Exhibit 10.154

                            LOAN AND SECURITY AGREEMENT

      THIS LOAN AND SECURITY AGREEMENT is made as of March 6, 1997, by and among
GREEN TREE FINANCIAL SERVICING  CORPORATION  ("Lender"),  a Delaware corporation
with an office at 100 North Point Center East,  Suite 200,  Alpharetta,  Georgia
30202-4168;  LITCHFIELD FINANCIAL  CORPORATION  ("Litchfield"),  a Massachusetts
corporation  with its chief executive  office and principal place of business at
789 Main Road, Stamford, Vermont 05352; and GREEN MOUNTAIN FUNDING CORP. ("Green
Mountain"), a Delaware corporation with its chief executive office and principal
place of business at 789 Main Road,  Stamford,  Vermont  05352  (Litchfield  and
Green Mountain are referred to collectively as "Borrowers" and individually as a
"Borrower").

      Each Borrower has requested that Lender make available a revolving  credit
facility to  Borrowers,  which  facility  shall be used by  Borrowers to finance
their  mutual  and  collective  enterprise  of  financing  the  acquisition  and
development of rural and vacation properties and timeshare  interests.  In order
to utilize  the  financial  powers of each  Borrower in the most  efficient  and
economical  manner,  and in order to facilitate the financing of each Borrower's
needs,  Lender  will,  at the  request  of either  Borrower,  make loans to both
Borrowers  under  the  revolving  credit  facility  on a  combined  basis and in
accordance with the provisions  hereinafter set forth.  Borrowers' business is a
mutual and collective enterprise and Borrowers believe that the consolidation of
all  revolving  credit loans under this  Agreement  will  enhance the  aggregate
borrowing powers of each Borrower and ease the administration of their revolving
credit loan relationship with Lender,  all to the mutual advantage of Borrowers.
Lender's  willingness  to extend  credit to  Borrowers  and to  administer  each
Borrower's  collateral security therefor,  on a combined basis as more fully set
forth in this Agreement,  is done solely as an accommodation to Borrowers and at
Borrowers' request in furtherance of Borrowers' businesses.

      NOW  THEREFORE,  for Ten  Dollars  ($10.00)  and other  good and  valuable
consideration, the parties hereto hereby agree as follows:

SECTION 1.  GENERAL DEFINITIONS

      A&D  Borrower  - a  Person  to  whom  an  A&D  Loan  from  a  Borrower  is
      -------------
      outstanding.

      A&D  Collateral  - all  Property  and  interests  in  Property  in which a
      ---------------
      Borrower  holds a Lien to  secure  the  whole or any part of an A&D  Loan,
      including the A&D Project securing such A&D Loan.

      A&D Loan - an  acquisition  or  development  term loan made or acquired by
      --------
      Litchfield prior to the date hereof and identified on Exhibit D hereto, or
      made or  acquired by Green  Mountain  after the  Closing  Date,  to an A&D
      Borrower for the purpose of enabling  such A&D Borrower to pay all or part
      of the  purchase  price of an A&D  Project  and/or the cost of  repairing,
      refurbishing or making improvements to such A&D Project or converting such
      A&D Project to a Timeshare Project.

<PAGE>

      A&D Loan  Documents - for each A&D Loan, all  instruments,  agreements and
      -------------------
      other  documents  that at any time  evidence or secure the payment of such
      A&D Loan.

      A&D Loan Formula Amount - on any date of  determination  thereof,  the sum
      -----------------------
      derived by (a) calculating for each Eligible A&D Loan  outstanding on such
      date  the  lesser  of (i) the  Applicable  A&D  Loan  Margin  or (ii)  the
      Applicable  A&D  Collateral  Margin,  and (b) adding  together each of the
      calculations so determined.

      A&D Obligor - a Person who is liable for the payment, in whole or in part,
      -----------
      of an A&D Loan,  including  the A&D Borrower and any guarantor of such A&D
      Loan.

      A&D Project - improved  real  Property that is acquired by an A&D Borrower
      -----------
      with the  proceeds  of an A&D  Loan  and  that at the time of  acquisition
      constitutes  a  Timeshare   Project  or  a  fully   constructed  hotel  or
      condominium that is to be converted into a Timeshare Project.

      Acceptable A&D Loan Documents - for each A&D Loan, A&D Loan Documents that
      -----------------------------
      evidence or secure the payment of such A&D Loan and that are  Enforceable,
      contain terms and conditions  (including Payment Rights and Remedies) that
      are  substantially  in the  form  and  scope  (excepting  only  local  law
      variations  and  changes in basic  business  terms) of the sample A&D Loan
      Documents  annexed to the Transaction  Documents  Certificate,  consistent
      with the  Underwriting  Criteria and  otherwise  acceptable  to Lender and
      create  Enforceable Liens with respect to the A&D Collateral  purported to
      be covered thereby.  In no event shall any A&D Loan Documents be deemed to
      constitute  "Acceptable  A&D Loan Documents"  unless,  pursuant to express
      provisions set forth therein,  such  documents,  together with all Payment
      Rights,  Remedies  and Liens  provided  for  thereunder,  may be  assigned
      (whether  outright or as security) or otherwise  transferred to any Person
      without the  necessity of obtaining  the consent of or giving prior notice
      to any other party to any of such documents for the  effectiveness  of any
      such assignment or transfer.

      Acceptable  Hypothecation  Loan Documents - for each  Hypothecation  Loan,
      -----------------------------------------
      Hypothecation  Loan  Documents that evidence or secure the payment of such
      Hypothecation  Loan and are  Enforceable,  contain  terms  and  conditions
      (including Payment Rights and Remedies) that are substantially in the form
      and scope  (excepting  only  local law  variations  and  changes  in basic
      business terms) of the sample  Hypothecation Loan Documents annexed to the
      Transaction  Documents  Certificate,   consistent  with  the  Underwriting
      Criteria and otherwise  acceptable to Lender and create  Enforceable Liens
      with  respect  to the  Hypothecation  Collateral  purported  to be covered
      thereby.  In no event shall any Hypothecation  Loan Documents be deemed to
      constitute "Acceptable  Hypothecation Loan Documents" unless,  pursuant to
      express  provisions set forth therein,  such documents,  together with all
      Payment  Rights,  Remedies  and  Liens  provided  for  thereunder,  may be
      assigned  (whether  outright  or as  security)  to any Person  without the
      necessity of obtaining  the consent of or giving prior notice to any other
      party  to any  of  such  documents  for  the  effectiveness  of  any  such
      assignment or transfer.

      Account - shall have the meaning given to "account" in the UCC.
      -------

      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 5% or more of any class of the Voting Stock of a Person;  or
      (iii) 5% or more of the Voting  Stock (or in the case of a Person which is
      not a  corporation,  5% or  more  of the  equity  interest)  of  which  is
      beneficially owned or held by a Person or a Subsidiary of a Person.

<PAGE>

      Agency  Agreement  (Document  Agent) - the  Collateral  Agent  and  Bailee
      ------------------------------------
      Agreement  (Document Agent) to be executed on or about the Closing Date by
      Borrowers, Lender and Document Agent.

      Agency Agreement (Servicing Agent) - for each Servicer, a Collateral Agent
      ----------------------------------
      and  Bailee  Agreement  to be  executed  on or about the  Closing  Date by
      Borrowers, Lender and such Servicer.

      Agency  Agreements - collectively,  the Agency Agreement  (Document Agent)
      ------------------
      and each Agency Agreement (Servicing Agent).

      Applicable A&D  Collateral  Margin - on any date and for each Eligible A&D
      ----------------------------------
      Loan outstanding on such date, an amount equal to (a) 65% of the Appraised
      Value of the  Eligible  A&D Project for such  Eligible A&D Loan if, at the
      time of acquisition thereof by the A&D Borrower, such Eligible A&D Project
      constituted hotel property; (b) 75% of the Appraised Value of Eligible A&D
      Project for such Eligible A&D Loan if, at the time of acquisition  thereof
      by the A&D Borrower,  such Eligible A&D Project  constituted a condominium
      project; and (c) if the Appraised Value has not been determined or relates
      to a Timeshare Project, 80% of the Sales Value. In applying the Applicable
      A&D  Collateral  Margin,  if more than one A&D Loan is secured by the same
      Eligible  A&D  Project,  then all such A&D Loans shall be deemed to be one
      A&D Loan.

      Applicable  A&D Loan Margin - on any date and for each  Eligible  A&D Loan
      ---------------------------
      outstanding  on such  date,  an amount  equal to 80% of the Net  Principal
      Balance  of such  Eligible  A&D Loan on such  date,  but not to exceed (a)
      during the period commencing 366 days, and ending 550 days, after the date
      of this Agreement,  75% of the original  principal amount of such Eligible
      A&D Loan,  and (b) during the period  commencing  551 days, and ending 730
      days,  after the date of this  Agreement,  70% of the  original  principal
      amount of such Eligible A&D Loan; provided,  however,  that the applicable
      percentage  shall be  reduced to 0% after 730 days  following  the date of
      this Agreement.

      Applicable  Laws - all  laws,  rules  and  regulations  applicable  to the
      ----------------
      Person,  conduct,  transaction,   covenant,  Loan  Documents,  Transaction
      Documents,  Timeshare  Financing  Documents or other  matters in question,
      including  all  applicable  common  law  and  equitable  principles;   all
      provisions of all applicable  state and federal  constitutions,  statutes,
      rules,   regulations  and  orders  of  governmental  bodies;  and  orders,
      judgments and decrees of all courts and arbitrators. The term includes all
      Consumer Laws, Land Sales Laws, and Environmental Laws.

      Appraised  Value - with respect to any A&D Project,  the fair market value
      ----------------
      of such A&D Project as determined by an independent  third party appraiser
      who holds an MAI  designation and who is state licensed or certified under
      the laws of the  state in  which  the A&D  Collateral  is  located,  which
      valuation is reflected in an appraisal prepared by such appraiser not more
      than 60 days prior to the date of  acquisition  of such A&D  Project by an
      A&D Borrower.

<PAGE>

      Approved Servicer- a Servicer identified on Exhibit A hereto.
      -----------------                           ---------

      Bank of Boston - the First National Bank of Boston,  a national bank, with
      --------------
      its headquarters in Boston, Massachusetts.

      Bank One - Bank One, Arizona, N.A., a national banking association.
      --------

      Bankruptcy Code - title 11 of the United States Code.
      ---------------

      Borrowing Base  Certificate - a Borrowing Base  Certificate in the form of
      ---------------------------
      Exhibit B hereto.
      ---------

      Business Day - any day excluding  Saturday,  Sunday and any day which is a
      ------------
      legal  holiday under the laws of the State of Georgia or is a day on which
      banking institutions located in such state are closed.

      Business Entity - a corporation,  partnership,  limited liability company,
      ---------------
      business trust or other form of business entity.

      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 Debt represented by obligations under a
      ----------------------------
      lease that is required to be capitalized for financial  reporting purposes
      in accordance with GAAP.

      Cash   Equivalents  -  (i)  marketable   direct   obligations   issued  or
      ------------------
      unconditionally  guaranteed by the United States  government and backed by
      the  full  faith  and  credit  of  the  United  States  government  having
      maturities of not more than 12 months from the date of  acquisition;  (ii)
      domestic  certificates of deposit and time deposits  having  maturities of
      not more than 12 months from the date of acquisition, bankers' acceptances
      having  maturities of not more than 12 months from the date of acquisition
      and overnight  bank deposits,  in each case issued by any commercial  bank
      organized  under the laws of the United  States,  any state thereof or the
      District of Columbia,  which at the time of acquisition  are rated A-1 (or
      better) by  Standard & Poor's  Corporation  of P-1 (or  better) by Moody's
      Investors  Services,  Inc.,  and not subject to offset  rights in favor of
      such bank  arising  from any banking  relationship  with such bank;  (iii)
      repurchase obligations with a term of not more than 30 days for underlying
      securities  of the types  described in clauses (i) and (ii) above  entered
      into with any financial  institution meeting the qualifications  specified
      in clause  (ii) above;  and (iv)  commercial  paper  having at the time of
      investment therein or a contractual  commitment to invest therein a rating
      of A-1 (or better) by Standard & Poor's  Corporation or P-1 (or better) by
      Moody's  Investors  Services,  Inc., and having a maturity within 9 months
      after the date of acquisition thereof.

      Cash Flow - cash  revenues of an A&D  Borrower in relation to a particular
      ---------
      A&D Project, less cash expenditures and other outlays by such A&D Borrower
      in relation to such A&D Project.

      Chattel  Paper - shall  have the  meaning  ascribed  to the term  "chattel
      --------------
      paper" in the UCC.

<PAGE>

      Claims - any and all claims, demands,  liabilities,  obligations,  losses,
      ------
      damages,   penalties,   actions,  judgments,  suits,  costs,  expenses  or
      disbursements  of any  kind or  nature  whatsoever  (including  reasonable
      attorneys' fees and expenses), whether arising under or in connection with
      the  Loan  Documents,  any  Transaction  Documents,  any  Applicable  Laws
      (including any Environmental Law) or otherwise.

      Closing  Date - the  date on  which  all of the  conditions  precedent  in
      -------------
      Section 9 of this Agreement are satisfied and the initial Revolver Loan is
      made under this Agreement.

      Collateral - all of the Property  and  interests in Property  described in
      ----------
      Section 6 of this  Agreement,  and all other  Property  and  interests  in
      Property that now or hereafter  secure the payment and  performance of any
      of the Obligations.

      Compliance Certificate - a Compliance Certificate in the form of Exhibit E
      ----------------------                                           ---------
      hereto.

      Concentration Accounts - the 2 bank accounts to be established on or about
      ----------------------
      the  date  of this  Agreement  by  Borrowers  at  Bank  One or such  other
      financial institution (or financial institutions) acceptable to Lender, as
      provided in Section 4.4 of this Agreement, which accounts shall constitute
      the  depository  accounts for all  payments  and proceeds  with respect to
      Pledged Loans and Pledged Loan Collateral,  shall be collaterally assigned
      to Lender  pursuant to the Deposit Account  Assignments,  and shall be the
      subject of the Payment Direction Agreements.

      Consolidated  - the  consolidation  in accordance  with GAAP of assets and
      ------------
      liabilities.

      Consumer  Laws - all federal,  state or local laws,  rules or  regulations
      --------------
      that govern or relate to the rights or protections of consumers, including
      the Truth in Lending  Act (and  Regulation  Z  promulgated  by the Federal
      Reserve Board pursuant  thereto),  the Equal Credit  Opportunity  Act (and
      Regulation by promulgated by the Federal Reserve Board pursuant  thereto),
      the Consumer  Credit  Protection Act of 1968,  the Real Estate  Settlement
      Procedures Act of 1974, the Fair Debt  Collection  Practices Act, all Land
      Sales Laws, and all Applicable Laws regulating the amount of interest fees
      or other charges that may be assessed against or collected from consumers.

      Credit Facilities - Facility A and Facility B.
      -----------------

      Credit Limit - for each Pledged Loan, the amount initially  established in
      ------------
      the  Transaction  Documents  relating to such  Pledged Loan as the maximum
      amount of such Pledged Loan (in the case of an A&D Loan) or line of credit
      for such Pledged Loan (in the case of a Hypothecation Loan).

      Debt - as applied to a Person means,  without  duplication:  (i) all items
      ----
      which in  accordance  with GAAP would be  included  in  determining  total
      liabilities  as shown on the  liability  side of a  balance  sheet of such
      Person  as at the date as of  which  Debt is to be  determined,  including
      Capitalized Lease Obligations; (ii) all obligations of other Persons which
      such  Person  has  guaranteed;  (iii)  all  reimbursement  obligations  in
      connection  with letters of credit or letter of credit  guaranties  issued
      for the account of such Person; and (iv) in the case of Borrowers (without
      duplication), the Obligations.

<PAGE>

      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 - on any date, a per annum rate of interest  that is equal to
      ------------
      (i) 5.75% plus the LIBOR Rate with respect to the principal  amount of all
      Facility  A Loans;  (ii)  4.0% plus the LIBOR  Rate  with  respect  to the
      principal amount of Facility B Revolver Loans outstanding; and (iii) 5.75%
      plus the LIBOR  Rate with  respect  to the  principal  amount of any other
      Obligations.

      Deposit  Account  Assignments  - each  Collateral  Assignment  of  Certain
      -----------------------------
      Deposit  Accounts to be executed by each Borrower in favor of Lender on or
      about the  Closing  Date and by which  each  Borrower  shall  collaterally
      assign  its  rights  in each of the  Concentration  Accounts  to Lender as
      security for the payment of the Obligations.

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

      Document - shall have the meaning  ascribed to the term  "document" in the
      --------
      UCC.

      Document Agent - Bank of Boston,  acting through its trust department,  or
      --------------
      such other Person as Borrowers  may retain to fulfill the role of Document
      Agent pursuant to the provisions of Section 4.6 of this Agreement, subject
      to Lender's prior written consent.

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

      EBITDA - for any fiscal period of  Litchfield,  an amount equal to the sum
      ------
      for such period of (i) Litchfield's  Consolidated  income (or loss) before
      interest  and taxes for such period plus,  (ii) to the extent  deducted in
      determining  such income (or loss),  depreciation,  amortization and other
      similar  non-cash  charges,  minus  (iii)  to  the  extent  recognized  in
      determining such income (or loss) extraordinary gains (or losses).

      Eligible A&D Borrower - an Eligible Borrower that is an A&D Borrower.
      ---------------------

      Eligible A&D  Collateral - A&D  Collateral  that is situated in the United
      ------------------------
      States,  is owned in fee simple  solely by an Eligible  A&D  Borrower,  is
      subject to an  Enforceable  Lien in favor of a Borrower  and no other Lien
      that is not a Permitted Lien, conforms in all respects to the Underwriting
      Criteria,  is not the  subject  of a pending  claim  under  any  policy of
      casualty  insurance for an amount that exceeds 20% of the Appraised  Value
      or Sales Value or any material  proceeding  for  condemnation  at the time
      that an A&D Loan secured by such A&D Collateral  was first funded,  and in
      respect of which all Governmental  Approvals have been obtained to convert
      any A&D Project that is not a Timeshare Project to a Timeshare Project.

