<PAGE>
                                          
                                          

         [EXHIBIT 10.25]
                        ------------------------------------------------
                                          
                             COLOR SPOT NURSERIES, INC.
                                          
                  ------------------------------------------------
                                          




                  ------------------------------------------------
                                          
                  ------------------------------------------------
                                          
                            LOAN AND SECURITY AGREEMENT
                                          
                              Dated:  October __, 1998
                                          
                                    $70,000,000
                                          
                  ------------------------------------------------
                                          
                             FLEET CAPITAL CORPORATION,
                                      AS AGENT
                                          
                               AND ADDITIONAL LENDERS
                          FROM TIME TO TIME PARTY THERETO

                  ------------------------------------------------

<PAGE>

                                 TABLE OF CONTENTS

<TABLE>
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<S>                                                                           <C>
SECTION 1.  CREDIT FACILITY. . . . . . . . . . . . . . . . . . . . . . . . . . 1

   1.1. Revolving Credit Loans.. . . . . . . . . . . . . . . . . . . . . . . . 1

SECTION 2.  INTEREST, FEES AND CHARGES . . . . . . . . . . . . . . . . . . . . 3

   2.1. Interest.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

   2.2. Computation of Interest and Fees.. . . . . . . . . . . . . . . . . . . 4

   2.3. LIBOR Option.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

   2.4. Closing Fee; Annual Agency Fee.. . . . . . . . . . . . . . . . . . . . 5

   2.5. Letter of Credit and LC Guaranty Fees. . . . . . . . . . . . . . . . . 5

   2.6. Unused Line Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

   2.7. Capital Adequacy.. . . . . . . . . . . . . . . . . . . . . . . . . . . 6

   2.8. Audit and Appraisal Fees.. . . . . . . . . . . . . . . . . . . . . . . 6

   2.9. Reimbursement of Expenses. . . . . . . . . . . . . . . . . . . . . . . 6

   2.10. Bank Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

SECTION 3.  LOAN ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . 7

   3.1. Manner of Borrowing Revolving Credit Loans.. . . . . . . . . . . . . . 7

   3.2. Payments.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

   3.3. Mandatory Prepayment from Proceeds of Sale, Loss, Destruction or
          Condemnation of Collateral.. . . . . . . . . . . . . . . . . . . . .10

   3.4. Application of Payments and Collections. . . . . . . . . . . . . . . .11

   3.5. All Loans to Constitute One Obligation.. . . . . . . . . . . . . . . .11

   3.6. Loan Account.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

   3.7. Statements of Account. . . . . . . . . . . . . . . . . . . . . . . . .12

   3.8. Sharing of Payments, Etc.. . . . . . . . . . . . . . . . . . . . . . .12

SECTION 4.  TERM AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . .12

                                     -i-
<PAGE>

   4.1. Term of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . .12

   4.2. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

SECTION 5.  SECURITY INTERESTS . . . . . . . . . . . . . . . . . . . . . . . .14

   5.1. Security Interest in Collateral. . . . . . . . . . . . . . . . . . . .14

   5.2. Lien Perfection; Further Assurances. . . . . . . . . . . . . . . . . .15

   5.3. Lien on Realty.. . . . . . . . . . . . . . . . . . . . . . . . . . . .15

SECTION 6.  COLLATERAL ADMINISTRATION. . . . . . . . . . . . . . . . . . . . .15

   6.1. General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

   6.2. Administration of Accounts.. . . . . . . . . . . . . . . . . . . . . .16

   6.3. Administration of Inventory. . . . . . . . . . . . . . . . . . . . . .18

   6.4. Administration of Equipment. . . . . . . . . . . . . . . . . . . . . .18

   6.5. Payment of Charges.. . . . . . . . . . . . . . . . . . . . . . . . . .19

SECTION 7.  REPRESENTATIONS  AND  WARRANTIES . . . . . . . . . . . . . . . . .19

   7.1. General Representations and Warranties.. . . . . . . . . . . . . . . .19

   7.2. Continuous Nature of Representations and Warranties. . . . . . . . . .26

   7.3. Survival of Representations and Warranties.. . . . . . . . . . . . . .26

SECTION 8.  COVENANTS  AND  CONTINUING  AGREEMENTS . . . . . . . . . . . . . .27

   8.1. Affirmative Covenants. . . . . . . . . . . . . . . . . . . . . . . . .27

   8.2. Negative Covenants.. . . . . . . . . . . . . . . . . . . . . . . . . .29

   8.3. Specific Financial Covenants.. . . . . . . . . . . . . . . . . . . . .32

SECTION 9.  CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . .32

   9.1. Documentation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

   9.2. No Default.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

   9.3. Other Conditions.. . . . . . . . . . . . . . . . . . . . . . . . . . .33

   9.4. Availability.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

   9.5. No Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

                                     -ii-
<PAGE>

SECTION 10.  EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT . . . . . . . .33

   10.1. Events of Default.. . . . . . . . . . . . . . . . . . . . . . . . . .33

   10.2. Acceleration of the Obligations.. . . . . . . . . . . . . . . . . . .36

   10.3. Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . .36

   10.4. Remedies Cumulative; No Waiver. . . . . . . . . . . . . . . . . . . .38

SECTION 11.  THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . .38

   11.1. Authorization and Action. . . . . . . . . . . . . . . . . . . . . . .38

   11.2. Agent's Reliance, Etc.. . . . . . . . . . . . . . . . . . . . . . . .39

   11.3. Fleet and Affiliates. . . . . . . . . . . . . . . . . . . . . . . . .40

   11.4. Lender Credit Decision. . . . . . . . . . . . . . . . . . . . . . . .40

   11.5. Indemnification.. . . . . . . . . . . . . . . . . . . . . . . . . . .40

   11.6. Agency Provisions Relating to Collateral. . . . . . . . . . . . . . .41

   11.7. Agent's Right to Purchase Commitments.. . . . . . . . . . . . . . . .42

   11.8. Right of Sale, Assignment, Participations.. . . . . . . . . . . . . .42

   11.9. Amendment.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43

   11.10. Resignation of Agent; Appointment of Successor.. . . . . . . . . . .44

SECTION 12.  MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . .45

   12.1. Power of Attorney.. . . . . . . . . . . . . . . . . . . . . . . . . .45

   12.2. Indemnity.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46

   12.3. No Sale of Interest by Borrower.. . . . . . . . . . . . . . . . . . .46

   12.4. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . .46

   12.5. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . .46

   12.6. Cumulative Effect; Conflict of Terms. . . . . . . . . . . . . . . . .46

   12.7. Execution in Counterparts.. . . . . . . . . . . . . . . . . . . . . .47

   12.8. Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47

   12.9. Agent's and Lenders' Consent. . . . . . . . . . . . . . . . . . . . .48

                                    -iii-
<PAGE>

   12.10. Credit Inquiries.. . . . . . . . . . . . . . . . . . . . . . . . . .48

   12.11. Time of Essence. . . . . . . . . . . . . . . . . . . . . . . . . . .48

   12.12. Entire Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . .48

   12.13. Interpretation.. . . . . . . . . . . . . . . . . . . . . . . . . . .48

   12.14. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . .49

   12.15. GOVERNING LAW; CONSENT TO FORUM. . . . . . . . . . . . . . . . . . .49

   12.16. WAIVERS BY BORROWER. . . . . . . . . . . . . . . . . . . . . . . . .50

   12.17. Illinois Collateral Protection Act.. . . . . . . . . . . . . . . . .50
</TABLE>


                                      -iv-
<PAGE>

                            LOAN AND SECURITY AGREEMENT

       THIS LOAN AND SECURITY AGREEMENT is made this ____ day of October, 1998,
by and among FLEET CAPITAL CORPORATION ("Fleet"), a Rhode Island corporation
with an office at One North Franklin Street, Suite 3600, Chicago, Illinois
60606, individually as a Lender and as Agent (the "Agent") for itself and any
other financial institution that is or becomes a party hereto (each such
financial institution, including Fleet, is referred to herein as a "Lender" and
collectively as the "Lenders"), each Lender and COLOR SPOT NURSERIES, INC., a
Delaware corporation with its chief executive office and principal place of
business at 3478 Buskirk Avenue, Suite 260, Pleasant Hill, California 94523
("Borrower").  Capitalized terms used in this Agreement have the meanings
assigned to them in Appendix A, General Definitions.  Accounting terms not
otherwise specifically defined herein shall be construed in accordance with GAAP
consistently applied.  All references to Borrower's months shall be deemed to
mean Borrower's fiscal months. 

                        SECTION 1.  CREDIT FACILITY

       Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lenders agree to make a Total Credit Facility of up to $70,000,000
available upon Borrower's request therefor, as follows:

       1.1.   REVOLVING CREDIT LOANS.

              1.1.1.     LOANS.  Each Lender agrees, for so long as no Default
       or Event of Default exists, to make Revolving Credit Loans to Borrower
       from time to time, as requested by Borrower in the manner set forth in
       subsection 3.1.1 hereof, up to a maximum principal amount at any time
       outstanding equal to the lesser of (i) such Lender's Revolving Loan
       Commitment and (ii) the product of such Lender's Revolving Loan
       Percentage multiplied by the Borrowing Base at such time MINUS reserves,
       if any and MINUS the LC Amount.  Without duplicating such matters as are
       taken into account in determining eligibility, Agent shall have the right
       to establish reserves in such amounts, and with respect to such matters,
       as Agent shall reasonably deem necessary or appropriate, against the
       amount of Revolving Credit Loans which Borrower may otherwise request
       under this subsection 1.1.1, including, without limitation, with respect
       to (i) price adjustments, damages, unearned discounts, returned products
       or other matters for which credit memoranda are issued in the ordinary
       course of Borrower's or any of its Subsidiary's businesses; (ii) other
       sums then due which are chargeable against Borrower's Loan Account as
       Revolving Credit Loans under any section of this Agreement; and
       (iii) such other matters, events, conditions or contingencies as to which
       Agent, in its reasonable credit judgment, determines reserves should be
       established from time to time hereunder.

                                     -1-
<PAGE>

              1.1.2.     SWINGLINE LOANS.  In order to reduce the frequency of
       transfers of funds from Lenders to Agent for making Revolving Credit
       Loans and for so long as no Default or Event of Default exists, Agent
       agrees to make Revolving Credit Loans to Borrower when Borrower requests
       any Revolving Credit Loan (such Revolving Credit Loans to be designated
       as "Swingline Loans") provided that the aggregate amount of Swingline
       Loans outstanding at any time will not (i) exceed $3,000,000; (ii) when
       added to the principal amount of Agent's other Revolving Credit Loans
       then outstanding, exceed Agent's Revolving Credit Commitment; or (iii)
       when added to the principal amount of all other Revolving Credit Loans
       then outstanding, exceed the Borrowing Base.  Within the foregoing
       limits, Borrower may borrow, repay and reborrow Swingline Loans during
       the Term.  All Swingline Loans shall be treated as Revolving Credit Loans
       for purposes of this Agreement, except that all Swingline Loans shall be
       Base Rate Revolving Credit Portions.

              1.1.3.     LETTERS OF CREDIT; LC GUARANTIES.  Agent agrees, for
       so long as no Default or Event of Default exists and if requested by
       Borrower, to (i) issue or cause to be issued by Bank or another Affiliate
       of Agent, on the date requested by Borrower, Letters of Credit for the
       account of Borrower or (ii) execute LC Guaranties by which Agent, Bank or
       another Affiliate of Agent, on the date requested by Borrower, shall
       guaranty the payment or performance by Borrower of its reimbursement
       obligations with respect to letters of credit, PROVIDED that the LC
       Amount shall not exceed $3,000,000 at any time.  No trade Letter of
       Credit or LC Guaranty may have an expiration date that is more than 180
       days after the date of issuance thereof; no standby Letter of Credit or
       LC Guaranty may have an expiration date that is more than one year after
       the date of issuance thereof (provided, however, that any such Letter of
       Credit or LC Guaranty may be renewable for one or more additional 
       one-year periods); and no Letter of Credit or LC Guaranty may have an
       expiration date (including any renewals) that is later than the 60th day
       prior to the last day of the Term.  Notwithstanding anything to the
       contrary contained herein, Borrower, Lenders and Agent hereby agree that
       all LC Obligations shall be satisfied by the prompt issuance of one or
       more Base Rate Revolving Credit Loans, which Borrower hereby acknowledges
       are requested and Lenders hereby agree to fund.  In the event that
       Revolving Credit Loans are not, for any reason, promptly made to satisfy
       all then existing LC Obligations, each Lender hereby agrees to pay to
       Agent, on demand, an amount equal to such LC Obligations MULTIPLIED BY
       such Lender's Revolving Loan Percentage, and until so paid, such amount
       shall be secured by the Collateral and shall bear interest and be payable
       at the same rate and in the same manner as Base Rate Revolving Credit
       Portions.  Immediately upon the issuance of a Letter of Credit or an LC
       Guaranty under this Agreement, each Lender shall be deemed to have
       irrevocably and unconditionally purchased and received from Agent,
       without recourse or warranty, an undivided interest and participation
       therein to the extent of such Lender's Revolving Loan Commitment.

                                     -2-
<PAGE>

              1.1.4.     USE OF PROCEEDS.  The Revolving Credit Loans shall be
       used solely for the satisfaction of existing Indebtedness of Borrower to
       Credit Agricole Indosuez and the other lenders under that certain Second
       Amended and Restated Credit Agreement, dated as of December 27, 1997
       among Borrower and such lenders and for Borrower's general operating
       capital needs in a manner consistent with the provisions of this
       Agreement and all applicable laws.

                     SECTION 2.  INTEREST, FEES AND CHARGES

       2.1.   INTEREST.

              2.1.1.     RATES OF INTEREST.  Except as provided in the last
       sentence of this subsection 2.1, interest shall accrue on the principal
       amount of the Base Rate Revolving Credit Portion and the Base Rate
       Seasonal Portion outstanding at the end of each day at a fluctuating rate
       per annum equal to the Applicable Margin PLUS the Base Rate.  The
       foregoing rate of interest shall increase or decrease by an amount equal
       to any increase or decrease in the Base Rate, effective as of the opening
       of business on the day that any such change in the Base Rate occurs.  If
       Borrower properly exercises the LIBOR Option as provided in Section 2.3,
       then, except as provided in the last sentence of this subsection 2.1,
       interest shall accrue on the principal amount of the LIBOR Revolving
       Credit Portions and the LIBOR Seasonal Portions outstanding at the end of
       each day at a rate per annum equal to the Applicable Margin PLUS the
       LIBOR Rate applicable to each LIBOR Portion for the corresponding LIBOR
       Period.  On and after the 90th day following the Closing Date, Interest
       on any Base Rate Revolving Credit Portion or LIBOR Revolving Credit
       Portion consisting of advances against Capped Inventory shall be
       calculated, using the Applicable Margin for Seasonal Advances for so long
       as such Inventory constitutes Capped Inventory.

              2.1.2.     DEFAULT RATE OF INTEREST.  Upon and after the
       occurrence of an Event of Default set forth in subsection 10.1.1 or
       10.1.3 and during the continuation thereof, the Agent at its option may,
       and upon direction of the Majority Lenders shall, cause the principal
       amount of all Loans to bear interest at a rate per annum equal to 2.0%
       PLUS the interest rate otherwise applicable thereto (the "Default Rate").

              2.1.3.     MAXIMUM INTEREST.  In no event whatsoever shall the
       aggregate of all amounts deemed interest hereunder and charged or
       collected pursuant to the terms of this Agreement exceed the highest rate
       permissible under any law which a court of competent jurisdiction shall,
       in a final determination, deem applicable hereto.  If any provisions of
       this Agreement, are in contravention of any such law, such provisions
       shall be deemed amended to conform thereto.

                                     -3-
<PAGE>

       2.2.   COMPUTATION OF INTEREST AND FEES.

       Interest, Letter of Credit and LC Guaranty fees and unused line fees
hereunder shall be calculated daily and shall be computed on the actual number
of days elapsed over a year of 360 days.  For the purpose of computing interest
hereunder, all items of payment received by Agent shall be deemed applied by
Agent on account of the Obligations (subject to final payment of such items) 1
Business Day after receipt by Agent of such items in Agent's account located in
Chicago, Illinois.

       2.3.   LIBOR OPTION.

                         (i)       Upon the conditions that:  (1) Agent shall
              have received a LIBOR Request from Borrower at least 3 Business
              Days prior to the first day of the LIBOR Period requested,
              (2) there shall have occurred no change in applicable law which
              would make it unlawful for any Lender to obtain deposits of U.S.
              dollars in the London interbank foreign currency deposits market,
              (3) as of the date of the LIBOR Request and the first day of the
              LIBOR Period, there shall exist no Default or Event of Default,
              (4) Agent is able to determine the LIBOR Rate in respect of the
              requested LIBOR Period (5) each Lender is able to obtain deposits
              of U.S. dollars in the London interbank foreign currency deposits
              market in the applicable amounts and for the requested LIBOR
              Period, and (6) as of the first date of the LIBOR Period, there
              are no more than 5 outstanding LIBOR Portions including the LIBOR
              Portion being requested; then interest on the LIBOR Portion
              requested during the LIBOR Period requested will be based on the
              applicable LIBOR Rate.

                         (ii)      Each LIBOR Request shall be irrevocable and
              binding on Borrower.  Borrower shall indemnify each Lender for any
              loss, penalty or expense incurred by such Lender due to failure on
              the part of Borrower to fulfill, on or before the date specified
              in any LIBOR Request, the applicable conditions set forth in this
              Agreement or due to the prepayment of the applicable LIBOR Portion
              prior to the last day of the applicable LIBOR Period, including,
              without limitation, any loss or expense incurred by reason of the
              liquidation or redeployment of deposits or other funds acquired by
              any Lender to fund or maintain the requested LIBOR Portion.

                         (iii)     If any Legal Requirement shall (1) make it
              unlawful for any Lender to fund through the purchase of U.S.
              dollar deposits any LIBOR Portion or otherwise give effect to its
              obligations as contemplated under this Section 2.3, or (2) shall
              impose on any Lender any costs based on or measured by the excess
              above a specified level of the amount of a category of deposits or
              other liabilities of such Lender which includes deposits by
              reference to which the LIBOR Rate is determined as provided herein
              or a category of extensions of credit or other assets of such
              Lender which includes any LIBOR Portion or 

                                     -4-
<PAGE>

              (3) shall impose on any Lender any restrictions on the amount of 
              such a category of liabilities or assets which such Lender may 
              hold, then, in each such case, such Lender may, by notice thereof 
              to Borrower, terminate the LIBOR Option.  Any LIBOR Portion 
              subject thereto shall immediately bear interest thereafter at the 
              rate and in the manner provided for Base Rate Portions pursuant to
              subsection 2.1.1.  Borrower shall indemnify each Lender against
              any loss, penalty or expense incurred by such Lender due to
              liquidation or redeployment of deposits or other funds acquired by
              such Lender to fund or maintain any LIBOR Portion that is
              terminated hereunder.

                         (iv)      Subject to subsection 11.8.4, each Lender
              shall receive payments of amounts of principal of and interest
              with respect to the LIBOR Portions free and clear of, and without
              deduction for, any Taxes.  If (1) any Lender shall be subject to
              any Tax in respect of any LIBOR Portion or any part thereof or,
              (2) Borrower shall be required to withhold or deduct any Tax from
              any such amount, the LIBOR Rate applicable to such LIBOR Portion
              shall be adjusted by Agent on behalf of the affected Lender to
              reflect all additional costs incurred by such Lender in connection
              with the payment by such Lender or the withholding by Borrower of
              such Tax and Borrower shall provide Agent such Lender with a
              statement detailing the amount of any such Tax actually paid by
              Borrower. Determination by Agent on behalf of a Lender of the
              amount of such costs shall, in the absence of manifest error, be
              conclusive.  If after any such adjustment any part of any Tax paid
              by any Lender is subsequently recovered by such Lender, such
              Lender shall reimburse Borrower to the extent of the amount so
              recovered. A certificate of an officer of such Lender setting
              forth the amount of such recovery and the basis therefor shall, in
              the absence of manifest error, be conclusive.

       2.4.   CLOSING FEE; ANNUAL AGENCY FEE.

       Borrower shall pay to Agent fees in accordance with the terms of the fee
letter between Borrower and Agent.

       2.5.   LETTER OF CREDIT AND LC GUARANTY FEES.

       Borrower shall pay to Agent, for the ratable benefit of Lenders, a per
annum fee equal to the Applicable Margin then in effect for LIBOR Revolving
Credit Portions MULTIPLIED BY the aggregate face amount of all Letters of Credit
and LC Guaranties outstanding from time to time during the term of this
Agreement, which fees shall be payable monthly in arrears on the first day of
each month, PLUS all normal and customary charges associated with the issuance
of such Letters of Credit and LC Guaranties, which fees and charges shall be
deemed fully earned and shall be due and payable upon issuance of each such
Letter of Credit or LC Guaranty and shall not be subject to rebate or proration
upon the termination of this Agreement for any reason.

                                     -5-
<PAGE>

       2.6.   UNUSED LINE FEE.

       Borrower shall pay to Agent, for the ratable benefit of Lenders, a fee
equal to 3/8 of 1.0% per annum of the average daily amount by which $70,000,000
exceeds the sum of (i) the outstanding principal balance of the Revolving Credit
Loans PLUS (ii) the LC Amount, MINUS the product of any Swingline Loans and the
ratio of the total Revolving Loan Commitment of all Lenders other than Agent to
the total Revolving Loan Commitments.  The unused line fee shall be payable
monthly in arrears on the first day of each calendar month hereafter.

