form and
the word "Grantor" shall mean "each Grantor or any subsequent owner or owners of
the  Trust  Property  or  any  part  thereof  or  interest  therein,"  the  word
"Beneficiary"  shall mean  "Beneficiary  or any  subsequent  borrower  under the
Credit  Agreement," the word "Credit Agreement" shall mean "the Credit Agreement
or any other evidence of  indebtedness  secured by this Deed of Trust," the word
"person"  shall  include  any  individual,   corporation,   partnership,  trust,
unincorporated association, government, governmental authority, or other entity,
and the words "Trust  Property"  shall include any portion of the Trust Property
or interest therein.  Whenever the context may require, any pronouns used herein
shall include the  corresponding  masculine,  feminine or neuter forms,  and the
singular form of nouns and pronouns shall include the plural and vice versa. The
captions in this Deed of Trust are for  convenience  or reference only and in no
way limit or amplify the provisions hereof.

          41.  Revolving  Credit;  Future  Advances.  The Loans  secured  hereby
include  revolving lines of credit extended by the Banks to Grantor  pursuant to
the Credit Agreement.  The outstanding balance of such revolving lines of credit
may increase and decrease  from time to time,  and sums may be advanced,  repaid
and readvanced  thereunder  until the final maturity of the Loans.  This Deed of
Trust is intended to secure all  indebtedness of Grantor under the Loans so long
as the Credit Agreement  continues in effect,  regardless of such repayments and
readvances of the proceeds of the Loans,  and  regardless of whether the balance
of such  obligations may be reduced,  from time to time, to zero. In addition to
all other  indebtedness  secured by this Deed of Trust, this Deed of Trust shall
secure also and constitute a first lien subject only to the Permitted Exceptions
on the Trust  Property for all future  advances made by the Banks to Grantor for
any purpose within six (6) years from the date of this Deed of Trust to the same
extent as if such  advances  were made on the date of the execution of this Deed
of Trust. The total amount of the indebtedness,  including future advances, that
is secured by this Deed of Trust,  may  increase or decrease  from time to time,
but shall not exceed the maximum  principal  amount of the Loans as set forth in
the Credit  Agreement at any one time,  together  with  interest  thereon at the
rates  provided  in the  Credit  Agreement,  and plus any  disbursement  made by
Beneficiary  or any of the Banks to protect the  security of this Deed of Trust,
with interest on such disbursement at the Default Rate.

          42. Last Dollars Secured;  Priority. This Deed of Trust secures only a
portion of the  Indebtedness  owing or which may become  owing by the Grantor to
the  Banks.   The  parties  agree  that  any  payments  or  repayments  of  such
Indebtedness  shall be and be deemed to be applied  first to the  portion of the
Indebtedness  that is not secured hereby,  it being the parties' intent that the
portion of the Indebtedness last remaining unpaid shall be secured hereby.


<PAGE>


                                                                              27





          42.  Enforceability;  Usury.  In no event shall any  provision of this
Deed of Trust,  the Note,  or any other  instrument  evidencing  or securing the
indebtedness  ever  obligate  Grantor  to pay or allow  Beneficiary  to  collect
interest on the Note or any other indebtedness  secured hereby at a rate greater
than the maximum  non-usurious rate permitted by applicable law (herein referred
to as the  "Highest  Lawful  Rate"),  or  obligate  Grantor  to pay  any  taxes,
assessments,  charges,  insurance  premiums or other  amounts to the extent that
such payments,  when added to the interest payable on the Note or any other note
secured  hereby,  would be held to constitute the payment by Grantor of interest
at a rate greater than the Highest Lawful Rate; and this provision shall control
over any  provision to the  contrary.  To the extent the Highest  Lawful Rate is
determined  by  reference  to the laws of the  State  of  Texas,  same  shall be
determined by reference to the  indicated  (weekly) rate ceiling (as defined and
described in Texas Revised Civil Statutes Article 5069-1.04,  as amended) at the
applicable time in effect.

          Without  limiting the  generality of the  foregoing,  in the event the
maturity of all or any part of the principal amount of the Indebtedness shall be
accelerated for any reason,  then such principal amount so accelerated  shall be
credited  with any interest  theretofore  paid thereon in advance and  remaining
unearned  at the time of such  acceleration.  If,  pursuant to the terms of this
instrument or the Note,  any funds are applied to the payment of any part of the
principal amount of the Indebtedness prior to the maturity thereof, then (a) any
interest which would otherwise thereafter accrue on the principal amount so paid
by such application shall be canceled, and (b) the Indebtedness remaining unpaid
after such  application  shall be credited with the amount of all  interest,  if
any,  theretofore  collected on the principal amount so paid by such application
and  remaining  unearned  at the date of said  application;  and if the funds so
applied  shall  be  sufficient  to  pay  in  full  all  the  Indebtedness,  then
Beneficiary  shall  refund to Grantor all interest  theretofore  paid thereon in
advance and remaining unearned at the time of such  acceleration.  Regardless of
any other provision in this  instrument,  or in any of the written  evidences of
the  Indebtedness,  Grantor shall never be required to pay any unearned interest
on the Indebtedness or any portion  thereof,  and shall never be required to pay
interest  thereon at a rate in excess of the Highest  Lawful Rate  construed  by
courts having competent jurisdiction thereof.

          43.  Homestead.  Grantor  represents  and  covenants  that  the  Trust
Property  forms no part any  property  owned,  used or  claimed  by Grantor as a
business or residential homestead,  or as exempt from forced sale under the laws
of the State of Texas,  and  disclaims  and  renounces  all and every such claim
thereto.

          44. Substitute  Trustee. In case of the resignation of the Trustee, or
the inability (through death or otherwise), refusal or failure of the Trustee to
act,  or at the option of  Beneficiary  or the  holder(s)  of a majority  of the
Indebtedness  for  any  other  reason  (which  reason  need  not be  stated),  a
Substitute Trustee may be named, constituted and appointed by Beneficiary or the
holder(s) of a majority of the  Indebtedness,  without other  formality  than an
appointment and designation in writing,  which appointment and designation shall
be full  evidence of the right and  authority  to make the same and of all facts
therein recited,  and this conveyance  shall vest in the Substitute  Trustee the
title,  powers and duties  herein  conferred  on the  Trustee  originally  named
herein,  and the conveyance of the Substitute Trustee to the purchaser(s) at any
sale of the  Trust  Property  of any part  thereof  shall be  equally  valid and
effective. The right to appoint a


<PAGE>


                                                                              28



Substitute  Trustee  shall exist as often and whenever  from any of said causes,
the Trustee,  original or  Substitute,  resigns or cannot,  will not or does not
act, or Beneficiary or the holder(s) of a majority of the  Indebtedness  desires
to  appoint a new  Trustee.  No bond  shall  ever be  required  of the  Trustee,
original or  Substitute.  The  recitals in any  conveyance  made by the Trustee,
original or  Substitute,  shall be accepted and construed in court and elsewhere
as prima facie evidence and proof of the facts recited, and no other proof shall
be required as to the request by  Beneficiary  or the Holder(s) of a majority of
the  Indebtedness  to the  Trustee to enforce  this Deed of Trust,  or as to the
notice of or holding of the sale, or as to any particulars thereof, or as to the
resignation  of the Trustee,  original or  Substitute,  or as to the  inability,
refusal or failure of the Trustee,  original or Substitute, to act, or as to the
election of  Beneficiary or the holder(s) of a majority of the  Indebtedness  to
appoint a new Trustee,  or as to  appointment of a Substitute  Trustee,  and all
prerequisites  of said sale shall be presumed to have been  performed;  and each
sale made under the powers  herein  granted  shall be a  perpetual  bar  against
Grantor  and the heirs,  personal  representatives,  successors  and  assigns of
Grantor.  Trustee, original or substitute, is hereby authorized and empowered to
appoint any one or more persons as  attorney-in-fact to act as Trustee under him
and in his name,  place and stead in order to take any actions  that  Trustee is
authorized and empowered to do hereunder, such appointment to be evidenced by an
instrument signed and acknowledged by said Trustee, original or substitute;  and
all acts done by said attorney-in-fact  shall be valid, lawful and binding as if
done by said Trustee, original or substitute, in person.

          45. Indemnification of Trustee. Except for gross negligence or willful
misconduct,  Trustee  shall not be liable  for any act or  omission  or error of
judgment.  Trustee may rely on any document  believed by him in good faith to be
genuine.  All money received by Trustee  shall,  until used or applied as herein
provided,  be held in  trust,  and  Trustee  shall not be  liable  for  interest
thereon. Grantor shall indemnify Trustee against all liability and expenses that
he may  incur in the  performance  of his  duties  hereunder  except  for  gross
negligence or willful misconduct.

          46.  Business  or  Commercial  Purpose.   Grantor  warrants  that  the
extension of credit  evidenced by the Note secured hereby is solely for business
or  commercial  purposes,  other than  agricultural  purposes.  Grantor  further
warrants  that the  credit  transaction  evidenced  by the Note is  specifically
exempted under Section 226.3(a) of Regulation Z issued by the Board of Governors
of the Federal  Reserve  System and Title 12 (Truth in Lending  Act) and Section
1603 of Title 15 (General  Provisions) of the Consumer Credit Protection Act and
that no disclosures are required to be given under such  regulations and federal
laws in connection with the above transaction.

          47. Final  Agreement.  In consideration of the premises and other good
and  valuable  consideration,  the receipt and  sufficiency  of which are hereby
acknowledged,  Grantor  hereby  confirms  and  agrees  that  this  Deed of Trust
(including the Schedules hereto),  the Note, any guarantees of the Note executed
by any  guarantors  and all  other  Loan  Documents  and  loan  papers  together
constitute  a written  "loan  agreement"  as defined in Section  26.02(a) of the
Texas Business and Commerce Code.


<PAGE>


                                                                              29





          48. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

          43. Receipt of Copy. Grantor  acknowledges that it has received a true
copy of this Deed of Trust.





<PAGE>


                                                                              30







          This Deed of Trust has been duly  executed  by  Grantor as of the date
first above written.

                                   NUEVO SOL TURF CLUB INC.


                                   By: /S/ Susan J. Carstensen
                                       -----------------------------------------
                                       Name:  Susan J. Carstensen
                                       Title: Treasurer




<PAGE>


                                                                              31



STATE OF MONTANA    )
                    )  ss.:
COUNTY OF GALLATIN  )

          On this 8th day of October, 1998, personally came Susan J. Carstensen,
before me came  _______________,  to be duly sworn by me, and did depose and say
that she  executed the  foregoing  instument in the name of Nuevo Sol Turf Club,
Inc., the corporation therein mentioned for the purposes therein mentioned.



                                   /S/ Vicki L. Consoli
                                   ---------------------------------------------
                                   Notary Public
                                   Residing at:  Bozeman, MT
                                   My Commission expires:  2/12/02

                                     [Notarial Stamp]





<PAGE>


                                                                              32



                                                    Schedule A

                                            [Attach legal description]



<PAGE>



                                                                     EXHIBIT D-2

================================================================================






                    AIRCRAFT MORTGAGE AND SECURITY AGREEMENT


                                   dated as of


                                 October 9, 1998


                                     made by


                          POWERHOUSE TECHNOLOGIES, INC.


                                   in favor of


       LEHMAN COMMERCIAL PAPER INC., as Administrative Agent, as Mortgagee







================================================================================

<PAGE>



                                TABLE OF CONTENTS

                                                                            Page

                                   ARTICLE I

                               CERTAIN DEFINITIONS............. .............. 1

SECTION 1.1. Definitions...................................................... 1

                                   ARTICLE II

                                 GRANTING CLAUSE.............................  4

                                  ARTICLE III

                    COVENANTS, REPRESENTATIONS AND WARRANTIES................. 5

SECTION 3.1.  Maintenance of Security Interest...............................  5
SECTION 3.2.  Handling of Payments...........................................  6
SECTION 3.3.  General Collateral Warranties, Representations and Covenants...  6
SECTION 3.4.  Aircraft and Engine Covenants, Warranties and Representations.. 10
SECTION 3.5.  Insurance Required............................................. 13
SECTION 3.6.  Events of Loss; Governmental Authorities....................... 15

                                   ARTICLE IV

                                    REMEDIES................................. 17

SECTION 4.1.  Remedies....................................................... 17
SECTION 4.2.  Possession of Aircraft......................................... 17
SECTION 4.3.  Receiver....................................................... 18
SECTION 4.4.  Sale and Suits for Enforcement................................. 18
SECTION 4.5.  Waiver of Appraisement, etc.................................... 19
SECTION 4.6.  Remedies Cumulative............................................ 19
SECTION 4.7.  Application of Proceeds........................................ 19
SECTION 4.8.  Delay or Omission; Possession of Notes......................... 19

                                   ARTICLE V

                            MISCELLANEOUS PROVISIONS......................... 20

SECTION 5.1.  Amendments, etc................................................ 20
SECTION 5.2.  Notices........................................................ 20
SECTION 5.3.  Governing Law; Terms........................................... 20
SECTION 5.4.  Severability................................................... 20



                                       -i-

<PAGE>






          AIRCRAFT MORTGAGE AND SECURITY AGREEMENT, dated as of October 9, 1998,
made by POWERHOUSE TECHNOLOGIES,  INC., a Montana corporation (together with its
successors and assigns,  the "Grantor")  with its principal place of business at
2311 South Seventh  Avenue,  Bozeman,  MT 59715,  in favor of LEHMAN  COMMERCIAL
PAPER INC., a New York corporation,  in its capacity as administrative agent for
the  Lenders  (as  defined  herein) (in such  capacity,  and  together  with any
successor  agent  appointed in  accordance  with the terms of Section 9.9 of the
Credit  Agreement  referred  to  herein,  the  "Administrative   Agent"  or  the
"Mortgagee"), having an office at 3 World Financial Center, New York, NY, 10285.


                              W I T N E S S E T H :


          WHEREAS,  the Mortgagee is a party to that certain  Credit  Agreement,
dated October 9, 1998 (as the same may be amended, modified or supplemented from
time to time, the "Credit Agreement"), among Powerhouse Technologies,  Inc. (the
"Borrower"),  the several  Lenders  from time to time  parties  thereto,  Lehman
Brothers Inc., as Arranger, Canadian Imperial Bank of Commerce, as Documentation
Agent,  Lehman Commercial Paper Inc., as Syndication Agent and Lehman Commercial
Paper Inc., as Administrative Agent;

                  WHEREAS,  the  Lenders  have agreed to make  revolving  credit
loans to the Borrower in an  aggregate  principal  amount of up to  $100,000,000
(the "Loans") pursuant to the Credit Agreement;

          WHEREAS, the Grantor is a wholly owned subsidiary of the Borrower; and

          WHEREAS,  it is a condition  precedent to the making of the Loans that
the Grantor shall have executed and delivered this Mortgage to the Mortgagee;

          NOW,  THEREFORE,  in  consideration  of the  premises  and in order to
induce  the  Mortgagee  to make  the  Loans  and for  other  good  and  valuable
consideration,  the receipt of which is hereby acknowledged,  the Grantor hereby
agrees with the Mortgagee for its benefit as follows:


                                    ARTICLE I

                               CERTAIN DEFINITIONS

          SECTION 1.1. Definitions. Unless otherwise defined herein, capitalized
terms  defined  in the  Credit  Agreement  shall  have the  respective  meanings
ascribed to them therein,  other  capitalized  terms defined in the preamble and
recitals  to this  Aircraft  Mortgage  and  Security  Agreement  shall  have the
respective  meanings ascribed to them therein and the following terms shall have
the following defined meanings (and shall be applicable to both the singular and
the plural forms of such terms):



<PAGE>


                                                                               2

          "Aircraft" means the Airframe, together with the two Engines initially
installed thereon (or any Engine substituted for one of said Engines pursuant to
Section 3.6(a) hereof), whether or not any of said initial or substitute Engines
may from time to time be installed on such Airframe.

          "Airframe" means the North American NA-265-40 aircraft (except for the
Engines or engines from time to time installed thereon) bearing Registration no.
N999VT and  manufacturer's  Serial No.  282-38  together  with any and all Parts
which are either  incorporated  or installed in or attached to such  Airframe or
required to be subject to the lien and  security  interest  of this  Mortgage in
respect of such Airframe as provided in Section 3.4(f) hereof.

          "Borrower  Obligations":  means the collective reference to the unpaid
principal of and  interest on the Loans and  Reimbursement  Obligations  and all
other   obligations  and  liabilities  of  the  Borrower   (including,   without
limitation, interest accruing at the then applicable rate provided in the Credit
Agreement and after the maturity of the Loans and Reimbursement  Obligations and
interest  accruing at the then applicable rate provided in the Credit  Agreement
after the filing of any  petition  in  bankruptcy,  or the  commencement  of any
insolvency, reorganization or like proceeding, relating to the Borrower, whether
or not a claim for  post-filing  or  post-petition  interest  is allowed in such
proceeding)  to the  Administrative  Agent or any Lender (or, in the case of any
Hedge Agreement referred to below, any Affiliate of any Lender),  whether direct
or  indirect,  absolute  or  contingent  which  may arise  under,  out of, or in
connection with, the Credit  Agreement,  this Agreement,  the , due or to become
due, or now existing or hereafter incurred, which may arise under, out of, or in
connection with, the Credit Agreement, this Agreement, the other Loan Documents,
any Letter of Credit or any Hedge  Agreement  entered into by the Borrower  with
any  Lender  (or any  Affiliate  of any  Lender)  or any  other  document  made,
delivered or given in connection  therewith,  in each case whether on account of
principal,  interest,   reimbursement  obligations,  fees,  indemnities,  costs,
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to the Administrative Agent or to the Lenders that are required to be
paid by the Borrower pursuant to the terms of any of the foregoing agreements).

          "Business Day" means any day which is not a Saturday,  Sunday or a day
on which banks in the States of New York are  authorized  or  obligated  by law,
executive order or governmental decree to be closed.

          "Collateral" has the meaning given in Article II hereof.

          "Engine"  means each of the two Pratt & Whitney  JT12A-6A jet aircraft
engines bearing the following manufacturer's serial numbers:

          Manufacturer                        Manufacturer's Serial No.
          ------------                        -------------------------
          Pratt & Whitney                           673169
          Pratt & Whitney                           638084;

053113-1107-02517-98AWC9V3-MTG

<PAGE>


                                                                               3


together with any and all Parts which are either incorporated or installed in or
attached  to such  Engine or  required  to be subject  to the Lien and  security
interest  of this  Mortgage  in respect of such  Engine as  provided  in Section
3.4(f)  hereof.  Each of which Engines is capable of producing 750 or more rated
takeoff horsepower or the equivalent thereof.

          "Event of Loss" has the meaning given in Section 3.6 hereof.

          "FAA" means the United States Federal Aviation Administration.

                  "FAA Act" or "Act" means 49 U.S.C.  Subtitle VII, ss.ss. 40101
et seq., as amended from time to time, any  regulations  promulgated  thereunder
and any successor provision.

          "FAA  Recording  Office":  the  office  of the FAA in  Oklahoma  City,
Oklahoma  maintained for the recording of Liens on aircraft and aircraft engines
pursuant to the FAA Act.

          "Grantor  Obligations":  means all  obligations and liabilities of the
Grantor which may arise under or in  connection  with this Mortgage or any other
Loan  Document to which the Grantor is a party,  in each case whether on account
of guarantee obligations,  reimbursement obligations, fees, indemnities,  costs,
expenses or otherwise (including, without limitation, all fees and disbursements
of counsel to the  Mortgagee,  Administrative  Agent or to the Lenders  that are
required to be paid by the Grantor pursuant to the terms of this Mortgage or any
other Loan Document).

          "Obligations":   means  the  collective   reference  to  the  Borrower
Obligations and the Grantor Obligations.

          "Mortgage" means this Aircraft Mortgage and Security Agreement, as the
same may be amended, modified or supplemented from time to time.

          "Net  Collateral   Insurance  Proceeds"  means  the  proceeds  of  any
settlement,  award or payment in respect of any insurance  mentioned pursuant to
Section 3.5(a) hereof, net of any taxes, fees and expenses (including attorney's
fees) incurred or the reasonably  estimated to be incurred in the collection and
application thereof.

          "Parts"  means,  at  any  time,  all  parts,  components,   equipment,
instruments,  appliances, avionics, radio and radar devices, quick engine change
equipment,  cargo  handling  systems and loose  equipment  that are at such time
incorporated  or  installed in or attached to the Airframe or any Engine or with
respect to which the Lien of this Agreement extends pursuant to Section 3.4(f).

          "Proceeds"  means whatever is receivable or received when the Airframe
or any  Engine or Part or other  Collateral  is sold,  exchanged,  collected  or
otherwise  disposed of, including,  without  limitation,  all amounts payable or
paid under  insurance,  requisition  or other payments as the result of any loss
(including  an Event of Loss) or damage to such  Airframe  or Engine or Part and
shall also include all "Proceeds" as defined in the Uniform  Commercial  Code of
the State of New York.