      Eligible A&D Loan - an A&D Loan which is an Eligible Loan, but only if and
      -----------------
      to the extent: (i) the unpaid principal balance and accrued interest owing
      with  respect  to the A&D Loan on any date  does not  exceed  25% (or such
      greater  percentage  as Lender may in its sole  discretion  permit) of the

<PAGE>

      then unpaid  principal  balance and accrued  interest of all  Eligible A&D
      Loans  outstanding;  (ii) the  completion  of the  development  of the A&D
      Project  is not more than 60 days past the  original  targeted  completion
      date as set  forth  in the  Project  Completion  Schedule  submitted  to a
      Borrower with respect to such A&D Loan;  (iii) the Cash Flow realized on a
      cumulative  basis from the sale of Timeshare  Intervals  and other sources
      before  and during  conversion  to,  and prior to  completion  of, the A&D
      Project  as a  Timeshare  Project  is not at any time less than 75% of the
      original  Project Cash Flow  Forecast;  (iv) at or prior to the funding of
      the A&D Loan,  the Eligible A&D Borrower  contributed to the total cost of
      the A&D Project in cash (other than cash  derived  from Money  Borrowed or
      other  incurrence  of Debt) or Property  fairly  valued of at least 10% of
      such cost; and (v) Lender shall have received a Loan Designation Schedule,
      Project Completion Schedule and Project Cash Flow Forecast with respect to
      such A&D Loan.

      Eligible  Borrower - a Person that is (i) either a natural person who is a
      ------------------
      citizen and  resident of the United  States or an Business  Entity that is
      duly organized and validly  existing under,  and has its principal  assets
      and place of  business  in, a state of the United  States;  (ii)  Solvent;
      (iii) not a debtor in any Insolvency Proceeding;  (iv) not an Affiliate or
      a creditor of either  Borrower;  and (v) not in default of any of such A&D
      Borrower's obligations to either Borrower.

      Eligible  Collateral - Eligible A&D  Collateral or Eligible  Hypothecation
      --------------------
      Collateral.

      Eligible   Hypothecation  Borrower  -  an  Eligible  Borrower  that  is  a
      ----------------------------------
      Hypothecation Borrower.

      Eligible  Hypothecation  Collateral  -  Hypothecation  Collateral  that is
      -----------------------------------
      situated  in  the  United   States,   is  owned   solely  by  an  Eligible
      Hypothecation  Borrower,  is  subject to an  Enforceable  Lien in favor of
      either  Borrower  and no other  Lien  that is not a  Permitted  Lien,  and
      conforms in all respects to the Underwriting Criteria.

      Eligible  Hypothecation  Loan - a Hypothecation  Loan which is an Eligible
      -----------------------------
      Loan and  which is  secured  by  Hypothecation  Collateral  consisting  of
      Eligible Timeshare Receivables.

      Eligible  Loan - an A&D  Loan  or a  Hypothecation  Loan  made  by  either
      --------------
      Borrower  in the  ordinary  course  of its  business  to an  Eligible  A&D
      Borrower or an Eligible  Hypothecation Borrower pursuant to Acceptable A&D
      Loan Documents or Acceptable Hypothecation Loan Documents, but only if and
      to the extent that such A&D Loan or  Hypothecation  Loan is a Pledged Loan
      and:  (i) such  Pledged  Loan is  payable  only in  Dollars,  is on a full
      recourse basis to the Eligible A&D Borrower or Hypothecation Borrower, and
      is not subject to any defense,  offset or  recoupment;  (ii) a Borrower is
      the legal and  beneficial  owner of and sole  payee  with  respect  to the
      entire Pledged Loan, free of all Liens except  Permitted  Liens,  and such
      Borrower has not sold or otherwise transferred any interest therein; (iii)
      the  Borrower  with  respect to such  Pledged  Loan has taken all steps to
      qualify  to do  business  in each  state in which,  under the laws of such
      state,  it is deemed to be doing  business  and in which the failure to so
      qualify would hinder,  delay or impair such Borrower's  ability to use the
      courts  of such  state to sue an  Obligor  or  realize  upon any Lien with
      respect to any Pledged  Loan  Collateral;  (iv) Lender has an  Enforceable
      collateral  assignment  of and Lien upon all  Transaction  Documents,  all
      Pledged Loan  Collateral  for such Pledged Loan and all Payment Rights and
      Remedies associated with or arising under such Transaction Documents;  (v)
      the Pledged Loan was made in conformity  with the  Underwriting  Criteria;

<PAGE>

      (vi) no event of default  exists  under any of the  Transaction  Documents
      evidencing  or securing  the Pledged  Loan  (whether or not a Borrower has
      waived any such event of  default);  (vii) no Obligor with respect to such
      Pledged Loan is in default of any of its  covenants  or other  obligations
      under any Transaction  Documents evidencing or securing any other A&D Loan
      or  Hypothecation  Loan made by such  Borrower;  (viii) the  principal and
      interest payable with respect to the Pledged Loan is not more than 30 days
      past due or 2 payments delinquent,  whichever first occurs, based upon the
      original  repayment  terms  for  such  Pledged  Loan as set  forth  in the
      Transaction  Documents related thereto as in effect on the date of funding
      of such  Pledged  Loan;  (ix) there is not  outstanding  any other loan or
      other  extension of credit by either Borrower to the Eligible A&D Borrower
      or Eligible  Hypothecation  Borrower that is secured, in whole or in part,
      by any of the  collateral  securing  such Pledged Loan unless such loan or
      other  extension  of  credit  is also a Pledged  Loan;  (x) the  principal
      balance of such Pledged  Loan does not exceed the Credit Limit  originally
      established in the  Transaction  Documents  relating to such Pledged Loan;
      (xi) no broker's,  finder's or other similar fees payable by a Borrower in
      connection  with such Pledged Loan remains unpaid in whole or in part; and
      (xii) the  originals  of all of the  Primary  Transaction  Documents  with
      respect  to such  Pledged  Loan are in the  possession  of  Lender  or the
      Document  Agent  and  such  Primary  Transaction  Documents  have not been
      destroyed,  defaced or substantially damaged in a manner that would render
      them  not  Enforceable  or  that  would  require  additional  proof  in an
      enforcement   proceeding   to   demonstrate   the   existence,   terms  or
      enforceability thereof.

      Eligible Timeshare  Purchaser - a natural Person who (i) (A) is a resident
      -----------------------------
      of the United States or Canada and has such Person's  principal  assets in
      the United States or Canada,  (B) is a  nonresident  citizen of the United
      States or (C) subject to the proviso in clause (xi) of the  definition  of
      Eligible  Timeshare  Receivable,  is a citizen of a country other than the
      United  States who  resides in a country  other than the United  States or
      Canada;  (ii)  is  Solvent;  (iii)  is  not a  debtor  in  any  Insolvency
      Proceeding; (iv) is not an Affiliate,  creditor, employee or relative of a
      Borrower or a Hypothecation  Borrower; and (v) is not in default of any of
      such Person's obligations to a Borrower or to a Hypothecation Borrower.

      Eligible Timeshare Receivable - a Timeshare Receivable which arises in the
      -----------------------------
      ordinary course of business of a Hypothecation  Borrower and which is owed
      by a  Timeshare  Purchaser  who is and at all times  remains  an  Eligible
      Timeshare Purchaser, but only if and to the extent that: (i) the Timeshare
      Receivable is evidenced by Timeshare  Financing Documents that satisfy the
      Underwriting Criteria, are Enforceable, provide for payment of amounts due
      thereunder in Dollars and in equal monthly  installments  of principal and
      interest  over a term  (measured  from  the date of  original  sale of the
      underlying  Timeshare  Interval) not to exceed 120 consecutive months, are
      subject to a Borrower's  Enforceable  Lien and no other Lien that is not a
      Permitted Lien, have been delivered to and are in the possession of Lender
      or the Document Agent and, to the extent any of the Transaction  Documents
      are  Instruments,  are  endorsed to a Borrower  (and,  if so  requested by
      Lender at any time,  endorsed  by such  Borrower  to  Lender);  (ii) it is
      secured by an Enforceable Lien in favor of the Hypothecation Borrower upon
      the underlying Timeshare Interval, but is subject to no other Lien that is
      not a Permitted Lien, and such Enforceable  Lien is collaterally  assigned
      of record to a Borrower  (and,  if so  requested  by Lender at any time an
      Event of Default  exists,  collaterally  reassigned  of record to Lender);
      (iii) any  Enforceable  Lien upon the underlying  Timeshare  Interval that
      constitutes,  or arises pursuant to the terms of, a Mortgage is insured by
      a mortgagee's  policy of title insurance in form and scope satisfactory to

<PAGE>

      a Borrower and satisfying the Underwriting Criteria (the benefits of which
      insurance  are  collaterally  assigned  to Lender by such  Borrower  if so
      requested by Lender); (iv) either the Hypothecation Borrower or a Borrower
      has received from the Timeshare  Purchaser,  in respect of the purchase of
      the underlying Timeshare Interval,  an amount equal to at least 10% of the
      actual  purchase  price of such  Timeshare  Interval (or, in the case of a
      Timeshare Purchaser that is not a resident of the United States or Canada,
      20% of the actual purchase price), and the Timeshare  Purchaser shall have
      received  no cash or other  rebates of any kind;  (v) the rate of interest
      payable on the unpaid principal balance of the Timeshare  Receivable is at
      least 12% per annum;  (vi) the sale of the  Timeshare  Interval from which
      the  Timeshare  Receivable  arises  shall  not have been  canceled  by the
      Timeshare   Purchaser,   all  required  deliveries  of  documents  by  the
      Hypothecation  Borrower to the Timeshare  Purchaser under  Applicable Laws
      have been made,  and any  statutory or other  applicable  cancellation  or
      rescission  period shall have  expired;  (vii) the sale shall have been in
      compliance  with  all  of  the  Timeshare   Financing  Documents  and  all
      Applicable  Laws;  (viii)  the  Timeshare   Purchaser  has  immediate  and
      unrestricted  access to the Timeshare Interval purchased by such Timeshare
      Purchaser  for  the  time-share  period  related  thereto,  the  Timeshare
      Interval  relates  to a  Timeshare  Project  that has been  renovated  and
      furnished in accordance with all specifications  provided in the Timeshare
      Financing  Documents,   any  public  offering  statements  and  any  other
      instruments or agreements,  and the Timeshare  Purchaser also has complete
      and  unrestricted  access to the  Timeshare  Project and all common  areas
      pertaining  thereto;  (ix) the Timeshare  Receivable is not subject to any
      defense,  offset,  recoupment  or  counterclaim,  whether under any of the
      Timeshare  Financing  Documents  or  Applicable  Laws;  (x) the  Timeshare
      Interval is not subject to any Lien that is not a Permitted  Lien; (xi) if
      the  Timeshare  Purchaser  is a  nonresident,  non-citizen  of the  United
      States,  the  aggregate  amount  of  Timeshare  Receivables  owing by such
      Timeshare  Purchaser  and all  other  such  Timeshare  Purchasers  who are
      nonresident  non-citizens of the United States does not exceed at any time
      5% of  the  total  Timeshare  Receivables  outstanding  at  such  time  or
      $500,000,  whichever  is  less;  and  (xii)  the  total  aggregate  of all
      Timeshare Receivables owing by such Timeshare Purchaser does not exceed 3%
      of the aggregate of all Eligible Timeshare  Receivables at a time when the
      total of all Eligible Timeshare Receivables equals or exceeds $2,000,000.

      Enforceable  -  when  used  with  reference  to  any  Loan  Document,  any
      -----------
      Transaction  Document,  any  Timeshare  Financing  Document  or any  other
      instrument  or agreement,  such  instrument or agreement was duly executed
      and delivered by each of the parties  thereto;  each signatory at the time
      of such execution and delivery had the capacity to contract,  and, if such
      signatory  signed  in  a  representative   capacity,   did  so  with  full
      authorization from the party  represented;  each Business Entity that is a
      signatory to such  instrument or agreement had full power and authority to
      execute and deliver such instrument and agreement;  and such instrument or
      agreement  creates a legal,  valid and binding  obligation of each of such
      parties  thereto  that  is  enforceable  against  each of the  parties  in
      accordance  with the terms thereof under all  Applicable  Laws (except for
      the effect of any Applicable  Laws relating to Insolvency  Proceedings and
      except for the effect of the  application  of any  general  principles  of
      equity upon the  enforcement  of Remedies  generally);  and when used with
      reference to any Lien, such Lien is a legal,  valid and binding Lien which
      has duly attached to the Property  intended to be the subject  thereof and
      is duly perfected under the UCC and all other Applicable Laws.

      Environmental   Laws  -  all  federal,   state  and  local  laws,   rules,
      --------------------
      regulations,  ordinances, programs, permits, guidances, orders and consent
      decrees relating to health, safety or environmental matters, including the
      Comprehensive  Environmental  Response,  Compensation and Liability Act of
      1980.

<PAGE>

      Equipment - shall have the meaning given to "equipment" in the UCC.
      ---------

      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 this Agreement.
      ----------------

      Facility  A - the  revolving  credit  facility  established  in  favor  of
      -----------
      Borrowers pursuant to the terms of Section 2.1 hereof.

      Facility  A  Borrowing  Base - on any date of  determination  thereof,  an
      ----------------------------
      amount  equal to the least of (a)  $15,000,000,  (b) the A&D Loan  Formula
      Amount on such date, or (c) the  difference  between  $25,000,000  and the
      amount of Facility B Revolver Loans outstanding on such date.

      Facility A Revolver  Loan - a  Revolver  Loan made by Lender to  Borrowers
      -------------------------
      pursuant to Section 2.1 hereof.

      Facility  B - the  revolving  credit  facility  established  in  favor  of
      -----------
      Borrowers pursuant to the terms of Section 2.2 hereof.

      Facility  B  Borrowing  Base - on any date of  determination  thereof,  an
      ----------------------------
      amount equal to the least of (a) $15,000,000,  (b) the Hypothecation  Loan
      Formula amount on such date, or (c) the difference between $25,000,000 and
      the amount of Facility A Revolver Loans outstanding on such date.

      Facility B Revolver  Loan - a  Revolver  Loan made by Lender to  Borrowers
      -------------------------
      pursuant to Section 2.2 hereof.

      Federal  Reserve  Board - the Board of  Governors  of the Federal  Reserve
      -----------------------
      System.

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

      General Intangible - shall have the meaning given to "general  intangible"
      ------------------
      in the UCC.

      Governmental Approvals - all authorizations, consents, approvals, licenses
      ----------------------
      and  exemptions  of,  registrations  and filings with, and reports to, all
      national state or local government  (whether  domestic or foreign) and any
      political    subdivisions    thereof    in   any    other    governmental,
      quasi-governmental,   judicial,   administrative,   public  or   statutory
      instrumentality, authority, body, agency, bureau or entity.

      Governmental Unit - a federal,  state, local, or foreign government or any
      -----------------
      department, agency, bureau or subdivision thereof.


      Hypothecation  Borrower  - a Person  to whom a  Hypothecation  Loan from a
      -----------------------
      Borrower is outstanding.

      Hypothecation  Collateral - all Property and interest in Property in which
      -------------------------
      a Borrower holds a Lien to secure the whole or any part of a Hypothecation
      Loan, including all Timeshare Financing Documents.

      Hypothecation  Loan - a loan or loans  made by  Litchfield  pursuant  to a
      -------------------
      revolving credit facility  established  prior to the Closing Date, or made
      or acquired by Green  Mountain  pursuant  to a revolving  credit  facility
      established  after the Closing Date, to a  Hypothecation  Borrower for the
      purpose of financing all or part of the Hypothecation  Borrower's Eligible
      Timeshare  Receivables  derived from the sale of Timeshare  Intervals with
      respect to a Timeshare Project.

      Hypothecation   Loan  Documents  -  for  each   Hypothecation   Loan,  all
      -------------------------------
      instruments,  agreements and other  documents that at any time evidence or
      secure the payment of such Hypothecation Loan.

      Hypothecation Loan Formula Amount - on any date of determination  thereof,
      ---------------------------------
      the sum derived by (a)  calculating for each Eligible  Hypothecation  Loan
      outstanding  on such date the  Hypothecation  Loan  Margin  and (b) adding
      together each of the calculations so determined.

      Hypothecation   Loan   Margin  -  on  any  date  and  for  each   Eligible
      -----------------------------
      Hypothecation Loan outstanding on such date, an amount equal to the lesser
      of (a) the principal  balance of such  Hypothecation  Loan on such date or
      (b) 80% of the aggregate amount of all Eligible Timeshare Receivables upon
      which a Borrower  has a Lien to secure the  payment of such  Hypothecation
      Loan.

      Hypothecation  Obligor - a Person who is liable for the payment,  in whole
      ----------------------
      or in part, of a Hypothecation Loan, including the Hypothecation  Borrower
      and any guarantor of such Hypothecation Loan.

      Insolvency  Proceeding - any action,  case or  proceeding  commenced by or
      ----------------------
      against a Person, or any agreement of such Person, for (a) the entry of an
      order  for  relief  under  any  chapter  of the  Bankruptcy  Code or other
      insolvency or debt adjustment law (whether state, federal or foreign), (b)
      the appointment of a receiver,  trustee, liquidator or other custodian for
      such  Person  or any  part of its  Property,  (c) an  assignment  or trust
      mortgage  for  the  benefit  of  creditors  of  such  Person,  or (d)  the
      liquidation, dissolution or winding up of the affairs of such Person.

      Instrument - shall have the meaning  ascribed to the term  "instrument" in
      ----------
      the UCC.