       2.7.   CAPITAL ADEQUACY.

       If any Lender shall have determined that the adoption after the date of
this Agreement of any law, rule or regulation regarding capital adequacy, or any
change after the date of this Agreement therein or in the interpretation or
application thereof or compliance by any Lender with any request or directive
after the date of this Agreement regarding capital adequacy (whether or not
having the force of law) from any central bank or governmental authority, does
or shall have the effect of reducing the rate of return on such Lender's capital
as a consequence of its obligations hereunder to a level below that which such
Lender could have achieved but for such adoption, change or compliance (taking
into consideration such Lender's policies with respect to capital adequacy) by
an amount deemed by such Lender, in its sole discretion, to be material, then
from time to time, after submission by such Lender to Agent and Borrower of a
written demand therefor, Borrower shall pay to such Lender such additional
amount or amounts as will compensate such Lender for such reduction.  A
certificate of such Lender claiming entitlement to payment as set forth above
shall be conclusive in the absence of manifest error. Such certificate shall set
forth the nature of the occurrence giving rise to such payment, the additional
amount or amounts to be paid to such Lender, and the method by which such
amounts were determined.  In determining such amount, such Lender may use any
reasonable averaging and attribution method.

       2.8.   AUDIT AND APPRAISAL FEES.

       Borrower shall pay to Agent out-of-pocket fees in connection with audits
and appraisals conducted by Agent's loan analysts of Borrower's books and
records and such other matters as Agent shall deem appropriate; PROVIDED, that
so long as no Default or Event of Default has occurred, Borrower shall only be
required to pay for two such audits and appraisals in any fiscal year of
Borrower.  Audit fees shall be payable on the first day of the month following
the date of issuance by Agent of a request for payment thereof to Borrower.

       2.9.   REIMBURSEMENT OF EXPENSES.

       If, (a) at any time or times regardless of whether or not an Event of
Default then exists, Agent, or (b) at any time or times that an Event of Default
exists, any Lender, incurs legal or accounting expenses or any other costs or
out-of-pocket expenses in connection with (i) the negotiation and preparation of
this Agreement or any of the other Loan Documents, any amendment of or
modification of this Agreement or any of the other Loan Documents, or any 

                                     -6-
<PAGE>

sale or attempted sale of any interest herein to a Participating Lender or an 
assignee; (ii) the administration of this Agreement or any of the other Loan 
Documents and the transactions contemplated hereby and thereby; (iii) any 
litigation, contest, dispute, suit, proceeding or action (whether instituted 
by Agent, any Lender, Borrower or any other Person) in any way relating to 
the Collateral, this Agreement or any of the other Loan Documents or 
Borrower's affairs; (iv) any attempt to enforce any rights of Agent, any 
Lender or any Participating Lender against Borrower or any other Person which 
may be obligated to any Lender by virtue of this Agreement or any of the 
other Loan Documents, including, without limitation, the Account Debtors; or 
(v) any attempt to inspect, verify, protect, preserve, restore, collect, 
sell, liquidate or otherwise dispose of or realize upon the Collateral; then 
all such legal and accounting expenses, other costs and out of pocket 
expenses shall be charged to Borrower.  All amounts chargeable to Borrower 
under this Section 2.9 shall be Obligations secured by all of the Collateral, 
shall be payable on demand to Agent for distribution to the applicable 
Lender, and shall bear interest from the date such demand is made until paid 
in full at the rate applicable to Base Rate Revolving Credit Portions from 
time to time.  Borrower shall also reimburse Agent and any Lender for 
expenses incurred by Agent or such Lender in its administration of the 
Collateral to the extent and in the manner provided in Section 6 hereof.

       2.10.  BANK CHARGES.

       Borrower shall pay to Agent, on demand, for distribution to the
applicable Lenders any and all fees, costs or expenses which any Lender pays to
a bank or other similar institution (including, without limitation, any fees
paid by any Lender to any other Lender) arising out of or in connection with (i)
the forwarding to Borrower or any other Person on behalf of Borrower, by any
Lender of proceeds of loans made by any Lender to Borrower pursuant to this
Agreement and (ii) the depositing for collection, by any Lender, of any check or
item of payment received or delivered to such Lender on account of the
Obligations.

                       SECTION 3.  LOAN ADMINISTRATION.

3.1.   MANNER OF BORROWING REVOLVING CREDIT LOANS.

       Borrowings under the credit facility established pursuant to Section 1
hereof shall be as follows:

              3.1.1.     LOAN REQUESTS.  A request for a Revolving Credit Loan
       shall be made, or shall be deemed to be made, in the following manner: 
       (i) Borrower shall give Agent notice of its intention to borrow, in which
       notice Borrower shall specify the amount of the proposed borrowing (which
       shall be no less than $100,000 in the case of Base Rate Portions which
       are not Swingline Loans (with respect to which there shall be no minimum
       borrowing amount)) and the proposed borrowing date, no later than 12:00
       noon, Chicago, Illinois, time on the proposed borrowing date (or in
       accordance with Section 2.3 hereof in the case of a request for a LIBOR
       Portion), PROVIDED, however, that no such request may be made at a time
       when there exists a 

                                     -7-
<PAGE>

       Default or an Event of Default; and (ii) the becoming due of any amount 
       required to be paid under this Agreement, whether as interest or for any 
       other Obligation, shall be deemed irrevocably to be a request for a 
       Revolving Credit Loan on the due date in the amount required to pay such 
       interest or other Obligation.

              3.1.2.     DISBURSEMENT.  Borrower hereby irrevocably authorizes
       Agent to disburse the proceeds of each Revolving Credit Loan requested,
       or deemed to be requested, pursuant to this subsection 3.1.2 as follows: 
       (i) the proceeds of each Revolving Credit Loan requested under subsection
       3.1.1(i) shall be disbursed by Agent in lawful money of the United States
       of America in immediately available funds, in the case of the initial
       borrowing, in accordance with the terms of the written disbursement
       letter from Borrower, and in the case of each subsequent borrowing, by
       wire transfer to such bank account as may be agreed upon by Borrower and
       Agent from time to time or elsewhere if pursuant to a written direction
       from Borrower; and (ii) the proceeds of each Revolving Credit Loan
       requested under subsection 3.1.1(ii) shall be disbursed by Agent by way
       of direct payment of the relevant interest or other Obligation.

              3.1.3.     PAYMENT BY LENDERS.  Agent shall give to each Lender
       prompt written notice by facsimile, telex or cable of the receipt by
       Agent from Borrower of any request for a Revolving Credit Loan.  Each
       such notice shall specify the requested date and amount of such Revolving
       Credit Loan, whether such Revolving Credit Loan shall be subject to the
       LIBOR Option, and the amount of each Lender's advance thereunder (in
       accordance with its applicable Revolving Loan Percentage).  Each Lender
       shall, not later than 1:00 p.m. (Chicago time) on such requested date,
       wire to a bank designated by Agent the amount of that Lender's Revolving
       Loan Percentage of the requested Revolving Credit Loan.  The failure of
       any Lender to make the Revolving Credit Loans to be made by it shall not
       release any other Lender of its obligations hereunder to make its
       Revolving Credit Loan.  Neither Agent nor any other Lender shall be
       responsible for the failure of any other Lender to make the Revolving
       Credit Loan to be made by such other Lender.  The foregoing
       notwithstanding, Agent in its sole discretion, may from its own funds,
       make a Revolving Credit Loan on behalf of any Lender hereto.  In such
       event, the Lender on behalf of whom Agent made the Revolving Credit Loan
       shall reimburse Agent for the amount of such Revolving Credit Loan made
       on its behalf, on a weekly (or more frequent, as determined by Agent in
       its sole discretion) basis.  The entire amount of interest attributable
       to such Revolving Credit Loan for the period from the date on which such
       Revolving Credit Loan was made by Agent on such Lender's behalf until
       Agent is reimbursed by such Lender, shall be paid to Agent for its own
       account.

              3.1.4.     AUTHORIZATION.  Borrower hereby irrevocably authorizes
       Agent to advance to Borrower, and to charge to Borrower's Loan Account
       hereunder as a Revolving Credit Loan, a sum sufficient to pay all
       interest accrued on the Obligations 

                                     -8-
<PAGE>

       during the immediately preceding month and to pay all costs, fees and 
       expenses at any time owed by Borrower to Agent or any Lender hereunder.

              3.1.5.     LETTER OF CREDIT AND LC GUARANTY REQUESTS.  A request
       for a Letter of Credit or LC Guaranty shall be made in the following
       manner:  Borrower may give Agent and Bank a written notice of its request
       for the issuance of a Letter of Credit or LC Guaranty, not later than
       11:00 a.m. Chicago, Illinois time, one Business Day before the proposed
       issuance date thereof, in which notice Borrower shall specify the
       proposed issuer and issuance date; PROVIDED, that no such request may be
       made at a time when there exists a Default or Event of Default.  Such
       request shall be accompanied by an executed application and reimbursement
       agreement in form and substance satisfactory to Agent and the Person
       being asked to issue the Letter of Credit or LC Guaranty, as well as any
       required corporate resolutions.

              3.1.6.     METHOD OF MAKING REQUESTS.  As an accommodation to
       Borrower, unless a Default or an Event of Default is then in existence,
       (i) Agent shall permit telephonic requests for Revolving Credit Loans to
       Agent, and (ii) Agent and Bank may, in their discretion, permit
       electronic transmittal of requests for Letters of Credit and LC
       Guaranties to them; and (iii) Agent may, in Agent's discretion, permit
       electronic transmittal of instructions, authorizations, agreements or
       reports to Agent.  Unless Borrower specifically directs Agent in writing
       not to accept or act upon telephonic or electronic communications from
       Borrower, Agent shall have no liability to Borrower for any loss or
       damage suffered by Borrower as a result of Agent's honoring of any
       requests, execution of any instructions, authorizations or agreements or
       reliance on any reports communicated to it telephonically or
       electronically and purporting to have been sent to Agent by Borrower and
       Agent shall have no duty to verify the origin of any such communication
       or the authority of the person sending it.  Each telephonic request for a
       Revolving Credit Loan accepted by Agent hereunder shall be promptly
       followed by a written confirmation of such request from Borrower to
       Agent.

       3.2.   PAYMENTS.

       Except where evidenced by notes or other instruments issued or made by
Borrower to any Lender and accepted by such Lender specifically containing
payment provisions which are in conflict with this Section 3.2 (in which event
the conflicting provisions of said notes or other instruments shall govern and
control), the Obligations shall be payable as follows:

              3.2.1.     PRINCIPAL.  Principal payable on account of Revolving
       Credit Loans shall be payable by Borrower to Agent, for the ratable
       benefit of Lenders, immediately upon the earliest of (i) the receipt by
       Agent or Borrower of any proceeds of any of the Collateral, to the extent
       of said proceeds, except as provided in subsection 6.4.2 and except that,
       so long as no Default or Event of Default exists, if all Loans
       outstanding at the time of receipt by Borrower of any such proceeds are
       LIBOR Portions, then Borrower may direct that such proceeds be held by
       Agent in 

                                     -9-
<PAGE>

       either a non-interest bearing cash collateral account maintained by Agent
       or in an investment that is not a Restricted Investment that is in the 
       possession of Agent to be applied to the payment of principal on the 
       last day of the LIBOR Period applicable to each LIBOR Portion in the
       order of maturity; (ii) the occurrence of an Event of Default in
       consequence of which Agent elects to accelerate the maturity and payment
       of the Obligations, or (iii) termination of this Agreement pursuant to
       Section 4 hereof; PROVIDED, HOWEVER, that if an Overadvance shall exist
       at any time, Borrower shall, on demand, repay the Overadvance.

              3.2.2.     INTEREST.

                         (i)       BASE RATE PORTION.  Interest accrued on Base
              Rate Portions shall be due on the earliest of (1) the first
              calendar day of each month (for the immediately preceding month),
              computed through the last calendar day of the preceding month, (2)
              the occurrence of an Event of Default in consequence of which
              Agent elects to accelerate the maturity and payment of the
              Obligations or (3) termination of this Agreement pursuant to
              Section 4 hereof.

                         (ii)      LIBOR PORTION.  Interest accrued on each
              LIBOR Portion shall be due and payable on each LIBOR Interest
              Payment Date and on the earlier of (1) the occurrence of an Event
              of Default in consequence of which Agent elects to accelerate the
              maturity and payment of the Obligations or (2) termination of this
              Agreement pursuant to Section 4 hereof.

              3.2.3.     COSTS, FEES AND CHARGES.  Costs, fees and charges
       payable pursuant to this Agreement shall be payable by Borrower as and
       when provided in Section 2 hereof, to Agent or to any other Person
       designated by Agent in writing.

              3.2.4.     OTHER OBLIGATIONS.  The balance of the Obligations
       requiring the payment of money, if any, shall be payable by Borrower to
       Agent as and when provided in this Agreement, the Other Agreements or the
       Security Documents, or on demand, whichever is later.

       3.3.   MANDATORY PREPAYMENT FROM PROCEEDS OF SALE, LOSS, DESTRUCTION OR
CONDEMNATION OF COLLATERAL.

       Except as provided in subsection 6.4.2 hereof, if Borrower or any of its
Subsidiaries sells any of the Equipment or real Property, or if any of the
Collateral is lost or destroyed or taken by condemnation, Borrower shall pay to
Agent, for the ratable benefit of Lenders, as and when received by Borrower or
such Subsidiary a sum equal to the proceeds (including insurance payments)
received by Borrower or such Subsidiary from such sale, loss, destruction or
condemnation. To the extent that the Collateral sold, lost, destroyed or
condemned consists of Equipment or real property, the applicable prepayment
shall be applied first, to reduce the outstanding principal balance of any
Seasonal Advance (and to permanently reduce by such amount the amount set forth
in clause (3) of the definition of Borrowing Base set forth herein) 

                                     -10-
<PAGE>

and second, to reduce the outstanding principal balance of the other 
Revolving Credit Loans. To the extent that the Collateral sold, lost, 
destroyed or condemned consists of Accounts, Inventory or other Property 
other than Equipment or real Property, the applicable prepayment shall be 
applied first, to reduce the outstanding principal balance of any Seasonal 
Advance and second, to reduce the outstanding principal balance of the other 
Revolving Credit Loans.  Borrower shall be responsible for any LIBOR breakage 
fees incurred by any Lender as a result of any prepayments made pursuant to 
this subsection 3.3; provided, however, that, so long as no Default or Event 
of Default exists, if all Loans outstanding at the time of receipt by 
Borrower of any such proceeds are LIBOR Portions, then Borrower may direct 
that such proceeds be held by Agent in either a non-interest bearing cash 
collateral account maintained by Agent or in an investment that is not a 
Restricted Investment that is in the possession of Agent to be applied to the 
payment of principal on the last day of the LIBOR Period applicable to each 
LIBOR Portion in the order of maturity.

       3.4.   APPLICATION OF PAYMENTS AND COLLECTIONS.

       All items of payment received by Agent by 1:00 p.m., Chicago, Illinois,
time, on any Business Day shall be deemed received on that Business Day.  All
items of payment received after 1:00 p.m., Chicago, Illinois, time, on any
Business Day shall be deemed received on the following Business Day.  Borrower
irrevocably waives the right to direct the application of any and all payments
and collections at any time or times hereafter received by Agent from or on
behalf of Borrower, and Borrower does hereby irrevocably agree that, subject to
subsection 3.2.1(i), Agent shall have the continuing exclusive right to apply
and reapply any and all such payments and collections received at any time or
times hereafter by Agent or its agent against the Obligations, in such manner as
Agent may deem advisable, notwithstanding any entry by Agent or any Lender upon
any of its books and records.  If as the result of collections of Accounts as
authorized by subsection 6.2.6 hereof a credit balance exists in the Loan
Account, such credit balance shall not accrue interest in favor of Borrower, but
shall be available to Borrower at any time or times for so long as no Default or
Event of Default exists.

       3.5.   ALL LOANS TO CONSTITUTE ONE OBLIGATION.

       The Loans shall constitute one general Obligation of Borrower, and shall
be secured by Agent's Lien, for the ratable benefit of Lenders, upon all of the
Collateral.

       3.6.   LOAN ACCOUNT.

       Agent shall enter all Loans as debits to a loan account (the "Loan
Account") and shall also record in the Loan Account all payments made by
Borrower on any Obligations and all proceeds of Collateral which are finally
paid to Agent for the ratable benefit of Lenders, and may record therein, in
accordance with customary accounting practice, other debits and credits,
including interest and all charges and expenses properly chargeable to Borrower.

                                     -11-
<PAGE>

       3.7.   STATEMENTS OF ACCOUNT.

       Agent will account to Borrower monthly with a statement of Loans, charges
and payments made pursuant to this Agreement, and such account rendered by Agent
shall, absent manifest error, be deemed final, binding and conclusive upon
Borrower unless Agent is notified by Borrower in writing to the contrary within
30 days of the date each accounting is mailed to Borrower.  Such notice shall
only be deemed an objection to those items specifically objected to therein.

       3.8.   SHARING OF PAYMENTS, ETC.

              If any Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) on
account of any Loan made by it in excess of its ratable share of payments on
account of Loans made by all Lenders, such Lender shall forthwith purchase from
each other Lender such participation in such Loan as shall be necessary to cause
such purchasing Lender to share the excess payment ratably with each other
Lender; PROVIDED, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and such Lender shall repay to the purchasing Lender the
purchase price to the extent of such recovery, together with an amount equal to
such Lender's ratable share (according to the proportion of (i) the amount of
such Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered.  Borrower agrees
that any Lender so purchasing a participation from another Lender pursuant to
this Section 3.8 may, to the fullest extent permitted by law, exercise all its
rights of payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor of Borrower in
the amount of such participation.  Notwithstanding anything to the contrary
contained herein, all purchases and repayments to be made under this Section 3.8
shall be made through Agent.

                     SECTION 4.  TERM AND TERMINATION

       4.1.   TERM OF AGREEMENT.

       Subject to the right of Lenders to cease making Loans to Borrower upon or
after the occurrence of any Default or Event of Default, this Agreement shall be
in effect for a period of three years from the date hereof, through and
including October __, 2001 (the "Term"), unless terminated as provided in
Section 4.2 hereof.

       4.2.   TERMINATION.

              4.2.1.     TERMINATION BY AGENT.  Agent may, and at the request
       of Majority Lenders shall, terminate this Agreement without notice upon
       or after the occurrence and during the continuance of an Event of
       Default.

                                     -12-
<PAGE>

              4.2.2.     TERMINATION BY BORROWER.  Upon at least 90 days' prior
       written notice to Agent, Borrower may, at its option, terminate this
       Agreement (PROVIDED, that prior written notice of 3 days shall be
       required if Borrower terminates this Agreement in connection with the
       sale of substantially all of its and its Subsidiaries' assets or all of
       its capital stock); PROVIDED, HOWEVER, no such termination shall be
       effective until Borrower has paid all of the Obligations (except for
       contingent indemnification obligations under Section 12.2 or under the
       indemnification provisions of the Security Documents) in immediately
       available funds and all Letters of Credit and LC Guaranties have been
       cash collateralized to Agent's satisfaction or Agent has received an
       irrevocable letter of credit in form and substance, and issued by a bank,
       satisfactory to Agent in its sole discretion pursuant to which Agent is
       entitled to recover the maximum amount at any time payable under each
       outstanding Letter of Credit or LC Guaranty, plus all costs and fees then
       or thereafter payable with respect to such Letter of Credit or LC
       Guaranty under the terms of this Agreement.  Any notice of termination
       given by Borrower shall be irrevocable unless Agent otherwise agrees in
       writing, and no Lender shall have any obligation to make any Loans, nor
       shall Agent be required to issue or procure any Letters of Credit or LC
       Guaranties, on or after the termination date stated in such notice.
       Borrower may elect to terminate this Agreement in its entirety only.  No
       section of this Agreement or type of Loan available hereunder may be
       terminated singly.

              4.2.3.     TERMINATION CHARGES.  At the effective date of
       termination of this Agreement for any reason prior to the last day of the
       Term (except for termination pursuant to subsection 4.2.1), Borrower
       shall pay to Agent, for the ratable benefit of Lenders (in addition to
       the then outstanding principal, accrued interest and other charges owing
       under the terms of this Agreement and any of the other Loan Documents),
       as liquidated damages for the loss of the bargain and not as a penalty,
       an amount equal to 1.0% of the Total Credit Facility.  

              4.2.4.     EFFECT OF TERMINATION.  All of the Obligations (except
       for contingent indemnification obligations under Section 12.2 or under
       the indemnification provisions of the Security Documents) shall be
       immediately due and payable upon the termination date stated in any
       notice of termination of this Agreement.  All undertakings, agreements,
       covenants, warranties and representations of Borrower contained in the
       Loan Documents shall survive any such termination and Agent shall retain
       its Liens in the Collateral and Agent and each Lender shall retain all of
       their respective rights and remedies under the Loan Documents
       notwithstanding such termination until all Obligations (except for
       contingent indemnification obligations under Section 12.2 or under the
       indemnification provisions of the Security Documents) have been
       discharged or paid, in full, in immediately available funds, together
       with the applicable termination charge, if any. Notwithstanding the
       payment in full of the Obligations, Agent shall not be required to
       terminate its security interests in the Collateral unless, with respect
       to any loss or damage Agent may incur as a result of dishonored checks or
       other items of payment received by Agent from 

                                     -13-
<PAGE>


       Borrower or any Account Debtor and applied to the Obligations, Agent 
       shall, at its option, (i) have received a written agreement, executed by 
       Borrower and by any Person whose loans or other advances to Borrower are 
       used in whole or in part to satisfy the Obligations, indemnifying Agent 
       and each such Lender from any such loss or damage; or (ii) have retained 
       such cash collateral for such period of time as Agent, in its reasonable 
       discretion, may deem necessary to protect Lender and each Lender from any
       such loss or damage.