<PAGE>


                                                                               4





                                   ARTICLE II

                                 GRANTING CLAUSE

          The Grantor hereby assigns, mortgages, transfers and confirms unto the
Mortgagee,  and  hereby  grants  to the  Mortgagee,  a first  priority  security
interest  in,  all  right,  title  and  interest  of the  Grantor  in and to the
following property, whether now owned or hereafter acquired (herein collectively
called the  "Collateral"),  as  collateral  security for the prompt and complete
payment and performance when due of all the Obligations:

          (a) the Aircraft  (including  the Airframe and the  Engines),  and all
     replacements thereof and substitutions  therefor in which the Grantor shall
     from time to time  acquire an  interest,  and all  records,  logs and other
     documents at any time maintained with respect to the foregoing property;

          (b) all Parts;

          (c) all right,  title and interest of the Grantor in, to and under any
     of the following related to the Airframe,  any Engine or any Parts: (i) all
     warranties, service contracts and product agreements of any manufacturer or
     of any  maintenance or overhaul  agency of the Airframe or the Engines,  or
     any  subcontractor or supplier or vendor thereof,  to the extent assignable
     or enforceable, and any and all rights of the Grantor to compel performance
     of the terms of such warranties,  service  contracts or product  agreements
     respecting  the Airframe or any of the Engines and (ii) all documents  with
     respect to the Airframe or any of the Engines,  whether maintained in Lease
     form,  electronic  form or on  microfiche,  including  but not  limited to:
     manufacturer's  maintenance and inspection manuals,  parts catalog,  engine
     and airframe logs, pilot check lists, and operator's  manuals for installed
     equipment,  all of which  shall be current  and  complete  from the date of
     manufacture, all wiring diagrams and supporting technical publications, and
     all other documentation and technical  information relating to the Airframe
     or any of the Engines, whether in the Grantor's control or the control of a
     lessee of the Airframe or any of the Engines;

          (d) all  rents,  issues,  profits,  revenues  and other  income of the
     property  subjected  or  required  to be  subjected  to the  Lien  of  this
     Mortgage;

          (e)  all  insurance  policies  required  to  be  maintained  hereunder
     otherwise  maintained  with respect to the Aircraft and all  insurance  and
     requisition  proceeds  with  respect to the  Aircraft  or any part  thereof
     including but not limited to the insurance  required under this Mortgage or
     any Lease;

          (f) all moneys and  securities  now or hereafter  paid or deposited or
     required to be paid or  deposited  to or with the  Mortgagee  by or for the
     account of the Grantor  pursuant to any term of any Loan  Document and held
     or  required  to be held by the  Mortgagee  hereunder  or  under  any  Loan
     Document; and




<PAGE>


                                                                               5



          (g) all Proceeds of all or any of the foregoing.

          Notwithstanding  the  foregoing  the Grantor,  and not the  Mortgagee,
shall  exclusively  be entitled to collect all rent and other  amounts under the
Lease and related  documentation  and  exercise  all its other  rights under the
Lease and related  documentation  prior to the occurrence and  continuance of an
Event of Default,  provided  that no action may be taken  without the consent of
the Mortgagee which would result in a Default or an Event of Default hereunder.

                                   ARTICLE III

                    COVENANTS, REPRESENTATIONS AND WARRANTIES

          SECTION  3.1.  Maintenance  of Security  Interest.  The  Grantor  will
perform,  or will cause to be performed,  unless  expressly waived in writing by
the Mortgagee, each and all of the following:

          (a) Record,  register and file this Mortgage, as well as such notices,
     financing  statements,  and/or other  documents or instruments as may, from
     time to time, be  reasonably  requested by the Mortgagee to carry out fully
     the intent of this Mortgage, with:

               (i) the FAA  Recording  Office,  in the case of the  Aircraft and
          Engines; and

               (ii) such other administrative or governmental agencies,  whether
          domestic or foreign, as may be reasonably  determined by the Mortgagee
          to be necessary or advisable in order to perfect,  establish,  confirm
          and/or maintain the security  interest and lien created hereunder as a
          legal,  valid and binding first  priority  security  interest and lien
          upon the Collateral  except for Liens permitted to exist under Section
          7.3 of the Credit Agreement (collectively, "Permitted Liens").

          (b) Furnish to the Mortgagee an opinion,  dated the Closing Date, from
     a counsel  acceptable to the Mortgagee  specializing  in matters related to
     the  FAA  Act  ("FAA  Counsel")  as to  the  Grantor's  fulfillment  of the
     requirements of this Mortgage  relating to the propriety of registration of
     the Aircraft,  the perfection of the security interests in the Aircraft and
     the Engines  described  herein,  and the absence of Liens and  encumbrances
     against the Aircraft and Engines, other than Permitted Liens;

          (c) Furnish to the Mortgagee copies of all documents or other evidence
     of every such recording, registering and filing;


          (d)  Execute  and  deliver or  perform,  or cause to be  executed  and
     delivered or performed,  such further and other instruments  and/or acts as
     the Mortgagee reasonably determines are necessary or advisable to carry out
     fully the intent and purpose of this


<PAGE>


                                                                               6


     Mortgage or to subject the  Collateral  to any  security  interest and Lien
     created hereunder, including, without limitation:

               (i) defending the right,  title and interest of the Grantor,  the
          Mortgagee  and  the  Lenders  in and to the  Collateral  by  means  of
          negotiation and, if necessary,  appropriate legal proceedings, against
          each  and  every  party  claiming  an  interest  therein  (other  than
          Permitted Liens) contrary or adverse to the Grantor's, the Mortgagee's
          or the Lenders' right, title and interest,  as the case may be, in and
          to same; and

               (ii) execute and deliver to the Mortgagee the Lease chattel paper
          counterpart of each Lease, if such a counterpart exists; and

          (e) Do and cause to be done all things  necessary  to perfect and keep
     in full force the security  interest  granted in favor of the Mortgagee for
     the  benefit of the  Lenders,  including,  but not  limited to, one or more
     applications  for  certificate of title and any other papers,  documents or
     instruments  requested  by the  Mortgagee  or any  one  of the  Lenders  in
     connection with this Mortgage,  the prompt payment of all fees and expenses
     incurred in connection with any filings to be made to perfect or continue a
     security  interest  in the  Collateral  in favor of the  Mortgagee  for the
     benefit  of the  Lenders  and the  making  of  appropriate  entries  on its
     financial statements and books and records disclosing the security interest
     granted  hereunder to the  Mortgagee  for the benefit of the  Lenders.  The
     Grantor hereby consents to the filing of extensions of such filings without
     the Grantor's signature.

          SECTION 3.2.  Handling of  Payments.  In the event an Event of Default
shall  occur  and be  continuing  and the  Grantor  (or  any of its  affiliates,
subsidiaries,  stockholders,  directors,  officers,  employees or agents)  shall
receive any proceeds of Collateral, including without limitation monies, checks,
notes,  drafts or any other  items of payment,  the Grantor  shall hold all such
items of payment in trust for the Mortgagee, for the benefit of the Lenders, and
as the property of the Mortgagee, for the benefit of the Lenders,  separate from
the funds of the Grantor, and no later than the first Business Day following the
receipt thereof,  at the election of the Mortgagee,  the Grantor shall cause the
same to be forwarded to the Mortgagee  for its custody and  possession on behalf
of the Lenders as additional Collateral.

          SECTION  3.3.  General  Collateral  Warranties,   Representations  and
Covenants. The Grantor warrants, represents and covenants with the Mortgagee and
each of the Lenders as follows:

          (a)  Representations  in Credit  Agreement.  The  representations  and
     warranties set forth in Section 4 of the Credit Agreement as they relate to
     the Grantor and this Mortgage,  each of which is hereby incorporated herein
     by reference, are true and correct, and the Mortgagee and each Lender shall
     be entitled to rely on each of them as if they were fully set forth herein,
     provided that each  reference in each such  representation  and warranty to
     the Borrower's knowledge shall, for the purposes of this Section 3.3(a), be
     deemed to be a reference to the Grantor's knowledge.



<PAGE>


                                                                               7




          (b) Inspection.  The Mortgagee (by any of its officers,  employees and
     agents),  on behalf of the Lenders,  shall have the right upon prior notice
     to an  officer  of the  Grantor,  and at any  reasonable  times  during the
     Grantor's usual business hours, (i) to inspect the Collateral,  all records
     related thereto (and to make extracts or copies from such records), and the
     premises  upon  which any of the  Collateral  is  located  (subject  to any
     restriction on inspection contained in a Lease with respect to the Aircraft
     or related  Collateral;  provided that  notwithstanding any such Lease, (A)
     any Person  designated  by the  Mortgagee  may inspect  such  Aircraft  and
     Engines at any  reasonable  time upon an event of default  under such Lease
     and (B) upon any Event of Default,  any Person  designated by the Mortgagee
     may inspect the Aircraft and Engines at any time),  and (ii) to discuss the
     Grantor's  affairs  and  finances  with any Person  and to verify  with any
     Person other than account debtors the amount, quality,  quantity, value and
     condition of, or any other matter relating to, the Collateral and, (iii) if
     an  Event of  Default  has  occurred  and is  continuing,  to  discuss  the
     Grantor's  affairs  and  finances  with the  Grantor's  Lessees and account
     debtors and to verify the amount,  quality,  value and condition of, or any
     other  matter  relating  to, the  Collateral  and such  Lessees and account
     debtors.  Upon or after the  occurrence and during the  continuation  of an
     Event of  Default,  the  Mortgagee  may at any  time and from  time to time
     employ and maintain on the Grantor's  premises a custodian  selected by the
     Mortgagee who shall have full authority to do all acts necessary to protect
     the  Mortgagee's  (for the benefit of the Lenders)  interest.  All expenses
     incurred  by the  Mortgagee,  on  behalf of the  Lenders,  by reason of the
     employment  of such  custodian  shall be paid by the Grantor,  added to the
     Obligations and secured by the Col lateral.

          (c) Transfers and Other Liens. The Grantor shall not (i) sell,  assign
     (by operation of law or otherwise) or otherwise dispose of any of, or grant
     any option  with  respect  to,  the  Collateral,  except  for  dispositions
     permitted  under this  Mortgage  or the Credit  Agreement,  (ii)  create or
     suffer to exist any Lien,  security interest or other charge or encumbrance
     upon or with  respect  to any of the  Collateral  except  for the  security
     interests  created by this Mortgage or other Permitted Liens; or (iii) take
     any other action in connection with any of the Collateral that would result
     in a Default,  materially impair the value of the interest or rights of the
     Grantor in the Collateral taken as a whole or that would materially  impair
     the interest or rights of the Mortgagee.

          (d) Location of Collateral.  The chief and other places of business of
     the  Grantor,  the books and  records  relating to the  Collateral  and the
     Collateral  (other  than the  Airframe  and the  Engines,  as to which  the
     Grantor  will  issue  to  the  Mortgagee,  upon  request,  written  reports
     indicating  the  location of such  Airframe and Engines) are located at the
     addresses  set forth on Schedule I hereto,  and the Grantor will not change
     any of the  same  without  prior  written  notice  to  and  consent  of the
     Mortgagee.

          (e)  Use of  Collateral.  The  Collateral  is and  will be used in the
     business of the Borrower and its Subsidiaries (including the Grantor).

          (f) Owner of  Collateral.  The  Grantor  is and,  except as  expressly
     permitted by this Mortgage or the Credit Agreement, will continue to be the
     owner of the Collateral


<PAGE>


                                                                               8


     hereunder,  now owned and upon the  acquisition of the same, free and clear
     of all Liens,  claims,  encumbrances and security  interests other than the
     security  interest in favor of the Mortgagee for the benefit of the Lenders
     hereunder and Permitted  Liens, and that it will defend such Collateral and
     any products and proceeds  thereof  against all material claims and demands
     of all Persons (other than holders of Permitted Liens) at any time claiming
     the same or any interest  therein  adverse to the Mortgagee or the Lenders,
     except as otherwise in the Loan Documents. The inclusion of proceeds of the
     Collateral under the security interest granted herein shall not be deemed a
     consent by the Lenders,  individually or collectively, to any sale or other
     disposition  of any  part  or all of the  Collateral  except  as  expressly
     permitted herein.

          (g) Payment of Taxes.  The Grantor has made and will  continue to make
     payment or deposit or otherwise  provide for the payment,  when due, of all
     taxes,  assessments or contributions required by law which have been or may
     be levied or assessed against the undersigned,  whether with respect to any
     of the  Collateral  or any  wages or  salaries  paid by the  Grantor  or in
     respect of the  Grantor's  income,  or  otherwise,  and will deliver to the
     Mortgagee,  on demand,  certificates or other evidence  satisfactory to the
     Mortgagee  attesting thereto.  Notwithstanding  the foregoing,  the Grantor
     shall  have the  right to  contest  any tax,  assessment,  or  contribution
     required by law to the extent such  contest is provided for under any Lease
     so long as (i)  such  contest  is  diligently  conducted  in good  faith by
     appropriate proceedings, (ii) no Lien (other than a Permitted Lien) results
     on the  Airframe,  any  Engine  or  other  Collateral,  (iii)  there  is no
     reasonable  likelihood of the sale,  appropriation,  or  foreclosure on the
     Airframe,  any Engine or other  Collateral,  and (iv) adequate  reserves or
     other appropriate provisions are being maintained in accordance with GAAP.

          (h) Compliance with Laws. The Grantor will use or cause to be used the
     Collateral for lawful  purposes only,  with all reasonable care and caution
     and in  conformity  in all  material  respects  with all  applicable  laws,
     ordinances and  regulations.  Notwithstanding  the  foregoing,  the Grantor
     shall have the right to contest the  compliance  with any  applicable  law,
     ordinance  or  regulation  to the extent such contest is provided for under
     any Lease so long as (i) such contest is diligently conducted in good faith
     by  appropriate  proceedings,  (ii) no Lien (other  than a Permitted  Lien)
     results on the Airframe, any Engine or other Collateral,  (iii) there is no
     reasonable  likelihood of the sale,  appropriation,  or  foreclosure on the
     Airframe,  any Engine or other  Collateral,  and (iv) adequate  reserves or
     other appropriate provisions are being maintained in accordance with GAAP.

          (i) Personal Property. The Collateral is now and shall remain personal
     property.

          (j) Mortgagee May Act. The Mortgagee may, in its  discretion,  for the
     account and expense of the  Grantor,  pay any amount or do any act required
     of the Grantor  hereunder  or  reasonably  requested  by the  Mortgagee  to
     preserve,  protect, maintain or enforce the Obligations,  the Collateral or
     the first priority Lien granted herein  (subject only to Permitted  Liens),
     and which the Grantor fails to do or pay within any applicable




<PAGE>


                                                                               9



     grace period  provided for in the Loan Documents (it being  understood that
     no grace period exists for the maintenance of insurance required by Section
     3.5), and any such payment shall be deemed an advance by the Lenders to the
     Grantor and shall be payable on demand  together  with interest at the rate
     applicable to overdue amounts as specified in Section 2.13(c) of the Credit
     Agreement, and shall constitute part of the Obligations.

          (k)  Grantor  Responsible  for  Collateral.  The  Grantor  assumes all
     responsibility  and liability arising from the use of the Collateral unless
     the claim giving rise to such responsibility or liability arises out of the
     gross  negligence  or wilful  misconduct  of the  Mortgagee or the Lenders,
     provided,  however,  that this provision is given solely for the benefit of
     the  Mortgagee  and the Lenders and the Grantor does not waive any right it
     may have against third parties.

          (l) Instrument or Chattel Paper.  If any amount payable under,  in, or
     in connection  with any of the Collateral  shall be or become  evidenced by
     any instrument or chattel paper,  such instrument or chattel paper shall be
     immediately  delivered  to the  Mortgagee  and  duly  endorsed  in a manner
     satisfactory  to the  Mortgagee to be held as  Collateral  pursuant to this
     Mortgage.

          (m) Notice of Liens and Other  Events.  The  Grantor  will  advise the
     Mortgagee  promptly,  in reasonable  detail, if it has knowledge (i) of any
     Lien (other than Permitted Liens) on, or claim asserted against, any of the
     Collateral  and (ii) of the  occurrence  of any  other  event  which  could
     reasonably be expected to have a Material  Adverse Effect on the Collateral
     or on the Liens created hereunder.

          (n) New Mortgagee. At any time, the Mortgagee may assign, transfer and
     deliver  any or  all  of the  Collateral  to  any  successor  Mortgagee  in
     accordance  with  the  terms  of  Section  10.6  of the  Credit  Agreement,
     whereupon  the  retiring  Mortgagee  shall  be  fully  discharged  from all
     responsibility  and such  successor  shall be vested  with all  powers  and
     rights of the Mortgagee  hereunder with respect thereto,  but the Mortgagee
     shall  retain  all rights and powers  with  respect to any  Collateral  not
     assigned,  transferred or delivered, provided that no such assignment shall
     increase the liability of the Grantor hereunder.

          (o) No Consents. No authorization,  consent,  approval or other action
     by,  and no  notice  to or  filing  with,  any  governmental  authority  or
     regulatory body or any other Person is required either (i) for the grant by
     the Grantor of the security  interests granted hereby or for the execution,
     delivery or  performance  of this Mortgage by the Grantor,  or (ii) for the
     perfection of or the exercise by the  Mortgagee,  on behalf of the Lenders,
     of its rights and remedies  hereunder,  except for the filings  required by
     the Uniform Commercial Code of the State in which the Grantor maintains its
     chief executive  office and the other  jurisdictions on Schedule I attached
     hereto and the filing of this Mortgage with the FAA Recording Office.

          (p) No Liens.  No effective  financing  statement or other  instrument
     similar in effect  covering all or any part of the Collateral  purported to
     be granted by the Grantor


<PAGE>


                                                                              10



     hereunder is on file in any recording office,  except such as may have been
     filed in favor of the  Mortgagee  for the benefit of the Lenders and except
     for Permitted Liens.

          (q)  Condemnation.  The  Grantor  shall,  immediately  upon  obtaining
     knowledge of the institution or threatened  institution of any requisition,
     condemnation  or other  eminent  domain  proceedings  for the taking of any
     portion of or interest in the Collateral,  notify the Mortgagee  thereof in
     writing. The Mortgagee may participate in any such proceedings. The Grantor
     shall deliver,  or cause to be delivered,  to the Mortgagee all instruments
     requested  by the  Mortgagee  to  permit  such  participation.  In any such
     proceedings,  the Mortgagee may be represented by counsel  satisfactory  to
     it.

          SECTION  3.4.   Aircraft   and  Engine   Covenants,   Warranties   and
Representations.  The  Grantor  warrants,  represents  and  covenants  with  the
Mortgagee and each of the Lenders as follows:

          (a)  Recordation  of Ownership.  The  Grantor's  ownership of or first
     priority  Lien on the Aircraft and Engines will be duly  recorded  with the
     FAA  Recording  Office  upon   recordation  of  an  aircraft   registration
     application.

          (b) Compliance  with Laws. The Grantor agrees that it shall not use or
     operate the Aircraft or any Engine, or permit the Aircraft or any Engine to
     be  used  or  operated,  in  violation  of  any  law  (including,   without
     limitation, laws concerning alcoholic beverages,  prohibited substances, or
     insurance)   of  any   Governmental   Authority  or  in  violation  of  any
     airworthiness certificate, license or registration relating to the Aircraft
     or any Engine issued by any such Governmental  Authority. In the event that
     any such law requires  the  alteration  of the Aircraft or any Engine,  the
     Grantor  will  conform  thereto or obtain  conformance  therewith  and will
     maintain  or cause to be  maintained  the  Aircraft  and  Engines in proper
     operating  condition under such laws, rules,  regulations and orders (or if
     the Aircraft or any Engine is in storage, in compliance with all applicable
     laws and with all  manufacturers  warranties and requirements for storage).
     Notwithstanding the foregoing,  the Grantor shall have the right to contest
     the  compliance  with any  applicable  law,  ordinance or regulation to the
     extent  such  contest is  provided  for under any Lease so long as (i) such
     contest is diligently  conducted in good faith by appropriate  proceedings,
     (ii) no Lien (other than  Permitted  Liens)  results on the  Airframe,  any
     Engine or other Collateral,  (iii) there is no reasonable likelihood of the
     sale,  appropriation,  or foreclosure on the Airframe,  any Engine or other
     Collateral,  and (iv) adequate reserves or other appropriate provisions are
     being maintained in accordance with GAAP;

          (c) Legal Limitations.  The Grantor agrees that it will not permit the
     Airframe or any Engine to be operated, used or located in violation of law.

          (d) Possession.  Except as otherwise set forth expressly  herein or in
     the Credit Agreement, the Grantor will not permit and will not, without the
     prior written  consent of the Mortgagee  and the Required  Lenders,  lease,
     sublease  or  otherwise  in any  manner  deliver,  transfer  or  relinquish
     possession of the Airframe or any Engine; provided however, that so long as
     no Event of Default shall have occurred and be continuing, the




<PAGE>


                                                                              11



     Grantor  may,  without  such prior  written  consent  deliver or permit the
     delivery  or  possession  of the  Airframe  or Engines to the  manufacturer
     thereof for testing or for other similar  purposes,  or to any organization
     for  service,  repair,  maintenance  or  overhaul  work on the  Airframe or
     Engines or for alterations in or modifications or additions to the Airframe
     or Engines to the extent  required or permitted by the terms hereof and the
     other Loan Documents;

          None of the permitted  relinquishments  of possession  set forth above
     shall affect the  registration  of the Aircraft or in any way  discharge or
     diminish any of the Grantor's  obligations  to the Mortgagee or the Lenders
     hereunder  or under any other Loan  Document or  constitute a waiver of the
     Mortgagee's or the Lenders' right or remedies hereunder or thereunder.