      Interest  Coverage Ratio - for any fiscal period,  the ratio which (i) the
      ------------------------
      sum of  Borrower's  EBITDA  for  such  period,  bears  to (ii)  the sum of
      interest expense,  including interest expense  attributable to capitalized
      leases  of  Borrower,  for the same  such  period,  all as  determined  in
      accordance with GAAP.

      Inventory - shall have the meaning given to "inventory" in the UCC.
      ---------

<PAGE>

      Land Sales Laws - all laws, rules and regulations that govern or relate to
      ---------------
      the  dedication,  development  and operation of Timeshare  Projects or the
      promotion, offer or sale of Timeshare Intervals to consumers.

      LIBOR  Rate - shall  have the  meaning  ascribed  to it in  Section  3.1.1
      -----------
      hereof.

      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 reservations, exceptions, encroachments, easements, rights-of-way,
      covenants, conditions, restrictions, leases and other title exceptions and
      encumbrances affecting Property.

      Loan  Account  - the loan  account  established  on the  books  of  Lender
      -------------
      pursuant to Section 4.11 of this Agreement.

      Loan  Designation  Schedule - a Loan  Designation  Schedule in the form of
      ---------------------------
      Exhibit C-1 or Exhibit C-2 annexed  hereto,  which shall be completed by a
      -----------    -----------
      Borrower  and  submitted  to Lender with respect to each Pledged Loan that
      such  Borrower  requests  Lender to consider as an Eligible A&D Loan or an
      Eligible Hypothecation Loan.

      Loan  Documents - this  Agreement,  the Other  Agreements and the Security
      ---------------
      Documents.

      Loan Party - each  Borrower and each other Person  (other than Lender) who
      ----------
      is at any time liable for the payment of the Obligations.

      Loan Year - a period  commencing  each calendar year on the same month and
      ---------
      day as the date of this  Agreement and ending on the same month and day in
      the  immediately  succeeding  calendar  year,  with the first such  period
      (i.e., the first Loan Year) to commence on the date of this Agreement.

      Loans - all loans and advances of any kind made by Lender pursuant to this
      -----
      Agreement.

      Margin Stock - as such term is defined in Regulation U and Regulation G of
      ------------
      the Board of Governors.

      Material  Adverse  Effect - the  effect of any event or  condition  which,
      -------------------------
      alone or when taken together with other events or conditions  occurring or
      existing  concurrently  therewith,  (a) has a material adverse effect upon
      the business, operations,  Properties,  condition (financial or otherwise)
      or business prospects of a Person,  including either Borrower; (b) has any
      material adverse effect  whatsoever upon the validity or enforceability of
      this  Agreement  or any of the  other  Loan  Documents;  (c) has or may be
      reasonably  expected to have any material adverse effect upon the value of
      the whole or any material part of the Collateral, the Liens of Lender with
      respect to the  Collateral or any material part thereof or the priority of
      such Liens;  (d)  materially  impairs the ability of a Borrower to perform
      its  obligations  under this Agreement or any of the other Loan Documents,
      including repayment of the Obligations when due; or (e) materially impairs
      the  ability of Lender to enforce or collect  the  Obligations  or realize
      upon any of the  Collateral  in  accordance  with the Loan  Documents  and
      Applicable Laws.

<PAGE>

      Maximum  Rate - the maximum  non-usurious  rate of interest  permitted  by
      -------------
      Applicable  Laws that at any time, or from time to time, may be contracted
      for, taken,  reserved,  charged or received on the Debt in question or, to
      the extent that at any time Applicable Laws may thereafter permit a higher
      maximum   non-usurious   rate  of   interest,   then  such  higher   rate.
      Notwithstanding  any other  provision  hereof,  the Maximum  Rate shall be
      calculated on a daily basis (computed on the actual number of days elapsed
      over a year of 365 or 366 days, as the case may be).

      Money  Borrowed - means (i) Debt  arising from the lending of money by any
      ---------------
      Person to either  Borrower;  (ii)  Debt,  whether  or not in any such case
      arising  from the lending by any Person of money to either  Borrower,  (A)
      which is  represented  by notes  payable or drafts  accepted that evidence
      extensions  of credit,  (B) which  constitutes  obligations  evidenced  by
      bonds,  debentures,  notes  or  similar  instruments,  or (C)  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)
      Debt that constitutes a Capitalized Lease Obligation;  (iv)  reimbursement
      obligations  with respect to letters of credit or guaranties of letters of
      credit;  and (v) Debt of a Borrower under any guaranty of obligations that
      would  constitute  Debt for Money Borrowed under clauses (i) through (iii)
      hereof, if owed directly by such Borrower.

      Mortgage - an instrument or agreement that creates under Applicable Laws a
      --------
      Lien upon real property or improvements  thereon,  whether such instrument
      or  agreement is a mortgage,  deed of trust,  deed to secure debt or other
      form of security instrument.

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

      Net Income - at any date of determination,  as applied to any Person,  the
      ----------
      net income (or net loss) of such Person for the period in  question  after
      giving effect to deduction of or provision for all operating expenses, all
      taxes and reserves  (including  reserves for deferred taxes) and all other
      proper deductions, all determined in accordance with GAAP.

      Net Principal  Balance - when used with  reference to the  Applicable  A&D
      ----------------------
      Loan  Margin of an  Eligible  A&D Loan on any date,  and for  purposes  of
      determining  the principal  balance on any date of such Eligible A&D Loan,
      an amount equal to the principal balance of such Eligible A&D Loan on such
      date,  but there shall in all events be excluded  from such  determination
      amounts added to the principal  balance thereof  (whether  pursuant to the
      underlying A&D Loan Documents or Applicable Laws) as capitalized interest,
      fees or other charges.

      Net Worth - at any date of determination, with respect to any Person, such
      ---------
      Person's total shareholder's  equity (including capital stock,  additional
      paid-in capital and retained  earnings,  after  deducting  treasury stock)
      which would appear as such on a balance  sheet of such Person  prepared in
      accordance with GAAP.

      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  either
      Borrower,  or both of them,  to Lender of any kind or  nature,  present or
      future,   whether  or  not  evidenced  by  any  note,  guaranty  or  other
      instrument,  whether arising under this Agreement or any of the other Loan
      Documents or otherwise,  and whether direct or indirect  (including  those
      acquired by assignment), absolute or contingent, primary or secondary, due
      or to become due, joint or several,  now existing or hereafter arising and
      however acquired.

<PAGE>

      Obligor - an A&D Obligor or a Hypothecation Obligor.
      -------

      Original Term - as defined in Section 5.1 of this Agreement.
      -------------
   
      Other  Agreements  - any and all  agreements,  instruments  and  documents
      -----------------
      (other than this Agreement and the Security Documents), heretofore, now or
      hereafter  executed by a  Borrower,  any  Subsidiary  of a Borrower or any
      other third party and  delivered to Lender in respect of the  transactions
      contemplated  by this Agreement,  including the Agency  Agreements and the
      Power-of- Attorney.

      Out-of-Formula  Condition  - on  any  date  of  determination  thereof,  a
      -------------------------
      condition such that the aggregate  principal amount of Facility A Revolver
      Loans or Facility B Revolver  Loans  outstanding  on such date exceeds the
      Facility A Borrowing  Base or Facility B Borrowing  Base,  as the case may
      be, on such date.

      Payment Account - bank account  #160232402265 that Lender maintains in its
      ---------------
      name at First Bank Systems,  having its principal  office in  Minneapolis,
      Minnesota, the wiring instructions to which are as follows: ABA 091000022,
      or such other account as Lender may hereafter establish from time to time.

      Payment  Direction  Agreements - each Payment  Direction  Agreement  among
      ------------------------------
      Borrowers,  Lender and a financial  institution  at which a  Concentration
      Account is maintained.

      Payment Items - all checks, drafts, or other items of payment payable to a
      -------------
      Borrower, including proceeds of any of the Collateral.

      Payment  Right - a right of a  Borrower  to the  payment  of money from an
      --------------
      Obligor  (whether  such right is evidenced by or  constitutes  an Account,
      Chattel  Paper,  Document,  General  Intangible or Instrument) or from any
      other Person at any time under any  Transaction  Document,  including  the
      right to the repayment of a Pledged Loan.

      Permitted  Lien - a Lien at any time  granted in favor of  Lender;  in the
      ---------------
      case of A&D Collateral and Hypothecation  Collateral, a Lien in favor of a
      Borrower; a Lien for Taxes (excluding any Liens imposed pursuant to any of
      the  provisions  of ERISA)  incurred in the ordinary  course of a Person's
      business and not yet due or being  Properly  Contested;  a Lien arising in
      the ordinary  course of business of a Person by  operation  of  Applicable
      Laws,  but only if  payment in respect of any such Lien is not at the time
      required or the Debt secured by such Lien is being Properly  Contested and
      such Lien does not  materially  detract  from the value of the property to
      which it attaches or materially impair the use thereof in the operation of
      such  Person's  business;  and, in the case of A&D  Collateral,  a Lien in
      favor of a Person other than a Borrower that is expressly  subordinate  to
      such Borrower's Lien thereon.

      Permitted  Use - with respect to  Litchfield,  a use of proceeds of any of
      --------------
      the Loans (i) on the Closing Date, to pay any fees payable to Lender under
      this Agreement;  and (ii) after the Closing Date, for Litchfield's general

<PAGE>

      operating  capital needs;  and, with respect to Green  Mountain,  a use of
      proceeds  of any of the Loans  (i) on the  Closing  Date,  to pay any fees
      payable to Lender under this  Agreement,  and (ii) after the Closing Date,
      to pay any Debt incurred in the ordinary course of Borrowers'  business to
      the extent not  prohibited by this  Agreement  and to make any  investment
      that is not a Restricted  Investment.  It shall not be a Permitted Use for
      either  Borrower  to use any  proceeds  of any of the Loans to acquire any
      Pledged Loans from the other,  except for  acquisitions  by Green Mountain
      from Litchfield of Pledged Loans that are free and clear of any Liens that
      are not Permitted Liens in exchange for fair and adequate consideration or
      the  acquisition  by  Litchfield  of Pledged Loans that have been released
      from the Collateral pursuant to the terms of this Agreement.

      Person - a natural person, a Business Entity or a Governmental Unit.
      ------

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

      Pledged Loan - an A&D Loan or  Hypothecation  Loan that (i) a Borrower has
      ------------
      designated  to Lender  in a Loan  Designation  Schedule  to be part of the
      Collateral,  whether  or not  such A&D  Loan or  Hypothecation  Loan is an
      Eligible  Loan;  (ii) is  subject  to a Lien in favor of  Lender to secure
      payment of the  obligations,  whether or not  Lender's  Lien with  respect
      thereto,  any  Transaction  Documents  evidencing same or any Pledged Loan
      Collateral  securing same is perfected or unperfected in whole or in part;
      and (iii) the  Transaction  Documents  for which are in the  possession of
      Lender or Document Agent.

      Pledged Loan  Collateral - with respect to each Pledged  Loan,  all of the
      ------------------------
      A&D Collateral or Hypothecation Collateral securing such Pledged Loan.

      Power-of-Attorney - the Irrevocable Power-of-Attorney and Agency Agreement
      -----------------
      to be executed by Borrower in favor of Lender and by which  Borrower shall
      confer upon Lender the power to act in Borrower's  name and on its behalf,
      after the occurrence and during the continuance of any Default or Event of
      Default, for the purpose of realizing upon any of the Collateral.

      Primary  Transaction  Documents  - with  respect to a Pledged  Loan,  each
      -------------------------------
      Transaction  Document that evidences the obligation of the A&D Borrower or
      Hypothecation Borrower to repay such Pledged Loan or the terms of any such
      repayment;  secures,  in whole or in part,  the  obligation  to repay such
      Pledged  Loan or to  perform  any other  obligation  with  respect  to any
      Pledged  Loan  Collateral  securing  such  Pledged  Loan;  or  constitutes
      Eligible Collateral.

      Project Cash Flow  Forecast - a forecasted  cash flow which is prepared by
      ---------------------------
      the A&D  Borrower  with respect to the A&D  Collateral  and sets forth the
      forecasted cash flow to be derived from the operation,  use or sale of any
      such A&D Collateral, and which has been reviewed and approved by Borrower.

      Project  Completion  Schedule - a schedule prepared by an A&D Borrower and
      -----------------------------
      delivered  to Borrower  with  respect to each A&D  Collateral  and setting
      forth the estimated time of completion of the  renovation and  development
      of such A&D  Collateral  or the  conversion  of such A&D  Collateral  to a
      Timeshare Project.

<PAGE>

      Properly  Contested - in the case of any Debt of a Person  (including  any
      -------------------
      Tax)  that is not  paid as and  when  due or  payable  by  reason  of such
      Person's  bona  fide  dispute  concerning  its  liability  to pay  same or
      concerning the amount  thereof,  that (i) such Debt and any Liens securing
      same are being properly contested in good faith by appropriate proceedings
      promptly  instituted  and  diligently  conducted;  (ii)  such  Person  has
      established  appropriate  reserves as shall be required in conformity with
      GAAP; (iii) the non-payment of such Debt during the period being contested
      by such  Person will not have a Material  Adverse  Effect and does not and
      will not result in a forfeiture of, foreclosure upon or loss of any assets
      of such Person;  (iv) no Lien is imposed upon any of such Person's  assets
      with  respect  to such Debt  unless  such Lien is at all times  junior and
      subordinate  in priority to the Liens in favor of Lender (except only with
      respect to property  taxes that have  priority  as a matter of  applicable
      state law) and  enforcement of such Lien is stayed during the period prior
      to the final  resolution or disposition  of such dispute;  (v) if the Debt
      results from the entry,  rendition or issuance  against such Person or any
      of its assets of a judgment,  writ, order or decree, such judgment,  writ,
      order or decree is stayed pending a timely appeal or other judicial review
      and such Person shall have  established  adequate  reserves in  accordance
      with GAAP for such judgment,  writ,  order or decree or the same is either
      fully insured against by an insurer that has not denied or reserved rights
      with respect to coverage or has been bonded to Lender's satisfaction;  and
      (vi) if such contest is abandoned, settled or determined adversely to such
      Person,  such  Person  forthwith  pays  such  Debt and all  penalties  and
      interest in connection therewith.

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

      Remedies  - all  rights,  remedies,  privileges  and  powers of a Borrower
      --------
      arising under or in connection with any of the Transaction Documents.

      Renewal Term - as defined in Section 5.1 of this Agreement.
      ------------

      Reportable  Event - any of the  events  set forth in  Section  4043(b)  of
      -----------------
      ERISA.

      Restricted  Investment - any  acquisition of Property by Green Mountain in
      ----------------------
      exchange for cash or other Property, whether in the form of an acquisition
      of  Securities  or other Debt,  or the  purchase or  acquisition  by Green
      Mountain of any other Property,  or a loan, advance,  capital contribution
      or subscription, except acquisitions of the following: (a) fixed assets to
      be used in the business of Green Mountain; (b) Cash Equivalents; (c) loans
      made or acquired by Green  Mountain in the  ordinary  course of  business,
      including  all  A&D  Loans  and  Hypothecation  Loans;  and  (d)  all  A&D
      Collateral or Hypothecation Collateral title to which is taken through the
      enforcement of Remedies under any Transaction Documents..

      Revolver  Loan - a Loan made by Lender as  provided  in  Section 2 of this
      -------------- 
      Agreement.

      Sales  Value  - the  value  of  an  Eligible  A&D  Project  determined  by
      ------------
      application of the following  formula:  .20 x (A x 51 x B), where A is the
      number of Timeshare Units existing or to exist in the A&D Project and B is

<PAGE>

      the estimated average weekly sales price for each Timeshare Interval,  all
      as reflected on the Project  Cash Flow  Forecast  received and approved by
      Borrower and submitted to Lender with respect to such A&D Project.

      SEC - the Securities and Exchange Commission or any governmental authority
      ---
      which may hereafter be substituted therefor.

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

      Security  Documents  -  the  Deposit  Account  Assignments,   the  Payment
      -------------------
      Direction  Agreements and all other  instruments  and agreements now or at
      any time hereafter securing the whole or any part of the Obligations.

      Servicer  - such  Person or Persons as may be  retained  by a Borrower  to
      --------
      fulfill the role of Servicer for one or more Pledged Loans pursuant to the
      provisions of Section 4.3 of this Agreement.

      Servicing  Agreement  - each  Servicing  Agreement  which is entered  into
      --------------------
      between  either or both  Borrowers and a Servicer and which sets forth the
      responsibility of the Servicer to either or both Borrowers with respect to
      Pledged Loans.

      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 Debt (including contingent debts), (ii) is able to pay all of its
      Debt as such Debt  matures,  (iii) has capital  sufficient to carry on its
      business and transactions and all business and transactions in which it is
      about to engage and (iv) is not "insolvent"  within the meaning of Section
      101(32) of the Bankruptcy Code.

      Subordinated  Debt  - Debt  of a  Borrower  that  is  subordinated  to the
      ------------------
      Obligations in a manner satisfactory to Lender.

      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.

      Tangible  Net  Worth - as  applied  to any  Person,  the Net Worth of such
      --------------------
      Person at the time in question,  after  deducting  therefrom the amount of
      all intangible  items reflected  therein,  including all unamortized  debt
      discount  and  expense,  unamortized  research  and  development  expense,
      unamortized  deferred  charges,  prepaid  expenses,   goodwill,   patents,
      trademarks, service marks, tradenames, copyrights, unamortized excess cost
      of investment in Subsidiaries over equity at dates of acquisition, and all
      similar items which would properly be treated as intangibles in accordance
      with GAAP.

      Taxes - any  present  or future  taxes,  levies,  imposts,  duties,  fees,
      -----
      assessments, deductions, withholdings or other charges of whatever nature,
      including income, receipts,  excise, property,  sales, transfer,  license,
      payroll, withholding, social security and franchise taxes now or hereafter
      imposed  or levied by the  United  States or any  state,  local or foreign
      government or by any department,  agency or other political subdivision or
      taxing  authority  thereof  or  therein,  and  all  interest,   penalties,
      additions to tax and similar liabilities with respect thereto.