                        SECTION 5.  SECURITY INTERESTS

       5.1.   SECURITY INTEREST IN COLLATERAL.

       To secure the prompt payment and performance to Agent and each Lender of
the Obligations, Borrower hereby grants to Agent, for the benefit of itself and
each Lender, a continuing Lien upon all of Borrower's assets, including all of
the following Property and interests in Property of Borrower, whether now owned
or existing or hereafter created, acquired or arising and wheresoever located:

                         (i)       Accounts;

                         (ii)      Inventory;

                         (iii)     Equipment;

                         (iv)      General Intangibles;

                         (v)       Investment Property;

                         (vi)      All monies and other Property of any kind now
              or at any time or times hereafter in the possession or under the
              control of Agent or any Lender or a bailee or Affiliate of Agent
              or any Lender;

                         (vii)     All accessions to, substitutions for and all
              replacements, products and cash and non-cash proceeds of (i)
              through (vi) above, including, without limitation, proceeds of and
              unearned premiums with respect to insurance policies insuring any
              of the Collateral; and

                         (viii)    All books and records (including, without
              limitation, customer lists, credit files, computer programs,
              print-outs, and other computer materials and records) of Borrower
              pertaining to any of (i) through (vii) above.

       Notwithstanding the foregoing, Collateral shall not include (1) any
licenses or permits the encumbrance of which would violate any law, statute or
regulation; or (2) any contract rights (including, without limitation, any
contracts or leases), the encumbrance of which would violate the terms of the
agreements establishing such rights; PROVIDED that Borrower shall use 

                                     -14-
<PAGE>

reasonable good faith efforts to obtain any necessary consent to enable any 
such contract right to be included within the Collateral.

       5.2.   LIEN PERFECTION; FURTHER ASSURANCES.

       Borrower shall execute such UCC-1 financing statements as are required by
the Code and such other instruments, assignments or documents as are necessary
to perfect Agent's Lien upon any of the Collateral and shall take such other
action as may be required to perfect or to continue the perfection of Agent's
Lien upon the Collateral.  Unless prohibited by applicable law, Borrower hereby
authorizes Agent to execute and file any such financing statement on Borrower's
behalf.  The parties agree that a carbon, photographic or other reproduction of
this Agreement shall be sufficient as a financing statement and may be filed in
any appropriate office in lieu thereof.  At Agent's request, Borrower shall also
promptly execute or cause to be executed and shall deliver to Agent any and all
documents, instruments and agreements deemed necessary by Agent to give effect
to or carry out the terms or intent of the Loan Documents.

       5.3.   LIEN ON REALTY.

       The due and punctual payment and performance of the Obligations shall
also be secured by the Lien created by Mortgages upon all real Property of
Borrower and its Subsidiaries described therein.  The Mortgages shall be
executed by Borrower or each applicable Subsidiary in favor of Agent, for the
benefit of itself and each Lender, and shall be duly recorded, at Borrower's
expense, in each office where such recording is required to constitute a fully
perfected Lien on the real Property covered thereby.  Borrower shall deliver to
Agent, at Borrower's expense, mortgagee title insurance policies issued by a
title insurance company satisfactory to Agent, which policies shall be in form
and substance satisfactory to Agent and shall insure a valid first Lien in favor
of Agent, for the benefit of itself and each Lender, on the Property covered
thereby, subject only to those exceptions acceptable to Agent and its counsel.
Borrower shall, and shall cause its Subsidiaries to, deliver to Agent such other
documents, including, without limitation, as-built survey prints of the real
Property, as Agent and its counsel may request relating to the real Property
subject to the Mortgage.

                  SECTION 6.  COLLATERAL ADMINISTRATION

       6.1.   GENERAL.

              6.1.1.     LOCATION OF COLLATERAL.  All Collateral, other than
       Inventory in transit and motor vehicles, will at all times be kept by
       Borrower and its Subsidiaries at one or more of the business locations
       set forth in EXHIBIT 6.1.1 hereto and such additional business locations
       as to which Borrower has given Agent 30 days advance written notice and
       with respect to which Borrower has obtained mortgages, leasehold
       mortgages or landlords' waivers satisfactory to Agent and shall not,
       without the prior written approval of Agent, be moved therefrom (other
       than to another location on EXHIBIT 6.1.1) except, prior to an Event of
       Default and Agent's acceleration of the maturity of the Obligations in
       consequence thereof, for (i) sales of Inventory in the 

                                     -15-
<PAGE>

       ordinary course of business; and (ii) removals in connection with 
       dispositions of Equipment that are authorized by subsection 6.4.2 hereof.

              6.1.2.     INSURANCE OF COLLATERAL.  Borrower shall maintain and
       pay for insurance upon all Collateral wherever located and with respect
       to Borrower's and each Subsidiary's business, covering casualty, hazard,
       public liability and such other risks in such amounts and with such
       insurance companies as are reasonably satisfactory to Agent.  Borrower
       shall deliver the originals of such policies to Agent with satisfactory
       lender's loss payable endorsements, naming Agent as sole loss payee,
       assignee or additional insured, as appropriate.  Each policy of insurance
       or endorsement shall contain a clause requiring the insurer to give not
       less than 30 days' prior written notice to Agent in the event of
       cancellation of the policy for any reason whatsoever and a clause
       specifying that the interest of Agent, for the benefit of itself and each
       Lender, shall not be impaired or invalidated by any act or neglect of
       Borrower or the owner of the Property or by the occupation of the
       premises for purposes more hazardous than are permitted by said policy. 
       Borrower agrees to deliver to Agent, promptly as rendered, true copies of
       all reports made in any reporting forms to insurance companies.

              6.1.3.     PROTECTION OF COLLATERAL.  All expenses of protecting,
       storing, warehousing, insuring, handling, maintaining and shipping the
       Collateral, any and all excise, property, sales, and use taxes imposed by
       any state, federal, or local authority on any of the Collateral or in
       respect of the sale thereof shall be borne and paid by Borrower or a
       Subsidiary of Borrower.  If Borrower or a Subsidiary of Borrower fails to
       promptly pay any portion thereof when due, Agent may, at its option, but
       shall not be required to, pay the same and charge Borrower therefor. 
       Neither Agent nor any Lender shall be liable or responsible in any way
       for the safekeeping of any of the Collateral or for any loss or damage
       thereto (except for reasonable care in the custody thereof while any
       Collateral is in Agent's actual possession) or for any diminution in the
       value thereof, or for any act or default of any warehouseman, carrier,
       forwarding agency, or other person whomsoever, but the same shall be at
       Borrower's sole risk.

       6.2.   ADMINISTRATION OF ACCOUNTS.

              6.2.1.     RECORDS, SCHEDULES AND ASSIGNMENTS OF ACCOUNTS. 
       Borrower shall, and shall cause each of its Subsidiaries to, keep
       accurate and complete records of its Accounts and all payments and
       collections thereon and shall submit to Agent and each Lender on such
       periodic basis as Agent shall request (but no more frequently than once a
       month so long as no Default or Event of Default exists and Availability
       is not less than $2,000,000) a borrowing base certificate for the
       preceding period, in form satisfactory to Agent.  On or before the 20th
       day of each month from and after the date hereof, Borrower shall deliver
       to Agent and each Lender, in form acceptable to Agent, a summary aged
       trial balance of all Accounts existing as of the last day of the
       preceding month, specifying the names, addresses and  face value for each
       Account 

                                      -16-
<PAGE>

       Debtor obligated on an Account so listed ("Schedule of Accounts"), and, 
       upon Agent's request therefor, any other information as Agent or any 
       Lender shall reasonably request.  If requested by Agent, Borrower shall 
       execute and deliver, and shall cause its Subsidiaries to execute and 
       deliver, to Agent formal written assignments of all of its Accounts 
       weekly or daily, which shall include all Accounts that have been
       created since the date of the last assignment, together with any other
       information Agent shall reasonably request.

              6.2.2.     DISCOUNTS, ALLOWANCES, DISPUTES.  If Borrower or any
       of its Subsidiaries grants any discounts, allowances or credits that are
       not shown on the face of the invoice for the Account involved, Borrower
       shall, and shall cause any such Subsidiary to, report such discounts,
       allowances or credits, as the case may be, to Agent as part of the next
       required Schedule of Accounts.  Upon the occurrence and during the
       continuance of an Event of Default, Agent shall have the right to settle
       or adjust all disputes and claims directly with the Account Debtor and to
       compromise the amount or extend the time for payment of the Accounts upon
       such terms and conditions as Agent may deem advisable, and to charge the
       deficiencies, costs and expenses thereof, including attorney's fees, to
       Borrower.

              6.2.3.     TAXES.  If an Account includes a charge for any tax
       payable to any governmental taxing authority, Agent is authorized, in its
       sole discretion, to pay the amount thereof to the proper taxing authority
       for the account of Borrower and to charge Borrower therefor, provided,
       however that Agent shall not be liable for any taxes to any governmental
       taxing authority that may be due by Borrower or any of its Subsidiaries.

              6.2.4.     ACCOUNT VERIFICATION.  Whether or not a Default or an
       Event of Default has occurred, any of Agent's officers, employees or
       agents shall have the right, at any time or times hereafter, in the name
       of Agent or any Lender, any designee of any Lender or Borrower, to verify
       the validity, amount or any other matter relating to any Accounts by
       mail, telephone, telegraph or otherwise; PROVIDED, that prior to the
       occurrence of a Default or Event of Default, Agent shall obtain
       Borrower's approval of any procedure utilized in connection with such
       verification.  Borrower shall, and shall cause it Subsidiaries to,
       cooperate fully with Agent in an effort to facilitate and promptly
       conclude any such verification process.

              6.2.5.     MAINTENANCE OF DOMINION ACCOUNT.  Borrower shall, and
       shall cause each Company to, maintain a Dominion Account or Accounts
       pursuant to lockbox arrangements reasonably acceptable to Agent with such
       banks as may be selected by Borrower or such Company and be reasonably
       acceptable to Agent. Borrower shall, and shall cause each Company to,
       issue to any such banks an irrevocable letter of instruction directing
       such banks to deposit all payments or other remittances received in the
       lockbox to the Dominion Account for application on account of the
       Obligations.  All funds deposited in any Dominion Account shall
       immediately become the property 

                                      -17-
<PAGE>

       of Agent, for the ratable benefit of Lenders, for payment of Obligations,
       and Borrower shall, and shall cause each Company to, obtain the agreement
       by such banks in favor of Agent to waive any offset rights against the 
       funds so deposited.  Agent assumes no responsibility for such lockbox 
       arrangement, including, without limitation, any claim of accord and 
       satisfaction or release with respect to deposits accepted by any bank 
       thereunder.

              6.2.6.     COLLECTION OF ACCOUNTS, PROCEEDS OF COLLATERAL.  To
       expedite collection, Borrower shall, and shall cause each Company to,
       endeavor in the first instance to make collection of its Accounts for
       Lenders.  All remittances received by Borrower or any Company on account
       of Accounts, together with the proceeds of any other Collateral, shall be
       held as Agent's property by Borrower or such Company as trustee of an
       express trust for Agent's benefit and Borrower or such Company shall
       immediately deposit the same in kind in the Dominion Account.  Agent
       retains the right at all times after the occurrence of a Default or an
       Event of Default to notify Account Debtors that Accounts have been
       assigned to Agent and to collect Accounts directly in its own name and to
       charge the collection costs and expenses, including attorneys' fees, to
       Borrower.

       6.3.   ADMINISTRATION OF INVENTORY.

              6.3.1.     RECORDS AND REPORTS OF INVENTORY.  Borrower and each
       of its Subsidiaries shall keep accurate and complete records of its
       Inventory.  Borrower shall furnish to Agent and each Lender Inventory
       reports in form and detail satisfactory to Agent at such times as Agent
       shall request, but only once each month, not later than the 20th day of
       such month, at any time that no Default or Event of Default exists and
       Availability is not less than $2,000,000.  Borrower shall conduct a
       physical inventory no less frequently than annually and shall provide to
       Agent and each Lender a report based on each such physical inventory
       promptly thereafter, together with such supporting information as Agent
       shall request.

       6.4.   ADMINISTRATION OF EQUIPMENT.

              6.4.1.     RECORDS AND SCHEDULES OF EQUIPMENT.  Borrower and each
       of its Subsidiaries shall keep accurate records itemizing and describing
       the kind, type, quality, quantity and book value of its Equipment and all
       dispositions made in accordance with subsection 6.4.2 hereof, and shall
       furnish Agent and Lenders with a current schedule containing the
       foregoing information on at least an annual basis and more often if
       requested by Agent.  Promptly on request therefor by Agent, Borrower
       shall deliver to Agent any and all evidence of ownership, if any, of any
       of the Equipment.

              6.4.2.     DISPOSITIONS OF EQUIPMENT.  Borrower shall not, and
       shall cause its Subsidiaries not to, sell, lease or otherwise dispose of
       or transfer any of the 

                                      -18-
<PAGE>

       Equipment or any part thereof without the prior written consent of Agent;
       PROVIDED, HOWEVER, that so long as no Default or Event of Default exists,
       Borrower and its Subsidiaries may sell or dispose of Equipment, provided 
       that if the proceeds of any such disposition (i) are less than $500,000, 
       Agent shall apply such proceeds to the outstanding Revolving Credit Loan 
       balance outstanding and shall permit Borrower to reborrow such proceeds 
       in accordance with the terms of this Agreement solely for use in 
       replacing the Equipment disposed of with new Equipment usable in the 
       business of Borrower or a Subsidiary of Borrower and subject to no Liens 
       other than Permitted Liens or (ii) are equal to or greater than $500,000,
       Agent shall provisionally apply such proceeds to reduce the outstanding 
       Revolving Credit Loan balance outstanding for a period of 30 days.  
       Within 30 days following receipt by Borrower of proceeds of disposition 
       in an amount equal to or greater than $500,000, Borrower may submit to 
       Agent a written statement detailing Borrower's plans to pay costs 
       incurred as a result of such disposition and to reinvest the balance of 
       such proceeds in productive assets to be used in its business.  If Agent 
       receives such a statement within such period, Agent shall permit 
       Borrower to reborrow such proceeds in accordance with the terms of this 
       Agreement to execute such reinvestment plan for a period of 180 days 
       following receipt by Borrower of such proceeds.  If no such plan is 
       submitted within said 30 days, all of such proceeds or, if such a plan 
       is so submitted, all of such proceeds remaining after said 180 days, 
       shall be applied to permanently reduce the amount set forth in 
       clause (3) of the definition of Borrowing Base set forth herein; 
       PROVIDED, that to the extent such proceeds are not reinvested and result 
       from sales of Equipment at market value, such reduction of the amount set
       forth in clause (3) of the definition of Borrowing Base shall be equal 
       to the amount by which such proceeds exceed $2,000,000 in any fiscal 
       year of Borrower or $5,000,000 in the aggregate during the Term.

       6.5.   PAYMENT OF CHARGES.

       All amounts chargeable to Borrower under Section 6 hereof shall be
Obligations secured by all of the Collateral, shall be payable on demand and
shall bear interest from the date such advance was made until paid in full at
the rate applicable to Base Rate Revolving Credit Portions from time to time.

                   SECTION 7.  REPRESENTATIONS  AND  WARRANTIES

       7.1.   GENERAL REPRESENTATIONS AND WARRANTIES.

       To induce Agent and each Lender to enter into this Agreement and to make
advances hereunder, Borrower warrants, represents and covenants to Agent and
each Lender that:

              7.1.1.     ORGANIZATION AND QUALIFICATION.  Borrower and each of
       its Subsidiaries, as applicable, is a corporation or limited partnership
       duly organized, validly existing and in good standing under the laws of
       the jurisdiction of its 

                                     -19-
<PAGE>

       incorporation or formation.  Borrower and each of its Subsidiaries is 
       duly qualified and is authorized to do business and is in good standing 
       as a foreign corporation or limited partnership, as applicable, in each 
       state or jurisdiction listed on EXHIBIT 7.1.1 hereto and in all other 
       states and jurisdictions where the character of its Properties or the 
       nature of its activities make such qualification necessary, except when 
       the failure to so qualify would not have a Material Adverse Effect.

              7.1.2.     POWER AND AUTHORITY.  Borrower and each of its
       Subsidiaries is duly authorized and empowered to enter into, execute,
       deliver and perform this Agreement and each of the other Loan Documents
       to which it is a party.  The execution, delivery and performance of this
       Agreement and each of the other Loan Documents have been duly authorized
       by all necessary corporate and limited partnership action, as applicable,
       and do not and will not (i) require any consent or approval of the
       general or limited partners or the shareholders of Borrower or any of
       Borrower's Subsidiaries; (ii) contravene Lone Star's agreement of limited
       partnership or Borrower's or any of its other Subsidiary's charter,
       articles or certificate of incorporation or by-laws; (iii) violate, or
       cause Borrower or any of its Subsidiaries to be in default under, any
       provision of any law, rule, regulation, order, writ, judgment,
       injunction, decree, determination or award in effect having applicability
       to Borrower or any such Subsidiary; (iv) result in a breach of or
       constitute a default under any indenture or loan or credit agreement or
       any other agreement, lease or instrument to which Borrower or any of its
       Subsidiaries is a party or by which it or its Properties may be bound or
       affected; or (v) result in, or require, the creation or imposition of any
       Lien (other than Permitted Liens) upon or with respect to any of the
       Properties now owned or hereafter acquired by Borrower or any of its
       Subsidiaries.

              7.1.3.     LEGALLY ENFORCEABLE AGREEMENT.  This Agreement is, and
       each of the other Loan Documents when delivered under this Agreement will
       be, a legal, valid and binding obligation of Borrower and each of its
       Subsidiaries party thereto, enforceable against it in accordance with its
       respective terms, except as may be limited by applicable bankruptcy,
       reorganization, insolvency or similar laws affecting the enforcement of
       creditor's rights generally.

              7.1.4.     CAPITAL STRUCTURE.  EXHIBIT 7.1.4 hereto states, as of
       the date hereof, (i) the correct name of each of the Subsidiaries of
       Borrower, its jurisdiction of incorporation or formation and the
       percentage of its Voting Stock or limited partnership interests, as
       applicable, owned by Borrower, (ii) the names of Borrower's corporate or
       joint venture Affiliates and the nature of the affiliation, (iii) the
       number, nature and holder of all outstanding Securities of Borrower and
       each Subsidiary of Borrower and (iv) the number of partnership interests
       of Lone Star and the number of authorized, issued and treasury shares of
       Borrower and each other Subsidiary of Borrower.  Borrower has good title
       to all of the shares and limited partnership interests it purports to own
       of the stock and limited partnership interests of each of its
       Subsidiaries, free and clear in each case of any Lien other than
       Permitted Liens.  All 

                                     -20-
<PAGE>

       such shares and limited partnership interests have been duly issued and 
       are fully paid and non-assessable.  Except as set forth on EXHIBIT 7.1.4,
       and except for options issued to purchase capital stock of Borrower to 
       non-management employees, directors and consultants of Borrower or its 
       Subsidiaries, there are no outstanding options to purchase, or any rights
       or warrants to subscribe for, or any commitments or agreements to issue 
       or sell, or any Securities or obligations convertible into, or any powers
       of attorney relating to, partnership interests or shares of the capital 
       stock of Borrower or any of its Subsidiaries.  Except as set forth on 
       EXHIBIT 7.1.4, and except for options issued to non-management employees 
       of Borrower or its Subsidiaries, there are no outstanding agreements or 
       instruments binding upon any of Borrower's shareholders relating to the 
       ownership of its shares of capital stock.  Lone Star GP is the sole 
       general partner of Lone Star.

              7.1.5.     CORPORATE NAMES.  Neither Borrower nor any of its
       Subsidiaries has been known as or used any corporate, fictitious or trade
       names except those listed on EXHIBIT 7.1.5 hereto and except for those
       used by Borrower or any Subsidiary in the future after giving Agent 30
       days advance written notice.  Except as set forth on EXHIBIT 7.1.5,
       neither Borrower and nor any of its Subsidiaries has been the survivor of
       a merger or consolidation or has acquired all or substantially all of the
       assets of any Person.

              7.1.6.     BUSINESS LOCATIONS; AGENT FOR PROCESS.  Borrower's and
       each of its Subsidiaries' chief executive office and other places of
       business are as listed on EXHIBIT 6.1.1 hereto.  During the preceding
       one-year period of the date hereof, neither Borrower nor any of its
       Subsidiaries has had an office, place of business or agent for service of
       process other than as listed on EXHIBIT 6.1.1.  Except as shown on
       EXHIBIT 6.1.1, no Inventory is stored with a bailee, warehouseman or
       similar party, nor is any Inventory consigned to any Person.

              7.1.7.     TITLE TO PROPERTIES; PRIORITY OF LIENS.  Borrower and
       each of its Subsidiaries has good, indefeasible and marketable title to
       and fee simple ownership of, or valid and subsisting leasehold interests
       in, all of its real Property, and good title to all of the Collateral and
       all of its other Property, in each case, free and clear of all Liens
       except Permitted Liens.  Borrower or one of its Subsidiaries has paid or
       discharged all lawful claims which, if unpaid, might become a Lien
       against any of Borrower's or such Subsidiary's Properties that is not a
       Permitted Lien.  The Liens granted to Agent under Section 5 hereof are
       first priority Liens, subject only to Permitted Liens.