          (e) Records and  Reports.  The Grantor  shall  maintain or cause to be
     maintained  accurate  and  complete  records,  logs,  manuals and all other
     materials  required by the FAA to be  maintained in respect of the Aircraft
     and  each  Engine.  The  Grantor  shall  promptly  furnish  or  cause to be
     furnished to the Mortgagee  such  information  as may be required to enable
     the  Mortgagee  to file any reports  required to be filed by the  Mortgagee
     with the FAA because of the  Mortgagee's  interest  in the  Airframe or any
     Engine and upon the occurrence of an Event of Default (upon the Mortgagee's
     request) shall deliver to the Mortgagee the Leases of all such documents in
     possession  of the  Grantor  and copies of all such  documents  relating to
     Aircraft and Engines leased or sold to third parties.

          (f)  Maintenance.  Grantor  will  keep or will  cause  to be kept  the
     Aircraft and each Engine in good repair and  condition and airworthy in all
     respects and will perform all checks and overhauls  required by the FAA and
     by the applicable maintenance program.

          (g) Replacement of Parts.  Grantor shall promptly  replace or cause to
     be replaced all Parts,  which may from time to time become worn out,  lost,
     stolen,   destroyed,   seized,   confiscated,   damaged  beyond  repair  or
     permanently rendered unfit for use for any reason whatsoever.  In addition,
     the Grantor may remove or may cause to be removed in the ordinary course of
     maintenance,  service, repair, overhaul or testing of any Parts, whether or
     not worn out, lost, stolen, destroyed, seized, confiscated,  damaged beyond
     repair or permanently rendered unfit for use; provided,  however,  that the
     Grantor will replace or will cause to be replaced such Parts as promptly as
     possible. All replacement Parts shall be free and clear of all Liens (other
     than Permitted  Liens) and shall be in as good operating  condition as, and
     shall  have a value and  utility  at least  equal to,  the Parts  replaced,
     assuming such replaced  Parts were in the condition and repair  required to
     be  maintained  by the terms hereof;  provided,  however,  that the Grantor
     shall  have the  right to  install  or to cause to be  installed  temporary
     replacement   Parts  pending  the   completion  of  permanent   repairs  or
     installation  of permanent  replacement  Parts,  in which event the Grantor
     shall install or shall cause to be installed permanent replacement Parts to
     meet such  requirements  as soon as  reasonably  possible  and in any event
     within  ninety  days  from  the  date of  installation  of  such  temporary
     replacement Parts. All Parts at any time



<PAGE>


                                                                              12



     removed from the  Airframe or any Engine  shall remain  subject to the Lien
     created  under this  Mortgage no matter where  located,  until such time as
     such Parts shall be replaced by Parts which have been  incorporated  in the
     Aircraft or such Engine and which meet the  requirements of subsections (i)
     and (ii) below. Immediately upon any replacement Part becoming incorporated
     or  installed  in or  attached  to the  Airframe  or any Engine as provided
     above,  without further act, (i) such replacement Part shall become subject
     to the Lien created  under this Mortgage and be deemed part of the Aircraft
     or such  Engine  for all  purposes  hereof to the same  extent as the Parts
     originally  incorporated  in the  Aircraft  or such Engine (and the Grantor
     shall  make  all  filings  or   registrations   necessary  to  perfect  the
     Mortgagee's  Lien in such  Part),  and  (ii)  the  replaced  Part  shall be
     released  from the Lien of this  Mortgage  and the  replaced  Part shall no
     longer be deemed a Part hereunder;

          (h) Alterations,  Modifications  and Additions.  Grantor shall make or
     shall cause to be made such alterations and  modifications in and additions
     to the  Aircraft  and Engines as may be required  from time to time to meet
     the   requirements   of  the  FAA  and  to  maintain  the   certificate  of
     airworthiness  therefor. In addition,  the Grantor may make or may cause to
     be made from time to time make such  alterations and  modifications  in and
     additions to the Airframe or any Engine as the Grantor may deem  desirable;
     provided that each such  alteration,  modification  and addition is readily
     removable  from  the  Aircraft  or such  Engine  or that  such  alteration,
     modification or addition shall not diminish the value, utility or condition
     of the Aircraft or any Engine below the value, utility or condition thereof
     immediately  prior to such alteration,  modification or addition,  assuming
     the  Aircraft  or such  Engine was then of the value or utility  and in the
     condition  required to be  maintained  by the terms of this  Mortgage;  and
     provided, further, that no such alteration,  modification or addition shall
     cause the  airworthiness  certification  or other license,  registration or
     authorization of the Aircraft or any Engine to cease to be in good standing
     under the FAA Act.  All Parts  added to the  Airframe  or any Engine as the
     result of such alteration,  modification or addition shall, without further
     act, be subject to the Lien created  under this  Mortgage.  Notwithstanding
     the foregoing sentence, so long as no Event of Default is in existence, the
     Grantor  may remove or may cause to be removed any Part if (A) such Part is
     in addition to, and not in  replacement  of or  substitution  for, any Part
     originally  incorporated  in the  Aircraft  or any  Engine  at the  time of
     delivery thereof or any Part in replacement of or substitution for any such
     Part or such Part is obsolete or no longer  useful in the  operation of the
     Aircraft or any Engine, (B) such Part is not required to be incorporated or
     installed in or attached or added to the Aircraft or any Engine pursuant to
     the terms of this  Section  3.4,  and (C) such Part can be removed from the
     Aircraft or such Engine without causing any material  damage thereto.  Upon
     the removal of any Part as provided above, such Part shall be released from
     the Lien created under this Mortgage.


          (i) Nameplate.  Grantor shall place and maintain, or shall cause to be
     placed and maintained, a fireproof plate in a reasonably prominent position
     on the flightdeck or cockpit of each Aircraft and on each Engine stating:

          THIS [AIRCRAFT][ENGINE] IS OWNED BY POWERHOUSE TECHNOLOGIES,  INC. AND
          IS SUBJECT TO A FIRST PRIORITY




<PAGE>


                                                                              13


          SECURITY  INTEREST  IN FAVOR  OF  LEHMAN  COMMERCIAL  PAPER  INC.,  AS
          ADMINISTRATIVE AGENT, AS MORTGAGEE.

          SECTION 3.5. Insurance Required.

               (a)  Type of  Insurance  Required.  The  Grantor  will  keep  the
          Collateral  continuously insured against such risks as are customarily
          insured  against by  businesses  of like size and type  engaged in the
          same or similar operations.

               (b) Policy Provisions Required. Each insurance policy obtained in
          satisfaction of the requirements of Section 3.5 hereof:

                    (i) shall be issued by such  insurer (or  insurers) as shall
               be financially responsible, of recognized standing and reasonably
               acceptable to the Mortgagee;

                    (ii)  shall  be  in  such  form  and  have  such  provisions
               (including without limitation the loss payable clause, the waiver
               of subrogation  clause,  the deductible  amount,  if any, and the
               standard  mortgagee   endorsement   clause),   as  are  generally
               considered standard provisions for the type of insurance involved
               and are reasonably acceptable in all respects to the Mortgagee;

                    (iii)   shall   prohibit    cancellation    or   substantial
               modification,  termination  or lapse in  coverage  by the insurer
               without prior written  notice to the Mortgagee of at least thirty
               days (or with  respect  to war risk and allied  perils  coverage,
               seven  days or  such  other  period  as may be  customary  in the
               industry);

                    (iv) without  limiting the generality of the foregoing,  all
               insurance   policies  for  (A)  hull  insurance  carried  on  the
               Collateral  shall name the  Mortgagee,  for the benefit of itself
               and the Lenders,  as loss payee and (B) liability insurance shall
               name the Mortgagee, for the benefit of the Lenders, as additional
               assureds thereunder in respect of any claim for payment;

                    (v)  shall  contain  such  other  customary  provisions  and
               endorsements as the Mortgagee may reasonably require;

                    (vi) shall  provide that in respect of the  interests of the
               Mortgagee under such insurance policies, such insurance shall not
               be  invalidated  by any action or  inaction of the Grantor or any
               other  Person and shall insure such  interests  of the  Mortgagee
               regardless   of  any  breach  or  violation   of  any   warranty,
               declaration  or  condition  contained  in  such  policies  by the
               Grantor or any other Person;

                    (vii) shall be primary  without right of  contribution  from
               any other  insurance  which is  carried by the  Mortgagee  or any
               Lender  with  respect  to its  interest  in the  Airframe  or any
               Engine;


<PAGE>


                                                                              14




                    (viii)  shall  provide  the  coverage  required  under  this
               Section  3.5 at all times and  whether  or not the  Aircraft  and
               Engines are in the  possession  and control of the Grantor or any
               third party;

                    (ix)  shall  provide  that  all of the  provisions  thereof,
               except the limits of liability,  shall operate in the same manner
               as if there were a separate  policy  covering  each  insured  and
               shall waive any rights of subrogation of the insurers against the
               Mortgagee or any Lender; and

                    (x)  shall  waive  any  right  of the  insurers  to  setoff,
               recoupment, counterclaim or any other deduction in respect of any
               liability of the Mortgagee or any Lender.

               (c)  Insurance  Certificates  Required.  The  Grantor  agrees  to
          furnish the Mortgagee on or before the date of the advance of Loans to
          which this Mortgage  relates,  an insurance  certificate  signed by an
          independent  insurance broker  reasonably  acceptable to the Mortgagee
          describing in reasonable  detail the insurance carried on the Aircraft
          and certifying that such insurance  complies with the terms hereof and
          that  such  insurance   adequately   protects  the  interests  of  the
          Mortgagee.  Prior to expiration of any such policy,  the Grantor shall
          furnish the Mortgagee with the same evidence  required to be delivered
          on or prior to the date of the advance of Loans to which this Mortgage
          relates and otherwise satisfactory to the Mortgagee that the policy or
          certificate  has been renewed or replaced or is no longer  required by
          this Agreement.

               (d) Power of  Attorney.  The Grantor  hereby  irrevocably  makes,
          constitutes and appoints the Mortgagee (and all officers, employees or
          agents  designated by the Mortgagee),  for the benefit of the Lenders,
          effective upon the  occurrence and during the  continuance of an Event
          of  Default,   as  the  Grantor's   true  and  lawful   attorney  (and
          agent-in-fact)  for the  purpose of  making,  settling  and  adjusting
          claims under such  policies of  insurance,  endorsing  the name of the
          Grantor on any check,  draft,  instrument or other item or payment for
          the  proceeds  of  such  policies  of  insurance  and for  making  all
          determinations   and  decisions  with  respect  to  such  policies  of
          insurance.

               (e) Mortgagee May Act. In the event the Grantor (i) shall fail to
          maintain,  or fail to  cause  to be  maintained,  the  full  insurance
          coverage  required  hereunder  or (ii)  shall  fail to keep any of its
          Collateral  in good  repair and good  operating  condition  subject to
          ordinary wear and tear,  then the Mortgagee may (but shall be under no
          obligation  to),  without waiving or releasing any Obligation or Event
          of  Default  by the  Grantor  hereunder,  contract  for  the  required
          policies  of  insurance  and pay the  premiums on the same or make any
          required repairs, renewals and replacements; and all sums so disbursed
          by  Mortgagee,  including  reasonable  attorneys'  fees,  court costs,
          expenses and other charges related thereto, shall be payable on demand
          by the Grantor to the Mortgagee  and shall be  additional  Obligations
          secured by the Collateral.

               (f) Payment for Uninsured  Loss.  The Grantor  agrees that to the
          extent that it shall not carry  insurance  required by Section  3.5(a)
          hereof, it shall in the event of any loss



<PAGE>


                                                                              15



          or  casualty  pay  promptly to the  Mortgagee,  for the benefit of the
          Lenders,  for application in accordance with the provisions of Section
          3.5(g)  hereof,  such  amount  as  would  have  been  received  as Net
          Collateral   Insurance  Proceeds  (as  hereinafter   defined)  by  the
          Mortgagee,  for the benefit of the Lenders  hereof had such  insurance
          been carried to the extent required.

               (g)  Application  of  Insurance  Proceeds.   Any  Net  Collateral
          Insurance  Proceeds received by shall be applied by the Grantor toward
          extinguishment of the defect or claim or satisfaction of the liability
          with respect to which such insurance proceeds may be paid.

               (h)  Notice  of  Loss.  In  case  of any  material  damage  to or
          destruction of all or any part of the Collateral  pledged hereunder by
          the  Grantor,  the  Grantor  shall give prompt  notice  thereof to the
          Mortgagee.  Each such notice shall  describe  generally the nature and
          extent  of such  damage,  destruction,  taking,  loss,  proceeding  or
          negotiations. The Grantor is hereby authorized and empowered to adjust
          or compromise any loss under any such insurance.

               (i) Lender Insurance.  Nothing herein shall prevent the Mortgagee
          or any  Lender  from  maintaining  additional  insurance  at  its  own
          expense;  provided that the  maintenance of such  insurance  shall not
          prejudice  the  Grantor's  ability to obtain,  or recover  under,  the
          insurance  required under this Section 3.5 or materially  increase the
          costs thereof.

          SECTION 3.6. Events of Loss; Governmental Authorities. As used herein,
"Event of Loss" means,  with  respect to the  Airframe or an Engine,  any of the
following events:  (i) loss of such Airframe or Engine or of the use thereof due
to the  destruction  of or damage to such  Airframe  or Engine to such extent as
shall render repair thereof uneconomical, provided that such repair shall not be
deemed  uneconomical if the proceeds of insurance with respect to such damage or
destruction (plus any applicable  amounts of deductibles)  shall be in an amount
at least equal to the cost of such repair;  (ii) any damage to such  Airframe or
Engine which results in an insurance settlement with respect to such Airframe or
Engine on the basis of a total loss or a constructive or compromised total loss;
(iii) the  disappearance of such Airframe or Engine which shall have resulted in
the loss of possession of such Airframe or Engine by the Grantor for a period of
five (5) consecutive days; (iv) the theft of such Airframe or Engine which shall
have  resulted  in the loss of  Airframe  or Engine by the  Grantor for five (5)
consecutive days; (v) the requisition of title,  confiscation or seizure of such
Airframe  or  Engine;  (vi) as a result of any  requirement  by the FAA or other
Governmental Authority,  the use of such Airframe or Engine in the normal course
of interstate air transportation shall have been prohibited for a period through
and  including  the December 31, 2004 unless,  prior to the  expiration  of such
period,  the Grantor  shall have  undertaken  and shall be  diligently  carrying
forward all steps which are  necessary  or desirable to permit the normal use of
such  Airframe  or  Engine,  or,  in any  event,  if such use  shall  have  been
prohibited  for a period of 360 days;  (vii) the  operation  or location of such
Airframe or Engine, while under requisition for use by a Governmental Authority,
in any area  excluded  from  coverage  by any  insurance  policy in effect  with
respect thereto  required by the terms of Section 3.5; or (viii) any other event
resulting in such Airframe or Engine being permanently rendered



<PAGE>


                                                                              16



unfit for normal use for any reason whatsoever. An Event of Loss with respect to
the  Aircraft  shall be deemed to have  occurred if an Event of Loss occurs with
respect to the Airframe. Upon the occurrence of an Event of Loss, the provisions
of this Section 3.6 shall apply, govern and control.

          (a) Event of Loss with Respect to an Engine. Upon the occurrence of an
     Event of Loss  with  respect  to the  Engine  (but not the  Aircraft),  the
     Grantor shall within three Business Days of the Grantor's  actual knowledge
     of such occurrence) give the Mortgagee written notice of such Event of Loss
     and shall as  promptly  as  practicable,  and in any event on or before the
     Business  Day  next  preceding  the  sixtieth  day  following  the  date of
     occurrence of such Event of Loss,  the Grantor shall subject or cause to be
     subjected to this Mortgage in replacement  thereof, a replacement Engine of
     the same model and having not less than the same value as the Engine  being
     replaced  and which be free and clear of all Liens  (other  than  Permitted
     Liens) and which shall be of like kind and  equivalent  value to, and which
     shall be in as good  operating  condition  as, the Engine so replaced  (for
     such purpose, it shall be assumed that such Engine was in the condition and
     repair required by the terms hereof) and,  following such replacement,  the
     replaced  Engine shall be released from the Lien created by this  Mortgage.
     If the Grantor shall not perform its obligation to effect such  replacement
     hereunder during the period of time provided herein,  such failure shall be
     an Event of Default.

          (b) Event of Loss with Respect to the Aircraft. Upon the occurrence of
     an Event of Loss with respect to the  Aircraft,  the Grantor shall give the
     Mortgagee  prompt  written  notice (and in any event within three  Business
     Days of the  Grantor's  actual  knowledge of such  occurrence)  thereof and
     shall, upon the receipt of any Net Collateral  Insurance  Proceeds,  prepay
     the Loans in accordance  with Section 2.10(b) of the Credit  Agreement.  In
     the event of payment in full by the  Grantor  of all  amounts  then due and
     payable  hereunder  upon the  occurrence of an Event of Loss,  the Aircraft
     shall be released from the Lien of this Mortgage,  and the Mortgagee  shall
     execute and  deliver  such  instruments  as may be  reasonably  required to
     evidence such release.

          (c) Replacement of Engines.  If Net Collateral  Insurance Proceeds are
     received with respect to the Engine that has been or is being replaced (and
     which by the terms of this  Section  3.6 may be  replaced)  by the  Grantor
     pursuant to Section 3.5(a), such Net Collateral Insurance Proceeds shall be
     paid  over to,  or  retained  by,  the  Mortgagee,  and at the time of such
     replacement  in  accordance  with  Section  3.6(a),  the amount of such Net
     Collateral   Insurance  Proceeds  remaining  after   reimbursement  of  the
     Mortgagee for costs and expenses (and the Mortgagee is hereby authorized to
     so apply such Net  Collateral  Insurance  Proceeds  to such  reimbursement)
     shall be paid over to the Grantor and as provided for in Section 3.5.

          (d) Use of Aircraft Not Constituting an Event of Loss. If payments are
     received  with  respect  to a  requisition  for  use  by  any  Governmental
     Authority  which does not  constitute an Event of Loss under the definition
     thereof, such payments may be retained by the Grantor.



<PAGE>


                                                                              17





          (e) Default.  Notwithstanding the foregoing provisions of this Section
     3.6,  any  payments  received  at  any  time  by  the  Mortgagee  from  any
     Governmental  Authority or other Person,  whether or not with respect to an
     Event of Loss,  which are payable to the Grantor,  shall not be paid to the
     Grantor  if at the time of such  payment  an Event of  Default  shall  have
     occurred and be  continuing,  in which event all such amounts shall be paid
     to and held by the Mortgagee as security for the Obligations of the Grantor
     hereunder  and under the other Loan  Documents and applied by the Mortgagee
     toward the payment of such Obligations.




                                   ARTICLE IV

                                    REMEDIES


          SECTION  4.1.  Remedies.  If an Event of  Default  shall  occur and be
continuing, the Mortgagee may, without notice of any kind to the Grantor, and at
the direction of the Required Lenders shall, carry out or enforce the actions or
remedies  provided in this Article IV or  elsewhere  in this  Mortgage or in the
Loan  Documents  or  otherwise  available  to a secured  party under the Uniform
Commercial  Code  or  other  applicable  law as in  effect  at the  time  in any
applicable jurisdiction.

          SECTION 4.2. Possession of Aircraft. If an Event of Default shall have
occurred and be continuing,  the Mortgagee may, without notice,  take possession
of all or any part of the Aircraft and may exclude the Grantor,  and all persons
claiming under the Grantor,  wholly or partly therefrom.  If an Event of Default
shall have  occurred and be  continuing,  at the request of the  Mortgagee,  the
Grantor shall  promptly  deliver or cause to be delivered to the Mortgagee or to
whomsoever  the Mortgagee  shall  designate,  at such time or times and place or
places  as the  Mortgagee  may  specify,  and fly or  cause  to be flown to such
airport or  airports  in the  continental  United  States as the  Mortgagee  may
specify,  without  risk or  expense  to the  Mortgagee,  all or any  part of the
Aircraft  specified by the  Mortgagee.  In addition,  the Grantor will  provide,
without cost or expense to the Mortgagee,  storage  facilities for the Aircraft.
In addition, without the necessity of any demand upon the Grantor, the Mortgagee
may, without being  responsible for loss or damage,  except to the extent caused
by the gross  negligence  or wilful  misconduct of the  Mortgagee,  (i) obtain a
judgment  conferring  on the  Mortgagee  the right to  immediate  possession  or
requiring  the Grantor to deliver  immediate  possession  of all or part of such
Aircraft to the  Mortgagee,  to the entry of which  judgment the Grantor  hereby
specifically  consents,  and/or (ii) with or, to the fullest extent  provided by
law,  without such  judgment,  pursue all or any part of such Aircraft  wherever
they may be found  and enter  any of the  premises  of the  Grantor  where  such
Aircraft may be and search for such  Aircraft and take  possession of and remove
the same. The Grantor agrees to pay to the Mortgagee,  all expenses  incurred in
taking any such action;  and all such expenses shall,  until paid, be secured by
the lien and  security  interest  of this  Mortgage.  Upon every such  taking of
possession,  the  Mortgagee  may,  from time to time,  make all such  reasonable
expenditures for maintenance,  insurance,  repairs,  replacements,  alterations,
additions



<PAGE>


                                                                              18



and  improvements  to  and of  the  Aircraft  as it may  deem  proper  and  such
expenditures shall constitute obligations secured hereby.