<PAGE>

      Timeshare Financing Documents - all instruments and agreements executed by
      -----------------------------
      a Timeshare  Purchaser in favor of a Hypothecation  Borrower in connection
      with a sale of a Timeshare Interval by such Hypothecation Borrower to such
      Timeshare Purchaser.

      Timeshare Interval - a timeshare ownership interest in a Timeshare Project
      ------------------
      sold to a Timeshare  Purchaser  by  delivery  of a warranty  deed or other
      appropriate instrument of conveyance or transfer,  which interest consists
      of an undivided  interest with those of other Timeshare  Purchasers in the
      Timeshare Project.

      Timeshare  Project - a vacation or resort  property  that is  dedicated to
      ------------------
      Timeshare  Interval  ownership  pursuant to a plan that has  received  all
      Governmental Approvals and is in compliance with all Applicable Laws.

      Timeshare  Purchaser  - a  Person  who  purchases  one or  more  Timeshare
      --------------------
      Intervals from a Hypothecation Borrower.

      Timeshare  Receivable  - an amount or amounts at any time due,  payable or
      ---------------------
      owing by a Timeshare  Purchaser to a Hypothecation  Borrower in connection
      with the sale of a Timeshare  Interval by such  Hypothecation  Borrower to
      such Timeshare Purchaser.

      Timeshare Unit - with respect to a Timeshare  Project,  a unit within such
      --------------
      Timeshare  Project  that  is or may  become  the  subject  of a  timeshare
      ownership interest in favor of a Timeshare Purchaser.

      Transaction Documents - all instruments,  agreements,  documents and other
      ---------------------
      writings  that now or hereafter (i) evidence a Pledged Loan or any Payment
      Right  relating   thereto,   including  all  promissory   notes  and  loan
      agreements,  (ii) secure (whether by the grant or conveyance of a security
      interest  or other  Lien) a Pledged  Loan or any  Payment  Right  relating
      thereto,  including all security agreements,  UCC-1 financing  statements,
      Mortgages,   pledge   agreements,   lease   agreements,   negative  pledge
      agreements,   hypothecation  agreements,   assignments,   title  insurance
      policies,  surveys and site  assessments,  (iii)  guarantee the payment or
      performance  of all or any part of any Payment  Right owing by an Obligor,
      including all guaranties,  support or contribution agreements,  letters of
      credit,  indemnifications  and repurchase  agreements,  or (iv) are at any
      time executed and  delivered by any Person in connection  with or relating
      to any Payment  Right,  including  all  mortgagee  waivers or  agreements,
      lockbox,   blocked   account  or  other   dominion   account   agreements,
      intercreditor  or  subordination  agreements  and  estoppel  certificates,
      whether the  foregoing  are  executed  and  delivered  by an Obligor,  any
      guarantor  or  surety of a Payment  Right or any  other  Person.  The term
      "Transaction  Documents"  shall  include  the  A&D  Loan  Documents,   the
      Hypothecation Loan Documents and the Timeshare Financing Documents.

      Transaction Documents Certificate - the Certificate Regarding the Forms of
      ---------------------------------
      Certain Transaction  Documents,  to be executed and delivered by Borrowers
      to Lender on the Closing Date.

      UCC - the Uniform  Commercial  Code (or any successor  statute) as adopted
      ---
      and in force in the State of Georgia  or, when the laws of any other state
      govern the method or manner of the creation or  perfection of any security
      interest  in  any of  the  Collateral,  A&D  Collateral  or  Hypothecation
      Collateral,  as the  case  may be,  the  Uniform  Commercial  Code (or any
      successor statute) of such state.

<PAGE>

      Underwriting Criteria - the criteria customarily employed by each Borrower
      ---------------------
      as of the date of this Agreement in determining the creditworthiness of an
      Obligor,  the value or suitability of any A&D Collateral or  Hypothecation
      Collateral,  or the suitability of a Timeshare  Purchaser or any Timeshare
      Financing Documents.

      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).

            Accounting Terms. Unless otherwise specified herein, all terms of an
            -----------------
accounting character used in this Agreement shall be interpreted, all accounting
determinations  under this Agreement shall be made, and all financial statements
required to be delivered under this Agreement  shall be prepared,  in accordance
with GAAP,  applied on a basis consistent with the most recent audited financial
statements of Litchfield and its Subsidiaries heretofore delivered to Lender and
using  the  same  method  for  valuation  as  used  in  such  audited  financial
statements,  except  for any  change  in  which  Borrowers'  independent  public
accountants  concur or as required  by GAAP.  In the event of any change in GAAP
that occurs after the date of this  Agreement and that is material to Borrowers,
conforming  adjustments  shall be made to any  financial  covenants set forth in
this Agreement, or the components thereof, that are affected by such change.

            Other Terms. All other terms contained in this Agreement shall have,
            ------------
when the  context so  indicates,  the  meanings  provided  for by the UCC 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 this Agreement as a whole
and not to any particular  section,  paragraph or subdivision.  Any pronoun used
shall be deemed to cover all genders. In the computation of periods of time from
a specified  date to a later  specified  date,  the word "from"  means "from and
including"  and the words "to" and "until"  each means "to but  excluding."  The
section  titles,  table of contents  and list of exhibits  appear as a matter of
convenience only and shall not affect the interpretation of this Agreement.  All
references to statutes and related  regulations  shall include any amendments of
same  and  any  successor  statutes  and  regulations.  All  references  to  any
instruments  or  agreements,   including  the  Loan  Documents  and  Transaction
Documents,  shall  include  any and all  modifications  thereto  and any and all
extensions or renewals thereof.  Wherever the phrase "including" shall appear in
this  Agreement,  such word  shall be  understood  to mean  "including,  without
limitation." All references to the time of day shall mean the time of day on the
day in question in Atlanta, Georgia, unless otherwise expressly provided in this
Agreement.  A  Default  or an Event of  Default  shall be deemed to exist at all
times  during the period  commencing  on the date that such  Default or Event of
Default  occurs to the date on which such  Default or Event of Default is waived
in writing  pursuant  to this  Agreement  or is cured  within any period of cure
expressly provided in this Agreement. References in this Agreement to Borrower's
"knowledge"  shall mean the  knowledge of any officer or director of Borrower as
to the matter in question.

SECTION 2.  CREDIT  FACILITIES

      Subject  to the  terms  and  conditions  of,  and  in  reliance  upon  the
representations  and  warranties  made in,  this  Agreement  and the other  Loan

<PAGE>

Documents,  Lender agrees to establish the Credit  Facilities  pursuant to which
Lender  agrees to make  available to Borrowers  up to  $25,000,000  in aggregate
outstanding at any time, available upon Borrowers' request therefor, as follows:

      2.1.  Facility A Revolver  Loans.  Lender agrees,  during the term of this
            ---------------------------
Agreement  and for so long as no  Default or Event of  Default  exists,  to make
Facility  A Revolver  Loans to  Borrowers  from time to time,  as  requested  by
Borrowers  in the  manner  set forth in Section  3.1.1  hereof,  up to a maximum
principal amount at any time outstanding  equal to the Facility A Borrowing Base
at such time.  The Facility A Revolver  Loans shall be used solely for Permitted
Uses.  In no event shall any proceeds of any Revolver  Loans be used to purchase
or to carry, reduce,  retire or refinance any Debt incurred to purchase or carry
any Margin  Stock.  The initial  Facility A Revolver Loan shall be to Litchfield
and  shall be for an amount in excess of  $250,000.  If the  unpaid  balance  of
Facility A Revolver  Loans  outstanding at any time should exceed the Facility A
Borrowing Base at such time,  such Facility A Revolver Loans shall  nevertheless
constitute Obligations that are secured by the Collateral and entitled to all of
the benefits of the Loan Documents and shall be repaid on demand.

      2.2.  Facility B Revolver  Loans.  Lender agrees,  during the term of this
            ---------------------------
Agreement  and for so long as no  Default or Event of  Default  exists,  to make
Facility  B Revolver  Loans to  Borrowers  from time to time,  as  requested  by
Borrowers  in the  manner  set forth in Section  3.1.1  hereof,  up to a maximum
principal amount at any time outstanding  equal to the Facility B Borrowing Base
at such time.  The Facility B Revolver  Loans shall be used solely for Permitted
Uses.  In no event shall any proceeds of any Revolver  Loans be used to purchase
or to carry, reduce,  retire or refinance any Debt incurred to purchase or carry
any Margin  Stock.  The initial  Facility B Revolver Loan shall be to Litchfield
and  shall be for an amount in excess of  $250,000.  If the  unpaid  balance  of
Facility B Revolver  Loans  outstanding at any time should exceed the Facility B
Borrowing Base at such time,  such Facility B Revolver Loans shall  nevertheless
constitute Obligations that are secured by the Collateral and entitled to all of
the benefits of the Loan Documents and shall be repaid on demand.

SECTION 3.  INTEREST,  FEES  AND  CHARGES

      3.1.  Interest.
            ---------

            3.1.1.  Rates of Interest.  Interest  shall accrue on the  principal
                    ------------------
amount of the  Facility  A  Revolver  Loans at the end of each day at a rate per
annum  equal to 3.75% plus the LIBOR  Rate,  and shall  accrue on the  principal
amount of the Facility B Revolver Loans  outstanding at the end of each day at a
rate per annum  equal to 2.00% plus the LIBOR Rate.  As used in this  Agreement,
the term "LIBOR Rate" shall mean the rate  published in The Wall Street  Journal
                                                        ------------------------
under "Money  Rates" (or if such  publication  shall cease to publish such rate,
then the rate  published  in such other  nationally  recognized  publication  as
Lender may from time to time  specify) as the average of the  interbank  offered
rates for  Dollar  deposits  in the  London  interbank  market for a term of one
month,  based on quotations  at 5 major banks.  The LIBOR Rate for each day of a
month shall be the rate so  published  on the first  Business Day of such month,
provided  that the  LIBOR  Rate on the date of this  Agreement  and for each day
remaining in the month in which this  Agreement is executed shall be the rate so
published on the date of this Agreement.  On the date hereof,  the LIBOR Rate is
5.46875%  and  therefore  the rate of interest in effect  hereunder  on the date
hereof, expressed in simple interest terms, is 9.21875% with respect to Facility
A Revolver Loans and 7.46875% with respect to Facility B Revolver Loans.

<PAGE>

            3.1.2.  Default  Rate of  Interest.  Interest  shall  accrue  at the
                    ---------------------------
Default  Rate (i) with  respect to the  principal  amount of any  portion of the
Obligations  (and,  to the extent  permitted by  Applicable  Laws,  all past due
interest)  that is not  paid on the due  date  thereof  (whether  due at  stated
maturity,  on demand,  upon  acceleration or otherwise)  until paid in full, and
(ii) with respect to the  principal  amount of all of the  Obligations  upon the
earlier to occur of (x) a Borrower's  receipt of notice of Lender's  election to
charge the Default Rate based upon the  existence of any Event of Default or (y)
the commencement by or against a Borrower of an Insolvency  Proceeding,  whether
or not under the  circumstances  described in either  clauses (i) or (ii) hereof
Lender  elects  to  accelerate  the  maturity  or demand  payment  of any of the
Obligations.  To the fullest  extent  permitted by Applicable  Laws, the Default
Rate shall apply and accrue on any  judgment  entered with respect to any of the
Obligations and to the unpaid  principal  amount of the  Obligations  during any
Insolvency  Proceeding of a Borrower.  Each Borrower  acknowledges that the cost
and expense to Lender  attendant  upon the occurrence of an Event of Default are
difficult  to  ascertain  or estimate  and that the  Default  Rate is a fair and
reasonable estimate to compensate Lender for such added cost and expense.

      3.2.  Computation of Interest and Fees.  Interest,  fees and other charges
            ---------------------------------
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 Payment Items or other forms of payment received by Lender shall
be deemed  applied  by Lender on account of the  Obligations  (subject  to final
payment of such  items) on the  Business  Day  received by Lender in the Payment
Account  in  immediately  available  funds  and  Lender  shall be deemed to have
received such Payment  Items or other forms of payment on the date  specified in
Section 4.4 hereof.

      3.3. Annual Credit  Facility Fee. For each Loan Year (or portion  thereof)
           ----------------------------
that either of the Credit  Facilities is in effect,  Borrowers  shall be jointly
and  severally  obligated to pay to Lender a credit  facility fee  annually,  in
advance,  on the first day of each Loan Year (if such day is not a Business Day,
on the next succeeding  Business Day),  commencing on the date hereof. The first
annual credit facility fee shall be in the amount of $75,000 and each subsequent
fee shall be due and  payable in the amount of .16% of the  aggregate  amount of
Facility A and Facility B on the date that such fee is payable.

      3.4. Audit and Appraisal  Fees.  Borrowers  shall be jointly and severally
           --------------------------
obligated to reimburse  Lender for quarterly audit expenses at the per diem rate
of $300,  together with all out-of-pocket costs and expenses incurred by Lender,
in  connection  with each audit and  appraisal of  Borrower's  books and records
(including  all  Transaction  Documents)  and such other matters as Lender shall
deem reasonable and  appropriate in connection with each such quarterly  audits.
For so long as no  Default  or  Event of  Default  exists,  the per  diem  audit
expenses for any  quarterly  audit shall not be payable  after the eighth day of
such audit.

      3.5.  Reimbursement  of Expenses.  If, at any time or times  regardless of
            ---------------------------
whether  or not an  Event  of  Default  then  exists,  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 or any amendment of or  modification  of this Agreement or any of
the other Loan Documents;  (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 Lender,  either  Borrower,  an Obligor or any other Person) in any
way  relating  to the  Collateral,  this  Agreement  or any  of the  other  Loan
Documents or either  Borrower's  or any Obligor's  affairs;  (iv) any attempt to

<PAGE>

enforce any rights of Lender  against either  Borrower,  an Obligor or any other
Person which may be  obligated  to Lender by virtue of this  Agreement or any of
the other Loan  Documents;  or (v) any  attempt  to  inspect,  verify,  protect,
preserve,  perfect or continue the perfection of Lender's  Liens upon,  restore,
collect, sell, liquidate or otherwise dispose of or realize upon the Collateral;
then  all such  legal  and  accounting  expenses,  other  reasonable  costs  and
out-of-pocket  expenses  of Lender  shall be charged to  Borrowers.  All amounts
chargeable to Borrowers  under this Section 3.5 shall be Obligations  secured by
all of the  Collateral,  shall be  payable  on demand to Lender  and shall  bear
interest  from the  date  such  demand  is made  until  paid in full at the rate
applicable to Facility A Revolver Loans from time to time.  Borrowers shall also
be jointly and severally  obligated to reimburse Lender for reasonable costs and
out-of-pocket   expenses  incurred  by  Lender  in  its  administration  of  the
Collateral to the extent and in the manner provided in Section 4 hereof.

      3.6. Bank Charges.  Borrowers shall be jointly and severally  obligated to
           -------------
pay to Lender,  on demand,  any and all reasonable fees, costs or expenses which
Lender  pays  to a  bank  or  other  similar  institution  arising  out of or in
connection  with the depositing for collection by Lender of any check or item of
payment received or delivered to Lender on account of the Obligations.

      3.7.  Maximum  Interest.  Regardless  of any  provision  contained in this
            ------------------
Agreement  or any of the  other  Loan  Documents,  in no  contingency  or  event
whatsoever  shall the aggregate of all amounts that are contracted for,  charged
or received  by Lender  pursuant  to the terms of this  Agreement  or any of the
other Loan Documents and that are deemed  interest under  Applicable Laws exceed
the  highest  rate  permissible   under  any  Applicable  Laws.  No  agreements,
conditions, provisions or stipulations contained in this Agreement or any of the
other Loan  Documents or the exercise by Lender of the right to  accelerate  the
payment  or  the  maturity  of all or any  portion  of the  Obligations,  or the
exercise of any option whatsoever contained in any of the Loan Documents, or the
prepayment  by Borrowers of any of the  Obligations,  or the  occurrence  of any
contingency whatsoever,  shall entitle Lender to charge or receive in any event,
interest or any charges, amounts, premiums or fees deemed interest by Applicable
Laws (such  interest,  charges,  amounts,  premiums and fees  referred to herein
collectively  as "Interest") in excess of the Maximum Rate and in no event shall
Borrowers  be obligated to pay Interest  exceeding  such Maximum  Rate,  and all
agreements,  conditions  or  stipulations,  if any,  which  may in any  event or
contingency  whatsoever  operate to bind,  obligate or compel  Borrowers  to pay
Interest exceeding the Maximum Rate shall be without binding force or effect, at
law or in equity, to the extent only of the excess of Interest over such Maximum
Rate.  If any  Interest is charged or  received  in excess of the  Maximum  Rate
("Excess"),  each Borrower  acknowledges  and stipulates that any such charge or
receipt shall be the result of an accident and bona fide error, and such Excess,
to the  extent  received,  shall  be  applied  first  to  reduce  the  principal
Obligations and the balance, if any, returned to Borrowers,  it being the intent
of the  parties  hereto  not to  enter  into a  usurious  or  otherwise  illegal
relationship.  The right to  accelerate  the maturity of any of the  Obligations
does not include the right to  accelerate  any interest  that has not  otherwise
accrued on the date of such acceleration,  and Lender does not intend to collect
any  unearned  interest  in the event of any such  acceleration.  Each  Borrower
recognizes that, with fluctuations in the rates of interest set forth in Section
2.1.1 of this Agreement and the Maximum Rate, such an unintentional result could
inadvertently  occur.  All monies paid to Lender  hereunder  or under any of the
other Loan Documents,  whether at maturity or by prepayment, shall be subject to
any rebate of  unearned  interest as and to the extent  required  by  Applicable
Laws. By the execution of this Agreement,  each Borrower  covenants that (i) the
credit or return of any Excess shall  constitute  the acceptance by Borrowers of
such Excess, and (ii) Borrowers shall not seek or pursue any other remedy, legal
or equitable,  against Lender,  based in whole or in part upon  contracting for,
charging  or  receiving  any  Interest in excess of the  Maximum  Rate.  For the
purpose  of  determining  whether or not any  Excess  has been  contracted  for,

<PAGE>

charged or received by Lender,  all interest at any time contracted for, charged
or received from Borrowers in connection  with any of the Loan Documents  shall,
to the extent  permitted by Applicable Laws, be amortized,  prorated,  allocated
and spread in equal  parts  throughout  the full term of the  Obligations.  Each
Borrower and Lender shall,  to the maximum  extent  permitted  under  Applicable
Laws, (i) characterize any non-principal  payment as an expense,  fee or premium
rather than as Interest and (ii) exclude  voluntary  prepayments and the effects
thereof.  The provisions of this Section shall be deemed to be incorporated into
every Loan Document (whether or not any provision of this Section is referred to
therein).  All such Loan Documents and  communications  relating to any Interest
owed by Borrowers and all figures set forth therein shall,  for the sole purpose
of  computing  the  extent  of  Obligations,   be  automatically  recomputed  by
Borrowers,  and by any  court  considering  the  same,  to  give  effect  to the
adjustments or credits required by this Section.