              7.1.8.     ACCOUNTS.  Agent may rely, in determining which
       Accounts are Eligible Accounts, on all statements and representations
       made by any Company with respect to any Account or Accounts.  Unless
       otherwise indicated in writing to Agent, with respect to each Eligible
       Account:

                                     -21-
<PAGE>

                         (i)       It is genuine and in all respects what it
              purports to be, and it is not evidenced by a judgment;

                         (ii)      It arises out of a completed, BONA FIDE sale
              and delivery of goods or rendition of services by a Company in the
              ordinary course of its business and in accordance with the terms
              and conditions of all purchase orders, contracts or other
              documents relating thereto and forming a part of the contract
              between such Company and the Account Debtor and the Account Debtor
              is not an Affiliate of such Company;

                         (iii)     It is for a liquidated amount maturing as
              stated in the duplicate invoice covering such sale or rendition of
              services, a copy of which has been furnished or is available to
              Agent;

                         (iv)      Such Account, and Agent's Lien therein, is
              not, and will not (by voluntary act or omission of any Company) be
              in the future, subject to any offset, Lien, deduction, defense,
              dispute, counterclaim or any other adverse condition except as
              disclosed in the most recent schedule of Accounts delivered by
              Borrower to Agent and except for disputes resulting in returned
              goods where the amount in controversy is deemed by Agent to be
              immaterial, and each such Account is absolutely owing to a Company
              and is not contingent in any respect or for any reason;

                         (v)       Except pursuant to the Conditional Sales
              Program, no company has made any agreement with any Account Debtor
              thereunder for any extension, compromise, settlement or
              modification of any such Account or any deduction therefrom,
              except discounts or allowances which are granted by such Company
              in the ordinary course of its business for prompt payment and
              which are reflected in the calculation of the net amount of each
              respective invoice related thereto and are reflected in the
              Schedules of Accounts submitted to Agent pursuant to subsection
              6.2.1 hereof;

                         (vi)      There are no facts, events or occurrences
              which in any way impair the validity or enforceability of any
              Accounts or tend to reduce the amount payable thereunder from the
              face amount of the invoice and statements delivered to Agent with
              respect thereto;

                         (vii)     To the best of Borrower's knowledge, the
              Account Debtor thereunder (1) had the capacity to contract at the
              time any contract or other document giving rise to the Account was
              executed and (2) such Account Debtor is Solvent; and

                         (viii)    To the best of Borrower's knowledge, there
              are no proceedings or actions which are threatened or pending
              against any Account Debtor 

                                     -22-
<PAGE>

              thereunder which might result in any material adverse change in 
              such Account Debtor's financial condition or the collectibility 
              of such Account.

              7.1.9.     EQUIPMENT.  The Equipment taken as a whole is in good
       operating condition and repair, and all necessary replacements of and
       repairs thereto shall be made so that the value and operating efficiency
       of the Equipment shall be maintained and preserved, reasonable wear and
       tear excepted.  Borrower shall not, and shall cause each of its
       Subsidiaries not to, permit any of the Equipment to become affixed to any
       real Property leased to Borrower or such Subsidiary so that an interest
       arises therein under the real estate laws of the applicable jurisdiction
       unless the landlord of such real Property has executed a landlord waiver
       or leasehold mortgage in favor of and in form acceptable to Agent, and
       Borrower shall not, and shall cause each of its Subsidiaries not to,
       permit any of the Equipment to become an accession to any personal
       Property other than Equipment that is subject to first priority (except
       for Permitted Liens) Liens in favor of Agent.

              7.1.10.    FINANCIAL STATEMENTS; FISCAL YEAR.  The Consolidated
       and consolidating balance sheets of Borrower and such other Persons
       described therein (including the accounts of all Subsidiaries of Borrower
       and their respective Subsidiaries for the respective periods during which
       a Subsidiary relationship existed) as of June 30, 1998, and the related
       statements of income, changes in stockholder's equity, and changes in
       financial position for the periods ended on such dates, have been
       prepared in accordance with GAAP, and present fairly the financial
       positions of Borrower and such Persons at such dates and the results of
       Borrower's and such Persons' operations for such periods.  Since June 30,
       1998, there has been no material change in the condition, financial or
       otherwise, of Borrower or such other Persons as shown on the Consolidated
       balance sheet as of such date and no change in the aggregate value of
       Equipment and real Property owned by Borrower or such other Persons,
       except changes in the ordinary course of business, none of which
       individually or in the aggregate has been materially adverse.  The fiscal
       year of Borrower and each of its Subsidiaries ends on June 30 of each
       year.

              7.1.11.    FULL DISCLOSURE.  The financial statements referred to
       in subsection 7.1.10 hereof do not, nor does this Agreement or any other
       written statement of Borrower or any of its Subsidiaries to Agent or any
       Lender, contain any untrue statement of a material fact or omit a
       material fact necessary to make the statements contained therein or
       herein not misleading, except in cases where corrections are made to the
       financial statements with the consent of Agent.  There is no fact which
       Borrower or any of its Subsidiaries has failed to disclose to Agent in
       writing which materially affects adversely or, so far as Borrower can now
       reasonably foresee, will materially affect adversely the Properties,
       business, prospects or condition (financial or otherwise) of Borrower or
       any of its Subsidiaries or the ability of Borrower or any of its
       Subsidiaries to perform this Agreement or the other Loan Documents.

                                     -23-


<PAGE>

              7.1.12.    SOLVENT FINANCIAL CONDITION.  Borrower and each of its
       Subsidiaries is now and, after giving effect to the Loans to be made
       hereunder, at all times will be, Solvent.

              7.1.13.    SURETY OBLIGATIONS.  Neither Borrower nor any of its
       Subsidiaries is obligated as surety or indemnitor under any surety or
       similar bond or other contract issued or entered into to assure payment,
       performance or completion of performance of any undertaking or obligation
       of any Person.

              7.1.14.    TAXES.  The federal tax identification number of
       Borrower and each of its Subsidiaries is shown on EXHIBIT 7.1.14 hereto. 
       Borrower and each of its Subsidiaries has filed all federal, state and
       local tax returns and other reports it is required by law to file and has
       paid, or made provision for the payment of, all taxes, assessments, fees,
       levies and other governmental charges upon it, its income and Properties
       as and when such taxes, assessments, fees, levies and charges are due and
       payable, unless and to the extent any thereof are being actively
       contested in good faith and by appropriate proceedings and Borrower or
       such Subsidiary maintains reasonable reserves on its books therefor.  The
       provision for taxes on the books of Borrower and each of its Subsidiaries
       is adequate for all years not closed by applicable statutes, and for the
       current fiscal year.

              7.1.15.    BROKERS.  There are no claims for brokerage
       commissions, finder's fees or investment banking fees in connection with
       the transactions contemplated by this Agreement.

              7.1.16.    PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. 
       Borrower and each of its Subsidiaries owns or possesses all the patents,
       trademarks, service marks, trade names, copyrights and licenses necessary
       for the present and planned future conduct of its business without any
       known conflict with the rights of others.  All such patents, trademarks,
       service marks, trade names, copyrights, licenses and other similar rights
       are listed on EXHIBIT 7.1.16 hereto.

              7.1.17.    GOVERNMENTAL CONSENTS.  Borrower and each of its
       Subsidiaries has, and is in good standing with respect to, all
       governmental consents, approvals, licenses, authorizations, permits,
       certificates, inspections and franchises necessary to continue to conduct
       its business as heretofore or proposed to be conducted by it and to own
       or lease and operate its Properties as now owned or leased by it, except
       in cases where the failure to have any such items does not cause a
       Material Adverse Effect.

              7.1.18.    COMPLIANCE WITH LAWS.   Borrower and each of its
       Subsidiaries has duly complied with, and its Properties, business
       operations and leaseholds are in compliance in all material respects
       with, the provisions of all federal, state and local laws, rules and
       regulations applicable to Borrower or such Subsidiary, as applicable, its
       Properties or the conduct of its business and there have been no
       citations, notices


                                      -24-
<PAGE>

       or orders of noncompliance issued to Borrower or any of its 
       Subsidiaries under any such law, rule or regulation which could 
       reasonably be expected to have a Material Adverse Effect.  Borrower 
       and each of its Subsidiaries has established and maintains an adequate 
       monitoring system to insure that it remains in compliance with all 
       federal, state and local laws, rules and regulations applicable to it. 
       No Inventory has been produced in violation of the Fair Labor 
       Standards Act (29 U.S.C. Section 201 ET SEQ.), as amended.

              7.1.19.    RESTRICTIONS.  Neither Borrower nor any of its
       Subsidiaries is a party or subject to any contract, agreement, or charter
       or other corporate or limited partnership restriction, which materially
       and adversely affects the use or ownership of any of its Properties. 
       Neither Borrower nor any of its Subsidiaries is a party or subject to any
       contract or agreement which restricts its right or ability to incur
       Indebtedness, other than as set forth on EXHIBIT 7.1.19 hereto, none of
       which prohibit the execution of or compliance with this Agreement or the
       other Loan Documents by Borrower or any of its Subsidiaries, as
       applicable.

              7.1.20.    LITIGATION.  Except as set forth on EXHIBIT 7.1.20
       hereto, there are no actions, suits, proceedings or investigations
       pending, or to the knowledge of Borrower, threatened, against or
       affecting Borrower or any of its Subsidiaries, or the business,
       operations, Properties, prospects, profits or condition of Borrower or
       any of its Subsidiaries which could reasonably be expected to cause a
       Material Adverse Effect.  Neither Borrower nor any of its Subsidiaries is
       in default with respect to any order, writ, injunction, judgment, decree
       or rule of any court, governmental authority or arbitration board or
       tribunal.

              7.1.21.    NO DEFAULTS.  No event has occurred and no condition
       exists which would, upon or after the execution and delivery of this
       Agreement or Borrower's performance hereunder, constitute a Default or an
       Event of Default.  Neither Borrower nor any of its Subsidiaries is in
       default in (and no event has occurred and no condition exists which
       constitutes, or which with the passage of time or the giving of notice or
       both would constitute, a default in) the payment of any Indebtedness to
       any Person for Money Borrowed which is not being repaid on the Closing
       Date.

              7.1.22.    LEASES.  EXHIBIT 7.1.22 hereto is a complete listing
       of all capitalized leases and operating leases of Borrower and its
       Subsidiaries.  Borrower and each of its Subsidiaries is in material
       compliance with all of the terms of each of its respective capitalized
       and operating leases.

              7.1.23.    PENSION PLANS.  Except as disclosed on EXHIBIT 7.1.23
       hereto, neither Borrower nor any of its Subsidiaries has any Plan. 
       Borrower and each of its Subsidiaries is in material compliance with the
       requirements of ERISA and the regulations promulgated thereunder with
       respect to each Plan.  No fact or situation that could reasonably be
       expected to result in a Material Adverse Effect exists in



                                      -25-
<PAGE>

       connection with any Plan.  Neither Borrower nor any of its 
       Subsidiaries has any withdrawal liability in connection with a 
       Multiemployer Plan.

              7.1.24.    TRADE RELATIONS.  There exists no actual or threatened
       termination, cancellation or limitation of, or any modification or change
       in, the business relationship between Borrower or any of its Subsidiaries
       and any customer or any group of customers whose purchases individually
       or in the aggregate are material to the business of Borrower or any of
       its Subsidiaries, or with any material supplier, and there exists no
       present condition or state of facts or circumstances which would
       materially affect adversely Borrower or any of its Subsidiaries or
       prevent Borrower or any of its Subsidiaries from conducting such business
       after the consummation of the transaction contemplated by this Agreement
       in substantially the same manner in which it has heretofore been
       conducted.

              7.1.25.    LABOR RELATIONS.  Except as described on EXHIBIT
       7.1.25 hereto, neither Borrower nor any of its Subsidiaries is a party to
       any collective bargaining agreement.  There are no material grievances,
       disputes or controversies with any union or any other organization of
       Borrower's or any of its Subsidiaries' employees, or threats of strikes,
       work stoppages or any asserted pending demands for collective bargaining
       by any union or organization.

              7.1.26.    YEAR 2000.  Borrower has reviewed its operations and
       those of its Subsidiaries with a view to assessing whether its
       businesses, or the businesses of any of its Subsidiaries, will have a
       Year 2000 Problem.  Borrower represents and warrants that it has a
       reasonable basis to believe that no Year 2000 Problem will cause a
       material adverse effect on the business of Borrower or any of its
       Subsidiaries.

              7.1.27.    DESIGNATED SENIOR DEBT.  Other than the Obligations,
       there exists no other Designated Senior Debt (as defined in the
       Indenture).

       7.2.   CONTINUOUS NATURE OF REPRESENTATIONS AND WARRANTIES.

       Each representation and warranty contained in this Agreement and the
other Loan Documents shall be continuous in nature and shall remain accurate,
complete and not misleading at all times during the term of this Agreement,
except for changes in the nature of Borrower's or any of its Subsidiaries'
business or operations that would render the information in any exhibit attached
hereto either inaccurate, incomplete or misleading, so long as Agent has
consented to such changes or such changes are expressly permitted by this
Agreement.  Schedules to this Agreement may be updated by Borrower to reflect
any such changes.

       7.3.   SURVIVAL OF REPRESENTATIONS AND WARRANTIES.

       All representations and warranties of Borrower contained in this
Agreement or any of the other Loan Documents shall survive the execution,
delivery and acceptance thereof by



                                      -26-
<PAGE>

Lenders and the parties thereto and the closing of the transactions described 
therein or related thereto.

                  SECTION 8.  COVENANTS AND CONTINUING AGREEMENTS

       8.1.   AFFIRMATIVE COVENANTS.

       During the term of this Agreement, and thereafter for so long as there
are any Obligations outstanding (other than contingent indemnification
obligations under Section 12.2 or under the indemnification provisions of the
Security Documents), Borrower covenants that, unless otherwise consented to by
Majority Lenders in writing, it shall:

              8.1.1.     VISITS AND INSPECTIONS.  Permit representatives of
       Agent, or any Lender accompanying Agent, from time to time, as often as
       may be reasonably requested, but only during normal business hours, to
       visit and inspect the Properties of Borrower and each of its
       Subsidiaries, inspect, audit and make extracts from their respective
       books and records, and discuss with their respective officers, employees
       and independent accountants, Borrower's and each of its Subsidiaries'
       business, assets, liabilities, financial condition, business prospects
       and results of operations.

              8.1.2.     NOTICES.  Promptly notify Agent in writing of the
       occurrence of any event or the existence of any fact which renders any
       representation or warranty in this Agreement or any of the other Loan
       Documents inaccurate, incomplete or misleading.

              8.1.3.     FINANCIAL STATEMENTS.  Keep, and cause its
       Subsidiaries to keep, adequate records and books of account with respect
       to its business activities in which proper entries are made in accordance
       with GAAP reflecting all its financial transactions; and cause to be
       prepared and furnished to Agent and each Lender the following (all to be
       prepared in accordance with GAAP applied on a consistent basis, unless
       Borrower's certified public accountants concur in any change therein and
       such change is disclosed to Agent and is consistent with GAAP):

                         (i)       not later than 90 days after the close of
              each fiscal year of Borrower, unqualified (except for a
              qualification for a change in accounting principles with which the
              accountant concurs) audited financial statements of Borrower and
              each of its Subsidiaries as of the end of such year, on a
              Consolidated and consolidating basis, certified by a firm of
              independent certified public accountants of recognized standing
              selected by Borrower acceptable to Agent;

                         (ii)      not later than 30 days after the end of each
              month hereafter, including the last month of Borrower's fiscal
              year, unaudited interim financial statements (which shall consist
              of an income statement, statement of cash flows and a balance
              sheet) of Borrower and each of its Subsidiaries as of the end of
              such month and of the portion of Borrower's fiscal year then
              elapsed, on



                                      -27-
<PAGE>

              a Consolidated and consolidating basis, certified by the 
              principal financial officer of Borrower as prepared in 
              accordance with GAAP and fairly presenting the Consolidated 
              financial position and results of operations of Borrower and 
              each of its Subsidiaries for such month and period subject only 
              to changes from audit and year-end adjustments and except that 
              such statements need not contain notes;

                         (iii)     promptly after the sending or filing thereof,
              as the case may be, copies of any proxy statements, financial
              statements or reports which Borrower has made available to its
              shareholders in their capacity as shareholders and copies of any
              regular, periodic and special reports or registration statements
              which Borrower files with the Securities and Exchange Commission
              or any governmental authority which may be substituted therefor,
              or any national securities exchange;

                         (iv)      promptly after the filing thereof, copies of
              any annual report to be filed with ERISA in connection with each
              Plan; and

                         (v)       such other data and information (financial
              and otherwise) as Agent, from time to time, may reasonably
              request, bearing upon or related to the Collateral or Borrower's
              or any of its Subsidiaries' financial condition or results of
              operations.

       Concurrently with the delivery of the financial statements described in
clause (i) of this subsection 8.1.3, Borrower shall forward to Agent and each
Lender a copy of the accountants' letter to Borrower's management that is
prepared in connection with such financial statements and also shall cause to be
prepared and shall furnish to Agent and each Lender a certificate of the
aforesaid certified public accountants certifying to Agent and Lenders that,
based upon their examination of the financial statements of Borrower and its
Subsidiaries performed in connection with their examination of said financial
statements, they are not aware of any Default or Event of Default, or, if they
are aware of such Default or Event of Default, specifying the nature thereof,
and acknowledging, in a manner satisfactory to Agent, that they are aware that
Agent and each Lender is relying on such financial statements in making its
decisions with respect to the Loans.  Concurrently with the delivery of the
financial statements described in clauses (i) and (ii) of this subsection 8.1.3,
or more frequently if requested by Agent, Borrower shall cause to be prepared
and furnished to Agent a Compliance Certificate in the form of EXHIBIT 8.1.3
hereto executed by the Chief Financial Officer of Borrower.

              8.1.4.     LANDLORD AND STORAGE AGREEMENTS.  Provide Agent with
       copies of all agreements between Borrower or any of its Subsidiaries and
       any landlord or warehouseman which owns any premises at which any
       Inventory may, from time to time, be kept.



                                      -28-
<PAGE>

              8.1.5.     GUARANTOR FINANCIAL STATEMENTS.  Deliver or cause to
       be delivered to Agent financial statements for each Guarantor (to the
       extent not delivered pursuant to subsection 8.1.3 hereof) in form and
       substance satisfactory to Agent at such intervals and covering such time
       periods as Agent may request.

              8.1.6.     PROJECTIONS.  No later than the end of each fiscal
       year of Borrower, deliver to Agent Projections of Borrower and its
       Subsidiaries for the forthcoming fiscal year, month by month.

              8.1.7.     YEAR 2000 ISSUES.  Take all actions reasonably
       necessary and commit adequate resources to assure that its computer-based
       and other systems (and those of all Subsidiaries of Borrower) are able to
       effectively process data, including dates before, on and after January 1,
       2000, without experiencing any Year 2000 Problem that is reasonably
       likely to cause a material adverse effect on the business of Borrower or
       any of its Subsidiaries.  Borrower will provide Agent with assurances and
       substantiations (including, but not limited to, the results of internal
       or external audit reports prepared in the ordinary course of business)
       reasonably acceptable to Agent as to the capability of Borrower and any
       of its Subsidiaries to conduct its and their businesses and operations
       before, on and after January 1, 2000 without experiencing a Year 2000
       Problem causing a material adverse effect of the business of Borrower or
       any of its Subsidiaries.

       8.2.   NEGATIVE COVENANTS.

       During the term of this Agreement, and thereafter for so long as there
are any Obligations outstanding (other than contingent indemnification
obligations under Section 12.2 or under the indemnification provisions of the
Security Documents), Borrower covenants that, unless Majority Lenders have first
consented thereto in writing, it will not:

              8.2.1.     MERGERS; CONSOLIDATIONS; ACQUISITIONS.  Merge or
       consolidate, or permit any Subsidiary of Borrower to merge or
       consolidate, with any Person; or acquire, or permit any of its
       Subsidiaries to acquire, all or any substantial part of the Properties of
       any Person; PROVIDED, that any Subsidiary of Borrower may merge with and
       into any other Subsidiary of Borrower.

              8.2.2.     LOANS.  Make, or permit any Subsidiary of Borrower to
       make, any loans or other advances of money (other than for salary, travel
       advances, advances against commissions and other similar advances in the
       ordinary course of business and advance payments made for Christmas tree
       purchases in the ordinary course of business) to any Person, other than
       Subsidiary Loans.

              8.2.3.     TOTAL INDEBTEDNESS FOR MONEY BORROWED.  Create, incur,
       assume, or suffer to exist, or permit any Subsidiary of Borrower to
       create, incur or suffer to exist, any Indebtedness for Money Borrowed,
       except:



                                      -29-
<PAGE>

                         (i)       Obligations owing to Agent and Lenders under
              this Agreement;

                         (ii)      other Indebtedness for Money Borrowed
              existing on the Closing Date as set forth on EXHIBIT 8.2.3 hereto;

                         (iii)     indebtedness of any Subsidiary of Borrower
              resulting from a Subsidiary Loan;

                         (iv)      Permitted Purchase Money Indebtedness;

                         (v)       obligations incurred in connection with
              interest rate protection arrangements; and 

                         (vi)      unsecured indebtedness for Money Borrowed not
              included in paragraphs (i) through (vi) above which does not
              exceed at any time, in the aggregate, the sum of $1,000,000.

              8.2.4.     AFFILIATE TRANSACTIONS.  Enter into, or be a party to,
       or permit any Subsidiary of Borrower to enter into or be a party to, any
       transaction with any Affiliate of Borrower, except (i) in the ordinary
       course of and pursuant to the reasonable requirements of Borrower's or
       such Subsidiary's business and upon fair and reasonable terms which are
       fully disclosed to Agent and are no less favorable to Borrower than would
       obtain in a comparable arm's length transaction with a Person not an
       Affiliate of Borrower or such Subsidiary and (ii) usual and customary
       employment agreements and indemnification arrangements contained in a
       Borrower's or a Subsidiary's formation documents as in effect on the date
       hereof.