          SECTION 4.3. Receiver.  If an Event of Default shall have occurred and
be continuing,  the Mortgagee shall be entitled, as a matter of right as against
the Grantor,  without notice or demand and without regard to the adequacy of the
security for the Obligations by virtue of this Mortgage or any other  collateral
or to the solvency of the Grantor, upon the commencement of judicial proceedings
by it to enforce any right under this Mortgage, to the appointment of a receiver
of all or any part of the Collateral.

          SECTION  4.4.  Sale  and  Suits  for  Enforcement.  (i) If an Event of
Default shall have occurred and be continuing,  the  Mortgagee,  with or without
taking possession of the Aircraft, may

          (A) to the extent and in the manner  permitted by law,  sell at one or
     more sales, as an entirety or in separate lots or parcels,  all or any part
     of the Aircraft, subject to any existing Lease or not, as the Mortgagee may
     decide, at public or private sale, at such place or places and at such time
     or times and upon such terms,  including terms of credit (which may include
     the  retention of title by the  Mortgagee to the property so sold),  as the
     Mortgagee may determine,  whether or not the Aircraft shall be at the place
     of sale; and

          (B) proceed to protect and enforce its rights  under this  Mortgage by
     suit, whether for specific  performance of any covenant herein contained or
     in aid of the exercise of any power herein  granted or for the  foreclosure
     of this  Mortgage  and the sale of the  Collateral  under the  judgment  or
     decree of a court of competent  jurisdiction  or for the enforcement of any
     other right.

          (ii) At any sale of the Aircraft or any part thereof by the  Mortgagee
pursuant to paragraph (i) (A) above,  the Mortgagee may consider and accept bids
requiring  the  extension of credit to the bidder and may  determine the highest
bidder at such sale,  whether or not the bid of such bidder  shall be solely for
cash or shall require the extension of credit.

          (iii) The Mortgagee,  to the extent permitted by law, may from time to
time adjourn any sale under  paragraph  (i)(A) above by announcement at the time
and place  appointed for such sale or for any adjournment  thereof;  and without
further  notice or  publication,  except as may be required by law, such sale be
made at the time and place to which the same shall have been so adjourned.

          (iv) Upon the  completion  of any sale under  paragraph  (i)(A) above,
full title and right of possession to the Aircraft so sold shall (subject to any
retention  of title by the  Mortgagee as part of the terms of such sale) pass to
the accepted  purchaser  forthwith  upon the  completion  of such sale,  and the
Grantor shall  deliver,  in accordance  with the  instructions  of the Mortgagee
(including  flying the Aircraft or causing the same to be flown to such airports
in the continental United States as the Mortgagee may specify), such Aircraft so
sold.  If the Grantor  shall for any reason fail to deliver such  Aircraft,  the
Mortgagee  shall have all of the  rights  granted by  Section  4.2  hereof.  The
Mortgagee is hereby irrevocably appointed the true and



<PAGE>


                                                                              19




lawful  attorney of the Grantor,  in its name and stead,  to make all  necessary
conveyances  of the  Aircraft  so sold.  Nevertheless,  if so  requested  by the
Mortgagee  or by any  purchaser,  the  Grantor  shall  confirm  any such sale or
conveyance by executing and delivering  all proper  instruments of conveyance or
releases as may be designated in any such request.

          SECTION 4.5. Waiver of Appraisement,  etc. The Grantor agrees,  to the
fullest  extent that it lawfully may,  that it will not (and hereby  irrevocably
waives its right to) at any time plead,  or claim the benefit or  advantage  of,
any appraisement,  valuation, stay, extension,  moratorium or redemption law now
or hereafter  in force,  in order to prevent or hinder the  enforcement  of this
Mortgage or the absolute sale of the Collateral.

          SECTION 4.6. Remedies Cumulative.  No remedy herein conferred upon the
Mortgagee is intended to be exclusive of any other remedy, but every such remedy
shall be  cumulative  and shall be in  addition  to every  other  remedy  herein
conferred or now or hereafter existing in law.

          SECTION 4.7.  Application  of Proceeds.  If an Event of Default  shall
have  occurred  and be  continuing,  the  proceeds  of any sale,  lease or other
disposition of all or any part of the  Collateral  pursuant to this Mortgage and
all other sums  realized  or held by the  Mortgagee  under this  Mortgage or any
proceedings  hereunder  shall be  applied  in the  following  order of  priority
(unless otherwise directed by the Required Lenders):

          First:  To the  payment  of the  expenses  of any  such  sale,  lease,
     disposition  or  other  realization  (and  of  the  retaking,  holding  and
     preparing  for sale or lease),  including  reasonable  compensation  to the
     Mortgagee's agents and counsel, and all expenses,  liabilities and advances
     made or incurred  by the  Mortgagee  in  connection  therewith  or incurred
     pursuant to Section 3.3(j) hereof,  including,  without  limitation,  taxes
     upon or with respect to such sale,  lease,  disposition or realization  and
     the payment of taxes and Liens, if any, prior to the Lien of this Mortgage;

          Second:  To the payment of the Obligations in whole or in part in such
     order as the Mortgagee may elect; and

          Third:  To the Grantor or as any court of competent  jurisdiction  may
     otherwise direct.

          SECTION 4.8. Delay or Omission;  Possession of Notes.  (i) No delay or
omission of the  Mortgagee  to  exercise  any right or remedy  arising  upon the
happening of any Default or Event of Default shall impair any right or remedy or
shall be  construed to be a waiver of any such Default or Event of Default or an
acquiescence  therein; and every right and remedy given to the Mortgagee by this
Article IV or by applicable  law may be exercised from time to time and as often
as may be deemed expedient by the Mortgagee.

          (ii) All rights of action  under this  Mortgage may be enforced by the
Mortgagee  without  the  possession  of the  Notes or any  other  instrument  or
document evidencing any Obligation or the production thereof in any proceeding.


<PAGE>


                                                                              20






                                    ARTICLE V

                            MISCELLANEOUS PROVISIONS

          SECTION 5.1. Amendments,  etc. No amendment or waiver of any provision
of this Mortgage nor consent to any departure by the Grantor therefrom, shall in
any event be  effective  unless the same  shall be in writing  and signed by the
Mortgagee,  and then  such  waiver or  consent  shall be  effective  only in the
specific instance and for the specific purpose for which given.

          SECTION 5.2. Notices. All notices, requests and demands to or upon the
respective  parties  hereto to be effective  shall be given in  accordance  with
Section 10.2 of the Credit Agreement;

          SECTION 5.3.  Governing Law; Terms. This Mortgage shall be governed by
and  construed in accordance  with the laws of the State of New York,  except to
the extent that the law of another jurisdiction may be mandatorily applicable to
proceedings  taken  for  the  enforcement  of the  rights  and  remedies  of the
Mortgagee  hereunder,  provided that any such rights or remedies  which shall be
valid  under the laws of such other  jurisdiction  shall not be  affected by any
invalidity thereof under the laws of the State of New York.

          SECTION 5.4.  Severability.  The  invalidity of any one or more of the
provisions  of this Mortgage  shall not affect the remaining  provisions of this
Mortgage should be held by any court of law to be invalid,  or should operate to
render this Mortgage invalid or to impair the lien and security interest of this
Mortgage on all or the major  portion of the  property  intended to be mortgaged
hereunder,  this Mortgage shall be construed as if such  provisions had not been
contained therein.

          IN WITNESS WHEREOF, the parties hereto have caused this Mortgage to be
duly executed and delivered as of the day and year first above written.


                                   POWERHOUSE TECHNOLOGIES, INC.


                                   By: /S/ Susan J. Carstensen
                                       -----------------------------------------
                                       Title:  CFO and Treasurer

                                   LEHMAN COMMERCIAL PAPER INC., as
                                   Administrative Agent, as Mortgage


                                   By: /S/ William J. Gallagher
                                       -----------------------------------------
                                       Title:  Authorized Signatory

<PAGE>







                                                                      Schedule I
                                                                      ----------


                                Places of Filings
                                -----------------


Federal Aviation Administration                          Oklahoma City, Oklahoma



<PAGE>








SCHEDULES

SCHEDULE I        -        Location of Collateral



                                      -ii-

<PAGE>








                                                                      SCHEDULE I



                          [Waived Conditions Precedent]

                  [Describe any conditions precedent waived on
                      Closing Date and terms of any waiver]



<PAGE>






                                                                         ANNEX 1


                               [Board Resolutions]



<PAGE>






                                                                         ANNEX 2


                                    [By-Laws]



<PAGE>






                                                                         ANNEX 3



                         [Certificate of Incorporation]



<PAGE>













                                                                       EXHIBIT E


                                     FORM OF
                            ASSIGNMENT AND ACCEPTANCE


          Reference is made to the Credit Agreement, dated as of October 9, 1998
(as amended,  supplemented or otherwise  modified from time to time, the "Credit
Agreement"), among Powerhouse Technologies,  Inc., (the "Borrower"), the Lenders
named therein, Lehman Brothers Inc., as Arranger,  Lehman Commercial Paper Inc.,
Administrative  Agent and as Syndication  Agent,  and Canadian  Imperial Bank of
Commerce as Documentation  Agent. Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.

          The Assignor  identified on Schedule l hereto (the "Assignor") and the
Assignee identified on Schedule l hereto (the "Assignee") agree as follows:


          1. The Assignor hereby  irrevocably  sells and assigns to the Assignee
without recourse to the Assignor,  and the Assignee hereby irrevocably purchases
and  assumes  from the  Assignor  without  recourse to the  Assignor,  as of the
Effective Date (as defined below),  the interest  described in Schedule 1 hereto
(the "Assigned  Interest") in and to the Assignor's rights and obligations under
the Credit  Agreement with respect to those credit  facilities  contained in the
Credit  Agreement  as are set  forth  on  Schedule  1 hereto  (individually,  an
"Assigned Facility";  collectively,  the "Assigned Facilities"),  in a principal
amount for each Assigned Facility as set forth on Schedule 1 hereto.

          2. The Assignor (a) makes no representation or warranty and assumes no
responsibility  with respect to any  statements,  warranties or  representations
made in or in  connection  with the  Credit  Agreement  or with  respect  to the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Credit  Agreement,  any other Loan  Document or any other  instrument  or
document  furnished  pursuant  thereto,  other  than that the  Assignor  has not
created any adverse claim upon the interest  being  assigned by it hereunder and
that such  interest is free and clear of any such  adverse  claim;  (b) makes no
representation  or warranty  and assumes no  responsibility  with respect to the
financial  condition  of the  Borrower,  any of its  Subsidiaries  or any  other
obligor  or  the  performance  or  observance  by  the  Borrower,   any  of  its
Subsidiaries or any other obligor of any of their respective  obligations  under
the Credit  Agreement  or any other Loan  Document  or any other  instrument  or
document furnished  pursuant hereto or thereto;  and (c) attaches any Notes held
by  it   evidencing   the  Assigned   Facilities   and  (i)  requests  that  the
Administrative Agent, upon request by the Assignee,  exchange the attached Notes
for a new Note or Notes  payable to the  Assignee  and (ii) if the  Assignor has
retained any interest in the Assigned Facility, requests that the Administrative
Agent  exchange  the  attached  Notes  for a new  Note or Notes  payable  to the
Assignor, in each case in amounts which reflect the assignment being made hereby
(and after giving effect to any other assignments which have become effective on
the Effective Date).




<PAGE>


                                                                               2



          3.  The  Assignee  (a)  represents  and  warrants  that it is  legally
authorized to enter into this Assignment and Acceptance;  (b) represents that it
is a financial institution  regulated by a Governmental  Authority of the United
States of America or a State thereof, or is a wholly-owned  subsidiary of, or is
managed by such a financial  institution;  (c)  confirms  that it has received a
copy of the Credit Agreement,  together with copies of the financial  statements
delivered  pursuant to Section 6.1 thereof (or, if no such financial  statements
have been delivered,  copies of the financial  statements  delivered pursuant to
Section 4.1  thereof),  each other Loan  Document and such other  documents  and
information  as it has deemed  appropriate  to make its own credit  analysis and
decision to enter into this Assignment and Acceptance;  (d) agrees that it will,
independently  and without  reliance upon the Assignor,  the Agents or any other
Lender and based on such documents and information as it shall deem  appropriate
at the time,  continue to make its own credit  decisions in taking or not taking
action  under the  Credit  Agreement,  the  other  Loan  Documents  or any other
instrument or document  furnished  pursuant hereto or thereto;  (e) appoints and
authorizes the Agents to take such action as agent on its behalf and to exercise
such powers and discretion under the Credit Agreement,  the other Loan Documents
or any other instrument or document  furnished pursuant hereto or thereto as are
delegated to the Agents by the terms  thereof,  together with such powers as are
incidental  thereto;  and (f) agrees that it will be bound by the  provisions of
the  Credit  Agreement  and will  perform in  accordance  with its terms all the
obligations  which by the  terms of the  Credit  Agreement  are  required  to be
performed by it as a Lender  including,  if it is organized  under the laws of a
jurisdiction  outside  the United  States,  its  obligation  pursuant to Section
2.18(d) of the Credit Agreement.

          4. The effective date of this  Assignment and Acceptance  shall be the
Effective  Date of  Assignment  described  in Schedule 1 hereto (the  "Effective
Date").  Following the execution of this Assignment and  Acceptance,  it will be
delivered to the Administrative  Agent for acceptance by it and recording by the
Administrative  Agent  pursuant  to the Credit  Agreement,  effective  as of the
Effective   Date  (which  shall  not,   unless   otherwise   agreed  to  by  the
Administrative  Agent, be earlier than five Business Days after the date of such
acceptance and recording by the Administrative Agent).

          5. Upon such  acceptance and  recording,  from and after the Effective
Date,  the  Administrative  Agent  shall  make all  payments  in  respect of the
Assigned Interest  (including  payments of principal,  interest,  fees and other
amounts) to the Assignor for amounts  which have accrued to the  Effective  Date
and to the Assignee for amounts  which have accrued  subsequent to the Effective
Date.

          6. From and after the  Effective  Date,  (a) the  Assignee  shall be a
party to the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Loan  Documents and shall be bound by the  provisions  thereof and (b) the
Assignor  shall,  to the extent  provided  in this  Assignment  and  Acceptance,
relinquish  its rights and be  released  from its  obligations  under the Credit
Agreement.

          7. This  Assignment and  Acceptance and the rights and  obligations of
the parties  under this  Agreement  and  Acceptance  shall be  governed  by, and
construed and interpreted in accordance, with the law of the State of New York.



<PAGE>


                                                                               3



          IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.



<PAGE>













                                   Schedule 1
                          to Assignment and Acceptance


Name of Assignor:  __________________________________

Name of Assignee:  __________________________________

Effective Date of Assignment:  ______________________



   Credit                     Principal          Commitment Percentage Assigned
   Facility Assigned          Amount Assigned   --------------------------------
----------------------     --------------------

                                $__________              __._______%


[Name of Assignee]                               [Name of Assignor]



By: ________________________________    By:  __________________________________
     Title:                                   Title:


Accepted:                               Consented To:

LEHMAN COMMERCIAL PAPER INC, as         POWERHOUSE TECHNOLOGIES, INC.
Administrative Agent



By: _______________________________     By:  __________________________________
     Title:                                    Title:

                                        LEHMAN COMMERCIAL PAPER INC., as
                                        Syndication Agent




                                        By: ___________________________________
                                              Title:







<PAGE>






                                                                       EXHIBIT F



                     MATTERS TO BE COVERED IN LEGAL OPINIONS



                          I. OPINION OF ROGERS & HARDIN

          A.  Each of the Loan  Parties  (i) has been duly  incorporated  and is
validly  existing and in good  standing as a  corporation  under the laws of the
state of Delaware,  (ii) has the  corporate  power and  authority to execute and
deliver  each of the Loan  Documents  to which it is a  party,  to  perform  its
obligations under each such Loan Document and to grant the security interests to
be granted by it  pursuant  to the  Security  Documents  and, in the case of the
Borrower,  to borrow under the Credit  Agreement and (iii) has duly  authorized,
executed and delivered each Loan Document to which it is a party.

          B. The execution and delivery by any Loan Party of the Loan  Documents
to which it is a party,  the  granting  by it of the  security  interests  to be
granted  by it  pursuant  to the  Security  Documents  and,  in the  case of the
Borrower, its borrowings in accordance with the terms of the Loan Documents, and
performance  of its payment  obligations  thereunder  (i) will not result in any
violation of (A) the Certificate of  Incorporation or By-Laws of such Loan Party
and (B) assuming that proceeds of borrowings will be used in accordance with the
terms of the Credit  Agreement,  any Federal or Georgia  statute or the Delaware
General Corporation Law or any rule or regulation issued pursuant to any Federal
or Georgia statute or the Delaware General Corporation Law or any order known to
us issued by any court or governmental agency or body and ii) will not breach or
result in a default under or result in the creation of any lien upon or security
interest in the Loan Parties'  properties pursuant to the terms of any agreement
or  instrument  (other  than the  security  interests  created  by the  Security
Documents.

          C. No consent, approval, authorization, order, filing, registration or
qualification of or with any Federal or Georgia  governmental  agency or body or
any Delaware governmental agency or body acting pursuant to the Delaware General
Corporation  Law is required for the execution and delivery by any Loan Party of
the Loan  Documents to which it is a party,  the borrowings by any Loan Party in
accordance  with the terms of the Loan Documents or the  performance by the Loan
Parties of their respective payment  obligations under the Loan Documents or the
granting of any security interests under the Security Documents,  except filings
required  for the  perfection  of  security  interests  granted  pursuant to the
Security Documents.

[The foregoing assumes all parties are Delaware Corporations. If this assumption
is incorrect,  counsel in the  appropriate  jurisdiction  should cover issues in
paragraph   1,2,   and  3  that  are  governed  by  the  law  of  the  state  of
incorporation.]

          D. The courts of Georgia  would give effect to the  provisions  of the
Loan Documents  whereby the parties  thereto have agreed that the Loan Documents
shall be governed



<PAGE>






by, and construed and  interpreted  in accordance  with, the laws of the Sate of
New York. If,  however,  the courts of Georgia were to apply the laws of Georgia
as the governing law in respect of any Loan Document,  then,  assuming that each
of the Loan Documents is a valid and legally  binding  obligation of each of the
Lenders parties thereto,  each Loan Document constitutes and each Note delivered
to a Lender after the date hereof,  assuming the due  execution  and delivery by
the Loan Party which is the maker of such Note, will  constitute,  the valid and
legally  binding  obligation  of each  Loan  Party  which  is a  party  thereto,
enforceable against such Loan Party in accordance with its terms.

          E. To our knowledge there is no action,  suit or proceeding  before or
by any court,  arbitrator or governmental agency, body or official, now pending,
to which any Loan Party is a party or to which the business,  assets or property
of any  Loan  Party  is  subject  and no  such  action,  suit or  proceeding  is
threatened  to which any Loan Party or the  business,  assets or property of any
Loan Party would be subject  that in either case  questions  the validity of the
Loan Documents.

          F. No Loan Party is an "investment  company" within the meaning of the
Investment Company Act of 1940, as amended.

          G. Each of the Financing  Statements listed in Schedule __ hereto (the
"Financing  Statements") is in appropriate form for filing in the filing offices
listed in Schedule __ (the "Filing Offers").

          H. The UCC Search Reports listed in Schedule ____ hereto set forth the
proper filing offices and the proper debtors necessary to identify those persons
who under the  Uniform  Commercial  Code have on file  financing  statements  in
[specify  States] (each, an "Opinion  State") against the Loan Parties  covering
the  Collateral in which a security  interest is perfected by filing a financing
statement under the Uniform Commercial Code as in effect in the Opinion State[s]
as of the effective dates therefor set forth on Schedule __ hereto.

[UCC issues for states other than  Georgia  which are not covered by other state
counsel may be covered by Rogers & Hardin based  solely on review by  applicable
UCC provisions of the relevant states.]

          XI. The Guarantee  and  Collateral  Agreement  creates in favor of the
Administrative  Agent for the benefit of the Lenders a security  interest in the
collateral  described  therein in which a security interest may be created under
Article  9 of  each  Opinion  State  UCC  (the  "Security  Agreement  Article  9
Collateral").

          J. Upon the filing in the Filing Offices of the Financing  Statements,
the Administrative Agent will have a perfected security interest for the benefit
of the Lenders in that portion of the Security Agreement Article 9 Collateral in
which a security  interest is  perfected by filing a financing  statement  under
each Opinion State UCC.

          K. The security interest of the  Administrative  Agent for the benefit
of the Lenders in that portion of the collateral  described in the Guarantee and
Collateral Agreement as



<PAGE>






instruments  will  be a  perfected  security  interest  upon  delivery  of  such
instruments to the Administrative Agent in the State of New York.

          L. All of the shares of capital  stock  described on Schedule 2 to the
Guarantee and Collateral Agreement (except for directors' qualifying shares) are
owned of record by the Borrower or a Subsidiary of the Borrower, as described on
such Schedule 2.

          M. The  Guarantee  and  Collateral  Agreement  creates in favor of the
Administrative  Agent for the benefit of the Lenders a security  interest  under
each Opinion State UCC in the  investment  property  identified on Schedule 2 to
the Guarantee and Collateral Agreement (the "Pledged Securities").

          N. The Administrative Agent will have a perfected security interest in
the  Pledged  Securities  for the benefit of the  Lenders  upon  delivery to the
Administrative  Agent  for  the  benefit  of the  Lenders  of  the  certificates
representing the Pledged Securities in registered form,  indorsed in blank by an
effective  indorsement  or  accompanied  by undated  stock  powers with  respect
thereto  duly  indorsed  in  blank by an  effective  indorsement.  Assuming  the
Administrative Agent and each of the Lenders does not have notice of any adverse
claim to the  Pledged  Securities,  the  Administrative  Agent will  acquire the
security interest in the Pledged  Securities for the benefit of the Lenders free
of any adverse claim.