SECTION 4.  LOAN  ADMINISTRATION; PAYMENTS; NATURE OF EACH BORROWER'S
            LIABILITY

      4.1.  Manner of  Borrowing  Revolver  Loans.  Borrowings  under the Credit
            --------------------------------------
Facilities shall be as follows:

            4.1.1.  Loan Requests.  A request for a Revolver Loan shall be made,
                    --------------
or shall be deemed to be made, in the following manner:

                  (i) Borrowers  may give Lender notice of Borrowers'  intention
to borrow,  which shall be in writing  and shall  specify  whether the  proposed
borrowing is to be a Facility A Revolver Loan or a Facility B Revolver Loan, the
amount of the Loan, and the proposed date of funding of the Loan (which shall be
a  Business  Day).  Lender  shall  have no  obligation  to honor  any  notice of
borrowing if any Default, Event of Default or Out-of-Formula Condition exists at
the time of  Lender's  receipt  of such  notice or would  result  from  Lender's
funding of the  requested  Loan,  and  Lender may defer the  funding of any Loan
requested  pursuant to a notice of  borrowing  received  after 11:00 a.m. on any
Business Day to the next Business  Day. By Borrowers'  submission of a notice of
intention to borrow, Borrowers shall be deemed to represent and warrant that the
information  in the most recent  Borrowing  Base  Certificate  remains  true and
accurate as of the time of such notice.

                  (ii) Unless payment is otherwise timely made by Borrowers, the
becoming  due of any amount  required to be paid under this  Agreement or any of
the other Loan Documents, as principal, accrued interest, fees or other charges,
shall be deemed  irrevocably  to be a request  by  Borrowers  from  Lender for a
Revolver  Loan on the due date of, and in an aggregate  amount  required to pay,
such principal, accrued interest, fees or other charges and the proceeds of each
such  Revolver  Loan may be disbursed by Lender by way of direct  payment of the
relevant  Obligation and shall bear interest at the rate of interest  applicable
to  Revolver   Loans   (whether  or  not  any  Default,   Event  of  Default  or
Out-of-Formula  Condition  exists  at the  time of or  would  result  from  such
Revolver Loan). As an accommodation to Borrowers,  Lender will permit electronic
transmittal of notices of intention to borrow,  Borrowing Base  Certificates and
other authorizations and instructions to Lender from Borrowers. Unless Borrowers
specifically  direct  Lender in  writing  not to  accept or act upon  electronic
communications  from Borrowers,  Lender shall have no liability to Borrowers for
any loss or damage suffered by Borrowers as a result of Lender's honoring of any
such notices,  instructions,  authorizations or reports that are communicated to
Lender  electronically  and  purporting to have been sent to Lender by Borrowers
and Lender shall have no duty to verify the origin of any such  communication or
the authority of the person sending it.

<PAGE>

            4.1.2.  Disbursement.  Each Borrower hereby  irrevocably  authorizes
                    -------------
Lender to disburse the proceeds of each Revolver Loan requested, or deemed to be
requested,  pursuant  to Section  4.1.1 as  follows:  (i) the  proceeds  of each
Revolver Loan requested  under Section  4.1.1(i) shall be disbursed by Lender 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  Borrowers,  and  in  the  case  of  each  subsequent
borrowing,  by wire  transfer  to such bank  account  as may be  agreed  upon by
Borrowers  and Lender  from time to time or  elsewhere  if pursuant to a written
direction from a Borrower; and (ii) the proceeds of each Revolver Loan requested
under Section 4.1.1(ii) shall be disbursed by Lender by way of direct payment of
the relevant interest or other Obligation.

      4.2.  Repayment of  Obligations.  All payments  with respect to any of the
            --------------------------
Obligations shall be made to Lender not later than 2:00 p.m. central time on the
date when due,  in  Dollars  and by wire  transfer  to the  Payment  Account  of
immediately  available  funds,  without any offset or counterclaim  and free and
clear of (and without deduction for) any Taxes.  Except where evidenced by notes
or  other  instruments  issued  or  made by  Borrowers  to  Lender  specifically
containing  payment  provisions  which are in conflict with this Section 4.2 (in
which event the conflicting  provisions of said notes or other instruments shall
govern and  control),  the  Obligations  shall be due and payable  (and shall be
paid) as follows:

            4.2.1.  Principal.  Principal  payable on account of Revolver  Loans
                    ----------
shall be  payable by  Borrowers  to Lender  immediately  upon (i) each date that
Borrowers  are  obligated  pursuant to the  provisions  of Section 4.4 hereof to
transmit to Lender balances in the Concentration Accounts, to the extent of such
balances,  (ii) the  occurrence of an Event of Default in  consequence  of which
Lender elects to  accelerate  the maturity and payment of the  Obligations,  and
(iii)  termination  of the Credit  Facility  under which the Revolver Loans were
made by Lender to  Borrowers,  to the extent that payment is required to be made
in accordance with the provisions of Section 5.2.4 of this Agreement.

            4.2.2. Interest. Interest accrued on the Revolver Loans shall be due
                   ---------
on (i) the first  Business  Day of each  month  (for the  immediately  preceding
month),  computed through the last calendar day of the preceding month, (ii) the
occurrence  of an Event of  Default in  consequence  of which  Lender  elects to
accelerate the maturity and payment of the Obligations, and (iii) termination of
either or both of the Credit  Facilities,  to the extent that payment of accrued
interest  is  required  pursuant  to the  provisions  of  Section  5.2.4 of this
Agreement.

            4.2.3.  Costs,  Fees and Charges.  Costs,  fees and charges  payable
                    -------------------------
pursuant to this Agreement shall be payable by Borrowers as and when provided in
Section 3 hereof,  to Lender  or to any  other  Person  designated  by Lender in
writing.

            4.2.4. Other Obligations.  The balance of the Obligations  requiring
                   ------------------
the payment of money,  if any,  shall be payable by  Borrowers  to Lender as and
when provided in this Agreement or the other Loan  Documents,  or, if no date of
payment is otherwise specified in the Loan Documents, on demand.

            4.2.5.  Out-of-Formula  Condition.  If on any date an Out-of-Formula
                    --------------------------
Condition  exists with  respect to  Revolver  Loans  outstanding  under a Credit

<PAGE>

Facility,  then,  not later than 2 Business  Days after the sooner to occur of a
Borrower's obtaining knowledge thereof or a Borrower's receipt of written notice
thereof from Lender,  Borrowers shall cure such Out-of-Formula  Condition either
by (i) payment to Lender of an amount,  to be applied to the principal amount of
the  Revolver  Loans in respect  of which an  Out-of-Formula  Condition  exists,
sufficient to eliminate such Out-of-Formula  Condition,  or (ii) the addition to
the existing  Collateral  new Pledged Loans to increase the Facility A Borrowing
Base or the  Facility B Borrowing  Base,  as the case may be, so as to eliminate
the  Out-of-Formula  Condition.   During  the  period  that  any  Out-of-Formula
Condition  exists,  Lender  shall  have no  obligation  whatsoever  to honor any
requests for a Revolver Loan under either or both of the Credit Facilities.

            4.2.6.  Prepayment.  Borrowers shall be authorized to borrow,  repay
                    -----------
and reborrow  Revolver  Loans without  having to pay any  prepayment  premium or
penalty in connection therewith;  provided,  however, if a Borrower shall remove
                                  --------   -------
any Pledged Loan from the Collateral in accordance with and subject to the terms
of Section  4.5.2 hereof and within 30 days  thereafter  such Pledged Loan shall
become  subject to a Lien other than a Permitted  Lien (except a Lien granted in
connection  with  an  asset  securitization   transaction  or  whole  loan  sale
transaction  of  which  such  Pledged  Loan is made a  part),  then,  except  as
hereinafter  provided, at the time such Pledged Loan becomes subject to any such
Lien,  Borrowers  shall be jointly and  severally  obligated  to pay to Lender a
prepayment fee equal to the Applicable  Prepayment Percentage (as defined in the
succeeding  sentence)  of the  amount  obtained  by  multiplying  (i) the unpaid
principal  balance of such Pledged Loan  (whether or not such Pledged Loan is an
Eligible Loan) by (ii) the Applicable A&D Loan Margin or the Hypothecation  Loan
Margin, as applicable depending upon whether the Pledged Loan to be removed from
the  Collateral  as  provided  in  Section  4.5.2  hereof  is  an  A&D  Loan  or
Hypothecation Loan. For purposes hereof, the "Applicable  Prepayment Percentage"
shall be 3% if removal  occurs  during the first Loan Year,  2% if such  removal
occurs  during the second Loan Year,  and 1% if such removal  occurs  during the
third Loan Year. Notwithstanding the foregoing provisions of this Section 4.2.6,
if Borrowers  shall be  permitted  to remove a Pledged Loan from the  Collateral
pursuant  to the terms and  conditions  of Section  4.5.2  hereof,  and (i) such
Pledged Loan is an A&D Loan but is not an Eligible A&D Loan,  (ii) Borrowers are
removing such Pledged Loan from the  Collateral  for the purpose of pledging the
same to a lender (other than Lender) that is not an Affiliate of either Borrower
for which  Borrowers  will receive  availability  or borrowing  credit from such
other  lender  and (iii)  Lender  does not elect to deem  such  Pledged  Loan an
Eligible  Loan,  then no  prepayment  fee  shall  be  payable  by  Borrowers  in
connection with or as the result of Borrowers' removal of such Pledged Loan from
the Collateral.  The preceding sentence shall apply only to A&D Loans and not to
Hypothecation Loans.

      4.3.  Retention and Duties of Approved  Servicers.  Borrowers shall retain
            --------------------------------------------
one or more Servicers (each of which must be an Approved  Servicer) with respect
to all of the Pledged Loans,  the duties and  responsibilities  of each of which
Servicers shall be as set forth and detailed in the Servicing  Agreement and the
Agency  Agreement  (Servicing  Agent) and shall include the  following:  (i) the
receipt and  collection  of all amounts due and payable  with respect to each of
the Pledged Loans and the proceeds of any Pledged Loan Collateral, including all
monies remitted by Timeshare  Purchasers  with respect to Timeshare  Receivables
forming a part of the  Pledged  Loan  Collateral;  (ii) the  deposit of all such
payments and proceeds in the Concentration Account (into which no other funds of
a Borrower or any other Obligor shall be  commingled);  (iii) the maintenance of
accurate and timely  books and records  relating to the  Servicer's  receipt and
collection  of all such  payments and proceeds and the balance due in respect of
the Pledged  Loans;  (iv) the  rendering  to  Borrowers  and, if so requested by
Lender,  to Lender,  of periodic  reports (not less  frequently than monthly) in
which the Servicer shall set forth such  information as is customarily  reported
to Borrowers under the Servicing  Agreement and with such  additional  detail as

<PAGE>

Lender  may  from  time to time  request;  and (v) the  maintenance  of  records
concerning the status of all of the Timeshare Receivables. If the Person serving
as a  Servicer  at any time  shall  resign,  Borrowers  shall  promptly  cause a
successor to be appointed,  provided that such successor, to be qualified,  must
be an Approved  Servicer or otherwise  acceptable to Lender,  in the exercise of
its customary credit judgment,  and shall be obligated to execute and deliver to
Lender an  agreement in form and content  substantially  identical to the Agency
Agreement  (Servicing Agent) entered into by the predecessor  Servicer and shall
be  obligated  to comply  with all of the  provisions  of the  Agency  Agreement
(Servicing Agent).  Borrowers alone shall be responsible for paying all fees and
expense reimbursement of the Servicer.

      4.4. Concentration  Accounts.  Borrowers shall establish the Concentration
           ------------------------
Accounts at Bank One or one or more other banks  organized under the laws of the
United States or any State that are acceptable to Lender and that are not at any
time a creditor of either  Borrower (other than solely in the capacity as either
Borrower's  depository  bank) unless such bank executes an agreement with Lender
by which such bank shall  agree not to offset  any  amounts  owing to it against
funds on deposit in the Concentration  Account.  Borrowers shall cause such bank
to join with Lender in  executing  a Payment  Direction  Agreement.  In no event
shall a  Borrower  change  the  bank  at  which  the  Concentration  Account  is
maintained without Lender's prior written consent.  Each Borrower shall deposit,
and shall cause each  Servicer  to  deposit,  all  payments  with  respect to or
proceeds of any Collateral into a Concentration Account,  promptly after receipt
thereof,  and neither of the  Borrowers  nor any Servicer  shall  deposit into a
Concentration  Account any other monies or Payment Items that do not  constitute
proceeds of Collateral.  Borrowers shall be obligated to instruct and cause each
depository bank at which a Concentration Account is maintained to wire transfer,
at least once each week, all collected balances in the Concentration  Account to
the Payment  Account  for  application  to the  Obligations  or,  subject to the
provisions below in this Section 4.4, to either  Borrower's  operating  account.
Under no circumstances  may a Borrower  transfer amounts from the  Concentration
Accounts  to any account  other than the  Payment  Account if, at the time of or
after  giving  effect to such  transfer,  (a) a  Default,  Event of  Default  or
Out-of-Formula Condition exists, or (b) the sum of the Facility A Borrowing Base
and the Facility B Borrowing  Base at the time of transfer,  plus the  collected
balances  in  the  Concentration  Accounts  at  such  time,  do not  exceed  the
outstanding  principal  balance of the  Obligations  at such  time,  by at least
$250,000.  At any time that an Event of Default  shall exist,  Lender may direct
each depository bank at which a Concentration  Account is maintained to transfer
all  balances at any time or from time to time  existing  in such  Concentration
Account to the Payment Account pursuant to the Payment Direction Agreement.

      4.5.  Loan Designation Procedure; Removal from Collateral.
            ----------------------------------------------------

            4.5.1.  With  respect to each A&D Loan and each  Hypothecation  Loan
that  Borrowers  desire to be added to the  Collateral  after the Closing  Date,
Green Mountain shall complete and submit to Lender a Loan Designation  Schedule,
appropriately   completed,   and  shall  comply  with  the   document   delivery
requirements of Section 4.6 hereof.

            4.5.2.  Each Borrower shall be authorized  from time to time, on not
less than 5 Business  Days' notice to Lender,  to designate  one or more Pledged
Loans  owned by it to be removed  from the  Collateral,  but only if each of the
following  conditions  is  satisfied  at the time of  Lender's  receipt  of such
request  and at the time of Lender's  release of its Liens with  respect to each
Pledged  Loans:  (a) no Default,  Event of Default or  Out-of-Formula  Condition
exists or would  result  therefrom;  (b) after  giving  effect to any  requested

<PAGE>

release,  there are no other  Pledged  Loans  owing by the same A&D  Borrower or
Hypothecation  Borrower,  as the  case may be,  which  are  secured  by the same
Pledged  Loan  Collateral  that secures the Pledged Loan which is the subject of
the release;  and (c) such Borrower submits to Lender  appropriate forms of Lien
release,  which are in all respects  acceptable to Lender in the exercise of its
customary  credit  judgment.  In connection with the release of any such Pledged
Loan,  Lender agrees that,  subject to satisfaction of the conditions to release
set forth  herein,  it shall  notify  Document  Agent to release  and deliver to
Borrowers the  Transaction  Documents  relating to Pledged Loan so released from
the Collateral.  After a Pledged Loan is released from the Collateral,  the same
shall no longer be deemed to be a Pledged Loan under this Agreement and shall no
longer be a part of the Collateral, and shall not ever be considered an Eligible
Loan even if the same is  thereafter  repledged  to Lender.  Borrowers  shall be
jointly and severally  obligated to pay all reasonable  costs and  out-of-pocket
expenses  associated  with any such release,  including all filing fees for Lien
release documents and the reasonable  costs,  attorneys' fees incurred by Lender
in connection with its review of any Lien release documents. Lender shall, if so
requested by Borrowers, authorize the Document Agent to release to Borrowers any
Transaction  Documents that relate to such Pledged Loan that is removed from the
Collateral to the extent that such  Transaction  Documents do not also relate to
any other Pledged  Loan. If no prepayment  fee is payable by Borrowers to Lender
under  Section  4.2.6 hereof as a  consequence  of the removal of a Pledged Loan
because a Borrower  intends to sell the entirety of such Pledged Loan to a third
party that is not an Affiliate  of either  Borrower,  Borrowers  shall so notify
Lender in writing at or prior to a Borrower's  designation  of such Pledged Loan
as one to be removed  from the  Collateral  and shall  afford  Lender a right of
first  refusal (to be  exercised  within 15 days after such  notice) to purchase
such Pledged Loan on the same terms and  conditions as are offered to a Borrower
by a proposed purchaser thereof that is not an Affiliate of a Borrower.