              8.2.5.     LIMITATION ON LIENS.  Create or suffer to exist, or
       permit any Subsidiary of Borrower to create or suffer to exist, any Lien
       upon any of its Property, income or profits, whether now owned or
       hereafter acquired, except:

                         (i)       Liens at any time granted in favor of Agent,
              for the benefit of itself and each Lender;

                         (ii)      Liens for taxes (excluding any Lien imposed
              pursuant to any of the provisions of ERISA) not yet due, or being
              contested in the manner described in subsection 7.1.14 hereto, but
              only if in Agent's reasonable judgment such Lien does not
              adversely affect Agent's or Lenders' rights or the priority of
              Agent's Lien in the Collateral;

                         (iii)     Liens arising in the ordinary course of
              Borrower's or any Subsidiary's business by operation of law or
              regulation, but only if payment in respect of any such Lien is not
              at the time required and such Liens do not, in the aggregate,
              materially detract from the value of the Property of Borrower or



                                      -30-
<PAGE>

              such Subsidiary or materially impair the use thereof in the
              operation of Borrower's or such Subsidiary's business;

                         (iv)      Purchase Money Liens securing Permitted
              Purchase Money Indebtedness;

                         (v)       such other Liens as appear on EXHIBIT 8.2.5
              hereto;

                         (vi)      so long as no Event of Default has occurred
              and is continuing, attachment, judgment and other similar non-tax
              Liens arising in connection with court proceedings, but only if
              and for so long as the execution or other enforcement of such
              Liens is and continues to be effectively stayed and bonded on
              appeal, the validity and amount of the claims secured thereby are
              being actively contested in good faith and by appropriate lawful
              proceedings and such Liens do not, in the aggregate, materially
              detract from the value of the Property of Borrower or its
              Subsidiaries or materially impair the use thereof in the operation
              of Borrower's or any of its Subsidiary's businesses;

                         (vii)     reservations, exceptions, easements, rights
              of way and other similar encumbrances affecting real Property,
              provided, that, in Agent's sole judgment, they do not in the
              aggregate materially detract from the value of said Properties or
              materially interfere with  their use in the ordinary conduct of
              Borrower's or any of its Subsidiary's businesses, and, if said
              real Property constitutes Collateral, Agent has consented thereto;
              and

                         (viii)    such other Liens as Agent may hereafter
              approve in writing.

              8.2.6.     SUBORDINATED DEBT.  Make, or permit any Subsidiary of
       Borrower to make, any payment of any part or all of any Subordinated Debt
       or take any other action or omit to take any other action in respect of
       any Subordinated Debt, except in accordance with the subordination
       agreement relative thereto.

              8.2.7.     DISTRIBUTIONS.  Declare or make, or permit any
       Subsidiary of Borrower to declare or make, any Distributions (other than
       Distributions made when no Default or Event of Default exists to Borrower
       by a Subsidiary) except for redemptions of stock or options issued to
       employees whose employment has been terminated, provided that (i) such
       redemptions shall not exceed $2,000,000 in the aggregate during the Term,
       and (ii) Availability equals or exceeds $3,000,000 after giving effect to
       any such redemptions.

              8.2.8.     CAPITAL EXPENDITURES.  Make Capital Expenditures
       (including, without limitation, by way of capitalized leases), excluding
       any reinvestments in Equipment as described in subsection 6.4.2 and any
       casualty insurance proceeds received by Borrower or any of its
       Subsidiaries which are spent to replace Collateral which is lost or
       destroyed, which, in the aggregate, as to Borrower and all of its
       Subsidiaries,



                                      -31-
<PAGE>

       exceed $3,000,000 for the period beginning on the Closing Date and 
       ending June 30, 1999 and $5,000,000 during any fiscal year of Borrower 
       thereafter, except that any unused portion of the Capital Expenditure 
       allowance for any fiscal year may be carried over to the immediately 
       succeeding fiscal year to be used in such succeeding fiscal year after 
       all of the Capital Expenditure allowance for that year has been used.

              8.2.9.     DISPOSITION OF ASSETS.  Sell, lease or otherwise
       dispose of any of, or permit any Subsidiary of Borrower to sell, lease or
       otherwise dispose of, any of its Properties, including any disposition of
       Property as part of a sale and leaseback transaction, to or in favor of
       any Person, except (i) sales of Inventory in the ordinary course of
       business for so long as no Event of Default exists hereunder, (ii)
       transfers of Property to Borrower by a Subsidiary of Borrower or (iii)
       dispositions expressly authorized by this Agreement.

              8.2.10.    STOCK OF SUBSIDIARIES.  Permit any of Borrower's
       Subsidiaries to issue any additional shares of its capital stock or any
       additional partnership interests, except director's qualifying shares.

              8.2.11.    BILL-AND-HOLD SALES, ETC.  Except pursuant to the
       Conditional Sales Program, make a sale to any customer on a
       bill-and-hold, guaranteed sale, sale and return, sale on approval or
       consignment basis, or any sale on a repurchase or return basis.

              8.2.12.    RESTRICTED INVESTMENT.  Make or have, or permit any
       Subsidiary of Borrower to make or have, any Restricted Investment.

              8.2.13.    TAX CONSOLIDATION.  File or consent to the filing of
       any consolidated income tax return with any Person other than any
       Subsidiary of Borrower.

              8.2.14.    FISCAL YEAR.  Change, or permit any of its
       Subsidiaries to change, its fiscal year except, upon reasonable advance
       notice to Agent, a change to a calendar year end.

       8.3.   SPECIFIC FINANCIAL COVENANTS.

       During the term of this Agreement, and thereafter for so long as there
are any Obligations outstanding (other than contingent indemnification
obligations under Section 12.2 or under the indemnification provisions of the
Security Documents), Borrower covenants that, unless otherwise consented to by
Majority Lenders in writing, it shall comply with all of the financial covenants
set forth in Exhibit 8.3 hereto.

                        SECTION 9.  CONDITIONS PRECEDENT

       Notwithstanding any other provision of this Agreement or any of the other
Loan Documents, and without affecting in any manner the rights of Agent or any
Lender under the



                                      -32-
<PAGE>

other sections of this Agreement, neither Agent nor any Lender shall be 
required to make any Loan, nor shall Agent be required to issue or procure 
any Letter of Credit or LC Guaranty, under this Agreement unless and until 
each of the following conditions has been and continues to be satisfied or 
waived pursuant to Section 11.9 hereof:

       9.1.   DOCUMENTATION.

       Agent shall have received, in form and substance satisfactory to Agent
and its counsel, a duly executed copy of this Agreement and the other Loan
Documents, together with such additional documents, instruments and certificates
as Agent and its counsel shall require in connection therewith from time to
time, all in form and substance satisfactory to Agent and its counsel.

       9.2.   NO DEFAULT.

       No Default or Event of Default shall exist.

       9.3.   OTHER CONDITIONS.

       Each of the conditions precedent set forth in the Loan Documents shall
have been satisfied.

       9.4.   AVAILABILITY.

       Agent shall have determined that immediately after Lenders have made the
initial Loans contemplated hereby, and all closing costs incurred in connection
with the transactions contemplated hereby have been paid or accrued,
Availability shall not be less than $5,000,000.

       9.5.   NO LITIGATION.

       No action, proceeding, investigation, regulation or legislation shall
have been instituted, threatened or proposed before any court, governmental
agency or legislative body to enjoin, restrain or prohibit, or to obtain damages
in respect of, or which is related to or arises out of this Agreement or the
consummation of the transactions contemplated hereby.

            SECTION 10.  EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT

       10.1.  EVENTS OF DEFAULT.

       The occurrence of one or more of the following events shall constitute an
"Event of Default":

              10.1.1.    PAYMENT OF OBLIGATIONS.  Borrower shall fail to pay
       any of the Obligations on the due date thereof (whether due at stated
       maturity, on demand, upon acceleration or otherwise) and, in the case of
       interest payments only, such failure continues for 5 days after the due
       date thereof.



                                      -33-
<PAGE>

              10.1.2.    MISREPRESENTATIONS.  Any representation, warranty or
       other statement made or furnished to Agent or any Lender by or on behalf
       of Borrower, any Subsidiary of Borrower or any Guarantor in this
       Agreement, any of the other Loan Documents or any instrument, certificate
       or financial statement furnished in compliance with or in reference
       thereto proves to have been false or misleading in any material respect
       when made or furnished or when reaffirmed pursuant to Section 7.2 hereof.

              10.1.3.    BREACH OF SPECIFIC COVENANTS.  Borrower shall fail or
       neglect to perform, keep or observe any covenant contained in Sections
       5.2, 5.3, 6.1.1, 6.2, 8.1.1, 8.1.3, 8.2 or 8.3 hereof on the date that
       Borrower is required to perform, keep or observe such covenant.

              10.1.4.    BREACH OF OTHER COVENANTS.  Borrower shall fail or
       neglect to perform, keep or observe any covenant contained in this
       Agreement (other than a covenant which is dealt with specifically
       elsewhere in Section 10.1 hereof) and the breach of such other covenant
       is not cured to Agent's satisfaction within 30 days after the sooner to
       occur of Borrower's receipt of notice of such breach from Agent or the
       date on which such failure or neglect first becomes known to any
       executive officer of Borrower.

              10.1.5.    DEFAULT UNDER SECURITY DOCUMENTS, OTHER AGREEMENTS OR
       PURCHASE DOCUMENT.  Any event of default shall occur under, or Borrower
       or any of its Subsidiaries shall default in the performance or observance
       of any term, covenant, condition or agreement contained in, any of the
       Security Documents or the Other Agreements and such default shall
       continue beyond any applicable grace period.

              10.1.6.    OTHER DEFAULTS.  There shall occur any default or
       event of default on the part of Borrower or any of its Subsidiaries under
       any agreement, document or instrument to which Borrower or such
       Subsidiary is a party or by which Borrower or such Subsidiary or any of
       its Property is bound, creating or relating to any Indebtedness for Money
       Borrowed in an amount exceeding, at any time, $500,000 in the aggregate
       (other than the Obligations), if the payment or maturity of such
       Indebtedness is accelerated in consequence of such event of default or
       demand for payment of such Indebtedness is made.

              10.1.7.    UNINSURED LOSSES.  Any material loss, theft, damage or
       destruction of any of the Collateral such that the aggregate value of
       such Collateral MINUS the amount of such Collateral covered by insurance
       exceeds $500,000.

              10.1.8.    INSOLVENCY AND RELATED PROCEEDINGS.  Borrower or any
       Guarantor shall cease to be Solvent or shall suffer the appointment of a
       receiver, trustee, custodian or similar fiduciary, or shall make an
       assignment for the benefit of creditors, or any petition for an order for
       relief shall be filed by or against Borrower or



                                      -34-
<PAGE>

       any Guarantor under the federal bankruptcy laws (if against Borrower 
       or any Guarantor, the continuation of such proceeding for more than 60 
       days), or Borrower or any Guarantor shall make any offer of 
       settlement, extension or composition to their respective unsecured 
       creditors generally.

              10.1.9.    BUSINESS DISRUPTION; CONDEMNATION.  There shall occur
       a cessation of a substantial part of the business of Borrower, any
       Subsidiary of Borrower or any Guarantor for a period which significantly
       and adversely affects Borrower's, such Subsidiary's or such Guarantor's
       capacity to continue its business, on a profitable basis; or Borrower,
       any Subsidiary of Borrower or any Guarantor shall suffer the loss or
       revocation of any license or permit now held or hereafter acquired by
       Borrower, such Subsidiary or such Guarantor which is necessary to the
       continued or lawful operation of its business; or Borrower, any
       Subsidiary of Borrower or any Guarantor shall be enjoined, restrained or
       in any way prevented by court, governmental or administrative order from
       conducting all or any material part of its business affairs; or any
       material lease or agreement pursuant to which Borrower, such Subsidiary
       or any Guarantor leases, uses or occupies any Property shall be canceled
       or terminated prior to the expiration of its stated term; or any material
       part of the Collateral shall be taken through condemnation or the value
       of such Property shall be impaired through condemnation.

              10.1.10.   CHANGE OF OWNERSHIP.  (i) Kohlberg & Company, LLC or
       an Affiliate thereof ceases to own and control 100% of the issued and
       outstanding general partnership interests of KCSN Acquisition Company,
       L.P.; (ii) KCSN Acquisition Company, L.P. ceases to own and control, on a
       fully diluted basis, at least 30% of the issued and outstanding stock of
       Borrower and to possess the power to elect a majority of the Board of
       Directors of Borrower or otherwise direct the management and policies of
       Borrower; (iii) Borrower ceases to own and control 100% of the issued and
       outstanding shares of each of CSCT , Lone Star GP and LSGR Holdings, Inc.
       and (iv) (a) Loan Star GP ceases to be the sole general partner of Lone
       Star or (b) LSGR Holdings, Inc. ceases to be the sole limited partner of
       Lone Star.

              10.1.11.   ERISA.  A Reportable Event shall occur which Agent, in
       its sole discretion, shall determine in good faith constitutes grounds
       for the termination by the Pension Benefit Guaranty Corporation of any
       Plan or for the appointment by the appropriate United States district
       court of a trustee for any Plan, or if any Plan shall be terminated or
       any such trustee shall be requested or appointed, or if Borrower, any
       Subsidiary of Borrower or any Guarantor is in "default" (as defined in
       Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer
       Plan resulting from Borrower's, such Subsidiary's or such Guarantor's
       complete or partial withdrawal from such Plan.

              10.1.12.   CHALLENGE TO AGREEMENT.  Borrower, any Subsidiary of
       Borrower or any Guarantor, or any Affiliate of any of them, shall
       challenge or contest in any



                                      -35-
<PAGE>

       action, suit or proceeding the validity or enforceability of this 
       Agreement or any of the other Loan Documents, the legality or 
       enforceability of any of the Obligations or the perfection or priority 
       of any Lien granted to Agent, for the benefit of itself and Lenders.

              10.1.13.   REPUDIATION OF OR DEFAULT UNDER GUARANTY AGREEMENT. 
       Any Guarantor shall revoke or attempt to revoke the Guaranty Agreement
       signed by such Guarantor, or shall repudiate such Guarantor's liability
       thereunder or shall be in default under the terms thereof.

              10.1.14.   JUDGMENTS.  Any money judgment, writ of attachment or
       similar process (collectively, "Judgments") is issued or rendered against
       Borrower or any of its Subsidiaries, or any of their respective Property
       (i) in the case of money Judgments, in an amount of $250,000 or more for
       any single judgment, attachment or process or $500,000 for all such
       judgments, attachments or processes in the aggregate, in each case in
       excess of any applicable insurance with respect to which the insurer has
       admitted liability and (ii) in the case of non-monetary Judgments, such
       Judgment or Judgments (in the aggregate) are reasonably likely to have a
       material adverse effect on the business of Borrower or any of its
       Subsidiaries, and, in each case, which judgment, attachment or process is
       not stayed, released or discharged within 45 days of if being filed
       against Borrower, any Subsidiary of Borrower or any Guarantor, or any of
       their respective Property.

       10.2.  ACCELERATION OF THE OBLIGATIONS.

       Without in any way limiting the right of Lenders to demand payment of any
portion of the Obligations payable on demand in accordance with Section 3.2
hereof, upon or at any time after the occurrence and during the continuance of
an Event of Default, all or any portion of the Obligations shall, at the option
of Agent and without presentment, demand protest or further notice by Agent or
any Lender, become at once due and payable and Borrower shall forthwith pay to
Agent, for the ratable benefit of Lenders, the full amount of such Obligations,
PROVIDED, that upon the occurrence of an Event of Default specified in
subsection 10.1.9 hereof, all of the Obligations shall become automatically due
and payable without declaration, notice or demand by Agent.

       10.3.  OTHER REMEDIES.

       Upon or at any time after the occurrence and during the continuance of an
Event of Default, Agent shall have and may exercise from time to time the
following rights and remedies:

              10.3.1.    All of the rights and remedies of a secured party
       under the Code or under other applicable law, and all other legal and
       equitable rights to which Agent or any Lender may be entitled, all of
       which rights and remedies shall be cumulative and



                                      -36-
<PAGE>

       shall be in addition to any other rights or remedies contained in this 
       Agreement or any of the other Loan Documents, and none of which shall 
       be exclusive.

              10.3.2.    The right to take immediate possession of the
       Collateral, and to (i) require Borrower or any Subsidiary of Borrower to
       assemble the Collateral, at Borrower's expense, and make it available to
       Agent at a place designated by Agent which is reasonably convenient to
       both parties, and (ii) enter any premises where any of the Collateral
       shall be located and to keep and store the Collateral on said premises
       until sold (and if said premises be the Property of Borrower or any
       Subsidiary of Borrower, Borrower agrees not to charge, and shall cause
       its Subsidiaries not to charge, Agent for storage thereof).

              10.3.3.    The right to sell or otherwise dispose of all or any
       Collateral in its then condition, or after any further manufacturing or
       processing thereof, at public or private sale or sales, with such notice
       as may be required by law, in lots or in bulk, for cash or on credit, all
       as Agent, in its sole discretion, may deem advisable.  Borrower agrees
       that 10 days' written notice to Borrower of any public or private sale or
       other disposition of Collateral shall be reasonable notice thereof, and
       such sale shall be at such locations as Agent may designate in said
       notice.  Agent shall have the right to conduct such sales on Borrower's
       or any of its Subsidiary's premises, without charge therefor, and such
       sales may be adjourned from time to time in accordance with applicable
       law.  Agent shall have the right to sell, lease or otherwise dispose of
       the Collateral, or any part thereof, for cash, credit or any combination
       thereof, and Agent, on behalf of Lenders, may purchase all or any part of
       the Collateral at public or, if permitted by law, private sale and, in
       lieu of actual payment of such purchase price, may set off the amount of
       such price against the Obligations.  The proceeds realized from the sale
       of any Collateral may be applied, after allowing 2 Business Days for
       collection, first to the costs, expenses and attorneys' fees incurred by
       Agent in collecting the Obligations, in enforcing the rights of Lenders
       under the Loan Documents and in collecting, retaking, completing,
       protecting, removing, storing, advertising for sale, selling and
       delivering any Collateral; second to the interest due upon any of the
       Obligations; and third, to the principal of the Obligations.  If any
       deficiency shall arise, Borrower and each Guarantor shall remain jointly
       and severally liable to Lenders therefor.

              10.3.4.    Agent is hereby granted a license or other right to
       use, without charge, Borrower's labels, patents, copyrights, rights of
       use of any name, trade secrets, trade names, trademarks and advertising
       matter, or any Property of a similar nature, as it pertains to the
       Collateral, in advertising for sale and selling any Collateral and
       Borrower's rights under all licenses and all franchise agreements shall
       inure to Agent's benefit.

              10.3.5.    Agent may, at its option, require Borrower to deposit
       with Agent funds equal to the LC Amount and, if Borrower fails to
       promptly make such deposit,



                                      -37-
<PAGE>

       Agent may advance such amount as a Revolving Credit Loan (whether or 
       not an Overadvance is created thereby).  Each such Revolving Credit 
       Loan shall be secured by all of the Collateral and shall bear interest 
       and be payable at the same rate and in the same manner as Base Rate 
       Revolving Credit Portions.  Any such deposit or advance shall be held 
       by Agent as a reserve to fund future payments on such LC Guaranties 
       and future drawings against such Letters of Credit. At such time as 
       all LC Guaranties have been paid or terminated and all Letters of 
       Credit have been drawn upon or expired, any amounts remaining in such 
       reserve shall be applied against any outstanding Obligations, or, if 
       all Obligations have been indefeasibly paid in full, returned to 
       Borrower.

       10.4.  REMEDIES CUMULATIVE; NO WAIVER.

       All covenants, conditions, provisions, warranties, guaranties,
indemnities, and other undertakings of Borrower and each of its Subsidiaries
contained in this Agreement and the other Loan Documents, or in any document
referred to herein or contained in any agreement supplementary hereto or in any
schedule or in any Guaranty Agreement given to Agent or contained in any other
agreement between Agent and Borrower or any of its Subsidiaries, heretofore,
concurrently, or hereafter entered into, shall be deemed cumulative to and not
in derogation or substitution of any of the terms, covenants, conditions, or
agreements of Borrower herein contained.  The failure or delay of Agent to
require strict performance by Borrower of any provision of this Agreement or to
exercise or enforce any rights, Liens, powers, or remedies hereunder or under
any of the aforesaid agreements or other documents or security or Collateral
shall not operate as a waiver of such performance, Liens, rights, powers and
remedies, but all such requirements, Liens, rights, powers, and remedies shall
continue in full force and effect until all Loans and all other Obligations
owing or to become owing from Borrower to any Lender shall have been fully
satisfied.  None of the undertakings, agreements, warranties, covenants and
representations of Borrower or any of its Subsidiaries contained in this
Agreement or any of the other Loan Documents and no Event of Default by Borrower
or any of its Subsidiaries under this Agreement or any other Loan Documents
shall be deemed to have been suspended or waived by Agent, unless such
suspension or waiver is by an instrument in writing specifying such suspension
or waiver and is signed by a duly authorized representative of Agent and
directed to Borrower.

                             SECTION 11.  THE AGENT

       11.1.  AUTHORIZATION AND ACTION.

              Each Lender hereby appoints and authorizes Agent to take such
action on its behalf and to exercise such powers under this Agreement and the
other Loan Documents as are delegated to Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto.  Each Lender
hereby acknowledges that Agent shall not have by reason of this Agreement
assumed a fiduciary relationship in respect of any Lender.  In performing its
functions and duties under this Agreement, Agent shall act solely as Agent of



                                      -38-
<PAGE>

Lenders and shall not assume, or be deemed to have assumed, any obligation
toward, or relationship of agency or trust with or for, Borrower.  As to any
matters not expressly provided for by this Agreement and the other Loan
Documents, Agent may, but shall not be required to, exercise any discretion or
take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Majority Lenders, whenever such instruction shall be
requested by Agent or required hereunder, or a greater or lesser number of
Lenders if so required hereunder, and such instructions shall be binding upon
all Lenders; PROVIDED, however, that Agent shall not be required to take any
action which exposes Agent to any liability or which is contrary to this
Agreement, the other Loan Documents or applicable law, unless Agent is
indemnified therefor to its satisfaction (which may, at Agent's option, include
indemnification by each Lender other than Fleet for its pro rata share of all
such liabilities).  If Agent seeks the consent or approval of the Majority
Lenders (or a greater or lesser number of Lenders as required in this
Agreement), with respect to any action hereunder, Agent shall send notice
thereof to each Lender and shall notify each Lender at any time that the
Majority Lenders (or such greater or lesser number of Lenders) have instructed
Agent to act or refrain from acting pursuant hereto.