          O. The [Borrower] [relevant  Subsidiary] is licensed under the laws of
the Opinion State to __________ [describe terms of license]; and such license is
in full force and effect.

          P. [AWI] is a party to [describe  contract  with  Opinion  State] (the
"Contract").  Although the Contract prohibits  assignment by [AWI] of its rights
and  obligations  under the  Contract,  neither the Contract nor the laws of the
Opinion State prohibit the creator by AWI of a security interest in the Contract
pursuant to the Guarantee and Collateral Agreement,  to the extent such security
interest relates to money due or to become due to AWI pursuant to the Contract.


The foregoing  opinions may be subject to such  qualifications,  exceptions  and
limitations as shall be reasonable and customary.





<PAGE>







                          II. OPINIONS OF LOCAL COUNSEL


          A. The execution and delivery by any Loan Party of the Loan  Documents
to which it is a party,  its borrowings in accordance with the terms of the Loan
Documents, performance of its payment obligations thereunder and granting of the
security  interests to be granted by it pursuant to the Security  Documents will
not  result  in any  violation  of any  Federal  or  statute  of  the  State  of
___________ (the "Opinion State"),  or any rule or regulation issued pursuant to
any statute of the Opinion State.

          B. No consent, approval, authorization, order, filing, registration or
qualification of with any Opinion State governmental  agency or body is required
for the execution and delivery by any Loan Party of the Loan  Documents to which
it is a party,  the  borrowings by the Borrower in accordance  with the terms of
the Loan Documents or the  performance  by the Loan Parties of their  respective
payment  obligations  under the Loan  Documents  or the granting of any security
interests  under  the  Security  Documents,  except  filings  required  for  the
perfection of security interests granted pursuant to the Security Documents.

          C.  Each of the  financing  statements  listed  on  Schedule  ___ (the
"Financing  Statements") is in appropriate form for filing in the filing offices
listed on Schedule __ (the "Filing Offices").

          D. The UCC Search  Reports listed on Schedule ___ set forth the proper
filing  offices and the proper  debtors  necessary to identify those persons who
under the  Uniform  Commercial  Code have on file  financing  statements  in the
Opinion  State  against the Loan  Parties  covering  the  Collateral  in which a
security interest is perfected by filing a financing statement under the Uniform
Commercial  Code as in effect in the Opinion State (the "Opinion  State UCC") as
of the effective dates therefor set forth on Schedule ___.

          E. The  Guarantee  and  Collateral  Agreement  creates in favor of the
Administrative  Agent for the benefit of the Lenders a security  interest in the
collateral  described  therein in which a security interest may be created under
Article  9  of  the  Opinion  State  UCC  (the  "Security  Agreement  Article  9
Collateral").

          F. Upon the filing in the Filing Offices of the Financing  Statements,
the Administrative Agent will have a perfected security interest for the benefit
of the Lenders in that portion of the Security Agreement Article 9 Collateral in
which a security interest is perfected by filing a financing statement under the
Opinion State UCC.

          G. The [Borrower] [relevant  Subsidiary] is licensed under the laws of
the Opinion State to __________  [describe terms of license];  and license is in
full force and effect.

          H. [AWI] is a party to [describe  contract  with  Opinion  State] (the
"Contract").  Although the Contract prohibits  assignment by [AWI] of its rights
and  obligations  under the  Contract,  neither the Contract nor the laws of the
Opinion State prohibit the creator by AWI of a



<PAGE>






security  interest in the  Contract  pursuant to the  Guarantee  and  Collateral
Agreement,  to the  extent  such  security  interest  relates to money due or to
become due to AWI pursuant to the Contract.

          I.   The Mortgage listed on Schedule __(the "State Mortgage"):

               A.  constitutes  a  legal,   valid  and  binding   obligation  of
               _______________[mortgagor] enforceable against _______________ in
               accordance with its terms;

               B. is in proper form for recording;

               C. complies as to form with all existing Requirements of Law; and

               D. creates in favor of the  Administrative  Agent for the ratable
               benefit of the  Lenders a legal,  valid and  binding  lien on the
               real  property  and fixtures  described  in such State  Mortgage,
               enforceable  as such against the Borrower  and,  when recorded in
               the applicable office listed on Schedule __, all other Persons.

          The facts  that (a) the State  Mortgage  secures  obligations  arising
under a revolving  line of credit and (b) the  Revolving  Credit  Loans may from
time to time be repaid in full or in part and reborrowed in accordance  with the
terms of the Credit Agreement will not result in a subordination of the liens of
any State Mortgage to any other lien on the real property and fixtures described
in such State  Mortgage  or  otherwise  impair the  priority of the lien of such
State Mortgage.

          J. The courts of the Opinion  State will enforce  those  provisions in
the Guarantee and  Collateral  Agreement and the State  Mortgages  which provide
that the validity,  construction  and  enforceability  of such documents will be
governed  by the laws of the State of New York,  except  that the  courts of the
Opinion  State  may  apply  the  internal  law of the  State  to  determine  the
perfection  and effect of perfection  of the liens created under such  documents
and the application of remedies in enforcing such liens with respect to property
located in the State.

The foregoing  opinions may be subject to such  qualifications,  exceptions  and
limitations as shall be reasonable and customary.



<PAGE>








            III. OPINIONS OF COUNSEL IN STATES WITH LOTTERY CONTRACTS


          Section 9-318(4) of the Uniform Commercial Code in effect in the State
of ____________ provides as follows:


          Such provision of the State UCC is applicable to the provisions of the
Guarantee and Collateral Agreement whereby [AWI] grants a security interest (the
"Security Interest") in all Accounts and General Intangibles for money due or to
become due under the [describe Contract] (the "State Lottery  Contract").  There
is no other  provision of the laws of the State of _______  (including,  without
limitation,  any laws relating to gambling,  gaming or lotteries) that conflicts
with such provision of the State UCC, as such provision  applies to the grant by
[AWI] of the Security  Interest,  nor does such grant of the  Security  Interest
require any consent or  authorization  of, notice to, or filing or  registration
with,  any  governmental  authority  of the  State of  __________.  Accordingly,
insofar  as the laws of the  State  of  _______  are  applicable,  the  Security
Interest is a valid and enforceable  security  interest in all right,  title and
interest  of [AWI] in  Accounts  and  General  Intangibles  for money due and to
become due under the State Lottery  Contract.  Assuming that the chief executive
office  of  [AWI]  is  located  in  a  jurisdiction  other  than  the  State  of
___________,  no filing or registration  with any governmental  authority of the
State of _______ is required  under the laws of the State of ________ to perfect
the Security Interest.



<PAGE>







                        IV. OPINIONS OF AIRCRAFT COUNSEL


          A. the Agreement, as supplemented by the Agreement Supplement, creates
a duly perfected  first priority  security  interest in the aircraft in favor of
the Agent,  it being  understood  that no opinion is herein  expressed as to the
validity,  priority or  enforceability of such security interest under local law
or as to the recognition of the perfection of such security  interest as against
third parties in any legal proceeding outside the United States;

          B. none of the Agreement,  the Agreement  Supplement,  or the Security
Assignment  are  required to be refiled with the FAA or filed or recorded in any
other  place  within the United  States in order to  perfect,  or  maintain  the
perfection of the security  interest in the Aircraft (insofar as such assignment
affects an  interest  covered by the  recording  system  established  by the FAA
pursuant  to 49 U.S.C.  Section  44107),  all as  created by the  Agreement,  as
supplemented by the Agreement Supplement, and the Security Assignment; and

          C. no  authorization,  approval,  consent,  license  or order  of,  or
registration with, or the giving of notice to, the FAA is required for the valid
authorization, delivery and performance of the Agreement, as supplemented by the
Agreement Supplement, or the Security Assignment, except for such filings as are
referred to above.


<PAGE>








                                                                     EXHIBIT G-1


                                    TERM NOTE


THIS NOTE AND THE OBLIGATIONS  REPRESENTED  HEREBY MAY NOT BE TRANSFERRED EXCEPT
IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT  REFERRED TO
BELOW.  TRANSFERS OF THIS NOTE AND THE  OBLIGATIONS  REPRESENTED  HEREBY MUST BE
RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE  AGENT PURSUANT TO THE
TERMS OF SUCH CREDIT AGREEMENT.

$5,000,000                                                    New York, New York
                                                                October 14, 1998

          FOR VALUE RECEIVED, the undersigned,  POWERHOUSE TECHNOLOGIES, INC., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to
LaSalle  National Bank (the "Lender") or its  registered  assigns at the Payment
Office  specified in the Credit  Agreement  (as  hereinafter  defined) in lawful
money of the United States and in  immediately  available  funds,  the principal
amount of (a) FIVE MILLION  DOLLARS  ($5,000,000),  or, if less,  (b) the unpaid
principal  amount of the  Tranche  [A] Term Loan made by the Lender  pursuant to
Section 2.1 of the Credit  Agreement.  The principal amount shall be paid in the
amounts and on the dates specified in Section 2.3 of the Credit  Agreement.  The
Borrower  further  agrees to pay  interest  in like money at such  office on the
unpaid principal amount hereof from time to time outstanding at the rates and on
the dates specified in Section 2.13 of the Credit Agreement.

          The holder of this Note is  authorized  to  endorse  on the  schedules
annexed hereto and made a part hereof or on a  continuation  thereof which shall
be  attached  hereto  and made a part  hereof  the date,  Type and amount of the
Tranche [A] Term Loan and the date and amount of each payment or  prepayment  of
principal with respect  thereto,  each conversion of all or a portion thereof to
another Type,  each  continuation  of all or a portion  thereof as the same Type
and, in the case of Eurodollar  Loans,  the length of each Interest  Period with
respect thereto.  Each such endorsement shall constitute prima facie evidence of
the  accuracy  of the  information  endorsed.  The  failure  to  make  any  such
endorsement  or  any  error  in  any  such  endorsement  shall  not  affect  the
obligations of the Borrower in respect of the Tranche [A] Term Loan.

          This  Note  (a) is one of the Term  Notes  referred  to in the  Credit
Agreement  dated as of October 9, 1998 (as  amended,  supplemented  or otherwise
modified from time to time,  the "Credit  Agreement"),  among the Borrower,  the
Lender,  the other banks and  financial  institutions  from time to time parties
thereto, Lehman Commercial Paper Inc., as Administrative Agent, Lehman Brothers,
Inc., as Arranger and Lehman  Commercial  Paper Inc., as Syndication  Agent, and
Canadian  Imperial Bank of Commerce,  as Documentation  Agent, (b) is subject to
the provisions



<PAGE>






of the Credit Agreement and (c) is subject to optional  andmandatory  prepayment
in whole or in part as  provided in the Credit  Agreement.  This Note is secured
and  guaranteed as provided in the Loan  Documents.  Reference is hereby made to
the Loan  Documents for a description  of the  properties  and assets in which a
security  interest has been  granted,  the nature and extent of the security and
the guarantees,  the terms and conditions upon which the security  interests and
each guarantee were granted and the rights of the holder of this Note in respect
thereof.

          Upon the  occurrence of any one or more of the Events of Default,  all
principal  and all accrued  interest  then  remaining  unpaid on this Note shall
become, or may be declared to be,  immediately due and payable,  all as provided
in the Credit Agreement.

          All  parties  now and  hereafter  liable  with  respect  to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.

          Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.

          NOTWITHSTANDING  ANYTHING TO THE CONTRARY  CONTAINED  HEREIN OR IN THE
CREDIT  AGREEMENT,  THIS NOTE MAY NOT BE TRANSFERRED  EXCEPT  PURSUANT TO AND IN
ACCORDANCE  WITH THE  REGISTRATION  AND OTHER  PROVISIONS OF SECTION 10.6 OF THE
CREDIT AGREEMENT.

          THIS NOTE SHALL BE  GOVERNED  BY, AND  CONSTRUED  AND  INTERPRETED  IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

                                   POWERHOUSE TECHNOLOGIES INC.


                                   By: /S/ Susan J. Carstensen
                                   ---------------------------------------------
                                       Name:  Susan J. Carstensen
                                       Title: CFO and Treasurer




<PAGE>













                                                                     Schedule A
                                                                    to Term Note

              LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS


<TABLE>
<CAPTION>
                                                             Amount of          Amount of Base
                                            Amount       Principal of Base        Rate Loans         Unpaid Principal
                  Amount of Base         Converted to        Rate Loans          Converted to        Balance of Base        Notation
      Date          Rate Loans         Base Rate Loans         Repaid          Eurodollar Loans         Rate Loans           Made By
      ----          ----------         ---------------         ------          ----------------         ----------           -------
<S>   <C>           <C>                  <C>                   <C>               <C>                     <C>                  <C>












     ====           ==========         ===============         ======          ================         ==========           =======

</TABLE>

















<PAGE>













                                                                      Schedule B
                                                                    to Term Note

      LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS


<TABLE>
<CAPTION>

                                                                              Amount of
                                         Interest Period                     Eurodollar       Unpaid
                           Amount        and Eurodollar       Amount of         Loans        Principal
            Amount of   Converted to        Rate with       Principal of    Converted to    Balance of
           Eurodollar    Eurodollar          Respect         Eurodollar       Base Rate     Eurodollar       Notation
  Date        Loans         Loans            Thereto        Loans Repaid        Loans          Loans         Made By
  ----        -----         -----            -------        ------------        -----          -----         -------
<S>           <C>           <C>              <C>            <C>                 <C>            <C>            <C>






  ====        =====         =====            =======        ============        =====          =====         =======


</TABLE>


<PAGE>






                                    TERM NOTE


THIS NOTE AND THE OBLIGATIONS  REPRESENTED  HEREBY MAY NOT BE TRANSFERRED EXCEPT
IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT  REFERRED TO
BELOW.  TRANSFERS OF THIS NOTE AND THE  OBLIGATIONS  REPRESENTED  HEREBY MUST BE
RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE  AGENT PURSUANT TO THE
TERMS OF SUCH CREDIT AGREEMENT.

$6,666,666.66                                                 New York, New York
                                                                October 14, 1998

          FOR VALUE RECEIVED, the undersigned,  POWERHOUSE TECHNOLOGIES, INC., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to
CIBC Inc.  (the  "Lender")  or its  registered  assigns  at the  Payment  Office
specified in the Credit  Agreement (as  hereinafter  defined) in lawful money of
the United States and in immediately  available  funds,  the principal amount of
(a) SIX MILLION,  SIX HUNDRED AND SIXTY-SIX THOUSAND,  SIX HUNDRED AND SIXTY-SIX
DOLLARS  AND  SIXTY-SIX  CENTS  ($6,666,666.66),  or,  if less,  (b) the  unpaid
principal  amount of the  Tranche  [A] Term Loan made by the Lender  pursuant to
Section 2.1 of the Credit  Agreement.  The principal amount shall be paid in the
amounts and on the dates specified in Section 2.3 of the Credit  Agreement.  The
Borrower  further  agrees to pay  interest  in like money at such  office on the
unpaid principal amount hereof from time to time outstanding at the rates and on
the dates specified in Section 2.13 of the Credit Agreement.

          The holder of this Note is  authorized  to  endorse  on the  schedules
annexed hereto and made a part hereof or on a  continuation  thereof which shall
be  attached  hereto  and made a part  hereof  the date,  Type and amount of the
Tranche [A] Term Loan and the date and amount of each payment or  prepayment  of
principal with respect  thereto,  each conversion of all or a portion thereof to
another Type,  each  continuation  of all or a portion  thereof as the same Type
and, in the case of Eurodollar  Loans,  the length of each Interest  Period with
respect thereto.  Each such endorsement shall constitute prima facie evidence of
the  accuracy  of the  information  endorsed.  The  failure  to  make  any  such
endorsement  or  any  error  in  any  such  endorsement  shall  not  affect  the
obligations of the Borrower in respect of the Tranche [A] Term Loan.

          This  Note  (a) is one of the Term  Notes  referred  to in the  Credit
Agreement  dated as of October 9, 1998 (as  amended,  supplemented  or otherwise
modified from time to time,  the "Credit  Agreement"),  among the Borrower,  the
Lender,  the other banks and  financial  institutions  from time to time parties
thereto, Lehman Commercial Paper Inc., as Administrative Agent, Lehman Brothers,
Inc., as Arranger and Lehman Commercial Paper Inc., as Syndication Agent, (b) is
subject to the provisions



<PAGE>






of the Credit Agreement and (c) is subject to optional  andmandatory  prepayment
in whole or in part as  provided in the Credit  Agreement.  This Note is secured
and  guaranteed as provided in the Loan  Documents.  Reference is hereby made to
the Loan  Documents for a description  of the  properties  and assets in which a
security  interest has been  granted,  the nature and extent of the security and
the guarantees,  the terms and conditions upon which the security  interests and
each guarantee were granted and the rights of the holder of this Note in respect
thereof.

          Upon the  occurrence of any one or more of the Events of Default,  all
principal  and all accrued  interest  then  remaining  unpaid on this Note shall
become, or may be declared to be,  immediately due and payable,  all as provided
in the Credit Agreement.

          All  parties  now and  hereafter  liable  with  respect  to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.

          Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.

          NOTWITHSTANDING  ANYTHING TO THE CONTRARY  CONTAINED  HEREIN OR IN THE
CREDIT  AGREEMENT,  THIS NOTE MAY NOT BE TRANSFERRED  EXCEPT  PURSUANT TO AND IN
ACCORDANCE  WITH THE  REGISTRATION  AND OTHER  PROVISIONS OF SECTION 10.6 OF THE
CREDIT AGREEMENT.

          THIS NOTE SHALL BE  GOVERNED  BY, AND  CONSTRUED  AND  INTERPRETED  IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

                                   POWERHOUSE TECHNOLOGIES INC.


                                   By: /S/ Susan J. Carstensen
                                   ---------------------------------------------
                                       Name:  Susan J. Carstensen
                                       Title: CFO and Treasurer




<PAGE>













                                                                     Schedule A
                                                                    to Term Note

              LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS


<TABLE>
<CAPTION>
                                                             Amount of          Amount of Base
                                            Amount       Principal of Base        Rate Loans         Unpaid Principal
                  Amount of Base         Converted to        Rate Loans          Converted to        Balance of Base        Notation
      Date          Rate Loans         Base Rate Loans         Repaid          Eurodollar Loans         Rate Loans           Made By
      ----          ----------         ---------------         ------          ----------------         ----------           -------
<S>   <C>           <C>                  <C>                   <C>               <C>                     <C>                  <C>












     ====           ==========         ===============         ======          ================         ==========           =======

</TABLE>

















<PAGE>













                                                                      Schedule B
                                                                    to Term Note

      LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS


<TABLE>
<CAPTION>

                                                                              Amount of
                                         Interest Period                     Eurodollar       Unpaid
                           Amount        and Eurodollar       Amount of         Loans        Principal
            Amount of   Converted to        Rate with       Principal of    Converted to    Balance of
           Eurodollar    Eurodollar          Respect         Eurodollar       Base Rate     Eurodollar       Notation
  Date        Loans         Loans            Thereto        Loans Repaid        Loans          Loans         Made By
  ----        -----         -----            -------        ------------        -----          -----         -------
<S>           <C>           <C>              <C>            <C>                 <C>            <C>            <C>






  ====        =====         =====            =======        ============        =====          =====         =======


</TABLE>





<PAGE>








                                                                     EXHIBIT G-2


                              REVOLVING CREDIT NOTE


THIS NOTE AND THE OBLIGATIONS  REPRESENTED  HEREBY MAY NOT BE TRANSFERRED EXCEPT
IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT  REFERRED TO
BELOW.  TRANSFERS OF THIS NOTE AND THE  OBLIGATIONS  REPRESENTED  HEREBY MUST BE
RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE  AGENT PURSUANT TO THE
TERMS OF SUCH CREDIT AGREEMENT.

$10,000,000                                                   New York, New York
                                                                October 14, 1998

          FOR VALUE RECEIVED, the undersigned,  POWERHOUSE TECHNOLOGIES, INC., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to
LaSalle  National Bank (the "Lender") or its  registered  assigns at the Payment
Office  specified in the Credit  Agreement  (as  hereinafter  defined) in lawful
money of the United States and in immediately  available funds, on the Revolving
Credit  Termination  Date  the  principal  amount  of (a)  TEN  MILLION  DOLLARS
($10,000,000),  or, if less, (b) the aggregate  unpaid  principal  amount of all
Revolving  Credit Loans made by the Lender to the  Borrower  pursuant to Section
2.4 of the Credit Agreement. The Borrower further agrees to pay interest in like
money at such Payment Office on the unpaid  principal amount hereof from time to
time  outstanding at the rates and on the dates specified in Section 2.13 of the
Credit Agreement.

          The holder of this Note is  authorized  to  endorse  on the  schedules
annexed hereto and made a part hereof or on a  continuation  thereof which shall
be  attached  hereto and made a part  hereof  the date,  Type and amount of each
Revolving  Credit Loan made  pursuant to the Credit  Agreement  and the date and
amount of each payment or prepayment  of principal  thereof,  each  continuation
thereof, each conversion of all or a portion thereof to another Type and, in the
case of  Eurodollar  Loans,  the length of each  Interest  Period  with  respect
thereto.  Each such  endorsement  shall  constitute  prima facie evidence of the
accuracy of the information  endorsed.  The failure to make any such endorsement
or any error in any such  endorsement  shall not affect the  obligations  of the
Borrower in respect of any Revolving Credit Loan.