      4.6.  Required  Document  Deliveries.  With  respect  to an  A&D  Loan  or
            -------------------------------
Hypothecation  Loan that Borrowers desire to be a Pledged Loan,  Borrowers shall
deliver or cause to be delivered  to Lender (or, in the case of the  Transaction
Documents  for such Pledged Loan, to the Document  Agent) the  following,  which
delivery shall be made, except as hereinafter  provided,  concurrently  with, or
prior to, the delivery by Borrowers to Lender of a Loan Designation Schedule for
such Pledged Loans:

                  (i) if such  Pledged  Loan is an Eligible  A&D Loan, a Project
Completion  Schedule and a Project Cash Flow  Forecast  with respect to such A&D
Loan;

                  (ii) a Borrowing Base  Certificate  reflecting the addition of
such Pledged Loan to the Collateral if such Pledged Loan is an Eligible Loan;

                  (iii)  the  originals  of  each  of  the  Primary  Transaction
Documents for such Pledged Loan;

                  (iv) if any of the Transaction Documents include an Instrument
executed  by an  Obligor  or a  Timeshare  Purchaser,  the  original  Instrument
endorsed in blank by the Obligor or  Timeshare  Purchaser,  or, if endorsed to a
Borrower, endorsed in blank by an authorized officer of such Borrower;

                  (v) if any of the Pledged  Loan  Collateral  shall  consist of
real estate  encumbered by a Mortgage,  the original or copy time-stamped by the
appropriate  recording  office of the  recorded  Mortgage;  an  original or copy
time-stamped  by the  appropriate  recording  office of all  amendments  to such

<PAGE>

Mortgage; with respect to a Mortgage securing an A&D Loan, an assignment of such
Mortgage from the applicable  Borrower to Lender, in form suitable for recording
by Lender;  with respect to each Mortgage  received by a Hypothecation  Borrower
from a Timeshare Purchaser and collaterally assigned to a Borrower, the original
or copy  time-stamped  by the  appropriate  recording  office of such collateral
assignment and an original  collateral  reassignment  of such Mortgage from such
Borrower to Lender,  executed in blank and in form  suitable  for  recording  by
Lender at any time that an Event of Default exists; and a title insurance policy
with respect to such real estate insuring  Lender's  interest as first mortgagee
with respect to the real  estate,  in an amount not less than the full amount of
the Pledged Loan secured by such Pledged Loan  Collateral,  from a title company
approved  by Lender,  or, if title  insurance  was not  obtained  for a Mortgage
encumbering  a  Timeshare  Interval  (and no such  policy  shall be deemed to be
required by this  Agreement),  an opinion from an attorney  acceptable to Lender
that the Mortgage  creates a first  priority  Lien on the  underlying  Timeshare
Interval subject only to such exceptions as are acceptable to Lender;

                  (vi) if any of the Pledged Loan  Collateral  shall  consist of
Property  other than real estate,  an original  assignment  and/or pledge of all
such Pledged Loan Collateral,  in form and scope  acceptable to Lender,  and any
amendments  or  assignments  of the same showing an unbroken  chain of ownership
from the originator to a Borrower; and an original assignment from such Borrower
of all of its interests in such non-real estate Pledged Loan Collateral,  signed
in blank,  in form ready for filing or  recording  and  accompanied  by UCC-1 or
UCC-3 financing statements, if applicable, in each instance acceptable to Lender
in both  form and scope  and in form  acceptable  to  Lender  and  suitable  for
recording;

                  (vii) if the Pledged Loan Collateral consists,  in whole or in
part, of Timeshare Receivables, if requested by Lender at any time that an Event
of Default exists,  an original notice to the Timeshare  Purchaser signed by the
Hypothecation  Borrower and the applicable Borrower that payments are to be made
to  Lender  or its  designee  and to no other  Person  until  further  notice is
received from Lender;

                  (viii)  if and to the  extent  that  any of the  Pledged  Loan
Collateral is subject to any Lien other than a Permitted Lien, a release of such
Lien, in form and scope satisfactory to Lender, which shall show on its face its
having  been  recorded  in the  appropriate  recording  office to  effectuate  a
complete release of such Lien under Applicable Laws; and

                  (ix) such  other  instruments  and  agreements  as Lender  may
request from time to time to give effect to the terms of this Agreement,  and to
perfect or more fully  perfect any Lien that it may have with  respect to any of
the Collateral.

Notwithstanding the foregoing  provisions of this Section 4.6, Mortgages,  UCC-1
financing statements and other documents, agreements or instruments constituting
Transaction  Documents that have been delivered for recording or filing with the
appropriate  authority  shall  not be  subject  to  the  requirement  set  forth
hereinabove that all Transaction  Documents be delivered to Document Agent prior
to or  concurrently  with delivery by Borrowers to Lender of a Loan  Designation
Schedule  for a Pledged  Loan,  but shall be  delivered  to the  Document  Agent
promptly upon their receipt or return from recording or filing.

<PAGE>

      4.7.  Borrowing Base  Certificate.  Each Borrower shall submit to Lender a
            ----------------------------
Borrowing Base Certificate, properly completed, (i) not later than the fifth day
of each month,  which  Borrowing  Base  Certificate  shall state the  Facility A
Borrowing  Base  and the  Facility  B  Borrowing  Base as of the last day of the
immediately  preceding  month,  and shall be obligated to submit  Borrowing Base
Certificates  more  frequently  (if so  requested  by Lender) at any time that a
Default, Event of Default or Out-of-Formula  Condition exists; (ii) on each date
that a Borrower  submits to Lender a notice of intention  to borrow  pursuant to
the provisions of Section  4.1.1(i)  hereof,  which  Borrowing Base  Certificate
shall  state the amount of the  Facility  A  Borrowing  Base and the  Facility B
Borrowing  Base as of the close of  business  of the  Business  Day  immediately
preceding  the date of such  notice;  and  (iii) on each  date  that a  Borrower
requests  Lender to release any  Collateral  pursuant to Section  4.5.1  hereof,
which shall state the amount of the  Facility A  Borrowing  Base and  Facility B
Borrowing Base after giving effect to such release. On each date that a Borrower
submits a Borrowing Base Certificate to Lender, each Borrower shall be deemed to
have warranted and  represented  to Lender that, to the best of such  Borrower's
knowledge, the information contained therein is true and correct and that all of
the A&D Loans and  Hypothecation  Loans included in the  calculations  set forth
therein constitute Eligible Loans and all of the Hypothecation Borrowers and A&D
Borrowers included therein are Eligible Borrowers.

      4.8.  Collection  of Payments.  Prior to the  occurrence of any Default or
            ------------------------
Event of  Default,  Borrowers  and the  applicable  Servicer  shall  continue to
service and administer all Pledged Loans constituting Collateral in the ordinary
course of business.  Borrowers  shall collect all amounts due to Borrowers  with
respect to the Pledged Loans  diligently  and in good faith.  Upon and after the
occurrence of an Event of Default,  Lender shall be entitled (but not obligated)
to assume the  administration  and servicing of such Pledged Loans (after giving
any required notices to Obligors) and each Borrower shall deliver all amounts at
any time paid to such Borrower with respect to any of the Collateral directly to
Lender  and  shall  continue  to do so until  otherwise  notified  by  Lender in
writing.  If any  Obligor  on a Pledged  Loan  shall be in default of any of its
obligations under any of the A&D Loan Documents or Hypothecation Loan Documents,
a Borrower  shall not be authorized to waive any such default,  or to enter into
any forbearance or moratorium with respect thereto,  for so long as such Pledged
Loan remains  part of the  Collateral,  unless and until Lender shall  otherwise
give its consent in writing.

      4.9.  Application of Payments and Collections.  All Payment Items or other
            ----------------------------------------
forms of payment received by Lender by 2:00 p.m.,  Minneapolis,  Minnesota time,
on any Business Day shall be deemed  received on that  Business Day. All Payment
Items or other forms of payment received after 2:00 p.m., Minneapolis, Minnesota
time,  on any Business Day shall be deemed  received on the  following  Business
Day. Each Borrower irrevocably waives the right to direct the application of any
and all  payments and  collections  at any time or times  hereafter  received by
Lender  from  or  on  behalf  of a  Borrower,  and  each  Borrower  does  hereby
irrevocably agree that Lender 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 Lender or its agent against the  Obligations,  in such manner
as Lender may deem  advisable.  If as the result of collections of Pledged Loans
and related  Payment Rights 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.

      4.10. All Loans to Constitute One Obligation; Cross-Collateralization. The
            ----------------------------------------------------------------
Revolver Loans shall constitute one general Obligation of Borrowers, and (unless
and to the extent otherwise expressly provided in any of the Security Documents)
shall be secured by Lender's Liens upon all of the Collateral.

<PAGE>

      4.11.  Loan  Account;  Statements  of Account.  Lender shall  establish an
             ---------------------------------------
account on its books (the "Loan  Account") and shall enter all Revolver Loans as
debits  to 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 Lender,  and may record  therein,  in accordance  with
customary accounting practice, other debits and credits,  including interest and
all charges and expenses properly  chargeable to Borrowers.  Lender will account
to Borrowers  monthly with a statement of Revolver  Loans,  charges and payments
made pursuant to this Agreement, and such accounting rendered by Lender shall be
deemed final, binding and conclusive upon Borrowers unless Lender is notified by
Borrowers  in  writing  to the  contrary  within  30 days  after  the date  each
accounting  is deemed to have been sent  pursuant to Section  11.8.  Such notice
shall  only be deemed an  objection  to those  items  specifically  objected  to
therein.

      4.12.  Verification  of  Collateral.  Whether or not a Default or Event of
             -----------------------------
Default has occurred,  any of Lender's officers,  employees or agents shall have
the right, at any time or times hereafter,  in the name of Lender,  any designee
of Lender or either  Borrower,  to  verify  the  validity  , amount or any other
matter  relating to any Pledged Loan or Pledged Loan  Collateral  (including any
Timeshare  Receivable) by mail, telephone,  telegraph or other means.  Borrowers
shall  cooperate  fully  with  Lender in an effort to  facilitate  and  promptly
conclude any such verification process.

      4.13. Borrowers' Representative. Each Borrower hereby irrevocably appoints
            --------------------------
Litchfield  as,  and  Litchfield  shall  act under the Loan  Documents  as,  the
representative  of each  Borrower  for all  purposes  under the Loan  Documents,
including  requesting  Borrowings  and receiving  account  statements  and other
notices and communications to Borrowers (or any of them) from Lender. Lender may
rely, and shall be fully  protected in relying,  on  disbursement  instructions,
reports,  information  or any  other  notice or  communication  made or given by
Litchfield,  whether in its own name,  on behalf of any Borrower or on behalf of
"the  Borrowers,"  and Lender  shall have no  obligation  to make any inquiry or
request  any  confirmation  from or on behalf of any  other  Borrower  as to the
binding  effect  on such  Borrower  of any such  request,  instruction,  report,
information, notice or communication,  nor shall the joint and several character
of Borrowers'  liability for the Revolver  Loans be affected,  provided that the
provisions  of this  Section  4.13 shall not be  construed so as to preclude any
Borrower from directly  requesting  Borrowings or taking other actions permitted
to be taken by "a Borrower" hereunder.


      4.14. Nature and Extent of Each Borrower's Liability.
            -----------------------------------------------

                        (i) Joint and Several Liability.  Each Borrower shall be
                            ----------------------------
liable,  on a joint and several  basis,  for all of the Revolver Loans and other
Obligations,  regardless  of  which  Borrower  actually  may have  received  the
proceeds of any Revolver  Loans or other  extensions of credit  hereunder or the
amount of such Revolver  Loans  received or the manner in which Lender  accounts
for such Revolver Loans or other  extensions of credit on its books and records,
it being  acknowledged  and agreed that Revolver  Loans to any Borrower inure to
the mutual  benefit of all Borrowers and that Lender is relying on the joint and
several  liability  of  Borrowers  in  extending  the  Revolver  Loans and other
financial  accommodations  hereunder.  Each Borrower hereby  unconditionally and
irrevocably  agrees that upon default in the payment when due (whether at stated
maturity,  by  acceleration  or otherwise) of any principal of, or interest owed
on, any of the Revolver  Loans,  such  Borrower  shall  forthwith  pay the same,
without notice or demand.

<PAGE>

                        (ii) Unconditional Nature of Liability.  Each Borrower's
                             ----------------------------------
joint  and  several  liability  hereunder  with  respect  to the Loans and other
Obligations  shall,  to the fullest  extent  permitted by  Applicable  Laws,  be
unconditional  irrespective  of (i) the validity,  enforceability,  avoidance or
subordination of any of the Obligations or of any document evidencing all or any
part of the  Obligations,  (ii) the absence of any attempt to collect any of the
Obligations  from any  other  Loan  Party or any  Collateral  or other  security
therefor,  or the  absence of any other  action to enforce  the same,  (iii) the
waiver, consent, extension,  forbearance or granting of any indulgence by Lender
with  respect to any  provision  of any  instrument  evidencing  or securing the
payment  of any of the  Obligations,  or any other  agreement  now or  hereafter
executed by any other  Borrower  and  delivered  to Lender,  (iv) the failure by
Lender to take any steps to  perfect or  maintain  the  perfected  status of its
security  interest  in or Lien upon,  or to  preserve  its rights to, any of the
Collateral  or other  security  for the  payment  or  performance  of any of the
Obligations or Lender's  release of its Liens upon any Collateral,  (v) Lender's
election,  in any  proceeding  instituted  under the  Bankruptcy  Code,  for the
application of Section  1111(b)(2) of the Bankruptcy Code, (vi) any borrowing or
grant of a security  interest  by any other  Borrower,  as  debtor-in-possession
under Section 364 of the Bankruptcy  Code,  (vii) the disallowance of all or any
portion of Lender's  claims for the  repayment of any of the  Obligations  under
Section 502 of the Bankruptcy Code, or (viii) any other  circumstance that might
constitute  a legal or  equitable  discharge  or defense of any other  Borrower.
Whenever an Event of Default  exists,  Lender may proceed  directly and at once,
without  notice,  against any or all of the Loan  Parties to collect and recover
all or any part of the Obligations,  without first proceeding  against any other
Loan  Party or against  any  Collateral  or other  security  for the  payment or
performance of any of the  Obligations.  Each Borrower  consents and agrees that
Lender shall be under no  obligation to marshall any assets in favor of any Loan
Party or against or in payment of any or all of the Obligations.

                        (iii) No Release from Liability.  No payment or payments
                              --------------------------
made by an Loan Party or received or  collected by Lender from a Borrower or any
other  Person  by  virtue  of  any  action  or   proceeding  or  any  setoff  or
appropriation or application at any time or from time to time in reduction of or
in payment of the  Obligations  shall be deemed to modify,  release or otherwise
affect the liability of each Borrower under this Agreement,  each of which shall
remain  jointly and severally  liable for the payment and  performance of all of
the Obligations until all of the Obligations are paid in full and this Agreement
is terminated.

                        (iv)  Subordination.  Each Borrower hereby  subordinates
                              --------------
any  Claims,  including  any right of  payment,  subrogation,  contribution  and
indemnity,  that it may have from or  against  any  other  Loan  Party,  and any
successor or assign of any other Loan Party, including any trustee,  receiver or
debtor-  in-possession,  howsoever arising,  due or owing or whether heretofore,
now or hereafter existing, to the payment in full of all of the Obligations.

SECTION 5.  TERM  AND  TERMINATION

      5.1. Term of Credit Facilities.  Subject to Lender's right to cease making
           --------------------------
Revolver Loans to Borrowers upon or after the occurrence of any Default or Event
of  Default,  the Credit  Facilities  shall be in effect for a period of 3 years
from the date hereof,  through  March 6, 2000 (the  "Original  Term"),  and this
Agreement shall automatically renew itself for 1-year periods thereafter (each a
"Renewal Term"), unless terminated as provided in Section 5.2 hereof.

<PAGE>

      5.2.  Termination and Reductions of Credit Facilities.
            ------------------------------------------------

            5.2.1.  Termination  by Lender.  Upon at least 90 days prior written
                    -----------------------
notice to either Borrower,  Lender may terminate the Credit Facilities as of the
last day of the Original  Term or the then  current  Renewal Term and Lender may
terminate the Credit  Facilities  without notice upon or after the occurrence of
an Event of Default.

            5.2.2. Termination by Borrowers. Upon at least 60 days prior written
                   -------------------------
notice to Lender  (in the case of any  termination  of  Facility  A) and upon at
least 30 days prior written notice to Lender (in the case of any  termination of
Facility B), either Borrower may, at its option, terminate either or both of the
Credit  Facilities;  provided,  however,  that no such  termination by Borrowers
                     --------   -------
shall be effective unless Borrowers  designate which of the Credit Facilities is
to be terminated and has caused to be satisfied all of the Obligations  relating
to such terminated Credit Facility in immediately available funds. Any notice of
termination  given by a Borrower  shall be irrevocable  unless Lender  otherwise
agrees in writing.

            5.2.3.  Termination Charges. On the effective date of termination of
                    --------------------
either or both of the Credit  Facilities by Borrowers for any reason,  Borrowers
shall be jointly and  severally  obligated  to pay to Lender (in addition to the
then  outstanding  principal,  accrued interest and other fees and 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 the product of the amount of the terminated  Credit  Facility (and, for
this purpose,  the amount of Facility B shall be deemed to be $10,000,000) times
3% if termination occurs in the first Loan Year, 2% if termination occurs in the
second  Loan  Year,  and 1% if  termination  occurs  during the third Loan Year.
Notwithstanding the foregoing,  no termination charge shall be due or payable if
any termination  occurs on the last day of the Original Term or thereafter,  or,
in the case of Facility B, if termination is effective as of the last day of any
Loan Year.