       11.2.  AGENT'S RELIANCE, ETC.

              Neither Agent, any Affiliate of Agent, nor any of their respective
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement or
the other Loan Documents, except for its or their own gross negligence or
willful misconduct.  Without limitation of the generality of the foregoing,
Agent:  (i) may consult with legal counsel, independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts, (ii) makes no warranties or representations to
any Lender and shall not be responsible to any Lender for any recitals,
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Documents; (iii) shall not have any duty beyond
Agent's customary practices in respect of loans in which Agent is the only
lender, to ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions of this Agreement or the other Loan Documents
on the part of Borrower, to inspect the property (including the books and
records) of Borrower or any of its Subsidiaries, to monitor the financial
condition of Borrower or any of its Subsidiaries or to ascertain the existence
or possible existence or continuation of any Default or Event of Default; (iv)
shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
the other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; (v) shall not be liable to any Lender for any action taken,
or inaction, by Agent upon the instructions of Majority Lenders pursuant to
Section 11.1 hereof or refraining to take any action pending such instructions;
(vi) shall not be liable for any apportionment or distributions of payments made
by it in good faith pursuant to Section 3 hereof; and (vii) shall incur no
liability under or in respect of this Agreement or the other Loan Documents by
acting upon any notice, consent, certificate, message or other instrument or
writing (which may be by telephone, facsimile, telegram, cable or telex)
believed in good faith



                                      -39-
<PAGE>

by it to be genuine and signed or sent by the proper party or parties.  In 
the event any apportionment or distribution described in clause (vi) above is 
determined to have been made in error, the sole recourse of any Person to 
whom payment was due but not made shall be to recover from the recipients of 
such payments any payment in excess of the amount to which they are 
determined to have been entitled.

       11.3.  FLEET AND AFFILIATES.

              With respect to its commitment hereunder to make Loans, Fleet
shall have the same rights and powers under this Agreement and the other Loan
Documents as any other Lender and may exercise the same as though it were not
Agent; and the terms "Lender," "Lenders" or "Majority Lenders" shall, unless
otherwise expressly indicated, include Fleet in its individual capacity as a
Lender.  Fleet and its Affiliates may lend money to, and generally engage in any
kind of business with, Borrower, and any Person who may do business with or own
Securities of Borrower all as if Fleet were not Agent and without any duty to
account therefor to any other Lender.

       11.4.  LENDER CREDIT DECISION.

              Each Lender acknowledges that it has, independently and without
reliance upon Agent or any other Lender and based on the financial statements
referred to in subsection 7.1.10 hereof and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement.  Each Lender also acknowledges that it will, independently
and without reliance upon Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement.  Agent
shall not have any duty or responsibility, either initially or on an ongoing
basis, to provide any Lender with any credit or other similar information
regarding Borrower or any of its Subsidiaries.

       11.5.  INDEMNIFICATION.

              Lenders agree to indemnify Agent (to the extent not reimbursed by
Borrower), in accordance with their respective Revolving Loan Percentages, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against
Agent in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted by Agent under this Agreement; PROVIDED
that no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from Agent's gross negligence or willful misconduct. 
Without limitation of the foregoing, each Lender agrees to reimburse Agent
promptly upon demand for its ratable share, as set forth above, of any 
out-of-pocket expenses (including attorneys' fees) incurred by Agent in 
connection with the preparation, execution, delivery, administration, 
modification, amendment or enforcement (whether through negotiation, legal 
proceedings or otherwise) of, or legal advice in respect of rights or 



                                      -40-
<PAGE>

responsibilities under, this Agreement and each other Loan Document, to the 
extent that Agent is not reimbursed for such expenses by Borrower.  The 
obligations of Lenders under this Section 11.5 shall survive the payment in 
full of all Obligations and the termination of this Agreement.  In the event 
that after payment and distribution of any amount by Agent to Lenders, any 
Lender or any other Person, including Borrower, any creditor of Borrower or a 
trustee in bankruptcy, recovers from Agent any amount found to have been 
wrongfully paid to Agent or disbursed by Agent to Lenders, then Lenders, in 
accordance with their respective Revolving Loan Percentages, shall reimburse 
Agent for all such amounts.

       11.6.  AGENCY PROVISIONS RELATING TO COLLATERAL.

              Each Lender authorizes and ratifies Agent's entry into this
Agreement and the Security Documents for the benefit of Lenders.  Each Lender
agrees that any action taken by Agent with respect to the Collateral in
accordance with the provisions of this Agreement or the Security Documents, and
the exercise by Agent of the powers set forth herein or therein, together with
such other powers as are reasonably incidental thereto, shall be authorized and
binding upon all Lenders.  Agent is hereby authorized on behalf of all Lenders,
without the necessity of any notice to or further consent from any Lender, from
time to time prior to an Event of Default, to take any action with respect to
any Collateral or the Loan Documents which may be necessary to perfect and
maintain perfected Agent's Liens upon the Collateral, for its benefit and the
ratable benefit of Lenders.  Lenders hereby irrevocably authorize Agent, at its
option and in its discretion, to release any Lien granted to or held by Agent
upon any Collateral (i) upon termination of the Agreement and payment and
satisfaction of all Obligations; or (ii) constituting property being sold or
disposed of if Borrower certifies to Agent that the sale or disposition is made
in compliance with Section 3.3.1 and subsection 8.2.9 hereof (and Agent may rely
conclusively on any such certificate, without further inquiry); or (iii)
constituting property in which Borrower does not own any interest at the time
the Lien was granted or at any time thereafter; or (iv) in connection with any
foreclosure sale or other disposition of Collateral after the occurrence and
during the continuation of an Event of Default or (v) if approved, authorized or
ratified in writing by Agent at the direction of all Lenders. Upon request by
Agent at any time, Lenders will confirm in writing Agent's authority to release
particular types or items of Collateral pursuant hereto.  Agent shall have no
obligation whatsoever to any Lender or to any other Person to assure that the
Collateral exists or is owned by Borrower or any of its Subsidiaries or is cared
for, protected or insured or has been encumbered or that the Liens granted to
Agent herein or pursuant to the Security Documents have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of care, disclosure or fidelity, or to continue
exercising, any of its rights, authorities and powers granted or available to
Agent in this Section 11.6 or in any of the Loan Documents, it being understood
and agreed that in respect of the Collateral, or any act, omission or event
related thereto, Agent may act in any manner it may deem appropriate, in its
sole discretion, but consistent with the provisions of this Agreement,
including, without limitation, the provisions of Section 6.1.3 hereof, given
Agent's own interest in the Collateral as a Lender and that Agent shall have no
duty or liability whatsoever to any Lender.



                                     -41-

<PAGE>

       11.7.  AGENT'S RIGHT TO PURCHASE COMMITMENTS.

              Agent shall have the right, but shall not be obligated, at any
time upon written notice to any Lender and with the consent of such Lender,
which may be granted or withheld in such Lender's sole discretion, to purchase
for Agent's own account all of such Lender's interests in this Agreement, the
other Loan Documents and the Obligations, for the face amount of the outstanding
Obligations owed to such Lender, including, without limitation, all accrued and
unpaid interest and fees.

       11.8.  RIGHT OF SALE, ASSIGNMENT, PARTICIPATIONS.

              Borrower hereby consents to any Lender's participation, sale,
assignment, transfer or other disposition, at any time or times hereafter, of
this Agreement and any of the other Loan Documents, or of any portion hereof or
thereof, including, without limitation, such Lender's rights, title, interests,
remedies, powers, and duties hereunder or thereunder subject to the terms and
conditions set forth below:

              11.8.1.    SALES, ASSIGNMENTS.  Each Lender hereby agrees that,
       with respect to any sale or assignment (i) no such sale or assignment
       shall be for an amount of less than the lesser of (a) $5,000,000 and (b)
       such Lender's total Revolving Loan Commitment at such time, (ii) each
       such sale or assignment shall be made on terms and conditions which are
       customary in the industry at the time of the transaction, (iii) Agent
       must consent, such consent not to be unreasonably withheld, to each such
       assignment to a party which is not an original signatory to this
       Agreement, (iv) the assigning Lender shall pay to the Agent a processing
       and recordation fee of $3,500 and any out-of-pocket attorneys' fees and
       expenses incurred by the Agent in connection with any such sale or
       assignment.  After such sale or assignment has been consummated (x) the
       assignee lender thereupon shall become a "Lender" for all purposes of
       this Agreement and (y) the assigning Lender shall have no further
       liability for funding the portion of Revolving Loan Commitments assumed
       by such other Lender.

              11.8.2.    PARTICIPATIONS.  Any Lender may grant participations
       in its extensions of credit hereunder to any other Lender or other
       lending institution (a "Participating Lender"), provided that (i) no
       Participating Lender shall thereby acquire any direct rights under this
       Agreement, (ii) no Participating Lender shall be granted any right to
       consent to any amendment, except to the extent any of the same pertain to
       (A) reducing the aggregate principal amount of, or interest rate on, or
       fees applicable to, any Loan or (B) extending the final stated maturity
       of any Loan or the stated maturity of any portion of any payment of
       principal of, or interest or fees applicable to, any of the Loans;
       provided, however, that the rights described in this subclause (B) shall
       not be deemed to include the right to consent to any amendment with
       respect to or which has the effect of requiring any mandatory prepayment
       of any portion of any Loan or any amendment or waiver of any Default or
       Event of Default, (iii) no sale of a participation in extensions of
       credit shall in any manner relieve the originating Lender of its
       obligations hereunder, 

                                     -42-
<PAGE>

       (iv) the originating Lender shall remain solely responsible for the 
       performance of such obligations, (v) Borrower and the Agent shall 
       continue to deal solely and directly with the originating Lender in 
       connection with the originating Lender's rights and obligations under 
       this Agreement and the other Loan Documents, (vi) in no event shall
       any financial institution purchasing the participation grant a
       participation in its participation interest in the Loans without the
       prior written consent of Borrower (so long as no Event of Default shall
       have occurred and be continuing) and Agent, which consents shall not
       unreasonably be withheld and (vii) all amounts payable by Borrower
       hereunder shall be determined as if the originating Lender had not sold
       any such participation.

              11.8.3.    CERTAIN AGREEMENTS OF BORROWER.  Borrower agrees that
       (i) it will assist and cooperate with each Lender in any manner
       reasonably requested by such Lender to effect the sale of participation
       in or assignments of any of the Loan Documents or any portion thereof or
       interest therein, including, without limitation, assisting in the
       preparation of appropriate disclosure documents; and (ii) subject to the
       provisions of Section 12.14 hereof, such Lender may disclose credit
       information regarding Borrower to any potential participant or assignee.

              11.8.4.    NON U.S. RESIDENT TRANSFEREES.  If, pursuant to this
       Section 11.8, any interest in this Agreement or any Loans is transferred
       to any transferee which is organized under the laws of any jurisdiction
       other than the United States or any state thereof, the transferor Lender
       shall cause such transferee (other than any participant), and may cause
       any participant, concurrently with the effectiveness of such transfer, to
       (i) represent to the transferor Lender (for the benefit of the transferor
       Lender, the Agent and Borrower) that under applicable law and treaties no
       Taxes will be required to be withheld by Agent, Borrower or the
       transferor Lender with respect to any payments to be made to such
       transferee in respect of the interest so transferred, (ii) furnish to the
       transferor Lender, Agent and Borrower either United States Internal
       Revenue Service Form 4224 or United States Internal Revenue Service Form
       1001 (wherein such transferee claims entitlement to complete exemption
       from United States federal withholding tax on all interest payments
       hereunder), and (iii) agree (for the benefit of the transferor Lender,
       Agent and Borrower) to provide the transferor Lender, Agent and Borrower
       a new Form 4224 or Form 1001 upon the obsolescence of any previously
       delivered form and comparable statements in accordance with applicable
       United States laws and regulations and amendments duly executed and
       completed by such transferee, and to comply from time to time with all
       applicable United States laws and regulations with regard to such
       withholding tax exemption.

       11.9.  AMENDMENT.

              No amendment or waiver of any provision of this Agreement or any
other Loan Document, nor consent to any departure by Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Majority Lenders and Borrower, and then such waiver or consent shall be
effective only in the specific instance and for the specific 

                                     -43-
<PAGE>

purpose for which given; PROVIDED, HOWEVER, that no amendment, waiver or 
consent shall be effective, unless (i) in writing and signed by each Lender, 
do any of the following:  (1) increase or decrease the aggregate Revolving 
Loan Commitments, or any Lender's Revolving Loan Commitment, (2) reduce the 
principal of, or interest on, amounts payable hereunder other than those 
payable only to Fleet in its capacity as Agent, which may be reduced by Fleet 
unilaterally, (3) increase or decrease any interest rate payable hereunder 
except as provided in subsection 2.1.2, (4) postpone any date fixed for any 
payment of principal of, or interest on, amounts payable hereunder, other 
than those payable only to Fleet in its capacity as Agent, which may be 
postponed by Fleet unilaterally, (5) reduce the number of Lenders that shall 
be required for Lenders or any of them to take any action hereunder, (6) 
release or discharge any Person liable for the performance of any obligations 
of Borrower hereunder or under any of the Loan Documents, (7) amend any 
provision of this Agreement that requires the consent of all Lenders or 
consent to or waive any breach thereof, (8) amend this Section 11.9 or (9) 
release any substantial portion of the Collateral, unless otherwise permitted 
pursuant to Section 11.6 hereof; or (ii) in writing and signed by Lenders 
holding the Revolving Loan Percentages specified therein with respect to any 
provision of this Agreement that requires the agreement, consent or approval 
of Lenders holding such Revolving Loan Percentages in a different amount than 
Majority Lenders; or (iii) in writing and signed by Agent in addition to the 
Majority Lenders required above to take such action, if the amendment, waiver 
or consent in question affects the rights or duties of Agent under this 
Agreement or any Loan Document.

       11.10. RESIGNATION OF AGENT; APPOINTMENT OF SUCCESSOR.

              The Agent may resign as Agent by giving not less than 30 days'
prior written notice to the Lenders and Borrower.  If the Agent shall resign
under this Agreement, then, subject to the consent of the Borrower (which
consent shall not be unreasonably withheld and which consent shall not be
required during any period in which an Event of Default exists) either (i) the
Majority Lenders shall appoint from among the Lenders a successor agent for the
Lenders or (ii) if a successor agent shall not be so appointed and approved
within the 30 day period following the Agent's notice to the Lenders and
Borrower of its resignation, then the Agent shall appoint a successor agent who
shall serve as Agent until such time as the Majority Lenders appoint a successor
agent.  Upon its appointment, such successor agent shall succeed to the rights,
powers and duties of the Agent and the term "Agent" shall mean such successor
effective upon its appointment, and the former Agent's rights, powers and duties
as Agent shall be terminated without any other or further act or deed on the
part of such former Agent or any of the parties to this Agreement.  After the
resignation of any Agent hereunder, the provisions of this Section 11 shall
inure to the benefit of such former Agent and such former Agent shall not by
reason of such resignation be deemed to be released from liability for any
actions taken or not taken by it while it was an Agent under this Agreement.

                                     -44-
<PAGE>

                         SECTION 12.  MISCELLANEOUS

12.1.  POWER OF ATTORNEY.

       Borrower hereby irrevocably designates, makes, constitutes and appoints
Agent (and all Persons designated by Agent) as Borrower's true and lawful
attorney (and agent-in-fact) and Agent, or Agent's agent, may, without notice to
Borrower and in Borrower's or Agent's name, but at the cost and expense of
Borrower:

              12.1.1.    At such time or times upon and during the continuance
       of the occurrence of a Default or an Event of Default as Agent or said
       agent, in its sole discretion, may determine, endorse Borrower's name on
       any checks, notes, acceptances, drafts, money orders or any other
       evidence of payment or proceeds of the Collateral which come into the
       possession of Agent or under Agent's control.

              12.1.2.    At such time or times upon and during the continuance
       of the occurrence of an Event of Default as Agent or its agent in its
       sole discretion may determine: (i) demand payment of the Accounts from
       the Account Debtors, enforce payment of the Accounts by legal proceedings
       or otherwise, and generally exercise all of Borrower's rights and
       remedies with respect to the collection of the Accounts; (ii) settle,
       adjust, compromise, discharge or release any of the Accounts or other
       Collateral or any legal proceedings brought to collect any of the
       Accounts or other Collateral; (iii) sell or assign any of the Accounts
       and other Collateral upon such terms, for such amounts and at such time
       or times as Agent deems advisable; (iv) take control, in any manner, of
       any item of payment or proceeds relating to any Collateral; (v) prepare,
       file and sign Borrower's name to a proof of claim in bankruptcy or
       similar document against any Account Debtor or to any notice of lien,
       assignment or satisfaction of lien or similar document in connection with
       any of the Collateral; (vi) receive, open and dispose of all mail
       addressed to Borrower and notify postal authorities to change the address
       for delivery thereof to such address as Agent may designate; (vii)
       endorse the name of Borrower upon any of the items of payment or proceeds
       relating to any Collateral and deposit the same to the account of Agent
       on account of the Obligations; (viii) endorse the name of Borrower upon
       any chattel paper, document, instrument, invoice, freight bill, bill of
       lading or similar document or agreement relating to the Accounts,
       Inventory and any other Collateral; (ix) use Borrower's stationery and
       sign the name of Borrower to verifications of the Accounts and notices
       thereof to Account Debtors; (x) use the information recorded on or
       contained in any data processing equipment and computer hardware and
       software relating to the Accounts, Inventory, Equipment and any other
       Collateral; (xi) make and adjust claims under policies of insurance; and
       (xii) do all other acts and things necessary, in Agent's determination,
       to fulfill Borrower's obligations under this Agreement.

                                     -45-
<PAGE>

              The power of attorney granted hereby shall constitute a power
       coupled with an interest and shall be irrevocable.

       12.2.  INDEMNITY.

       Borrower hereby agrees to indemnify and hold Agent and each Lender
harmless from and against any liability, loss, damage, suit, action or
proceeding ever suffered or incurred by Agent or such Lender (including
reasonable attorneys fees and legal expenses) as the result of Borrower's
failure to observe, perform or discharge Borrower's duties hereunder. In
addition, Borrower shall defend each Lender against and save it harmless from
all claims of any Person with respect to the Collateral.  Without limiting the
generality of the foregoing, these indemnities shall extend to any claims
asserted against Agent or any Lender by any Person under any Environmental Laws
or similar laws by reason of Borrower's or any other Person's failure to comply
with laws applicable to solid or hazardous waste materials or other toxic
substances.  Notwithstanding any contrary provision in this Agreement, the
Obligations of Borrower under this Section 12.2 shall survive the payment in
full of the other Obligations and the termination of this Agreement.

       12.3.  NO SALE OF INTEREST BY BORROWER.

       Borrower may not sell, assign or transfer any interest in this Agreement,
any of the other Loan Documents, or any of the Obligations, or any portion
thereof, including, without limitation, Borrower's rights, title, interests,
remedies, powers, and duties hereunder or thereunder.

       12.4.  SEVERABILITY.

       Wherever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.

       12.5.  SUCCESSORS AND ASSIGNS.

       This Agreement, the Other Agreements and the Security Documents shall be
binding upon and inure to the benefit of the successors and assigns of Borrower
and Agent permitted under Section 11.8 hereof.

       12.6.  CUMULATIVE EFFECT; CONFLICT OF TERMS.

       The provisions of the Other Agreements and the Security Documents are
hereby made cumulative with the provisions of this Agreement.  Except as
otherwise provided in Section 3.2 hereof and except as otherwise provided in any
of the other Loan Documents by specific reference to the applicable provision of
this Agreement, if any provision contained in this 

                                     -46-
<PAGE>

Agreement is in direct conflict with, or inconsistent with, any provision in 
any of the other Loan Documents, the provision contained in this Agreement 
shall govern and control.

       12.7.  EXECUTION IN COUNTERPARTS.

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

       12.8.  NOTICE.

       Except as otherwise provided herein, all notices, requests and demands to
or upon a party hereto, to be effective, shall be in writing and shall be sent
by personal delivery against receipt, by overnight courier or by facsimile and,
unless otherwise expressly provided herein, shall be deemed to have been validly
served, given or delivered immediately when delivered against receipt, 1
Business Day after sent with an overnight courier for next Business Day delivery
or, in the case of facsimile notice, the Business Day when sent, addressed as
follows:


          If to Agent:          Fleet Capital Corporation
                                20800 Swenson Drive
                                Suite 350
                                Waukesha, Wisconsin  53186
                                Attention: Loan Administration Manager
                                Facsimile No.:  (414) 798-4882

          With a copy to:       Goldberg, Kohn, Bell, Black,
                                  Rosenbloom & Moritz, Ltd.
                                55 East Monroe Street
                                Suite 3700
                                Chicago, Illinois  60603
                                Attention: Karen Ruth Bieber
                                Facsimile No.:  (312) 332-2196

          If to Borrower:       Color Spot Nurseries, Inc.
                                3478 Buskirk Avenue
                                Suite 260
                                Pleasant Hill, California  94523
                                Attention:  Carlos Plaza
                                Facsimile No.:  (925) 935-0799

                                     -47-
<PAGE>

          With a copy to:       Brownstein, Hyatt, Farber & Strickland, P.C.
                                410 Seventeenth Street
                                22nd Floor
                                Denver, Colorado  80202-4437
                                Attention:  Steven S. Siegel
                                Facsimile No.: (303) 623-1956

or to such other address as each party may designate for itself by notice given
in accordance with this Section 12.8; PROVIDED, HOWEVER, that any notice,
request or demand to or upon Agent pursuant to subsection 3.1.1 or 4.2.2 hereof
shall not be effective until received by Agent.

       12.9.  AGENT'S AND LENDERS' CONSENT. 

       Whenever Agent's or any Lender's consent is required to be obtained under
this Agreement, any of the Other Agreements or any of the Security Documents as
a condition to any action, inaction, condition or event, Agent or any Lender
shall be authorized to give or withhold such consent in its sole and absolute
discretion and to condition its consent upon the giving of additional collateral
security for the Obligations, the payment of money or any other matter.

       12.10. CREDIT INQUIRIES.

       Borrower hereby authorizes and permits Agent and each Lender to respond
to usual and customary credit inquiries from third parties concerning Borrower
or any of its Subsidiaries.