          This Note (a) is one of the Revolving  Credit Notes referred to in the
Credit  Agreement  dated as of  October  9, 1998 (as  amended,  supplemented  or
otherwise  modified  from  time to time,  the  "Credit  Agreement"),  among  the
Borrower,  the Lender,  the other banks and financial  institutions from time to
time parties thereto,  Lehman  Brothers,  Inc., as Arranger,  Lehman  Commercial
Paper Inc., as  Syndication  Agent and Canadian  Imperial  Bank of Commerce,  as
Documentation  Agent,  (b) is subject to the provisions of the Credit  Agreement
and (c) is subject to optional and  mandatory  prepayment in whole or in part as
provided  in the  Credit  Agreement.  This Note is  secured  and  guaranteed  as
provided in the Loan  Documents.  Reference is hereby made to the Loan Documents
for a description of the properties and assets in which a security  interest has
been



<PAGE>

                                                                               2




granted, the nature and extent of the security and the guarantees, the terms and
conditions  uponwhich the security interests and each guarantee were granted and
the rights of the holder of this Note in respect thereof.

          Upon the  occurrence of any one or more of the Events of Default,  all
principal  and all accrued  interest  then  remaining  unpaid on this Note shall
become, or may be declared to be,  immediately due and payable,  all as provided
in the Credit Agreement.

          All  parties  now and  hereafter  liable  with  respect  to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.

          Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.

          NOTWITHSTANDING  ANYTHING TO THE CONTRARY  CONTAINED  HEREIN OR IN THE
CREDIT  AGREEMENT,  THIS NOTE MAY NOT BE TRANSFERRED  EXCEPT  PURSUANT TO AND IN
ACCORDANCE  WITH THE  REGISTRATION  AND OTHER  PROVISIONS OF SECTION 10.6 OF THE
CREDIT AGREEMENT.

          THIS NOTE SHALL BE  GOVERNED  BY, AND  CONSTRUED  AND  INTERPRETED  IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

                                   POWERHOUSE TECHNOLOGIES, INC.

                                   By: /S/ Susan J. Carstensen
                                      ------------------------------------------
                                      Name:  Susan J. Carstensen
                                      Title: CFO and Treasurer






<PAGE>













                                                                      Schedule A
                                                        to Revolving Credit Note

              LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS


<TABLE>
<CAPTION>

                                                     Amount of         Amount of Base
                                    Amount        Principal of Base       Rate Loans        Unpaid Principal
            Amount of Base       Converted to         Rate Loans         Converted to       Balance of Base     Notation
   Date       Rate Loans       Base Rate Loans          Repaid         Eurodollar Loans        Rate Loans        Made By
   ----       ----------       ---------------          ------         ----------------        ----------        -------
<S>           <C>              <C>                      <C>            <C>                     <C>               <C>









   ====       ==========       ===============          ======         ================        ==========        =======
</TABLE>






<PAGE>













                                                                      Schedule B
                                                        to Revolving Credit Note

      LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS

<TABLE>
<CAPTION>

                                                                               Amount of
                                         Interest Period                      Eurodollar       Unpaid
                            Amount       and Eurodollar       Amount of          Loans        Principal
            Amount of    Converted to       Rate with       Principal of     Converted to    Balance of
           Eurodollar     Eurodollar         Respect         Eurodollar        Base Rate     Eurodollar      Notation
  Date        Loans          Loans           Thereto        Loans Repaid         Loans          Loans        Made By
  ----        -----          -----           -------        ------------         -----          -----        -------
<S>           <C>            <C>             <C>            <C>                  <C>            <C>          <C>











  ====        =====          =====           =======        ============         =====          =====        =======
</TABLE>



<PAGE>

                              REVOLVING CREDIT NOTE


THIS NOTE AND THE OBLIGATIONS  REPRESENTED  HEREBY MAY NOT BE TRANSFERRED EXCEPT
IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT  REFERRED TO
BELOW.  TRANSFERS OF THIS NOTE AND THE  OBLIGATIONS  REPRESENTED  HEREBY MUST BE
RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE  AGENT PURSUANT TO THE
TERMS OF SUCH CREDIT AGREEMENT.

$13,333,333.34                                                New York, New York
                                                                October 14, 1998

          FOR VALUE RECEIVED, the undersigned,  POWERHOUSE TECHNOLOGIES, INC., a
Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to
CIBC Inc.  (the  "Lender")  or its  registered  assigns  at the  Payment  Office
specified in the Credit  Agreement (as  hereinafter  defined) in lawful money of
the United States and in immediately  available  funds, on the Revolving  Credit
Termination Date the principal amount of (a) THIRTEEN MILLION, THREE HUNDRED AND
THIRTY-THREE  THOUSAND,  THREE HUNDRED AND THIRTY-THREE DOLLARS AND THIRTY-THREE
CENTS ($1,333,333.33), or, if less, (b) the aggregate unpaid principal amount of
all  Revolving  Credit  Loans made by the  Lender to the  Borrower  pursuant  to
Section 2.4 of the Credit Agreement. The Borrower further agrees to pay interest
in like money at such Payment Office on the unpaid  principal amount hereof from
time to time outstanding at the rates and on the dates specified in Section 2.13
of the Credit Agreement.

          The holder of this Note is  authorized  to  endorse  on the  schedules
annexed hereto and made a part hereof or on a  continuation  thereof which shall
be  attached  hereto and made a part  hereof  the date,  Type and amount of each
Revolving  Credit Loan made  pursuant to the Credit  Agreement  and the date and
amount of each payment or prepayment  of principal  thereof,  each  continuation
thereof, each conversion of all or a portion thereof to another Type and, in the
case of  Eurodollar  Loans,  the length of each  Interest  Period  with  respect
thereto.  Each such  endorsement  shall  constitute  prima facie evidence of the
accuracy of the information  endorsed.  The failure to make any such endorsement
or any error in any such  endorsement  shall not affect the  obligations  of the
Borrower in respect of any Revolving Credit Loan.

          This Note (a) is one of the Revolving  Credit Notes referred to in the
Credit  Agreement  dated as of  October  9, 1998 (as  amended,  supplemented  or
otherwise  modified  from  time to time,  the  "Credit  Agreement"),  among  the
Borrower,  the Lender,  the other banks and financial  institutions from time to
time parties thereto,  Lehman  Commercial Paper Inc., as  Administrative  Agent,
Lehman Brothers, Inc., as Arranger, Lehman Commercial Paper Inc., as Syndication
Agent and Canadian  Imperial Bank of Commerce,  as  Documentation  Agent, (b) is
subject to the provisions of the Credit Agreement and (c) is subject to optional
and  mandatory  prepayment  in  whole  or in  part  as  provided  in the  Credit
Agreement.  This  Note  is  secured  and  guaranteed  as  provided  in the  Loan
Documents.  Reference is hereby made to the Loan  Documents for a description of
the properties and assets in which a security interest has been



<PAGE>

                                                                               2




granted, the nature and extent of the security and the guarantees, the terms and
conditions  uponwhich the security interests and each guarantee were granted and
the rights of the holder of this Note in respect thereof.

          Upon the  occurrence of any one or more of the Events of Default,  all
principal  and all accrued  interest  then  remaining  unpaid on this Note shall
become, or may be declared to be,  immediately due and payable,  all as provided
in the Credit Agreement.

          All  parties  now and  hereafter  liable  with  respect  to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.

          Unless otherwise defined herein, terms defined in the Credit Agreement
and used herein shall have the meanings given to them in the Credit Agreement.

          NOTWITHSTANDING  ANYTHING TO THE CONTRARY  CONTAINED  HEREIN OR IN THE
CREDIT  AGREEMENT,  THIS NOTE MAY NOT BE TRANSFERRED  EXCEPT  PURSUANT TO AND IN
ACCORDANCE  WITH THE  REGISTRATION  AND OTHER  PROVISIONS OF SECTION 10.6 OF THE
CREDIT AGREEMENT.

          THIS NOTE SHALL BE  GOVERNED  BY, AND  CONSTRUED  AND  INTERPRETED  IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

                                   POWERHOUSE TECHNOLOGIES, INC.

                                   By: /S/ Susan J. Carstensen
                                      ------------------------------------------
                                      Name:  Susan J. Carstensen
                                      Title: CFO and Treasurer






<PAGE>













                                                                      Schedule A
                                                        to Revolving Credit Note

              LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS


<TABLE>
<CAPTION>

                                                     Amount of         Amount of Base
                                    Amount        Principal of Base       Rate Loans        Unpaid Principal
            Amount of Base       Converted to         Rate Loans         Converted to       Balance of Base     Notation
   Date       Rate Loans       Base Rate Loans          Repaid         Eurodollar Loans        Rate Loans        Made By
   ----       ----------       ---------------          ------         ----------------        ----------        -------
<S>           <C>              <C>                      <C>            <C>                     <C>               <C>









   ====       ==========       ===============          ======         ================        ==========        =======
</TABLE>






<PAGE>













                                                                      Schedule B
                                                        to Revolving Credit Note

      LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS

<TABLE>
<CAPTION>

                                                                               Amount of
                                         Interest Period                      Eurodollar       Unpaid
                            Amount       and Eurodollar       Amount of          Loans        Principal
            Amount of    Converted to       Rate with       Principal of     Converted to    Balance of
           Eurodollar     Eurodollar         Respect         Eurodollar        Base Rate     Eurodollar      Notation
  Date        Loans          Loans           Thereto        Loans Repaid         Loans          Loans        Made By
  ----        -----          -----           -------        ------------         -----          -----        -------
<S>           <C>            <C>             <C>            <C>                  <C>            <C>          <C>











  ====        =====          =====           =======        ============         =====          =====        =======
</TABLE>



<PAGE>












                                                                       EXHIBIT H


                                    FORM OF
                            PREPAYMENT OPTION NOTICE




Attention of [            ]
Telecopy No. [            ]


                                                                          [Date]

Ladies and Gentlemen:

          The undersigned, LEHMAN COMMERCIAL PAPER INC., as administrative agent
(in such capacity,  the "Administrative  Agent") for the Lenders,  refers to the
Credit  Agreement,  dated as of October  9, 1998 (as  amended,  supplemented  or
otherwise modified from time to time, the "Credit Agreement"),  among POWERHOUSE
TECHNOLOGIES,  INC., a Delaware corporation (the "Borrower"),  the several banks
and other  financial  institutions  from time to time parties to this  Agreement
(the  "Lenders"),  LEHMAN  BROTHERS  INC.,  as  advisor  and  arranger  (in such
capacity,  the "Arranger"),  LEHMAN  COMMERCIAL PAPER INC., as syndication agent
(in such capacity,  the "Syndication  Agent"), and LEHMAN COMMERCIAL PAPER INC.,
as  administrative  agent (in such  capacity,  the  "Administrative  Agent") and
CANADIAN IMPERIAL BANK OF COMMERCE.,  as Documentation  Agent (in such capacity,
the  "Documentation  Agent").  Capitalized  terms used herein and not  otherwise
defined  herein  shall have the  meanings  assigned  to such terms in the Credit
Agreement.  The  Administrative  Agent  hereby  gives  notice  of  an  offer  of
prepayment  made by the  Borrower  pursuant  to  Section  2.10(d)  of the Credit
Agreement  of the Tranche B  Prepayment  Amount.  Amounts  applied to prepay the
Tranche B Term Loans  shall be applied  pro rata to the Tranche B Term Loan held
by you.  The portion of the  prepayment  amount to be allocated to the Tranche B
Term Loan held by you and the date on which such  prepayment will be made to you
(should you elect to receive such prepayment) are set forth below:


(A)       Total Tranche B Term Loan Prepayment Amount       __________
(B)       Portion of Tranche B Term Loan Prepayment
          Amount to be received by you                      __________
(C)       Prepayment  Date (10  Business Days after the
          date of this Prepayment Option Notice)            __________


          IF YOU  DO NOT  WISH  TO  RECEIVE  ALL  OF  THE  TRANCHE  B TERM  LOAN
PREPAYMENT  AMOUNT  TO BE  ALLOCATED  TO YOU ON THE  MANDATORY  PREPAYMENT  DATE
INDICATED IN PARAGRAPH (B) ABOVE,  please sign this notice in the space provided
below and indicate the percentage of the Tranche B Term Loan  Prepayment  Amount
otherwise payable which you do not wish to receive. Please



<PAGE>






return  this  notice  as  so  completed   via  telecopy  to  the   attention  of
[___________________] at  ____________________,  no later than [10:00] a.m., New
York City time, on the Prepayment Date, at Telecopy No.  [________________].  IF
YOU DO NOT RETURN THIS NOTICE,  YOU WILL RECEIVE 100% OF THE TRANCHE B TERM LOAN
PREPAYMENT ALLOCATED TO YOU ON THE MANDATORY PREPAYMENT DATE.

                                   LEHMAN COMMERCIAL PAPER INC.,
                                   as Administrative Agent


                                   By: ________________________________________
                                       Name:
                                       Title:

                                   [Lender]


                                   By: ________________________________________
                                       Name:
                                       Title:

Percentage of Tranche B
Prepayment Amount
Declined:  ________%



<PAGE>






                                                                       EXHIBIT I


                          FORM OF EXEMPTION CERTIFICATE


          Reference is made to the Credit Agreement, dated as of October 9, 1998
(as amended,  supplemented or otherwise  modified from time to time, the "Credit
Agreement")  among POWERHOUSE  TECHNOLOGIES,  INC., a Delaware  corporation (the
"Borrower"),  the several banks and other  financial  institutions  from time to
time parties to this Agreement (the "Lenders"), LEHMAN BROTHERS INC., as advisor
and arranger (in such capacity,  the "Arranger"),  LEHMAN COMMERCIAL PAPER INC.,
as syndication  agent (in such capacity,  the "Syndication  Agent"),  and LEHMAN
COMMERCIAL  PAPER  INC.,  as  administrative   agent  (in  such  capacity,   the
"Administrative   Agent")  and  CANADIAN   IMPERIAL   BANK  OF   COMMERCE.,   as
Documentation Agent (in such capacity, the "Documentation  Agent").  Capitalized
terms used herein that are not defined  herein shall have the meanings  ascribed
to them in the Credit Agreement.  ______________________ (the "Non-U.S. Lender")
is  providing  this  certificate  pursuant to  subsection  2.18(d) of the Credit
Agreement. The Non-U.S. Lender hereby represents and warrants that:


1. The Non-U.S.  Lender is the sole record and beneficial  owner of the Loans or
the  obligations  evidenced by Note(s) in respect of which it is providing  this
certificate.

          2.  The  Non-U.S.  Lender  is not a "bank"  for  purposes  of  Section
881(c)(3)(A) of the Internal  Revenue Code of 1986, as amended (the "Code").  In
this regard, the Non-U.S. Lender further represents and warrants that:

          (a) the Non-U.S.  Lender is not subject to  regulatory  or other legal
          requirements as a bank in any jurisdiction; and

          (b) the Non-U.S. Lender has not been treated as a bank for purposes of
          any tax,  securities  law or other  filing or  submission  made to any
          Governmental  Authority,  any  application  made to a rating agency or
          qualification  for any  exemption  from tax,  securities  law or other
          legal requirements;

          3. The Non-U.S. Lender is not a 10-percent shareholder of the Borrower
within the meaning of Section 881(c)(3)(B) of the Code; and

          4.  The  Non-U.S.  Lender  is  not a  controlled  foreign  corporation
receiving  interest  from  a  related  person  within  the  meaning  of  Section
881(c)(3)(C) of the Code.

          IN  WITNESS   WHEREOF,   the   undersigned   has  duly  executed  this
certificate.

                                   [NAME OF NON-U.S. LENDER]


                                   By:_________________________________________
                                      Name:
                                      Title:

Date:  ____________________


<PAGE>













                                                                       EXHIBIT J

                             FORM OF LENDER ADDENDUM

          Reference is made to the Credit Agreement, dated as of October 9, 1998
(as amended,  supplemented or otherwise  modified from time to time, the "Credit
Agreement"), among Powerhouse Technologies,  Inc., the banks and other financial
institutions from time to time parties thereto as Lenders, Lehman Brothers Inc.,
as Arranger,  Lehman  Commercial  Paper Inc.,  as  Syndication  Agent and Lehman
Commercial Paper Inc., as  Administrative  Agent, and Canadian  Imperial Bank of
Commerce.,  as  Documentation  Agent.  Unless  otherwise  defined herein,  terms
defined in the Credit Agreement and used herein shall have the meanings given to
them in the Credit Agreement.

          Upon  execution  and  delivery of this Lender  Addendum by the parties
hereto as provided in Section  10.17 of the Credit  Agreement,  the  undersigned
hereby becomes a Lender  thereunder having the Commitments set forth in Schedule
1 hereto, effective as of the Closing Date.

          THIS  LENDER   ADDENDUM  SHALL  BE  GOVERNED  BY,  AND  CONSTRUED  AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

          This  Lender  Addendum  may be  executed by one or more of the parties
hereto on any  number of  separate  counterparts,  and all of said  counterparts
taken  together  shall be  deemed  to  constitute  one and the same  instrument.
Delivery of an executed signature page hereof by facsimile transmission shall be
effective as delivery of a manually executed counterpart hereof.

          IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this  Lender
Addendum to be duly executed and  delivered by their proper and duly  authorized
officers as of this ____ day of ____, 1998.

                                   [ NAME OF LENDER ]


                                   By: ________________________________________
                                       Name:
                                       Title:

Accepted and agreed:

POWERHOUSE TECHNOLOGIES, INC.


By: __________________________
   Name:
   Title:





<PAGE>






LEHMAN COMMERCIAL PAPER INC., as
  Syndication Agent


By: ____________________________
   Name:
   Title:


LEHMAN COMMERCIAL PAPER INC., as
  Administrative Agent


By: ____________________________
   Name:
   Title:






<PAGE>






                                                                      Schedule 1


                         COMMITMENTS AND NOTICE ADDRESS



Name and Notice      Revolving             Tranche A Term      Tranche B Term
Address of Lender    Credit Commitment     Loan Commitment     Loan Commitment
-----------------    -----------------     ---------------     ---------------










<PAGE>







                                                                       EXHIBIT K

                            FORM OF REVOLVING CREDIT
                         COMMITMENT INCREASE SUPPLEMENT


          Reference is made to the Credit Agreement, dated as of October 9, 1998
(as amended,  supplemented or otherwise  modified from time to time, the "Credit
Agreement"), among Powerhouse Technologies,  Inc., the banks and other financial
institutions from time to time parties thereto as Lenders, Lehman Brothers Inc.,
as  Arranger,  Lehman  Commercial  Paper  Inc.,  as  Syndication  Agent,  Lehman
Commercial Paper Inc., as  Administrative  Agent, and Canadian  Imperial Bank of
Commerce, as Documentation Agent. Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.

          The Increasing Lender identified on Schedule l hereto (the "Increasing
Lender"), the Administrative Agent and the Borrower agree as follows:

          i. The Increasing  Lender hereby  irrevocably  increases its Revolving
Credit  Commitment  to the Borrower by the amount set forth on Schedule 1 hereto
(the "Increased Commitment") pursuant to Section 2.8(c) of the Credit Agreement.
From and after the Effective Date (as defined below) the Increasing  Lender will
be a Lender under the Credit Agreement with respect to the Increased  Commitment
as well as its existing Revolving Credit Commitment under the Credit Agreement.

          ii. The  Administrative  Agent (a) makes no representation or warranty
and assumes no  responsibility  with respect to any  statements,  warranties  or
representations  made in or in  connection  with the  Credit  Agreement  or with
respect  to the  execution,  legality,  validity,  enforceability,  genuineness,
sufficiency  or value of the Credit  Agreement,  any other Loan  Document or any
other  instrument  or  document  furnished   pursuant  thereto;   (b)  makes  no
representation  or warranty  and assumes no  responsibility  with respect to the
financial  condition  of the  Borrower,  any of its  Subsidiaries  or any  other
obligor  or  the  performance  or  observance  by  the  Borrower,   any  of  its
Subsidiaries or any other obligor of any of their respective  obligations  under
the Credit  Agreement  or any other Loan  Document  or any other  instrument  or
document furnished pursuant hereto or thereto. The Borrower, upon request by the
Increasing  Lender, in accordance with Section 2.6(e) will issue a Note or Notes
payable to the  Increasing  Lender and in amounts  which  reflect the  aggregate
Revolving Credit Commitment of the Increasing Lender after giving effect to this
Increase Supplement.

          iii. The  Increasing  Lender (a)  represents  and warrants  that it is
legally authorized to enter into this Increase Supplement;  (b) confirms that it
has received a copy of the Credit  Agreement,  together  with copies of the most
recent financial statements delivered pursuant to Section 6.1 thereof (or, if no
such  financial  statements  have  been  delivered,   copies  of  the  financial
statements delivered pursuant to Section 4.1 thereof),  each other Loan Document
and such other  documents and  information as it has deemed  appropriate to make
its own credit analysis and decision to enter into this Increase Supplement; (c)
agrees that it will,  independently  and without  reliance upon any Agent or any
Lender and based on such documents and information as it shall deem  appropriate
at the time,  continue to make its own credit  decisions in taking or not taking
action  under the  Credit  Agreement,  the  other  Loan  Documents  or any other
instrument or document  furnished  pursuant hereto or thereto;  (d) appoints and
authorizes the Agents to take such action as agent on its behalf and to exercise
such



<PAGE>






powers and discretion  under the Credit  Agreement,  the other Loan Documents or
any other  instrument or document  furnished  pursuant  hereto or thereto as are
delegated to the Agents by the terms  thereof,  together with such powers as are
incidental  thereto;  and (e) agrees that it will be bound by the  provisions of
the  Credit  Agreement  and will  perform in  accordance  with its terms all the
obligations  which by the  terms of the  Credit  Agreement  are  required  to be
performed by it as a Lender  including,  if it is organized  under the laws of a
jurisdiction  outside the United States,  its obligation  pursuant to subsection
2.18(e) of the Credit Agreement.

          iv.  The  effective  date of this  Increase  Supplement  shall  be the
Effective Date of the Increased  Commitment  described in Schedule 1 hereto (the
"Effective Date").  Following the execution of this Increase  Supplement by each
of the  Increasing  Lender  and  the  Borrower,  it  will  be  delivered  to the
Administrative  Agent for  acceptance and recording by it pursuant to the Credit
Agreement, effective as of the Effective Date (which shall not, unless otherwise
agreed to by the Administrative  Agent, be earlier than five Business Days after
the date of such acceptance and recording by the Administrative Agent).

          v. Upon such  acceptance and  recording,  from and after the Effective
Date,  the  Administrative  Agent  shall  make all  payments  in  respect of the
Increased Commitment (including payments of principal,  interest, fees and other
amounts)  to the  Increasing  Lender  for  amounts  which  have  accrued  on and
subsequent to the Effective Date.

          vi. From and after the Effective Date, the Increasing  Lender shall be
a party to the Credit  Agreement  and, to the extent  provided in this  Increase
Supplement,  have the rights and obligations of a Lender thereunder and shall be
bound by the provisions thereof.

          vii. This Increase  Supplement shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York.