            5.2.4. Effect of Termination. Upon the effective date of termination
                   ----------------------
of either of the Credit Facilities  (whether such termination is the result of a
notice of  termination  given by a Borrower or by Lender),  all  Revolver  Loans
outstanding under the Credit Facility that is terminated and all interest,  fees
and other charges  payable in connection  therewith shall be immediately due and
payable by Borrowers to Lender  without  further notice to or demand upon either
Borrower,  and Lender shall  forthwith  have no further  obligation  to make any
Revolver Loans to or for the direct or indirect  benefit of Borrowers  under the
Credit  Facility that is  terminated.  Provided no Default,  Event of Default or
Out-of-Formula  Condition exists, upon Lender's receipt in immediately available
funds  of an  amount  sufficient  to pay all  Obligations  outstanding  under or
payable in connection with the Credit Facility that has been terminated,  Lender
shall  execute a release of its Liens with respect to the A&D  Collateral if the
Credit Facility terminated is Facility A or the Hypothecation  Collateral if the
Credit Facility  terminated is Facility B,  notwithstanding the fact that all of
the Collateral  secures all of the Obligations.  All  undertakings,  agreements,
covenants, warranties and representations of each Borrower contained in the Loan
Documents shall nevertheless survive any termination of a single Credit Facility
and shall  continue  to apply with  respect to any Credit  Facility  that is not
terminated.  Notwithstanding  the  payment  in full  of all of the  Obligations,
Lender shall not be required to terminate its security  interest in Liens in the

<PAGE>

Collateral  unless,  with  respect  to any loss or damage  Lender may incur as a
result of dishonored checks, Payment Items or other forms of payment received by
Lender from either Borrower,  any Obligor or any Timeshare Purchaser and applied
to the Obligations, Lender shall (i) have received a written agreement, executed
by Borrowers  and by any Person whose loans or other  advances to Borrowers  are
used in whole or in part to satisfy the  Obligations,  indemnifying  Lender from
and  against  any such loss or  damage;  or (ii)  have  retained  such  monetary
reserves and Liens on the Collateral  for such period of time as Lender,  in its
reasonable discretion,  may deem necessary or appropriate to protect Lender from
any  such  loss or  damage.  No  termination  of  either  or both of the  Credit
Facilities  or  payment in full of the  Obligations  shall in any way affect the
obligation  of any  Loan  Party  to  indemnify  Lender  in  accordance  with the
provisions of the Loan Documents,  all of which indemnifications shall be deemed
to survive any  termination of the Credit  Facilities and payment in full of the
Obligations.

             5.2.5.  Voluntary  Reduction of Credit Facilities.  Borrowers shall
                     ------------------------------------------            
have the right at any time to permanently reduce the amount of either or both of
the Credit  Facilities  upon written notice by either Borrower to Lender of such
reduction,  which  notice  shall  specify the amount of such  reduction  and the
Credit Facility to be reduced.  Each such notice shall be irrevocable once given
and shall be given at least 5 Business  Days prior to the end of the month.  The
effective  date of any  voluntary  reduction  of  either  or both of the  Credit
Facilities  shall be the first day of a month  following the month in which such
notice is received by Lender.  If on the effective date of any such reduction of
either or both of the  Credit  Facilities  and after  giving  effect  thereto an
Out-of-Formula  Condition exists,  then there shall be due and payable to Lender
immediately, without further notice to or demand upon either Borrower, an amount
necessary to cure such Out-of-Formula Condition. If a Credit Facility is reduced
to zero, then such reduction shall be deemed to constitute a termination of such
Credit  Facility by Borrowers  pursuant to the terms of Sections 5.2.2 and 5.2.3
of this  Agreement  and shall not be  effective  unless the notice  required  by
Section 5.2.2 is given. In the event that Borrowers elect to permanently  reduce
the amount of Facility B pursuant to the terms hereof, then such reduction shall
serve to reduce the amount of Facility B upon which the annual  credit  facility
fee payable to Lender  pursuant to Section 3.3 of this Agreement is based. In no
event  shall any  reduction  of Facility A during the  Original  Term reduce the
amount of the annual credit  facility fee payable to Lender  pursuant to Section
3.3 of this Agreement,  and such fee shall be calculated as if no such reduction
to Facility A had ever occurred.

SECTION 6.  SECURITY FOR LOANS

      6.1.  Lien Upon Collateral.

            6.1.1. To secure the prompt payment and performance to Lender of all
of the Obligations,  each Borrower hereby grants to Lender a continuing security
interest in and Lien upon all of the following Property of such Borrower and all
of such Borrower's right,  title and interest therein,  whether such Property is
now owned or existing or hereafter created,  acquired or arising and wheresoever
located:

                        (i)   All Pledged Loans;

                        (ii)  All Pledged Loan Collateral;

                        (iii) All Payment Rights;

<PAGE>

                        (iv)  All Transaction Documents and all Remedies;

                        (v) All  monies  and  other  Property  of any kind  that
      relates  to any of the  Pledged  Loans  and  that is now or at any time or
      times  hereafter  in the  possession  or under the  control of  Lender,  a
      Servicer, or a bailee or Affiliate of Lender;

                        (vi)  All  accessions  to,  substitutions  for  and  all
      replacements,  products and cash and non-cash  proceeds of (i) through (v)
      above,  including  proceeds  of and  unearned  premiums  with  respect  to
      insurance policies insuring any of the Collateral; and

                        (vii) All  books and  records  of such  Borrower  to the
      extent pertaining to any of (i) through (vi) above, including all computer
      programs,  disks,  tapes and related  electronic  data  processing  media,
      credit files, account cards, payment records,  correspondence and ledgers,
      and  all  cabinets  in  which  any  of  the  foregoing  are  reflected  or
      maintained.

                         6.1.2.  As additional  security for the prompt  payment
and performance to Lender of all of the Obligations,  each Borrower agrees that,
if and to the extent  after the date of this  Agreement  such  Borrower  (or any
Affiliate  of such  Borrower)  shall  obtain  title to any of the  Pledged  Loan
Collateral  that consist of real  Property,  such  Borrower  shall,  at Lender's
request, promptly execute and deliver, or cause to be executed and delivered, to
Lender a Mortgage with respect to such real  Property,  in the form requested by
Lender and otherwise in conformity with Applicable Laws.

                         6.1.3.  In addition to the  foregoing and as additional
security for the payment and  performance  of the  Obligations,  Green  Mountain
hereby grants to Lender a continuing  security  interest in and Lien upon all of
Green Mountain's assets, including all of the following property and interest in
Property of Green Mountain,  whether now owned or existing or hereafter created,
acquired  or  arising  and  wheresoever  located:  (i) all  Accounts;  (ii)  all
Inventory;  (iii) all Equipment;  (iv) all  Instruments;  (v) all Chattel Paper;
(vi) all  Documents;  (vii) all  General  Intangibles;  (viii)  all  Securities,
whether  certificated or uncertificated  (but excluding any portion thereof that
constitute Margin Stock), and all securities entitlements; (ix) all other monies
and  other  Property  of any kind now or at any time or times  hereafter  in the
possession or under the control of Lender, a Servicer,  or a bailee or Affiliate
of Lender; (x) all accessions to,  substitutions for and replacements,  products
and cash and  non-cash  proceeds  of clauses (i)  through  (ix) of this  Section
6.1.3,  including  proceeds of and unearned  premiums  with respect to insurance
policies  insuring  any of  the  foregoing;  and  (xi)  all  books  and  records
(including  customer lists,  files,  correspondence,  tapes,  computer programs,
print-outs  and  other  computer   materials  and  records)  of  Green  Mountain
pertaining to any of the above in this Section 6.1.3.

      6.2.  Lien Perfection; Further Assurances.
            ------------------------------------

                         6.2.1.  Each  Borrower  shall,  at its  sole  cost  and
expense,  execute such UCC-1 financing  statements as are required by the UCC or
other  Applicable Laws and such other  instruments,  assignments or documents as
are  necessary to perfect,  or maintain the perfected  status of,  Lender'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 Lender's Lien upon the  Collateral,
including  (i) the pledge and delivery to Lender or Servicer of all  Instruments
evidencing a Payment  Right to such  Borrower and (ii)  promptly  upon  Lender's
request  therefor,  the  assignment  of record to Lender of all UCC-1  financing

<PAGE>

statements  naming an  Obligor  as debtor and such  Borrower  as secured  party.
Unless prohibited by any Applicable Laws, each Borrower hereby authorizes Lender
to execute and file any such financing  statement on such 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 Lender's  request,  each Borrower shall
also  promptly  execute or cause to be executed and shall  deliver to Lender any
and all documents,  instruments and agreements  deemed  reasonably  necessary by
Lender to give effect to or carry out the terms or intent of the Loan Documents.

            6.2.2. To the extent that any of the Transaction  Documents evidence
a Payment  Right and a security  interest  in or lease of  specific  goods (and,
therefore,  constitute  Chattel  Paper),  Borrowers  shall  either  cause  to be
inscribed on the face of each such  Transaction  Document a  conspicuous  legend
indicating that the same is at all times subject to the Liens in favor of Lender
or deliver  possession  thereof to Lender. For so long as no Default or Event of
Default  exists,  upon a  Borrower's  request  therefor  Lender will deliver (or
instruct the Servicer to deliver) to such Borrower any  Instrument  evidencing a
Payment Right  theretofore  delivered by such Borrower  pursuant to this Section
6.2 for the  purpose of enabling  such  Borrower  (a) to enforce  payment of, or
otherwise  exercise its rights and remedies with respect to, such Payment Right,
or (b) to administer  such  Instrument in the ordinary course of such Borrower's
business  operations,  which,  by way of  example,  may  include  modifications,
amendments, extensions, renewals or consolidations of such Instrument.

      6.3. No Obligations on Part of Lender. Lender shall be under no obligation
           ---------------------------------
to review or in any manner approve any Collateral  delivered to Lender from time
to time, but Lender shall have the absolute right to review and approve any such
Collateral  from time to time whenever it deems it  appropriate to do so. Lender
may, in its sole discretion, require that Collateral be delivered to it not less
than 5  Business  Days  prior  to any  date  on  which  Borrowers  request  such
Collateral  to be made part of the  Facility  A  Borrowing  Base or  Facility  B
Borrowing  Base.  Lender  shall  have no  responsibility  for  taking  any steps
necessary  to  preserve  rights  against  other  parties  or  any  other  rights
pertaining  to any of the  Collateral.  Lender shall have no  responsibility  to
perfect,  or to maintain the perfected  status of, any of its Liens with respect
to any of the  Collateral  or any of the Liens of a Borrower with respect to any
of the  Pledged  Loan  Collateral,  and no loss of,  imperfection  of Liens with
respect to or any damage to any Collateral or Pledged Loan  Collateral  shall in
any way release any Loan Party from the  obligation to pay or perform all of the
Obligations.  Without limiting the generality of the foregoing, Lender shall not
be liable or  responsible  in any way for any act of any Servicer,  custodian or
other Person  whatsoever,  and all of the same shall be at Borrowers' sole risk.
Lender shall not be responsible for any excise, property or other Taxes relating
to any of the  Collateral  or  Pledged  Loan  Collateral,  or due  upon any sale
thereof, and all such Taxes shall be the responsibility of Borrowers.  The grant
and  conveyance  of Liens  pursuant  to the  terms  hereof  and the  other  Loan
Documents  shall not obligate or be construed to obligate  Lender to perform any
of the terms contained in the A&D Loan Documents,  Hypothecation  Loan Documents
or any other  instrument  or  agreement  forming part of any of the Pledged Loan
Collateral  or  otherwise  to impose any duties upon Lender with  respect to the
same.

SECTION 7.  REPRESENTATIONS AND WARRANTIES

      7.1.  General  Representations  and Warranties.  To induce Lender to enter
            -----------------------------------------
into this Agreement and to make advances  hereunder,  each Borrower warrants and
represents to Lender and covenants with Lender that:

<PAGE>

            7.1.1. Organization and Qualification. Each Borrower and each of its
                   -------------------------------
Subsidiaries  is a  corporation  duly  organized,  validly  existing and in good
standing under the laws of the jurisdiction of its incorporation.  Each Borrower
and each of its  Subsidiaries is duly qualified and is authorized to do business
and is in good standing as a foreign  corporation in each state or  jurisdiction
listed on Schedule  7.1.1 hereto and, to the best of such  Borrower's  knowledge
          ---------------
and belief,  in all other states and  jurisdictions  where the  character of its
Properties or the nature of its activities make such qualification necessary.

            7.1.2.  Corporate  Power  and  Authority.   Each  Borrower  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 action and do not
and will not (i) require any consent or approval of the  shareholders  of either
Borrower  or any of  either  Borrower's  Subsidiaries;  (ii)  contravene  either
Borrower's charter,  articles or certificate of incorporation or by-laws;  (iii)
violate,  or cause either Borrower 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  such  Borrower  or  any of its
Subsidiaries;  (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 either 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
either 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,
Enforceable.

            7.1.4.  Capital  Structure.  Schedule  7.1.4  hereto  states (i) the
                    -------------------  ---------------
correct name of each of the  Subsidiaries of each Borrower,  its jurisdiction of
incorporation  and the  percentage  of its Voting Stock owned by such  Borrower,
(ii) the name of each Borrower's  corporate or joint venture  Affiliates and the
nature of the  affiliation,  and (iii) the  number  of  authorized,  issued  and
treasury  shares  of each  Borrower  and  each of its  Subsidiaries.  Except  as
provided in Schedule  7.1.4  hereto,  each Borrower has good title to all of the
            ---------------
shares it  purports  to own of the stock of each of its  Subsidiaries,  free and
clear in each case of any Lien other than Permitted  Liens. All such shares have
been  duly  issued  and  are  fully  paid  and  non-  assessable.  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, shares of the capital
stock of either  Borrower or any of its  Subsidiaries.  There are no outstanding
agreements or instruments binding upon either Borrower's  shareholders  relating
to the ownership of its shares of capital stock.

            7.1.5.  Corporate Names. No Borrower nor any of its Subsidiaries has
                    ----------------
been known as or used any  corporate,  fictitious  or trade names  except  those
listed on  Schedule  7.1.5  hereto.  Except as set forth on Schedule  7.1.5,  no
           ---------------                                  ---------------
Borrower nor any of its  Subsidiaries  has been the surviving  corporation  of a
merger or consolidation  or acquired all or  substantially  all of the assets of
any Person.

            7.1.6.  Business Locations;  Agent for Process.  Each Borrower's and
                    ---------------------------------------
each of its  Subsidiaries'  chief executive  office and other places of business
are as listed on Schedule 7.1.6 hereto.  During the preceding 5-year period,  no
                 --------------
Borrower  nor any of its  Subsidiaries  has had an office,  place of business or
agent for service of process other than as listed on Schedule 7.1.6.
                                                     ---------------

<PAGE>

            7.1.7.  Title to  Properties;  Priority of Liens.  Each 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. Each
Borrower has paid or discharged all lawful claims which, if unpaid, might become
a Lien against any such Borrower's  Properties that is not a Permitted Lien. The
Liens granted to Lender under Section 5 hereof are first priority Liens, subject
only to those Permitted  Liens which are expressly  stated to have priority over
the Liens of Lender.

            7.1.8.  Financial Statements;  Fiscal Year. The Consolidated balance
                    -----------------------------------
sheets of Litchfield  and such other Persons  described  therein  (including the
accounts of all  Subsidiaries  of Litchfield for the  respective  periods during
which a  Subsidiary  relationship  existed) as of  December  31,  1996,  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 Litchfield
and such Persons at such dates and the results of Litchfield's and such Persons'
operations for such periods. Since December 31, 1996, there has been no material
change in the  condition,  financial or  otherwise,  of either  Borrower or such
other Persons as shown on the Consolidated balance sheet as of such date, except
changes in the ordinary course of business, none of which individually or in the
aggregate has been materially adverse. The fiscal year of each Borrower and each
of its Subsidiaries ends on December 31 of each year.

            7.1.9.  Full  Disclosure.  The financial  statements  referred to in
                    -----------------
Section  7.1.8  hereof do not,  nor does  this  Agreement  or any other  written
statement  of either  Borrower  to Lender,  contain  any untrue  statement  of a
material  fact.  There is no fact or  circumstances  which  either  Borrower has
failed to disclose to Lender in writing and which may  reasonably be expected to
have a Material Adverse Effect.

            7.1.10.  Solvent Financial Condition.  Each 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.

            7.1.11.  Surety Obligations.  Except as set forth on Schedule 7.1.11
                     -------------------                         ---------------
hereto,  no  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 any agreement to assure  payment,  performance or completion of performance
of any undertaking or obligation of any other Person.

            7.1.12.  Taxes.  The  federal  tax  identification  number  of  each
                     ------
Borrower and each of its  Subsidiaries is shown on Schedule 7.1.12 hereto.  Each
                                                   ---------------
Borrower  has filed all federal,  state and local tax returns and other  reports
that it is required by Applicable  Laws to file and has paid, or made  provision
for the  payment  of, all Taxes upon it, its income and  Properties  as and when
such Taxes are due and payable,  except to the extent being Properly  Contested.
The  provision  for  Taxes  on the  books  of  each  Borrower  and  each  of its
Subsidiaries  are adequate to cover that portion of Taxes owing by such Borrower
and such  Subsidiaries  for all years not closed by applicable  statutes and for
its current fiscal year.

            7.1.13.  Brokers.  There are no claims  for  brokerage  commissions,
                     --------
finder's  fees  or  investment  banking  fees  in  connection  with  any  of the
transactions contemplated by this Agreement.

<PAGE>

            7.1.14. Patents, Trademarks,  Copyrights and Licenses. Each 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 conflict with the rights
of others. All such patents, trademarks, service marks, trade names, copyrights,
licenses and other similar rights are listed on Schedule 7.1.14 hereto.
                                                ---------------

            7.1.15.  Governmental  Consents.  Each  Borrower  and  each  of  its
                     -----------------------
Subsidiaries  has, and is in good  standing  with  respect to, all  Governmental
Approvals  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.

            7.1.16.  Compliance  with  Laws.  Each  Borrower  and  each  of  its
                     -----------------------
Subsidiaries  has duly complied with, and its Properties,  business  operations,
Pledged  Loans,  and Pledged Loan  Collateral  are in compliance in all material
respects  with,  the  provisions of all  Applicable  Laws and there have been no
citations,  notices or orders of noncompliance issued to such Borrower or any of
its Subsidiaries under any such law, rule or regulation.