       12.11. TIME OF ESSENCE.

       Time is of the essence of this Agreement, the Other Agreements and the
Security Documents.

       12.12. ENTIRE AGREEMENT.

       This Agreement and the other Loan Documents, together with all other
instruments, agreements and certificates executed by the parties in connection
therewith or with reference thereto, embody the entire understanding and
agreement between the parties hereto and thereto with respect to the subject
matter hereof and thereof and supersede all prior agreements, understandings and
inducements, whether express or implied, oral or written.

       12.13. INTERPRETATION.

       No provision of this Agreement or any of the other Loan Documents shall
be construed against or interpreted to the disadvantage of any party hereto by
any court or other governmental or judicial authority by reason of such party
having or being deemed to have structured or dictated such provision.

                                     -48-
<PAGE>

       12.14. CONFIDENTIALITY.

       Each Lender shall hold all nonpublic information obtained pursuant to the
requirements of this Agreement in accordance with such Lender's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices and in any event may make
disclosure reasonably required by a prospective participant or assignee in
connection with the contemplated participation or assignment or as required or
requested by any governmental authority or representative thereof or pursuant to
legal process and shall require any such participant or assignee to agree to
comply with this Section 12.14.

       12.15. GOVERNING LAW; CONSENT TO FORUM.

       THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF ILLINOIS; PROVIDED, HOWEVER, THAT IF ANY OF THE COLLATERAL
SHALL BE LOCATED IN ANY JURISDICTION OTHER THAN ILLINOIS,  THE LAWS OF SUCH
JURISDICTION SHALL GOVERN THE METHOD, MANNER AND PROCEDURE FOR FORECLOSURE OF
AGENT'S LIEN UPON SUCH COLLATERAL AND THE ENFORCEMENT OF AGENT'S OTHER REMEDIES
IN RESPECT OF SUCH COLLATERAL TO THE EXTENT THAT THE LAWS OF SUCH JURISDICTION
ARE DIFFERENT FROM OR INCONSISTENT WITH THE LAWS OF ILLINOIS.   AS PART OF THE
CONSIDERATION FOR NEW VALUE RECEIVED, AND REGARDLESS OF ANY PRESENT OR FUTURE
DOMICILE OR PRINCIPAL PLACE OF BUSINESS OF BORROWER, AGENT OR ANY LENDER,
BORROWER HEREBY CONSENTS AND AGREES THAT THE SUPERIOR COURT OF COOK COUNTY,
ILLINOIS, OR, AT AGENT'S OPTION, THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION, SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND
AGENT OR ANY LENDER PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF
OR RELATED TO THIS AGREEMENT.  BORROWER EXPRESSLY SUBMITS AND CONSENTS IN
ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,
AND BORROWER HEREBY WAIVES ANY OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK
OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY SUCH COURT.  BORROWER HEREBY WAIVES PERSONAL SERVICE OF THE
SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND
AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE AS
PROVIDED IN SECTION 12.8,.  NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE
TO AFFECT THE RIGHT OF AGENT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW, OR TO PRECLUDE THE ENFORCEMENT BY AGENT OF ANY JUDGMENT 

                                     -49-
<PAGE>

OR ORDER OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS 
AGREEMENT TO ENFORCE SAME IN ANY OTHER APPROPRIATE FORUM OR JURISDICTION.

       12.16. WAIVERS BY BORROWER.

       BORROWER WAIVES (i) THE RIGHT TO TRIAL BY JURY (WHICH EACH LENDER HEREBY
ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING
OUT OF OR RELATED TO ANY OF THE LOAN DOCUMENTS, THE OBLIGATIONS OR THE
COLLATERAL; (ii) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT,
PROTEST, DEFAULT, NON PAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT,
EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS,
DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY AGENT
OR ANY LENDER ON WHICH BORROWER MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND
CONFIRMS WHATEVER AGENT OR ANY LENDER MAY DO IN THIS REGARD; (iii) NOTICE PRIOR
TO AGENT'S TAKING POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR
SECURITY WHICH MIGHT BE REQUIRED BY ANY COURT PRIOR TO ALLOWING AGENT TO
EXERCISE ANY OF AGENT'S REMEDIES; (iv) THE BENEFIT OF ALL VALUATION,
APPRAISEMENT AND EXEMPTION LAWS; AND (v) NOTICE OF ACCEPTANCE HEREOF.  BORROWER
ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL INDUCEMENT TO EACH
LENDER'S ENTERING INTO THIS AGREEMENT AND THAT EACH LENDER IS RELYING UPON THE
FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH BORROWER.  BORROWER WARRANTS AND
REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND
HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.  IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

       12.17. ILLINOIS COLLATERAL PROTECTION ACT.

       Unless Borrower provides Agent with evidence of the insurance coverage
required by this Agreement, Agent may purchase insurance at Borrower's expense
to protect Agent's and Lenders' interests in the Collateral.  This insurance
may, but need not, protect Borrower's or any of its Subsidiary's interests.  The
coverage that Agent purchases may not pay any claim that Borrower or any of its
Subsidiaries may make or any claim that is made against Borrower or any of its
Subsidiaries in connection with the Collateral.  Borrower may later cancel any
insurance purchased by Agent, but only after providing Agent with evidence that
Borrower has obtained insurance as required by this Agreement.  If Agent
purchases insurance for the Collateral, Borrower will be responsible for the
costs of that insurance, including interest and 

                                     -50-
<PAGE>

any other charges that may be imposed in connection with the placement of the 
insurance, until the effective date of the cancellation or expiration of the 
insurance.  The costs of the insurance may be added to the Loans. The cost of 
the insurance may be more than the cost of insurance Borrower or any of its 
Subsidiaries may be able to obtain on its own.

                                     -51-
<PAGE>

       IN WITNESS WHEREOF, this Agreement has been duly executed in Chicago,
Illinois, on the day and year specified at the beginning of this Agreement.


                                       COLOR SPOT NURSERIES, INC., a Delaware
                                       corporation


                                       By
                                         --------------------------------------
                                       Title:  Chief Financial Officer

                                       Accepted in Chicago, Illinois:

                                       FLEET CAPITAL CORPORATION, as Agent


                                       By
                                         --------------------------------------
                                       Title
                                            -----------------------------------


                                       FLEET CAPITAL CORPORATION, as a Lender


                                       By
                                         --------------------------------------
                                       Title
                                            -----------------------------------

                                       Revolving Loan Commitment:  $70,000,000

                                     -52-

<PAGE>

                                     APPENDIX A
                                          
                                GENERAL DEFINITIONS

              When used in the Loan and Security Agreement dated as of October,
1998, by and among Fleet Capital Corporation, as Agent, the other Lenders and
Color Spot Nurseries, Inc., the following terms shall have the following
meanings (terms defined in the singular to have the same meaning when used in
the plural and vice versa):

              ACCOUNT DEBTOR - any Person who is or may become obligated under
       or on account of an Account.

              ACCOUNTS - all accounts, contract rights, chattel paper,
       instruments and documents, whether now owned or hereafter created or
       acquired by Borrower or any of its Subsidiaries, or in which Borrower or
       any of its Subsidiaries now has or hereafter acquires any interest.

              AFFILIATE - a Person (other than a Subsidiary): (i) which
       directly, or indirectly through one or more intermediaries, controls, or
       is controlled by, or is under common control with, a Person; (ii) which
       beneficially owns or holds 10% or more of any class of the Voting Stock
       of a Person; or (iii) 10% or more of the Voting Stock (or in the case of
       a Person which is not a corporation, 10% or more of the equity interest)
       of which is beneficially owned or held by a Person or a Subsidiary of a
       Person.

              AGREEMENT - the Loan and Security Agreement referred to in the
       first sentence of this Appendix A, all Exhibits thereto and this
       Appendix A.

              APPLICABLE MARGIN - the percentages set forth below with respect
       to the Base Rate Revolving Credit Portion, the Base Rate Seasonal
       Portion, the LIBOR Revolving Credit Portion and the LIBOR Seasonal
       Portion:

<TABLE>
                          LIBOR                                 LIBOR 
     Base Rate          Revolving          Base Rate           Seasonal
  Revolving Credit       Credit         Seasonal Advance       Advance
       Margin            Margin             Margin              Margin
<S>                     <C>             <C>                    <C>
       1.00%              3.00%             1.50%               3.50%

</TABLE>

              AVAILABILITY - the amount of money which Borrower is entitled to
       borrow from time to time as Revolving Credit Loans, such amount being the
       difference derived when the sum of the principal amount of Revolving
       Credit Loans then outstanding (including any amounts which Agent may have
       paid for the account of Borrower or any of its Subsidiaries pursuant to
       any of the Loan Documents and which have not been reimbursed by Borrower
       or such Subsidiary) PLUS the LC Amount, and the 

                                    
<PAGE>

       amount of any reserves is subtracted from the Borrowing Base. If the 
       amount outstanding is equal to or greater than the Borrowing Base, 
       Availability is 0.

              BANK - Fleet National Bank.

              BASE RATE - the rate of interest announced or quoted by Bank from
       time to time as its prime rate for commercial loans, whether or not such
       rate is the lowest rate charged by Bank to its most preferred borrowers;
       and, if such prime rate for commercial loans is discontinued by Bank as a
       standard, a comparable reference rate designated by Bank as a substitute
       therefor shall be the Base Rate.

              BASE RATE PORTION - a Base Rate Seasonal Portion or a Base Rate
       Revolving Credit Portion.

              BASE RATE REVOLVING CREDIT PORTION - that portion of the Revolving
       Credit Loans (other than Seasonal Advances) that is not subject to a
       LIBOR Option.

              BASE RATE SEASONAL PORTION - that portion of the Revolving Credit
       Loans which constitute Seasonal Advances that is not subject to a LIBOR
       Option.

              BORROWING BASE - as at any date of determination thereof, an
       amount equal to the lesser of:

                         (i)  $70,000,000; or

                         (ii)  an amount equal to: 

                               (1)    80% of the net amount of Eligible Accounts
                         outstanding at such date;
                                          
                                        PLUS

                            
                              (2)    the lesser of i) $40,000,000 or ii) (a) 50%
                         of the value of Eligible Ordinary Inventory consisting 
                         of raw materials and finished goods at such date, in 
                         each case calculated on the basis of the lower of cost 
                         or market with the cost calculated on an average cost 
                         basis, PLUS the lesser of (b) (1) $1,500,000 or (2) 50%
                         of the value of Eligible Christmas Tree Inventory 
                         calculated on the basis of the lower of cost or market 
                         with the cost calculated on an average cost basis;
                                          
                                        PLUS

                            
                              (3)    $15,000,000 during the period commencing on
                         each November 1 and ending on the following April 30 
                         during the Term.

                                    A-2
<PAGE>

       For purposes hereof, the net amount of Eligible Accounts at any time 
       shall be the face amount of such Eligible Accounts less any and all 
       returns, rebates, discounts (which may, at Agent's option, be 
       calculated on shortest terms), credits, allowances or excise taxes of any
       nature at any time issued, owing, claimed by Account Debtors, granted, 
       outstanding or payable in connection with such Accounts at such time.

              BUSINESS DAY - (i) when used with respect to the LIBOR Option,
       shall mean a day on which dealings may be effected in deposits of U.S.
       Dollars in the London interbank foreign currency deposits market and on
       which Agent is conducting and other banks may conduct business in London,
       England, in the State of Wisconsin or the State of Illinois and (ii) when
       used with respect to any other provision of the Agreement, any day
       excluding Saturday, Sunday and any day which is a legal holiday under the
       laws of the State of Wisconsin, the State of Illinois or the State of
       California or is a day on which banking institutions located in any of
       such states are closed.

              CAPITAL EXPENDITURES - expenditures made or liabilities incurred
       for the acquisition of any fixed assets or improvements, replacements,
       substitutions or additions thereto which have a useful life of more than
       one year, including the total principal portion of Capitalized Lease
       Obligations.

              CAPITALIZED LEASE OBLIGATION - any indebtedness represented by
       obligations under a lease that is required to be capitalized for
       financial reporting purposes in accordance with GAAP.

              CAPPED INVENTORY  - Inventory situated at a location that is not a
       CSCT location and with respect to which an acceptable mortgage, leasehold
       mortgage or landlord's, warehouseman's or processors agreement has not
       been delivered to Agent.

              CHRISTMAS TREE DIVISION - the business operations of CSCT.

              CHRISTMAS TREE INVENTORY - all tree Inventory of CSCT.

              CLOSING DATE - the date on which all of the conditions precedent
       in Section 9 of the Agreement are satisfied or waived and the initial
       Loan is made under the Agreement.

              CODE - the Uniform Commercial Code as adopted and in force in the
       State of Illinois, as from time to time in effect.

              COLLATERAL - all of the Property and interests in Property
       described in Section 5 of the Agreement, and all other Property and
       interests in Property that now or hereafter secure the payment and
       performance of any of the Obligations.

              COMPANIES - collectively, Borrower, CSCT and Lone Star.

                                    A-3
<PAGE>

              CONDITIONAL SALES PROGRAM - The Companies' rebate program for
       certain of its Account Debtors as heretofore conducted in the ordinary
       course of business.

              CONSOLIDATED - the consolidation in accordance with GAAP of the
       accounts or other items as to which such term applies.

              CSCT - Color Spot Christmas Trees, Inc., a Delaware corporation
       and a wholly-owned Subsidiary of Borrower.

              CURRENT ASSETS - at any date means the amount at which all of the
       current assets of a Person would be properly classified as current assets
       shown on a balance sheet at such date in accordance with GAAP.

              DEFAULT - an event or condition the occurrence of which would,
       with the lapse of time or the giving of notice, or both, become an Event
       of Default.

              DEFAULT RATE - as defined in subsection 2.1.2 of the Agreement.

              DISTRIBUTION - in respect of any company means and includes: (i)
       the payment of any dividends or other distributions on capital stock or
       other equity interests of the company (except distributions in such
       stock) and (ii) the redemption or acquisition of Securities unless made
       substantially contemporaneously from the net proceeds of the sale of
       Securities.

              DOMINION ACCOUNT - a special account or accounts of Agent
       established by Borrower pursuant to the Agreement at banks selected by
       Borrower, but acceptable to Agent in its reasonable discretion, and over
       which Agent shall have sole and exclusive access and control for
       withdrawal purposes.

              ELIGIBLE ACCOUNT - an Account arising in the ordinary course of a
       Company's business from the sale of goods or rendition of services which
       Agent, in its reasonable credit judgment, deems to be an Eligible
       Account.  Without limiting the generality of the foregoing, no Account
       shall be an Eligible Account if:

                         (i)       it arises out of a sale made by a Company to
              a Subsidiary or an Affiliate of such Company or to a Person
              controlled by an Affiliate of such Company; or

                         (ii)      it is an open Account and remains unpaid more
              than 90 days after the original invoice date with respect to
              Accounts of the Western Division or the Christmas Tree Division or
              more than 60 days from the due date with respect to Accounts of
              the Southwestern Division; or

                         (iii)     25% or more of the Accounts from the Account
              Debtor are not deemed Eligible Accounts hereunder; or

                                    A-4
<PAGE>

                         (iv)      except with respect to Account Debtors with a
              rating of at least 5(A)(2) by Dun & Bradstreet, the total unpaid
              Accounts of the Account Debtor exceed 20% of the net amount of all
              Eligible Accounts, to the extent of such excess; or

                         (v)       any covenant, representation or warranty
              contained in the Agreement with respect to such Account has been
              breached; or

                         (vi)      the Account Debtor is also a Company's
              creditor or supplier, or the Account Debtor has disputed liability
              with respect to such Account, or the Account Debtor has made any
              claim with respect to any other Account due from such Account
              Debtor to a Company, or the Account otherwise is or may become
              subject to any right of setoff or rebate by the Account Debtor in
              each case to the extent of such dispute, setoff or rebate; or

                         (vii)     the Account Debtor has commenced a voluntary
              case under the federal bankruptcy laws, as now constituted or
              hereafter amended, or made an assignment for the benefit of
              creditors, or a decree or order for relief has been entered by a
              court having jurisdiction in the premises in respect of the
              Account Debtor in an involuntary case under the federal bankruptcy
              laws, as now constituted or hereafter amended, or any other
              petition or other application for relief under the federal
              bankruptcy laws has been filed against the Account Debtor, or if
              the Account Debtor has failed, suspended business, ceased to be
              Solvent, or consented to or suffered a receiver, trustee,
              liquidator or custodian to be appointed for it or for all or a
              significant portion of its assets or affairs; or

                         (viii)    it arises from a sale to an Account Debtor
              outside the United States, unless the sale is on letter of credit,
              guaranty or acceptance terms, in each case acceptable to Agent in
              its sole discretion; or

                         (ix)      except pursuant to the Conditional Sales
              Program, it arises from a sale to the Account Debtor on a
              bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval,
              consignment or any other repurchase or return basis; or

                         (x)       the Account Debtor is the United States of
              America or any department, agency or instrumentality thereof,
              unless the applicable Company assigns its right to payment of such
              Account to Agent, for the benefit of itself and Lenders, in a
              manner satisfactory to Agent, so as to comply with the Assignment
              of Claims Act of 1940 (31 U.S.C. Section 203 ET SEQ., as amended);
              or

                         (xi)      it is not at all times subject to Agent's
              duly perfected, first priority security interest and to no other
              Lien that is not a Permitted Lien; or

                         (xii)     the goods giving rise to such Account have
              not been delivered to and accepted by the Account Debtor or the
              services giving rise to such 

                                    A-5
<PAGE>

              Account have not been performed by a Company and accepted by the 
              Account Debtor or the Account otherwise does not represent a 
              final sale; or

                         (xiii)    the Account is evidenced by chattel paper or
              an instrument of any kind, or has been reduced to judgment; or

                         (xiv)     the applicable Company has made any agreement
              with the Account Debtor for any deduction therefrom, except for
              discounts or allowances which are made in the ordinary course of
              business for prompt payment and which discounts or allowances are
              reflected in the calculation of the face value of each invoice
              related to such Account; or

                         (xv)      the applicable Company has made an agreement
              with the Account Debtor to extend the time of payment thereof.

              ELIGIBLE CHRISTMAS TREE INVENTORY - Eligible Inventory consisting
       of Christmas Tree Inventory.

              ELIGIBLE INVENTORY - such Inventory of a Company (other than
       packaging materials, supplies, displays and parts) which Agent, in its
       reasonable credit judgment, deems to be Eligible Inventory. Without
       limiting the generality of the foregoing, no Inventory shall be Eligible
       Inventory if:

                         (i)       it is not raw materials or finished goods; or

                         (ii)      it is not in good, new and saleable
              condition; or

                         (iii)     it is slow-moving, obsolete or
              unmerchantable; or

                         (iv)      it does not meet all standards imposed by any
              applicable governmental agency or authority; or

                         (v)       it does not conform in all respects to the
              warranties and representations set forth in the Agreement; or

                         (vi)      it is not at all times subject to Agent's
              duly perfected, first priority security interest and no other Lien
              except a Permitted Lien; or

                         (vii)     it is not situated at a location in
              compliance with the Agreement or is in transit; or

                         (viii)    except for up to $7,500,000 of Capped
              Inventory, it is situated at a location for which an acceptable
              mortgage, leasehold mortgage or landlord's, warehouseman's or
              processor's agreement has not been delivered to Agent, unless
              otherwise agreed by Agent.

                                    A-6
<PAGE>

              ELIGIBLE ORDINARY INVENTORY - Eligible Inventory consisting of
       Ordinary Inventory.

              ENVIRONMENTAL LAWS - all federal, state and local laws, rules,
       regulations, ordinances, programs, permits, guidances, orders and consent
       decrees relating to health, safety and environmental matters.

              EQUIPMENT - all machinery, apparatus, equipment, fittings,
       furniture, fixtures, motor vehicles and other tangible personal Property
       (other than Inventory) of every kind and description used in a Company's
       operations or owned by such Company or in which such Company has an
       interest, whether now owned or hereafter acquired by such Company and
       wherever located, and all parts, accessories and special tools and all
       increases and accessions thereto and substitutions and replacements
       therefor.

              ERISA - the Employee Retirement Income Security Act of 1974, as
       amended, and all rules and regulations from time to time promulgated
       thereunder.

              EVENT OF DEFAULT - as defined in Section 10.1 of the Agreement.

              GAAP - generally accepted accounting principles in the United
       States of America in effect from time to time.

              GENERAL INTANGIBLES - all intangible personal property of Borrower
       and each of its Subsidiaries (including things in action) other than
       goods, Accounts, chattel paper, documents, instruments and money, whether
       now owned or hereafter created or acquired by Borrower or any of its
       Subsidiaries.

              GUARANTORS - CSCT, Lone Star, Lone Star GP and any other Person
       who may hereafter guarantee payment or performance of the whole or any
       part of the Obligations.

              GUARANTY AGREEMENTS - the Continuing Guaranty Agreements which are
       to be executed by each Guarantor in form and substance satisfactory to
       Agent.

              INDENTURE - that certain Indenture dated as of December 24, 1997
       with respect to $100,000,000 of 10 1/2% senior subordinated notes due 
       2007 naming U.S. Trust Company of California, N.A. as Trustee.  

              INVENTORY - all of each Company's inventory, whether now owned or
       hereafter acquired including, but not limited to, all goods intended for
       sale or lease by each Company or for display or demonstration; all work
       in process; all crops growing or to be grown; all plants; all raw
       materials and other materials and supplies of every nature and
       description used or which might be used in connection with the
       manufacture, printing, packing, shipping, advertising, selling, leasing
       or furnishing of such goods or otherwise used or consumed in each
       Company's business; and all documents 

                                    A-7
<PAGE>

       evidencing and General Intangibles relating to any of the foregoing, 
       whether now owned or hereafter acquired by any Company.

              INVESTMENT PROPERTY - all of Borrower's and each of its
       Subsidiary's investment property, whether now owned or hereafter
       acquired, including, but not limited to, all securities (certificated or
       uncertificated), securities accounts, securities entitlements, commodity
       accounts and commodity contracts.