          IN WITNESS  WHEREOF,  the parties  hereto  have  caused this  Increase
Supplement to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.



<PAGE>













                                   Schedule 1
                         to Increasing Lender Supplement


Name of Increasing Lender: ___________________________________________

Effective Date of Increased Commitment: ______________________________


Principal                           Total Amount of Commitment
Amount of                           of Increasing Lender
Increased Commitment:               (including Increased Commitment):
---------------------               ---------------------------------


$____________________               $________________________________



[INCREASING LENDER]                       POWERHOUSE TECHNOLOGIES, INC.



By:__________________________             By:__________________________________
   Name:                                     Name:
   Title:                                    Title:




Accepted:
LEHMAN COMMERCIAL PAPER INC.,
  as Administrative Agent



By:__________________________
   Name:
   Title:





<PAGE>














                                                                       EXHIBIT L

                                     FORM OF
                              NEW LENDER SUPPLEMENT


          Reference is made to the Credit  Agreement dated as of October 9, 1998
(as amended,  supplemented or otherwise  modified from time to time, the "Credit
Agreement"), among Powerhouse Technologies,  Inc., the banks and other financial
institutions from time to time parties thereto as Lenders, Lehman Brothers Inc.,
as  Arranger,  Lehman  Commercial  Paper  Inc.,  as  Syndication  Agent,  Lehman
Commercial Paper Inc., as  Administrative  Agent, and Canadian  Imperial Bank of
Commerce, as Documentation Agent. Unless otherwise defined herein, terms defined
in the Credit Agreement and used herein shall have the meanings given to them in
the Credit Agreement.

          The New Lender identified on Schedule l hereto (the "New Lender"), the
Administrative Agent and the Borrower agree as follows:

          viii.  The New Lender  hereby  irrevocably  makes a  Revolving  Credit
Commitment  to the  Borrower  of the amount set forth on  Schedule 1 hereto (the
"New Commitment")  pursuant to Section 2.8(d) of the Credit Agreement.  From and
after the  Effective  Date (as  defined  below) the New Lender  will be a Lender
under the Credit Agreement with respect to the New Commitment.

          ix. The  Administrative  Agent (a) makes no representation or warranty
and assumes no  responsibility  with respect to any  statements,  warranties  or
representations  made in or in  connection  with the  Credit  Agreement  or with
respect  to the  execution,  legality,  validity,  enforceability,  genuineness,
sufficiency  or value of the Credit  Agreement,  any other Loan  Document or any
other  instrument  or  document  furnished   pursuant  thereto;   (b)  makes  no
representation  or warranty  and assumes no  responsibility  with respect to the
financial  condition  of the  Borrower,  any of its  Subsidiaries  or any  other
obligor  or  the  performance  or  observance  by  the  Borrower,   any  of  its
Subsidiaries or any other obligor of any of their respective  obligations  under
the Credit  Agreement  or any other Loan  Document  or any other  instrument  or
document furnished pursuant hereto or thereto. The Borrower, upon request by the
New Lender, in accordance with Section 2.6(e) will issue a Note or Notes payable
to the New Lender and in amounts which reflect the  aggregate  Revolving  Credit
Commitment of the New Lender after giving effect to this New Lender Supplement.

          x. The New  Lender  (a)  represents  and  warrants  that it is legally
authorized to enter into this New Lender Supplement; (b) represents that it is a
financial institution regulated by a Governmental Authority of the United States
of America or a State thereof, or is a wholly-owned  subsidiary of or is managed
by such a financial institution; (c) confirms that it has received a copy of the
Credit Agreement,  together with copies of the most recent financial  statements
delivered  pursuant to Section 6.1 thereof (or, if no such financial  statements
have been delivered,  copies of the financial  statements  delivered pursuant to
Section 4.1  thereof),  each other Loan  Document and such other  documents  and
information  as it has deemed  appropriate  to make its own credit  analysis and
decision  to enter into this New  Lender  Supplement;  (d) agrees  that it will,
independently  and  without  reliance  upon any Agent or any Lender and based on
such  documents  and  information  as it shall  deem  appropriate  at the  time,
continue to make its own credit  decisions in taking or not taking  action under
the Credit  Agreement or any other  instrument  or document  furnished  pursuant
hereto or thereto; (e) appoints and authorizes the Agents to take such action as
agent on its behalf and to exercise such powers and discretion under



<PAGE>






the  Credit  Agreement,  the other Loan  Documents  or any other  instrument  or
document  furnished pursuant hereto or thereto as are delegated to the Agents by
the terms thereof,  together with such powers as are incidental thereto; and (f)
agrees that it will be bound by the provisions of the Credit  Agreement and will
perform in accordance with its terms all the  obligations  which by the terms of
the Credit  Agreement are required to be performed by it as a Lender  including,
if it is organized  under the laws of a jurisdiction  outside the United States,
its obligation pursuant to subsection 2.18(d) of the Credit Agreement.

          xi.  The  effective  date of this New Lender  Supplement  shall be the
Effective  Date of the New  Commitment  described  in  Schedule  1  hereto  (the
"Effective Date"). Following the execution of this New Lender Supplement by each
of the New Lender and the Borrower,  it will be delivered to the  Administrative
Agent for  acceptance  and  recording  by it pursuant  to the Credit  Agreement,
effective as of the Effective Date (which shall not, unless  otherwise agreed to
by the  Administrative  Agent, be earlier than five Business Days after the date
of such acceptance and recording by the Administrative Agent).

          xii. Upon such acceptance and recording,  from and after the Effective
Date,  the  Administrative  Agent shall make all  payments in respect of the New
Commitment (including payments of principal,  interest,  fees and other amounts)
to the New  Lender for  amounts  which have  accrued  on and  subsequent  to the
Effective Date.

          xiii.  From and after the  Effective  Date,  the New Lender shall be a
party to the Credit  Agreement  and,  to the extent  provided in this New Lender
Supplement,  have the rights and obligations of a Lender thereunder and shall be
bound by the provisions thereof.

          xiv.  This New Lender  Supplement  shall be governed by, and construed
and interpreted in accordance with, the law of the State of New York.

          IN WITNESS  WHEREOF,  the  parties  hereto have caused this New Lender
Supplement to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.



<PAGE>












                                   Schedule 1
                            to New Lender Supplement


Name of New Lender:_________________________________________


Effective Date of New Commitment:_________________________________


Principal Amount of New Commitment: $________________________________






[NEW LENDER]                                POWERHOUSE TECHNOLOGIES, INC.



By:______________________________           By:________________________________
   Name:                                       Name:
   Title:                                      Title:




Accepted:
LEHMAN COMMERCIAL PAPER INC.,
  as Administrative Agent



By:______________________________
   Name:
   Title:

<PAGE>


                                                                       EXHIBIT M

                             PARTICIPATION AGREEMENT

     This  Participation  Agreement  is  entered  into as of October  8th,  1998
between LEHMAN COMMERCIAL PAPER,  INC., a Delaware  corporation ( "Participant")
and U.S.  BANK  NATIONAL  ASSOCIATION , a national  banking  association  ("U.S.
Bank").

                              Preliminary Statement

     U.S.  Bank,  as the  "Administrative  Bank"  and as the sole  "Bank"  party
thereto,  has entered  into a Credit  Agreement,  dated as of February  16, 1995
(together with any and all other  agreements,  documents,  instruments,  whether
heretofore  or  hereafter  executed  and  delivered by the Borrower or any other
obligor in connection  with the Credit  Agreement and as such documents may have
been or may hereafter be amended,  restated or modified  from time to time,  the
"U.S Bank Credit  Agreement")  with  Powerhouse  Technologies,  Inc., a Delaware
corporation f/k/a Video Lottery Technologies,  Inc. (the "Borrower") pursuant to
which  U.S.  Bank has made  loans  (collectively,  the  "U.S.  Bank  Loans"  and
individually,  a "U.S. Bank Loan") and issued the letters of credit described on
Schedule A attached hereto and incorporated  herein by reference  (collectively,
the "U.S.  Bank  Letters  of Credit"  and  individually,  a "U.S Bank  Letter of
Credit").

     In  connection  with the  issuance  of a U.S.  Bank  Letter of Credit,  the
Borrower  executed and delivered to U.S. Bank an  Application  and Agreement for
Standby Letter of Credit  described on said Schedule A with respect to such U.S.
Bank  Letter  of  Credit  (collectively,  the  "U.S.  Bank L/C  Agreements"  and
individually, a "U.S Bank L/C Agreement").

     The Participant,  as Agent and a "Lender" party thereto, has entered into a
Credit  Agreement,  dated as of October 9, 1998 (together with any and all other
agreements, documents, instruments, whether heretofore or hereafter executed and
delivered by the Borrower or any other  obligor in  connection  with such Credit
Agreement  and as such  documents  may have been or may  hereafter  be  amended,
restated or modified from time to time, the "Lehman Credit  Agreement") with the
Borrower  pursuant  to which  the  Participant  and the other  "Lender"  parties
thereto  have  agreed to make  loans or other  financial  accommodations  to the
Borrower  (collectively,  the "Lehman Loans" and individually,  a "Lehman Loan")
for the purpose of, among other things, refinancing the U.S. Bank Loans.

     The Borrower has requested  that U.S.  Bank  terminate the U.S. Bank Credit
Agreement  but  that  U.S.  Bank  maintain  the  U.S.  Bank  Letters  of  Credit
outstanding  without  requiring  the  Borrower to post cash  collateral  for the
entire amount available to be drawn on the U.S. Bank Letters of

     As a condition precedent to doing so, U.S. Bank has required that:



                                        1

<PAGE>



          (1) the Borrower  execute and deliver to U.S. Bank the Amendment No. 1
     to each U.S.  Bank L/C  Agreement  described in said Schedule A pursuant to
     which, among other things, the Borrower and U.S. Bank have agreed that such
     U.S. Bank L/C Agreement: (a) shall survive the termination of the U.S. Bank
     Credit Agreement and the "Loan Documents"  described therein;  and (b) sets
     forth the  Borrower's  covenants and  obligations  with respect to the U.S.
     Bank Letter of Credit issued pursuant thereto; and

          (2) the Borrower cause the  Participant to execute and deliver to U.S.
     this Agreement.

     To induce U.S.  Bank to terminate  the U.S.  Bank Credit  Agreement and the
other  "Loan  Documents"  described  therein,  other  than  the  U.S.  Bank  L/C
Agreements,  and to release  its  collateral,  other than cash  collateral  (the
"Collateral")  securing the Borrower's payment of its obligations under the U.S.
Bank L/C Agreements  (collectively the "Letter of Credit  Obligations") prior to
the payment in full of the Letter of Credit  Obligations  or discharge  thereof,
Participant  has agreed to  purchase a 100%  participation  interest in the U.S.
Bank Letters of Credit and in the Letter of Credit  Obligations  relating to the
U.S. Bank Letters of Credit.

     In consideration of the premises and the mutual covenants contained herein,
U.S. Bank and the Participant hereby covenant and agree as follows:

     1. Purchase and Sale of Participation Interests.

          (a) Concurrently with the execution hereof,  U.S. Bank shall be deemed
     to have sold and  transferred  to  Participant,  and  Participant  shall be
     deemed irrevocably and  unconditionally to have purchased and received from
     U.S.  Bank,  without  recourse or  warranty,  an  undivided  interest  (the
     "Participation")  equal to 100% (such percentage is hereinafter  called the
     Participant's "Percentage") in: (i) all U.S. Bank Letters of Credit and the
     Letter  of  Credit  Obligations   arising  therefrom  or  relating  thereto
     (collectively, the "Credit"); and (ii) all existing and future property and
     interests in property of the Borrower  securing  payment and performance of
     such Letter of Credit Obligations (the "Collateral").

          (b) Except as otherwise  provided in Section 3 or 4, the Participation
     includes a pro rata interest,  equal to the Participant's Percentage of all
     amounts  ("Payments")  which  are  actually  received  by U.S.  Bank or the
     Participant from, or for the account of, the Borrower on account of or with
     respect to the Credit, whether from: (i) the Borrower: (ii) the Collateral;
     or (iii) any other source,  including,  without  limitation,  recovery from
     litigation.

          (c) The  relationship  between the  Participant  and U.S.  Bank is and
     shall be that of a purchaser and seller of a property  interest  (i.e.,  an
     outright,  partial  assignment  of  an  interest  in  the  Credit  and  the
     Collateral) and not a creditor-debtor relationship.  Accordingly, U.S. Bank
     shall hold  possession of and legal title to the U.S.  Bank L/C  Agreements
     and all of the  Participant's  rights  with  respect  to the Credit and the
     Collateral shall be held and


                                        2

<PAGE>



     exercised  by U.S.  Bank in its  own  name  subject  to the  terms  of this
     Agreement,  but all such action by U.S.  Bank  shall,  to the extent of the
     Participation,  be taken by U.S. Bank as trustee for the  Participant,  and
     all Payments, Collateral and documents which at any time may come into U.S.
     Bank's  possession  shall at all times be held by U.S. Bank in trust and as
     agent for the Participant,  to the extent of the  Participation;  provided,
     that,   upon   Participant's   payment  of  its  purchase   price  for  its
     Participation in a demand for payment under a U.S. Bank Letter of Credit in
     accordance  with  Section  2  hereof,  U.S.  Bank  shall be  deemed to have
     assigned to Participant, without recourse or warranty, the Letter of Credit
     Obligations arising from U.S. Bank's payment of such demand for payment and
     Participant  shall directly collect such Letter of Credit  Obligations from
     Borrower and apply such collections to the payment of such Letter of Credit
     Obligations  without  U.S.  Bank being the  recipient  of, or the  intended
     beneficiary  of, such  collection or a transferee  from  Participant of any
     portion  of such  collection  except to the  extent  that  Participant  has
     distributed a portion of such  collection to U. S. Bank in accordance  with
     Section 3 hereof.  Participant  shall indemnify and hold harmless U.S. Bank
     from and  against  any and all claims,  liabilities,  obligations,  losses,
     damages,   penalties,   actions,   judgments,  suits,  costs,  expenses  or
     disbursements  of any  kind or  nature  whatsoever  which  may at any  time
     (including, without limitation, at any time following the payment of any of
     the Letter of Credit  Obligations)  be imposed on,  incurred by or asserted
     against U.S.  Bank in any way  relating to or arising out of  Participant's
     collection  of any Letter of Credit  Obligations  except to the extent that
     Participant  has  distributed a portion of such collection to U. S. Bank in
     accordance  with  Section 3 hereof.  All of  Participant's  indemnification
     obligations   provided  for  in  this  subsection  (c)  shall  survive  the
     termination of this Agreement.

          (d) Upon  Participant's  request  and at  Participant's  sole cost and
     expense including,  without  limitation,  payment of U.S. Bank's reasonable
     attorney's fees and legal expenses,  U.S. Bank shall execute and deliver to
     Participant a separate  assignment of any Letter of Credit Obligation which
     is deemed to have been  assigned to  Participant  pursuant to Section  1(c)
     hereof.

     2. Funding of Participation.

          (a) U.S. Bank shall  promptly  notify  Participant  of each demand for
     payment  under  a U. S.  Bank  Letter  of  Credit,  the  amount  thereof  (
     including,  without, limitation, all of customary fees, charges or expenses
     which U.S. Bank may assess in connection  with such  payment),  the date on
     which such payment is to be made and the amount of Participant's Percentage
     thereof.  By not later than 12:00 noon.  (Minneapolis  time) on the date on
     which such payment is to be made by U.S. Bank  (provided  that  Participant
     shall have received notice from U.S. Bank of the amount of such payment not
     later  than  10:00  a.m.  (New  York  time)  on the  date of such  payment,
     Participant  shall pay to U.S. Bank in immediately  available  funds as and
     for  the   purchase   price   of   Participant's   Participation   therein,
     Participant's   Percentage  of  such  demand  for  payment.   Participant's
     obligation to make such amounts available to U.S. Bank shall be irrevocable
     and shall not be subject to any


                                        3

<PAGE>



     qualification or exception  whatsoever and shall be made in accordance with
     the terms and  conditions  of this  Agreement  under  all  circumstances  ,
     provided,  that  Participant  shall not be required to reimburse  U.S. Bank
     hereunder  for any amount for which the  Borrower  would not be required to
     reimburse U.S. Bank pursuant to the relevant U.S. Bank L/C Agreement.


          (b) If and to the extent  Participant  shall not have made such amount
     available to U.S. Bank on any such date,  Participant  agrees, upon demand,
     to pay  interest on such amount to U.S.  Bank for the account of U.S.  Bank
     for each day from and  including  the date on which such  payment was to be
     made to but  excluding  the date such  payment  is made at a rate per annum
     equal to the rate  payable  equal to the  Reference  Rate  plus  2.00 % per
     annum.

          (c) Participant agrees with U.S. Bank that  Participant's  purchase of
     its Participation shall be with its own funds and not with the funds of the
     Borrower and  Participant  shall indemnify and hold harmless U.S. Bank from
     and against any and all claims, liabilities,  obligations, losses, damages,
     penalties,  actions,  judgments, suits, costs, expenses or disbursements of
     any kind or nature  whatsoever  which may at any time  (including,  without
     limitation,  at any time  following  the  payment  of any of the  Letter of
     Credit  Obligations)  be imposed on,  incurred by or asserted  against U.S.
     Bank in any way relating to or arising out of Participant's  failure to use
     its  own  funds  to  purchase  its  Participation.   All  of  Participant's
     indemnification  obligations  provided  for in this  subsection  (c)  shall
     survive the termination of this Agreement.

          (d) U.S.  Bank and  Participant  agree  that  U.S.  Bank  shall not be
     required to apply any Collateral to reduce the Letter of Credit Obligations
     when calculating the amount of  Participant's  purchase price and that U.S.
     Bank may retain all such Collateral until the Participant has purchased its
     Participation in all of the Letter of Credit  Obligations  arising from, or
     relating to the U. S. Bank  Letters of Credit , whereupon  U.S.  Bank shall
     deliver  such  Collateral  to  Participant  in the form held by U.S.  Bank,
     without recourse or warranty , provided,  that when the aggregate amount of
     the Letter of Credit  Obligations has been reduced to an amount equal to or
     less than the amount of cash collateral held by U.S. Bank in respect of the
     Letter of Credit  Obligations,  U.S.  Bank will apply such cash  collateral
     toward payment of the Letter of Credit Obligations before making any demand
     on Participant hereunder.

     3. Allocation of Payments.

          (a)  Distributions  with  respect to the Credit and the  Participation
     shall be made and payable  only out of Payments  actually  received in good
     funds by U.S. Bank or, if the Payment has been  collected by Participant in
     accordance with the proviso clause to Section 1(c), by Participant.



                                        4

<PAGE>



          (b) It is  understood  and agreed that the  Participant  shall have no
     interest in, and shall not be entitled to receive any part of the customary
     fees, charges or expenses which U.S. Bank may assess in connection with the
     issuance,  extension  (but  only  if such  extennsion  is  approved  by the
     Participant in accordance  with Section 7 hereof),  amendment or payment of
     any U.S.  Bank  Letter  of  Credit  in  accordance  with any U.S.  Bank L/C
     Agreement  (all  such  fees,   charges  and  expenses   being   hereinafter
     collectively referred to as "Fees").