              LC  AMOUNT - at any time, the aggregate undrawn face amount of all
       Letters of Credit and LC Guaranties then outstanding.

              LC GUARANTY - any guaranty pursuant to which Agent or any
       Affiliate of Agent shall guaranty the payment or performance by Borrower
       of its reimbursement obligation under any letter of credit. 

              LC OBLIGATIONS - any Obligations that arise from any draw against
       any Letter of Credit or against any letter of credit supported by an LC
       Guaranty. 

              LEGAL REQUIREMENT - any requirement imposed upon Agent or any
       Lender by any law of the United States of America or the United Kingdom
       or by any regulation, order, interpretation, ruling or official directive
       (whether or not having the force of law) of the Federal Reserve Board,
       the Bank of England or any other board, central bank or governmental or
       administrative agency, institution or authority of the United States of
       America, the United Kingdom or any political subdivision of either
       thereof.

              LETTER OF CREDIT - any letter of credit issued by Agent, Bank or
       any other Affiliate of Agent for the account of Borrower. 

              LIBOR INTEREST PAYMENT DATE - with respect to any LIBOR Portion,
       the last day of each calendar month during or immediately following the
       last day of the applicable LIBOR Period.

              LIBOR OPTION - the option granted pursuant to subsection 2.3 of
       the Agreement to have the interest on all or any portion of the principal
       amount of the Revolving Credit Loans based on a LIBOR Rate.

              LIBOR PERIOD - any period of one month, two months, three months
       or six months, commencing on a Business Day, selected as provided in
       subsection 2.3(i) of the Agreement; PROVIDED, however that no LIBOR
       Period shall extend beyond the last day of the Term unless Borrower and
       Lenders have agreed to an extension of the Term beyond the expiration of
       the LIBOR Period in question.  If any LIBOR Period so selected shall end
       on a date that is not a Business Day, such LIBOR Period shall instead end
       on the next preceding or succeeding Business Day as determined by Agent
       in accordance with the then current banking practice in London; PROVIDED,
       that Borrower shall not be required to pay double interest, even though
       the preceding 

                                    A-8
<PAGE>

       LIBOR Period ends and the new LIBOR Period begins on the same day. Each 
       determination by Agent of the LIBOR Period shall, in the absence of 
       manifest error, be conclusive.

              LIBOR PORTION - a LIBOR Revolving Credit Portion or a LIBOR
       Seasonal Portion.

              LIBOR RATE - with respect to any LIBOR Portion for the related
       LIBOR Period, an interest rate per annum (rounded upwards, if necessary,
       to the next higher 1/16 of 1% equal to the product of (i) the Base LIBOR
       Rate (as hereinafter defined) MULTIPLIED by (ii) Statutory Reserves. For
       purposes of this definition, the term "Base LIBOR Rate" shall mean the
       rate (rounded to the next higher 1/16 of 1%) at which deposits of U.S.
       dollars approximately equal in principal amount to the LIBOR Portion
       specified in the applicable LIBOR Request are offered to Agent by prime
       banks in the London interbank foreign currency deposits market at
       approximately 11:00 a.m., London time, 3 Business Days prior to the
       commencement of such LIBOR Period, for delivery on the first day of such
       LIBOR Period. Each determination by Agent of any LIBOR Rate shall, in the
       absence of manifest error, be conclusive.

              LIBOR REQUEST - a notice in writing (or by telephone confirmed by
       telex, telecopy or other facsimile transmission on the same day as the
       telephone request) from Borrower to Agent requesting that interest on a
       Revolving Credit Loan be based on the LIBOR Rate, specifying: (i) the 1st
       day of the LIBOR Period; (ii) the length of the LIBOR Period consistent
       with the definition of that term; and (iii) the dollar amount of the
       LIBOR Revolving Credit Portion or the LIBOR Seasonal Portion consistent
       with the definition of such terms.

              LIBOR REVOLVING CREDIT PORTION - that portion of the Revolving
       Credit Loans (other than Seasonal Advances) specified in a LIBOR Request
       (including any portion of Revolving Credit Loans which is being borrowed
       by Borrower concurrently with such LIBOR Request) which is not less than
       $1,000,000 and is an integral multiple of $100,000, which does not exceed
       the outstanding balance of Revolving Credit Loans not already subject to
       a LIBOR Option and, which, as of the date of the LIBOR Request specifying
       such LIBOR Portion, has met the conditions for basing interest on the
       LIBOR Rate in Section 2.3 of the Agreement and the LIBOR Period of which
       was commenced and not terminated.

              LIBOR SEASONAL PORTION - that portion of the Revolving Credit
       Loans which constitutes a Seasonal Advance specified in a LIBOR Request
       (including any portion of a Seasonal Advance which is being borrowed by
       Borrower concurrently with such LIBOR Request) which is not less than
       $1,000,000 and is an integral multiple of $100,000, which does not exceed
       the outstanding balance of Revolving Credit Loans not already subject to
       a LIBOR Option and, which, as of the date of the LIBOR Request 

                                    A-9
<PAGE>

       specifying such LIBOR Portion, has met the conditions for basing interest
       on the LIBOR Rate in Section 2.3 of the Agreement and the LIBOR Period of
       which was commenced and not terminated.

              LIEN - any interest in Property securing an obligation owed to, or
       a claim by, a Person other than the owner of the Property, whether such
       interest is based on common law, statute or contract. The term "Lien"
       shall also include rights of seller under conditional sales contracts or
       title retention agreements, reservations, exceptions, encroachments,
       easements, rights-of-way, covenants, conditions, restrictions, leases and
       other title exceptions and encumbrances affecting Property. For the
       purpose of the Agreement, Borrower shall be deemed to be the owner of any
       Property which it has acquired or holds subject to a conditional sale
       agreement or other arrangement pursuant to which title to the Property
       has been retained by or vested in some other Person for security
       purposes.

              LOAN ACCOUNT - the loan account established on the books of Agent
       pursuant to Section 3.6 of the Agreement.

              LOAN DOCUMENTS - the Agreement, the Other Agreements and the
       Security Documents.

              LONE STAR - Lone Star Growers, L.P., a Delaware limited
       partnership and a Subsidiary of Borrower.

              LOAN STAR GP - Lone Star, Inc., a Delaware corporation and the
       general partner of Lone Star.

              LOANS - all loans and advances of any kind made by any Lender
       pursuant to the Agreement.

              MAJORITY LENDERS - as of any date, Lenders holding 66-2/3% or more
       of the Revolving Loan Percentages of all Lenders as of such date.

              MATERIAL ADVERSE EFFECT - (i) a material adverse effect on the
       business, condition (financial or otherwise), operation, performance or
       properties of Borrower and its Subsidiaries taken as a whole, (ii) a
       material adverse effect on the rights and remedies of Agent and Lenders
       under the Loan Documents, or (iii) the material impairment of the ability
       of Borrower or any of its Subsidiaries to perform its obligations
       hereunder or under any Loan Document.

              MONEY BORROWED - means (i) indebtedness arising from the lending
       of money by any Person to Borrower or any Subsidiary of Borrower; (ii)
       indebtedness, whether or not in any such case arising from the lending by
       any Person of money to Borrower or any Subsidiary of Borrower, (1) which
       is represented by notes payable or drafts accepted that evidence
       extensions of credit, (2) which constitutes obligations 

                                    A-10
<PAGE>

       evidenced by bonds, debentures, notes or similar instruments, or (3) upon
       which interest charges are customarily paid (other than accounts payable)
       or that was issued or assumed as full or partial payment for Property; 
       (iii) indebtedness that constitutes a Capitalized Lease Obligation; 
       (iv) reimbursement obligations with respect to letters of credit or 
       guaranties of letters of credit and (v) indebtedness of Borrower or any 
       Subsidiary of Borrower under any guaranty of obligations that would 
       constitute Indebtedness for Money Borrowed under clauses (i) through 
       (iii) hereof, if owed directly by Borrower or such Subsidiary.

              MORTGAGES - the mortgages, deeds of trust and leasehold mortgages
       to be executed by Borrower and certain Subsidiaries on or about the
       Closing Date in favor of Agent, for the benefit of itself and Lenders,
       and by which Borrower or such Subsidiary shall grant and convey to Agent,
       for the benefit of itself and Lenders, as security for the Obligations, a
       Lien upon the real Property of Borrower listed on EXHIBIT A hereto.

              MULTIEMPLOYER PLAN - has the meaning set forth in Section
       4001(a)(3) of ERISA.

              OBLIGATIONS - all Loans and all other advances, debts,
       liabilities, obligations, covenants and duties, together with all
       interest, fees and other charges thereon, owing, arising, due or payable
       from Borrower to any Lender of any kind or nature, present or future,
       whether or not evidenced by any note, guaranty or other instrument,
       whether arising under the Agreement or any of the other Loan Documents
       whether direct or indirect (including those acquired by assignment),
       absolute or contingent, primary or secondary, due or to become due, now
       existing or hereafter arising and however acquired.

              ORDINARY INVENTORY - Inventory other than Christmas Tree
       Inventory, including without limitation Capped Inventory.

              OTHER AGREEMENTS - any and all agreements, instruments and
       documents (other than the Agreement and the Security Documents),
       heretofore, now or hereafter executed by Borrower, any Subsidiary of
       Borrower or any other third party and delivered to Agent in respect of
       the transactions contemplated by the Agreement.

              OVERADVANCE - the amount, if any, by which the outstanding
       principal amount of Revolving Credit Loans PLUS the LC Amount PLUS
       reserves, if any, exceeds the Borrowing Base.

              PARTICIPATING LENDER - each Person who shall be granted the right
       by a Lender to participate in any of the Loans described in the Agreement
       and who shall have entered into a participation agreement in form and
       substance satisfactory to such Lender.

                                    A-11
<PAGE>

              PERMITTED LIENS - any Lien of a kind specified in subsection 8.2.5
       of the Agreement.

              PERMITTED PURCHASE MONEY INDEBTEDNESS - Purchase Money
       Indebtedness of Borrower or any of its Subsidiaries incurred after the
       date hereof which is secured by a Purchase Money Lien and which, when
       aggregated with the principal amount of all other Purchase Money
       Indebtedness and Capitalized Lease Obligations of Borrower and its
       Subsidiaries at the time outstanding, does not exceed $6,000,000.  For
       the purposes of this definition, the principal amount of any Purchase
       Money Indebtedness consisting of capitalized leases shall be computed as
       a Capitalized Lease Obligation.

              PERSON - an individual, partnership, corporation, limited
       liability company, joint stock company, land trust, business trust, or
       unincorporated organization, or a government or agency or political
       subdivision thereof.

              PLAN - an employee benefit plan now or hereafter maintained for
       employees of Borrower that is covered by Title IV of ERISA.

              PROJECTIONS - Borrower's forecasted Consolidated and consolidating
       (i) balance sheets, (ii) profit and loss statements, (iii) cash flow
       statements, and (iv) capitalization statements, all prepared on a
       consistent basis with Borrower's historical financial statements,
       together with appropriate supporting details and a statement of
       underlying assumptions.

              PROPERTY - any interest in any kind of property or asset, whether
       real, personal or mixed, or tangible or intangible.

              PURCHASE MONEY INDEBTEDNESS - means and includes (i) Indebtedness
       (other than the Obligations) for the payment of all or any part of the
       purchase price of any fixed assets, (ii) any Indebtedness (other than the
       Obligations) incurred at the time of or within 10 days prior to or after
       the acquisition of any fixed assets for the purpose of financing all or
       any part of the purchase price thereof, and (iii) any renewals,
       extensions or refinancings thereof, but not any increases in the
       principal amounts thereof outstanding at the time.

              PURCHASE MONEY LIEN - a Lien upon fixed assets which secures
       Purchase Money Indebtedness, but only if such Lien shall at all times be
       confined solely to the fixed assets (and proceeds thereof) the purchase
       price of which was financed through the incurrence of the Purchase Money
       Indebtedness secured by such Lien.

              RENTALS - as defined in subsection 8.2.13 of the Agreement.

              REPORTABLE EVENT - any of the events set forth in Section 4043(b)
       of ERISA.

                                    A-12
<PAGE>

              RESTRICTED INVESTMENT - any investment made in cash or by delivery
       of Property to any Person, whether by acquisition of stock, Indebtedness
       or other obligation or Security, or by loan, advance or capital
       contribution, or otherwise, or in any Property except the following:

                         (i)       investments, to the extent existing on the
              Closing Date, in one or more Subsidiaries of Borrower by Borrower;

                         (ii)      Property to be used in the ordinary course of
              business;

                         (iii)     Current Assets arising from the sale of goods
              and services in the ordinary course of business of Borrower or any
              Subsidiary of Borrower;

                         (iv)      investments in direct obligations of the
              United States of America, or any agency thereof or obligations
              guaranteed by the United States of America, provided that such
              obligations mature within one year from the date of acquisition
              thereof;

                         (v)       investments in certificates of deposit
              maturing within one year from the date of acquisition issued by a
              bank or trust company organized under the laws of the United
              States or any state thereof having capital surplus and undivided
              profits aggregating at least $100,000,000; and

                         (vi)      investments in commercial paper given the
              highest rating by a national credit rating agency and maturing not
              more than 270 days from the date of creation thereof.

              REVOLVING CREDIT LOAN - a Loan made by any Lender as provided in
       Section 1.1 of the Agreement.

              REVOLVING LOAN COMMITMENT - with respect to any Lender, the amount
       of such Lender's commitment pursuant to subsection 1.1.1 of the
       Agreement, as set forth below such Lender's name on the signature page
       thereof. 

              REVOLVING LOAN PERCENTAGE - with respect to each Lender, the
       percentage equal to the quotient of such Lender's Revolving Loan
       Commitment DIVIDED BY the aggregate of all Revolving Loan Commitments. 

              SEASONAL ADVANCE - the amount by which the Revolving Loans at any
       time outstanding exceed the sum of clauses (ii)(1) and (ii)(2) contained
       in the definition of the term Borrowing Base.

              SCHEDULE OF ACCOUNTS - as defined in subsection 6.2.1 of the
       Agreement.

              SECURITY - shall have the same meaning as in Section 2(1) of the
       Securities Act of 1933, as amended.

                                    A-13
<PAGE>

              SECURITY DOCUMENTS - the Guaranty Agreements, the Mortgages and
       all other instruments and agreements now or at any time hereafter
       securing the whole or any part of the Obligations.

              SOLVENT - as to any Person, such Person (i) owns Property whose
       fair saleable value is greater than the amount required to pay all of
       such Person's Indebtedness (including contingent debts), (ii) is able to
       pay all of its Indebtedness as such Indebtedness matures and (iii) has
       capital sufficient to carry on its business and transactions and all
       business and transactions in which it is about to engage.

              SOUTHWESTERN DIVISION - the business operations of Lone Star.

              STATUTORY RESERVES - a fraction (expressed as a decimal) the
       numerator of which is the number one, and the denominator of which is the
       number one MINUS the aggregate of the maximum reserve percentages
       (including, without limitation, any marginal, special, emergency or
       supplemental reserves), expressed as a decimal, established by the Board
       of Governors of the Federal Reserve System and any other banking
       authority to which Bank or any Lender is subject for Eurocurrency
       Liabilities (as defined in Regulation D of the Board of Governors of the
       Federal Reserve System or any successor thereto).  Such reserve
       percentages shall include, without limitation, those imposed under such
       Regulation D. LIBOR Portions shall be deemed to constitute Eurocurrency
       Liabilities and as such shall be deemed to be subject to such reserve
       requirements without benefit of or credit for proration, exceptions or
       offsets which may be available from time to time to Bank or any Lender
       under such Regulation D. Statutory Reserves shall be adjusted
       automatically on and as of the effective date of any change in any
       reserve percentage.

              SUBORDINATED DEBT - Indebtedness of Borrower that is subordinated
       to the Obligations in a manner satisfactory to Agent and contains terms,
       including, without limitation, payment terms, satisfactory to Agent.

              SUBSIDIARY - any corporation of which a Person owns, directly or
       indirectly through one or more intermediaries, more than 50% of the
       Voting Stock at the time of determination.

              SUBSIDIARY LOANS - Indebtedness of CSCT and/or Lone Star to
       Borrower incurred from time to time after the Closing Date; PROVIDED,
       that such loans shall only be permitted to CSCT or Lone Star to the
       extent of the portion of the Borrowing Base which is attributable to the
       Eligible Accounts and Eligible Inventory of either CSCT or Lone Star, as
       applicable (or to the extent such loan is part of a Seasonal Advance).

              SWINGLINE LOANS - as defined in subsection 1.1.2 of the Agreement.

              TAX - in relation to any LIBOR Portion and the applicable LIBOR
       Rate, any tax, levy, impost, duty, deduction, withholding or charges of
       whatever nature required 

                                    A-14
<PAGE>

       by any Legal Requirement (i) to be paid by any Lender and/or (ii) to be 
       withheld or deducted from any payment otherwise required hereby to be 
       made by Borrower to any Lender; PROVIDED, that the term "Tax" shall not 
       include any taxes imposed upon the net income of Lender by the United 
       States of America, United Kingdom or any political subdivision thereof.

              TERM - as defined in Section 4.1 of the Agreement.

              TOTAL CREDIT FACILITY - $70,000,000.

              VOTING STOCK - Securities of any class or classes of a corporation
       the holders of which are ordinarily, in the absence of contingencies,
       entitled to elect a majority of the corporate directors (or Persons
       performing similar functions).

              WESTERN DIVISION - business operations of Borrower.

              YEAR 2000 PROBLEM - any significant risk that computer hardware,
       software or equipment containing embedded microchips essential to the
       business or operations of Borrower or any of its Subsidiaries will not,
       in the case of dates or time periods occurring after December 31, 1999,
       function at least as effectively and reliably as in the case of dates or
       time periods occurring before January 1, 2000, including the making of
       accurate leap year calculations.

              OTHER TERMS.  All other terms contained in the Agreement shall
have, when the context so indicates, the meanings provided for by the Code to
the extent the same are used or defined therein.

              CERTAIN MATTERS OF CONSTRUCTION.  The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to the Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders.  The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of the Agreement.  All references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations.  All references to any of the Loan Documents shall include any and
all modifications thereto and any and all extensions or renewals thereof.

                                    A-15
<PAGE>

              Witness the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first above written.


                                        COLOR SPOT NURSERIES, INC., a Delaware
                                        corporation


                                        By       
                                          ------------------------------------
                                        Title    
                                             ---------------------------------

                                        Accepted in Chicago, Illinois:

                                        FLEET CAPITAL CORPORATION, as Agent


                                        By       
                                          ------------------------------------
                                        Title    
                                             ---------------------------------



                                        FLEET CAPITAL CORPORATION, as a Lender


                                        By       
                                          ------------------------------------
                                        Title    
                                             ---------------------------------

                                     A-16

<PAGE>
                                      
                               LIST OF EXHIBITS

<TABLE>
<S>                      <C>
Exhibit 6.1.1            Borrower's and each Subsidiary's Business Locations
Exhibit 7.1.1            Jurisdictions in which Borrower and each Subsidiary is
                         Authorized to do Business
Exhibit 7.1.4            Capital Structure
Exhibit 7.1.5            Corporate Names; Transactions
Exhibit 7.1.14           Tax Identification Numbers
Exhibit 7.1.16           Patents, Trademarks, Copyrights and Licenses
Exhibit 7.1.19           Contracts Restricting Right to Incur Debts
Exhibit 7.1.20           Litigation
Exhibit 7.1.22           Operating Leases; Capitalized Leases
Exhibit 7.1.23           Pension Plans
Exhibit 7.1.25           Labor Contracts
Exhibit 8.1.3            Compliance Certificate
Exhibit 8.2.5            Permitted Liens
Exhibit 8.3              Financial Covenants
Exhibit A                Real Property Subject to Mortgages 

</TABLE>

<PAGE>
                                      
                                 EXHIBIT 8.1.3
                                          
                             COMPLIANCE CERTIFICATE
                                          
                            [Letterhead of Borrower]


                                          
                                                          , 
                                        ------------------  -----

-------------------------------

-------------------------------

-------------------------------

-------------------------------

              The undersigned, the chief financial officer of Color Spot 
Nurseries, Inc., a Delaware corporation ("Borrower"), on behalf of Borrower 
in his capacity as Chief Financial Officer, gives this certificate to Fleet 
Capital Corporation, as agent ("Agent"), in accordance with the requirements 
of subsection 8.1.2 of that certain Loan and Security Agreement dated 
______________, 1998, between Borrower and Agent ("Loan Agreement"). 
Capitalized terms used in this Certificate, unless otherwise defined herein, 
shall have the meanings ascribed to them in the Loan Agreement.

              1.         Based upon my review of the balance sheets and 
statements of income of Borrower for the [fiscal year] [quarterly period] 
ending __________________, 19__, copies of which are attached hereto, I 
hereby certify that:

              (i)        Consolidated [ADJUSTED TANGIBLE] Net Worth is
                         $____________;]

              (ii)       The Interest Coverage Ratio is ____ to ____;

              (iii)      Capital Expenditures during the period and for the
                         fiscal year to date total $__________ and $__________,
                         respectively.

              [LIST OTHERS, IF ANY]

              2.         No Default exists on the date hereof, other than:
______________________________________________________ [if none, so state]; and

<PAGE>

              3.         No Event of Default exists on the date hereof, other 
than ____________________________________________________ [if none, so state].

                                          Very truly yours,
                                          
                                          
                                          
                                          -------------------------------------
                                          Chief Financial Officer

                                        -2-
<PAGE>


                                      
                                  EXHIBIT 8.3
                                          
                             FINANCIAL COVENANTS

A.             INTEREST COVERAGE RATIO

                    [TO COME]

B.             [ADJUSTED TANGIBLE] NET WORTH

                    [TO COME]

[OTHERS?]

<PAGE>
                                      
                                  EXHIBIT A
                                          
                      REAL PROPERTY SUBJECT TO MORTGAGES