          (c) All Payments received by U.S. Bank or Participant, as the case may
     be, shall be retained by the recipient or distributed to the  non-recipient
     party,  as  applicable,  and applied by the parties in the following  order
     unless  a  Payment  is  required  to be  otherwise  applied  by  agreement,
     direction of the payor or law: (1) first, to Fees,  which shall be retained
     by  U.S.  Bank  or,  if  Participant  is the  recipient  of  such  Payment,
     distributed  to U.S..  Bank,  (2) second,  to  Extraordinary  Expenses  (as
     defined  in  Section  10  hereof),   which  shall  be  distributed  to  the
     Participant  to  the  extent  of  its  Percentage   thereof  provided  that
     Participant is in compliance with its obligations  under Section 10 hereof,
     (3) third, to the outstanding Letter of Credit Obligations,  which shall be
     distributed to the  Participant  provided the  Participant is in compliance
     with its obligations under Section 2(a) hereof;  provided, that, U. S. Bank
     may set off against any amount  distributable to Participant the amount, if
     any,  which  Participant  is  obligated  to pay to  U.S.  Bank  under  this
     Agreement.

          (d) If any of the Payments  received by, or distributed  to, U.S. Bank
     are  later  returned  or  repaid  by  U.S.  Bank  to  the  Borrower  or its
     representative or successor in interest, whether by court order, settlement
     or otherwise, the Participant shall, upon notice U.S. Bank, immediately pay
     to U.S.  Bank the  Participant's  Percentage of all Payments so returned or
     repaid together with any interest which U.S. Bank may be required to pay in
     connection therewith. All of Participant's obligations provided for in this
     subsection (d) shall survive the termination of this Agreement.

     4. Allocations of Fees and Letter of Credit Commission Between  Participant
and U.S. Bank.

          (a) As consideration for U.S. Bank's expenses and efforts in servicing
     the U.S. Bank L/C Agreement,  the  Participant  agrees that the Participant
     does not own and shall have no claim to any Fees.

          (b) On the date hereof,  U.S.  Bank agrees to pay the  Participant  an
     amount  equal to $0.00 as  Participant's  share of the  "Letter  of  Credit
     Commission"  previously  paid by the Borrower to U.S.  Bank pursuant to the
     U.S.  Bank Credit  Agreement.  U.S.  Bank shall retain as its share of such
     Letter of Credit  Commission and as  compensation  for its services and the
     costs and expenses herein agreed to be borne by it, the difference, if any,
     between the total of such Letter of Credit Commission received by U.S. Bank
     and the share thereof  allocated and paid to the  Participant in accordance
     with this Section 4(b).



                                        5

<PAGE>



     5. Access to Information; Independent Investigation.

     The Participant  acknowledges that the Participant has  independently,  and
without  reliance upon any  representations  of U.S.  Bank, and based on (i) the
financial information provided to the Participant by the Borrower,  (ii) various
information  provided to the  Participant by the Borrower,  and (iii) such other
financial  statements,  documents  and  information  as the  Participant  deemed
appropriate,  made and  relied  upon its own credit  analysis  and  judgment  to
execute this  Agreement and purchase the  Participation.  The  Participant  also
acknowledges  that it will,  independently  and without reliance upon U.S. Bank,
and  based  on such  financial  statements,  documents  and  information  as the
Participant  deems  appropriate at the time,  continue to make and rely upon its
own credit decision in taking or not taking action under this Agreement.

     6. Documents and Other Agreements Regarding Administration of the Loans.

     In order to enable U.S. Bank to better administer and enforce the U.S. Bank
L/C Agreements on its own behalf, and as trustee for the Participant,  and as an
inducement  to  U.S.  Bank  to  enter  into  this  Agreement  and  to  sell  the
Participation  to the Participant  hereunder,  the Participant  acknowledges and
agrees that it is in the  Participant's  best interest  that: (i) U.S. Bank hold
for itself,  and as bailee for the Participant,  all executed original copies of
the U.S.  Bank L/C  Agreements,  at its offices at U.S.  Bank Place,  601 Second
Avenue  South,  Minneapolis,  Minnesota  55402-4302 or such other office of U.S.
Bank as U.S.  Bank shall  determine  to be  appropriate;  (ii) U.S.  Bank not be
required to segregate  from its own funds  Payments  allocable to te Participant
hereunder;  and (iii)U.S.  Bank not be required to maintain  separate,  internal
records   with   respect  to  the   Participant's   Participation   (other  than
Participation  Reports).  The  agreements  of the  Participant  in the preceding
sentence  notwithstanding,  all  Payments and  Collateral  which are not for any
reason  disbursed  to,  or  applied  for the  benefit  of,  the  Participant  in
accordance with Sections 3 or 4 hereof, but which are otherwise allocable to the
Participant  hereunder,  will be held by U.S. Bank as agent and in trust for the
Participant,  subject at all times to the Participant's  rights hereunder.  Upon
written  notice from the  Participant,  U.S. Bank will permit the  Participant's
agents,  at any reasonable  time during business hours, to examine the copies of
the U.S. Bank L/C Agreements which are in U.S. Bank's possession and U.S. Bank's
books and records  relating  to the U.S.  Bank  Letters of Credit and U.S.  Bank
will, upon the Participant's request, and at the Participant's expense,  furnish
to the Participant copies of such documents and agreements  relating to the U.S.
Bank Letters of Credit as U.S. Bank may have in its possession.

     7.  U.S.  Bank's  Representations,  Duty  of  Care  and  Responsibility  to
Participant.

     The Participant  accepts the full risk of non-payment of the  Participation
and  agrees  that U.S.  Bank shall not be  responsible  for the  performance  or
observance  by the Borrower of any of the terms,  covenants or conditions of the
U.S.  Bank  L/C  Agreements  or for the  inspection  or  policing  of any of the
Collateral. The Participant specifically acknowledges that U.S. Bank has made no
warranty or representation to the Participant with respect to the due execution,
legality,  accuracy,  authenticity,  completeness,  validity,  enforceability or
collectibility of the U.S. Bank L/C Agreements (including,


                                        6

<PAGE>



without  limitation,  any warranty or representation  of the Borrower  contained
therein) or the U.S. Bank Letters of Credit,  or with respect to the solvency or
financial  condition of the Borrower or the future  existence or value of any of
the Collateral.  Notwithstanding anything to the contrary contained herein or in
any law  applicable  generally  to  transactions  of the type  evidenced by this
Agreement, the Participant and U.S. Bank agree that U.S. Bank shall be obligated
to manage and  supervise  the Credit and the U.S.  Bank L/C  Agreements  only in
accordance  with its  usual  practices,  modified  from time to time as it deems
appropriate under the circumstances, and U.S. Bank shall be entitled to take all
actions  with respect to the Credit as if there were no  participants  and as if
U.S. Bank were solely  involved in the Credit and the U.S.  Bank L/C  Agreements
except that U.S. Bank agrees that it will: (i) consult with Participant prior to
agreeing to amend,  modify or waive any  material  term or condition of any U.S.
Bank Letter of Credit; and (ii) not agree, without obtaining Participant's prior
written consent , to any amendment,  modification or waiver of the U.S. Bank L/C
Agreements,  any U.S.  Bank Letter of Credit or any Letter of Credit  Obligation
which  would  reduce the  principal  of, or rate of  interest  on, any Letter of
Credit  Obligation  or postpone the date fixed for the payment  thereof or which
would  extend the expiry date of any U.S.  Bank Letter of Credit or would permit
any drawing in excess of the stated amount of the applicable U.S. Bank Letter of
Credit. The Participant further agrees that U.S. Bank shall not be liable to the
Participant under any  circumstances  except for actual losses, if any, suffered
by the Participant  hereunder which are proximately caused either by U.S. Bank's
gross negligence,  willful misconduct or bad faith; subject only to such limited
liability,  the  Participant  hereby  exonerates  and releases U.S. Bank now and
hereafter   from  any  existing  or  future   obligation  or  liability  to  the
Participant,  express or implied,  for any (i) loss of, release of, depreciation
of, or failure to realize upon any of the Collateral; (ii) failure to collect or
receive payment of the Letter of Credit Obligations;  (iii) mistake, omission or
error of judgment in: (a) honoring,  or failing to honor, any demand for payment
on any U.S.  Bank  Letter  of  Credit,  or (b)  making  or  failing  to make any
examinations,  appraisals,  audits or checkups of the Borrower's  affairs or the
Collateral.

     8.  Waivers  and Release of Rights  Under the Loan  Agreements.  U.S.  Bank
reserves  the right,  in its sole  discretion,  at any time or times  hereafter,
without  giving  prior  notice to the  Participant  or  obtaining  Participant's
consent  except as  provided  in  Section 7 hereof,  (i) to  release  any of the
Collateral,  (ii) to resolve  any  discrepancy  in any demand for payment on any
U.S.  Bank  Letter of Credit  with the terms and  conditions  thereof,  (iii) to
consent to any action or failure to act by the  Borrower,  (iv) to  exercise  or
refrain  from  exercising  any powers or rights  which  U.S.  Bank may have as a
matter  of law,  or  under,  or in  respect  of the U.S.  Bank  L/C  Agreements,
including,  without  limitation,  the right to enforce  the  obligations  of the
Borrower,  and (v) to take any other  action  allowed  under  the U.S.  Bank L/C
Agreements  or  applicable  law. U.S. Bank will use its best efforts to give the
Participant  notice of the  occurrence of any material Event of Default of which
U.S.  Bank shall have actual  knowledge;  but the  Participant  agrees that U.S.
Bank's failure to give the  Participant  any such notice shall not result in any
liability on U.S. Bank's part to the Participant.

     9. Additional Credit to Borrower.



                                        7

<PAGE>



     U. S. Bank agrees that it will not extend additional credit to the Borrower
(other than in  connection  with  honoring a demand for  payment on a U.S.  Bank
Letter of Credit) without first obtaining Participant's prior written consent.

     10. Expenses.

          (a) Except as set forth  herein,  all  routine  costs and  expenses of
     monitoring  the U.S.  Bank Letters of Credit and  collecting  the Letter of
     Credit Obligations shall be borne by U.S. Bank.

          (b) Upon demand by U.S. Bank, the Participant shall pay its Percentage
     of all Extraordinary  Expenses incurred by U.S. Bank in connection with the
     Credit  and not  recovered  from  the  Borrower.  The  term  "Extraordinary
     Expense"  means  all  costs,   expenses  (including,   without  limitation,
     attorney's fees and legal expenses),  taxes, costs and expenses of appeals,
     and  out-of-pocket  advances (not including  ordinary  overhead expenses or
     salary expenses for U.S. Bank's  clerical or supervisory  personnel)  which
     are incurred by U.S.  Bank at any time or times  hereafter,  in  connection
     with (i) the collection or enforcement of the Letter of Credit Obligations;
     (ii) the  preservation  of the Collateral;  (iii) the sale,  disposition or
     other realization upon or the recovery of possession of the Collateral;  or
     (iv) the filing and  prosecution  of a complaint with respect to any of the
     above  matters or the defense of any claim,  actual or  threatened,  by the
     Borrower,  a receiver or trustee in bankruptcy for the Borrower,  any third
     party,  for,  or on  account  of,  or with  respect  to the  U.S.  Bank L/C
     Agreements,  whether to recover  damages  for  business  interference,  for
     liabilities  for  debts of the  Borrower,  including,  without  limitation,
     taxes,  for alleged  preferences  or  fraudulent  conveyances  or transfers
     received or alleged to have been  received from the Borrower as a result of
     the Credit or in  connection  with any Payments,  or  otherwise,  and shall
     include the amount of any recovery  from U.S.  Bank in such  litigation  or
     proceeding,  whether  by  settlement  or  pursuant  to a  judgment.  All of
     Participant's obligations provided for in this subsection (b) shall survive
     the termination of this Agreement.

     11. U.S. Bank's Books and Records to be Presumed Correct.

     U.S.  Bank's  books and  records and all entries  thereon,  and  statements
received by the Participant  from U.S. Bank with respect to the Credit,  will at
all times (i) evidence both the Participant's  interest and U.S. Bank's interest
in the  Credit;  (ii)  identify  the  same as such;  and  (iii)  subject  to the
Participant's   express  right  to  rebut  the   presumption   by   conclusively
demonstrating the existence of an error on the part of U.S. Bank, be presumed to
be  correct,  prima  facie  evidence  of  the  amount  of  the  Credit  and  the
Participant's interest therein. For the purposes of this Agreement, "U.S. Bank's
books and records" shall include: any book, register, statement of account, copy
statement of account,  contract of loan,  letter of undertaking,  bill signed by
U.S.  Bank,  index,  sheet of paper coil,  any device for  storing  data used by
electronic  computer,  the  printouts  of such  computers  and other  device for
storing data used by U.S. Bank.  For the purposes of this Section 11,  "entries"
shall be deemed to include any entry or copy thereof whether  recorded or copied
in


                                        8

<PAGE>



handwriting  or by  typewriter  and  whether  recorded  or copied by a method of
typing,  duplication,  photography  (including  microfilm)  or by  means  of any
mechanical,  electrical or electronic device or by means of electronic recording
or by any other method of recording  or  presentation  of words or figures or of
any other symbols.

     12. Sharing of Setoffs and Collateral.

          (a) U.S.  Bank  agrees  that,  so long as any  portion  of the  Credit
     remains  outstanding,  any  payment  to U.S.  Bank by way of set-off of the
     Borrower's  accounts  shall be applied to the  Borrower's  Letter of Credit
     Obligations  and shall be shared with the  Participant  in accordance  with
     Section 3 hereof.

          (b) The Participant  agrees that any security  interest granted by the
     Borrower to the  Participant  at any time or times  hereafter in all or any
     part of the Collateral shall be subordinate in all respects to the security
     interests of U.S. Bank,  irrespective of the actual date or order of filing
     of any financing  statements or other means of perfection  under applicable
     law, or the date of  extension  of credit by U.S.  Bank.  U.S.  Bank hereby
     expressly  appoints the Participant as U.S. Bank's agent for the purpose of
     perfecting U.S. Bank's security interest in any of the Collateral which may
     at  any  time  come  into  the  possession  of  the  Participant,  and  the
     Participant  hereby  agrees  to hold any such  Collateral  for U.S.  Bank's
     benefit and, upon request, to deliver such Collateral to U.S. Bank.

          (c) The  Participant  shall have no interest in any property  taken as
     security for any credit, loan or financial  accommodation made or furnished
     to the Borrower by U.S. Bank in which the Participant has no Participation,
     or in any property now or hereafter in U.S. Bank's possession or under U.S.
     Bank's control or in any deposit held or other  indebtedness  owing by U.S.
     Bank which may be or might become  security for  performance and payment of
     the Borrower's obligations and liabilities under and in connection with the
     U.S. Bank L/C Agreements by reason of the general description  contained in
     any  general  loan  or  collateral  agreement,  collateral  note  or  other
     instrument  held  by  U.S.  Bank  or by  reason  of any  right  of  setoff,
     counterclaim,  banker's  lien or otherwise,  except that if such  property,
     deposit,  indebtedness  or the  proceeds  thereof  shall be  applied to the
     payment  or  reduction  of any  Letter  of Credit  Obligation  owing by the
     Borrower,  then the Participant shall be entitled to its Percentage of such
     application.

     13. Participant's Right to Terminate.

     The  Participant  may not terminate its  obligations  hereunder  unless and
until all U.S. Bank Letters of Credit have: (i) expired in accordance with their
respective terms, (ii) been returned to U.S. Bank with written instructions from
the  beneficiary  thereof to cancel the  relevant  U.S.  Bank  Letter of Credit;
and/or  (iii) been drawn upon to the maximum  stated  amount  thereof and, if so
drawn upon, all Letter of Credit Obligations have been paid.



                                        9

<PAGE>



     14. Method for Making Payments Hereunder.

     Unless  otherwise  agreed  in  writing  from  time to time  hereafter,  all
payments  which the  Participant  is required to make to U.S. Bank or which U.S.
Bank is required to make to the  Participant  under this Agreement shall be made
by wire transfer,  or in other immediately available funds so that the recipient
of the payment  receives  the funds no later than the day the payment is due. If
for  any  reason  such  payments  are not  made  when  due,  U.S.  Bank  and the
Participant   shall  make  such  adjustments  as  may  be  equitable  under  the
circumstances to compensate the recipient for the delay in payment.

     15. Notices.

     All notices or other  communications  to any party in connection  with this
Agreement  shall be in writing and shall be sent by manual  delivery,  telegram,
telex, facsimile transmission,  overnight courier or United States mail (postage
prepaid)  addressed to such party at the address specified on the signature page
hereof, or at such other address as such party shall have specified to the other
party hereto in writing.  All periods of notice shall be measured  from the date
of delivery thereof if manually  delivered,  from the date of sending thereof if
sent by telegram,  telex or facsimile transmission,  from the first Business Day
after the date of sending if sent by overnight courier, or from two Business Day
after the date of mailing if mailed.

     16. Governing Law; Successors.

     This Agreement  shall be binding upon and shall inure to the benefit of the
legal  representatives,  successors and assigns of the respective parties hereto
and shall be  governed by and  interpreted  in  accordance  with the laws of the
State of  Minnesota.,  without  giving  effect to  conflict  of laws  principles
thereof,  but giving effect to federal laws of the United  States  applicable to
national banks.

     17. Consent to Jurisdiction.

     AT THE OPTION OF U.S BANK,  THIS  AGREEMENT  MAY BE ENFORCED IN ANY FEDERAL
COURT OR MINNESOTA  STATE COURT SITTING IN MINNEAPOLIS  OR ST. PAUL,  MINNESOTA;
AND THE PARTICIPANT CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND
WAIVES ANY ARGUMENT  THAT VENUE IN SUCH FORUMS IS NOT  CONVENIENT.  IN THE EVENT
THE PARTICIPANT  COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY
TORT OR CONTRACT  THEORY ARISING  DIRECTLY OR INDIRECTLY  FROM THE  RELATIONSHIP
CREATED BY THIS  AGREEMENT,  U.S BANK, AT ITS OPTION,  SHALL BE ENTITLED TO HAVE
THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED,  OR
IF SUCH TRANSFER CANNOT BE ACCOMPLISHED  UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.


                                       10

<PAGE>



     18. Waiver of Jury Trial.

     EACH OF U.S. BANK AND THE  PARTICIPANT  WAIVES ANY RIGHT TO A TRIAL BY JURY
IN ANY  ACTION OR  PROCEEDING  TO  ENFORCE  OR DEFEND  ANY RIGHTS (a) UNDER THIS
AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH, OR (b) ARISING FROM
ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES THAT ANY
SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

     19.   Participant's   Compliance   with  Law;   Resale  or   Assignment  of
Participation.

     The  Participant  hereby  warrants and represents to U.S. Bank that (i) the
Participant's  execution  and  delivery of this  Agreement  and  purchase of the
Participation  does  not  constitute  a  violation  by  the  Participant  of any
agreement, law, statute, decree or decision (including any legal lending limits)
which is binding on the  Participant;  and (ii) the Participant is acquiring the
Participation  for its own  account and , except as  contemplated  by the Lehman
Credit Agreement, will not sell, pledge, encumber, assign, or subparticipate its
Participation,  or any part  thereof,  to any person  without U.S.  Bank's prior
written  consent  unless  any such  sale,  pledge,  encumbrance,  assignment  or
subparticipation is to the parent or an affiliate of the Participant.  U.S. Bank
may  deal  exclusively  with  the  Participant   concerning  the   Participation
notwithstanding  U.S.  Bank's  knowledge of and/or consent to the  Participant's
sale, transfer,  assignment or subparticipation of the Participation.  U.S. Bank
and the  Participant  hereby agree that any such  transfer of an interest in the
Participation,  except as contemplated  by the second  preceding  sentence.  The
Participant   and  U.S.   Bank  further  agree  it  is  their  intent  that  the
Participation shall not be, and shall not be construed to be, a "security" under
any federal or state securities laws.



                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]














                                       11


<PAGE>



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


                                U.S. BANK NATIONAL ASSOCIATION


                                By:  ______________________________________
                                       Richard J. Mikos (print name)
                                Title: Vice President

                                Address:
                                U.S. Bank Place MPFP 1802
                                601 Second Avenue South
                                Minneapolis, Minnesota 55402-4302
                                Attention: Mr. Richard Mikos
                                Reference: Powerhouse Technologies,  Inc.
                                Telephone:  (612) 973-2134
                                Fax No.:  (612) 973-2148

                                LEHMAN COMMERCIAL PAPER, INC.

                                By:  ______________________________________
                                     _____________________________(print name)
                                Title:_____________________________________

                                Address:
                                3 World Trade Center
                                10th Floor
                                New York, New York 10285
                                Attention:   Mr. Michael O'Brien
                                Reference: Powerhouse Technologies, Inc.
                                Telephone:
                                Fax No.:


                                       12

<PAGE>


                                   SCHEDULE A

                           U. S Bank Letters of Credit


1.   Letter  of Credit  No.  SLCMMSP00165,  dated  July 3, 1998 in favor of T.L.
     International   Manufacturing/Distribution,   Inc.   in   the   amount   of
     $475,000.00,  as amended by Amendment  No. 1, dated July 27, 1998 issued by
     U. S. Bank pursuant to  Application  and  Agreement  for Standby  Letter of
     Credit dated July 1, 1998.

2.   Letter of Credit  No.  75800,  dated  June 26,  1995 in favor of  Firemen's
     Insurance Company, in the amount of $7,500,000.00,  as amended by Amendment
     No. 1,  dated  June 28,  1995,  Amendment  No.  2,  dated  March 11,  1996,
     Amendment No. 3, dated March 22, 1996 and  Amendment No. 4, dated  February
     3,  1997issued  by U. S. Bank  pursuant to  Application  and  Agreement for
     Standby Letter of Credit dated June 16, 1995 as revised June 19, 1995.



                                                        13