            7.1.17.  Restrictions.  No Borrower nor any of its Subsidiaries is a
                     -------------
party or  subject to any  contract,  agreement,  or  charter or other  corporate
restriction,  which  has or  could be  reasonably  expected  to have a  Material
Adverse Effect. No Borrower nor any of its Subsidiaries is a party or subject to
any contract or agreement  which  restricts  its right or ability to incur Debt,
and as set forth on Schedule 7.1.17 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.

            7.1.18.  Litigation.  Except as set forth on Schedule 7.1.18 hereto,
                     -----------                         ---------------
there are no actions,  suits,  proceedings or investigations  pending, or to the
knowledge of such Borrower,  threatened, against or affecting either Borrower or
any of its Subsidiaries,  or the business,  operations,  Properties,  prospects,
profits or  condition  of either  Borrower or any of its  Subsidiaries,  none of
which if resolved  adversely to either Borrower or its Subsidiaries would have a
Material  Adverse Effect.  No 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.

            7.1.19.  No Defaults.  No event has occurred and no condition exists
                     ------------
which  would,  upon or after the  execution  and  delivery of this  Agreement or
either  Borrower's  performance  hereunder,  constitute a Default or an Event of
Default. No Borrower nor any of its Subsidiaries is in default, 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 Debt to any Person for Money Borrowed.

            7.1.20.  Leases. Except for miscellaneous leases of office equipment
                     -------
entered into in the ordinary course of each Borrower's business, Schedule 7.1.20
                                                                 ---------------
hereto is a complete  listing of all capitalized  leases and operating leases of
each Borrower and each of its Subsidiaries on the date hereof. Each Borrower and
each of its  Subsidiaries is in full compliance with all of the terms of each of
its respective capitalized and operating leases.

            7.1.21.  Pension  Plans.  Except as  disclosed  on  Schedule  7.1.21
                     ---------------                            ----------------
hereto, no Borrower nor any of its Subsidiaries has any Plan on the date hereof.
The Plan in which each Borrower and each of its Subsidiaries  participates is in

<PAGE>

full compliance with the  requirements of ERISA and the regulations  promulgated
thereunder  with respect  thereto.  No fact or situation  that could result in a
material  adverse  change  in the  financial  condition  of  Borrower  exists in
connection  with such Plan.  No  Borrower  nor any of its  Subsidiaries  has any
withdrawal liability in connection with a Multiemployer Plan.

      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 a  Borrower's  or  its  Subsidiaries'  business  or
operations that would not have a Material Adverse Effect or would not render the
information  in any exhibit  attached  hereto either  inaccurate,  incomplete or
misleading,  so long as Lender has consented to such changes or such changes are
expressly   permitted  by  this   Agreement.   Notwithstanding   the  foregoing,
representations  and warranties  which by their terms are  applicable  only to a
specific date shall be deemed made only at and as of such date.

      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 Lender
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  to Lender,  each Borrower
covenants  that it shall and shall  cause each of its  Subsidiaries  to:

           8.1.1.  Visits and Inspections.
                   -----------------------

                    (i) Upon 3 Business  Days'  notice from  Lender,  permit any
representative,  officer,  accountant or agent of Lender, during normal business
hours, to visit and inspect any of such Borrower's  Properties,  to examine such
Borrower's books and records, and to discuss such Borrower's business, financial
affairs,  financial condition and accounts with such Borrower's officers, all at
such  reasonable time and as often as Lender may request and, in each such case,
cause each of its Subsidiaries so to do. Notwithstanding the foregoing, no prior
notice by Lender will be required as a condition to any such visit or inspection
if at the time thereof any Event of Default exists.

                  (ii) Upon 3 Business  Days'  notice  from Lender and the prior
submission by Lender to either Borrower of Lender's  proposed  agenda  therefor,
permit any representative,  officer,  accountant or agent of Lender from time to
time to discuss the  financial  statements  referred to in Section 7.1.8 hereof,
any other financial information from time to time delivered hereunder to Lender,
the  financial  condition of each  Borrower or any of its  Subsidiaries,  or any
information  contained in any  Borrowing  Base  Certificate  (collectively,  the
"Financial Information") with such Borrower's auditors;  provided, however, that
                                                         --------  -------
if no Default or Event of Default then exists, Lender will not have the right to
require such discussions more than once per year. Notwithstanding the foregoing,
no prior  notice or  submission  of a  proposed  agenda  will be  required  as a
condition to Lender's having such discussions with either Borrower's auditors at
any time that an Event of  Default  exists.  Each  Borrower  hereby  irrevocably
authorizes  its  auditors  to discuss all matters  pertaining  to the  Financial

<PAGE>

Information  with all such Persons.  Each Borrower  shall have the right to have
one or more of its officers present at any such discussions with such Borrower's
auditors,  but the availability of any officer of such Borrower to be present at
any such  discussion  shall not be a condition to Lender's  rights  hereunder to
hold such discussions.

            8.1.2.  Notices.  Notify Lender in writing (i) 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;  (ii) promptly after a Borrower's learning thereof, of
the  commencement  of any  litigation  having a  Material  Adverse  Effect  on a
Borrower or any of its  Properties,  whether or not the claim is  considered  by
such  Borrower  to be  covered  by  insurance,  and  of the  institution  of any
administrative proceeding which if determined adversely to a Borrower would have
a Material Adverse Effect; (iii) at least 30 days prior thereto, of a Borrower's
opening of any new office or place of  business or a  Borrower's  closing of any
existing office or place of business;  (iv) promptly after a Borrower's learning
thereof,  of any labor  dispute  to which a  Borrower  may  become a party,  any
strikes or walkouts relating to any of its plants or other  facilities,  and the
expiration of any labor contract to which it is a party or by which it is bound;
(v) promptly after a Borrower's learning thereof, of any material default by any
Loan Party under any note,  indenture,  loan agreement,  Mortgage,  lease, deed,
guaranty or other similar agreement relating to any Debt of a Borrower exceeding
$500,000; (vi) promptly after the occurrence thereof, of any Default or Event of
Default;  (vii)  promptly after the  occurrence  thereof,  of any default by any
Obligor under any of the Transaction Documents with respect to any Pledged Loan;
(viii) promptly after the rendition  thereof,  of any judgment  rendered against
any Loan  Party in an  amount  exceeding  $250,000;  and (ix)  promptly  after a
Borrower's  learning thereof,  of any termination or expiration of any Servicing
Agreement.

            8.1.3.  Financial  Statements.  Keep,  and cause each  Subsidiary 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 Lender
the  following  (all  to be  prepared  in  accordance  with  GAAP  applied  on a
consistent basis,  unless Borrowers'  certified public accountants concur in any
change  therein and such change is  disclosed to Lender and is  consistent  with
GAAP):

                        (i) not  later  than 120 days  after  the  close of each
      fiscal year of Litchfield,  unqualified  audited  financial  statements of
      Litchfield  and  its  Subsidiaries  as of  the  end  of  such  year,  on a
      Consolidated  basis,  certified by a firm of independent  certified public
      accountants of recognized  standing  selected by Litchfield but reasonably
      acceptable  to  Lender  (except  for  a  qualification  for  a  change  in
      accounting principles with which the accountant concurs);

                        (ii) not later than 45 days after the end of each fiscal
      quarter of Litchfield,  Litchfield's form 10Q filing with the SEC for such
      quarter;

                        (iii) promptly after the sending or filing  thereof,  as
      the case may be, copies of any proxy statements,  financial  statements or
      reports which Litchfield has made available to its shareholders and copies
      of any regular,  periodic and special reports or  registration  statements
      which Litchfield files with the SEC, or any national securities exchange;

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

<PAGE>

                        (v) with  respect to Green  Mountain,  annual  unaudited
      financial  statements of Green Mountain  delivered not later than 120 days
      after the close of each fiscal year,  and  quarterly  unaudited  financial
      statements  of Green  Mountain  delivered not later than 45 days after the
      end of each fiscal quarter of Green Mountain; and

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

            Concurrently with the delivery of the financial statements described
in clause (i) of this Section 8.1.3, Borrowers shall forward to Lender a copy of
the accountants' letter to Borrowers'  management that is prepared in connection
with such  financial  statements.  Concurrently  with the  delivery of the items
described in clauses (i) and (ii) of this Section 8.1.3,  or more  frequently if
requested  by Lender,  Borrowers  shall cause to be prepared  and  furnished  to
Lender  a  Compliance  Certificate  duly  executed  by the  president  or  chief
financial officer of Borrowers.

            8.1.4.  Transaction  Documents.  Include or caused to be included in
                    -----------------------
each Transaction  Document executed and delivered subsequent to the Closing Date
language providing that, subject to any restrictions upon the assignment thereof
by the Obligor,  such  Primary  Transaction  Document  shall be binding upon and
inure to the  benefit  of any and all  successors  and  assigns  of the  parties
thereto,  and exercise its best efforts to include such  language in any Primary
Transaction  Document in existence  on the Closing Date that does not  expressly
purport to be binding  upon the  successors  and assigns of the parties  thereto
pursuant to a written amendment or modification of any such Primary  Transaction
Document (but if such Borrower is unsuccessful in including such language in any
Primary Transaction Document, then the Pledged Loan evidenced or secured by such
Primary Transaction Document shall not be deemed to be an Eligible Loan).

            8.1.5.  Taxes.  Pay and discharge,  and cause each Subsidiary to pay
                    ------
and discharge, all Taxes prior to the date on which such Taxes become delinquent
or penalties  attach thereto,  except and to the extent only that such Taxes are
being Properly Contested.

            8.1.6.  Compliance with Laws.  Comply,  and cause each Subsidiary to
                    ---------------------
comply, with all Applicable Laws, including all laws, statutes,  regulations and
ordinances regarding the collection, payment and deposit of Taxes, and all ERISA
and  Environmental  Laws, and obtain and keep in force any and all  Governmental
Approvals  necessary to the ownership of its Properties or to the conduct of its
business,  which  violation or failure to obtain  might have a Material  Adverse
Effect.

            8.1.7.  Insurance. In addition to the insurance required herein with
                    ----------
respect  to the  Collateral,  maintain,  with  financially  sound and  reputable
insurers,  insurance with respect to its  Properties  and business  against such
casualties and  contingencies  of such type  (including  business  interruption,
larceny,  embezzlement or other criminal misappropriation insurance) and in such
amounts as is customary in the business of Borrowers or as otherwise  reasonably
required by Lender.

       8.2.  Negative  Covenants.   During  the  term  of  this  Agreement,  and
             --------------------
thereafter  for so long as there are any  Obligations  to Lender,  each Borrower
covenants that,  unless Lender has first consented  thereto in writing,  it will
not nor will it permit any Subsidiary to:

<PAGE>

            8.2.1. Mergers; Consolidations. Enter into any transaction to merge,
                   ------------------------
consolidate  or amalgamate  with any Person,  or liquidate,  wind up or dissolve
itself,  except  mergers  or  consolidations  of  any  Subsidiary  with  another
Subsidiary of either Borrower.

            8.2.2.  Loans.  Make any  loans or  other  advances  of money to any
                    ------
Person other than (i) for salary, travel advances,  advances against commissions
and  other  similar  advances  in  the  ordinary  course  of a  Borrower's  or a
Borrower's  Subsidiary's  business, and (ii) loans or other advances of money to
Obligors  and  other  Persons  in  the  ordinary   course  of  Borrower's  or  a
Subsidiary's business.

            8.2.3.  Affiliate  Transactions.  Enter  into,  or be a party to any
                    ------------------------
transaction  with any Affiliate or  stockholder,  except:  (i) the  transactions
contemplated  by the Loan Documents;  (ii) payment of customary  directors' fees
and indemnities;  (iii) transactions with Affiliates that were consummated prior
to the date  hereof;  and (iv) in the  ordinary  course of and  pursuant  to the
reasonable  requirements  of a Borrower's  business and upon fair and reasonable
terms which are fully disclosed to Lender.

            8.2.4.  Limitation on Liens. Create or suffer to exist any Lien upon
                    --------------------
any of the Collateral, whether now owned or hereafter acquired, except Permitted
Liens.

            8.2.5. Subordinated Debt. 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.

            8.2.6. Distributions.  Declare or make any Distributions at any time
                   --------------
that a Default,  Event of Default or  Out-of-Formula  Condition  exists or would
occur as the result of the making of any such Distribution.

            8.2.7.  Disposition of Assets.  Sell, lease or ot herwise dispose of
                    ----------------------
any interest in any of the Pledged Loans, Pledged Loan Collateral or Transaction
Documents to or in favor of any Person, including the sale, pledge or assignment
of any interest in any Pledged Loan,  except for sales,  leases or  dispositions
(i) to Lender,  (ii) of Pledged Loans released  pursuant to Section 4.5.2 hereof
or (iii) as otherwise expressly authorized by this Agreement.

            8.2.8. Stock of Subsidiaries. At any time that a Default or Event of
                   ----------------------
Default exists, permit any of its Subsidiaries to issue any additional shares of
its capital stock except director's qualifying shares.

            8.2.9.  Restricted  Investments and Debt Incurrence.  In the case of
                    --------------------------------------------
Green  Mountain,  (i) make or have any  Restricted  Investment;  or (ii) create,
incur, assume or suffer to exist any Debt, except (a) the Obligations,  (b) Debt
to  Litchfield  which  does not  exceed at any time the sum of  $1,000,000,  (c)
incidental accounts payable and current operating expenses (other than for Money
Borrowed)  incurred  and timely paid in the  ordinary  course of  business,  (d)
contingent   obligations  arising  out  of  endorsements  of  checks  and  other
negotiable  instruments  for deposit or  collection  in the  ordinary  course of
business,  and (e) the obligation to fund A&D Loans and Hypothecation  Loans and
to the extent  provided in  Transaction  Documents to which Green  Mountain is a
party.

            8.2.10.  Fiscal Year. Establish a fiscal year of Borrowers and their
                     ------------
Subsidiaries other than the 12-month period ending December 31 of each year.

<PAGE>

            8.2.11.  Corporate Documents.  Amend, modify or otherwise change any
                     --------------------
of the  terms or  provisions  in any of  either  Borrower's  corporate  charter,
Articles of Incorporation, By-laws, or other governing documents as in effect on
the  Closing  Date,  except  for  changes  that do not  affect  in any way  such
Borrower's  rights  and  obligations  to  enter  into  and to  perform  the Loan
Documents to which it is a party and to pay all of the  Obligations  and that do
not otherwise have a Material Adverse Effect.

            8.2.12.  Conduct of Business.
                     --------------------

                              (i) enter into, or permit any of its  Subsidiaries
            to enter into, any business that is substantially different from the
            business of Borrower or such  Subsidiaries  as set forth on Schedule
                                                                        --------
            8.2.12 or any  businesses or activities  that are not  substantially
            ------
            similar,  related or  incidental  to the  businesses  or  activities
            described in Schedule 8.2.12; or
                         ---------------

                              (ii) make or acquire loans other than loans of the
            type made by such Borrower and its  Subsidiaries  on the date hereof
            or as otherwise  described on Schedule  8.2.12;  provided,  however,
                                          ----------------   --------   -------
            that Borrowers and their  Subsidiaries shall be permitted to make or
            acquire  loans that are different  from those  described on Schedule
                                                                        --------
            8.2.12  (each  such  loan,  a "New  Business  Loan")  so long as the
            ------
            aggregate outstanding principal amount of New Business Loans held by
            Borrowers and their  Subsidiaries does not at any time exceed 25% of
            the   aggregate   serviced   portfolio   of   Borrowers   and  their
            Subsidiaries.

            8.2.13.  Administration  of Transaction  Documents.  Subordinate any
                     ------------------------------------------
Lien securing any Pledged Loan to the Lien of another Person; subordinate all or
any part of any Pledged Loan to the Debt of another  Person;  forgive all or any
part of any Pledged  Loan;  release any Solvent  guarantor  or other third party
Obligor  of the  payment  or  performance  of all or any part of such  Obligor's
liabilities or obligations with respect to any Pledged Loan; release any Pledged
Loan  Collateral  or Lien with  respect  thereto;  waive any  default  under any
Transaction  Documents  that relate to a Pledged  Loan;  or increase  the Credit
Limit on any Pledged Loan to an extent  where such New Credit  Limit  exceeds in
amount the applicable A&D Loan Margin or the Hypothecation Loan Margin.

            8.2.14.  Books and  Records.  Move or  relocate  books  and  records
                     -------------------
pertaining  to any of the  Collateral  from either  Borrower's  chief  executive
office and principal place of business.

      8.3. Specific Financial Covenants.  During the term of this Agreement, and
           -----------------------------
thereafter  for so long as  there  are any  Obligations  outstanding,  Borrowers
covenant that,  unless otherwise  consented to by Lender in writing,  Litchfield
shall:

            8.3.1.  Debt to Tangible  Net Worth  Ratio.  Maintain at all times a
                    -----------------------------------
ratio of total Debt to Consolidated Tangible Net Worth that does not exceed 6 to
1.

            8.3.2  Consolidated  Tangible  Net  Worth.  Maintain  at all times a
                   -----------------------------------
Consolidated Tangible Net Worth of not less than $33,000,000; provided, however,
that the foregoing  amount shall be  increased,  on a cumulative  basis,  on the
first day of each fiscal year, commencing January 1, 1998, by an amount equal to
50%  of the  Consolidated  Net  Income  of  Litchfield  during  the  immediately
preceding fiscal year (if a positive number).

<PAGE>

            8.3.3   Interest   Coverage   Ratio.   Maintain   at  all  times  an
                    ---------------------------- 
Interest Coverage Ratio of not less than 1.0 to 1.

SECTION 9.  CONDITIONS PRECEDENT

      9.1.  Conditions  Precedent to Initial  Loans.  Notwithstanding  any other
            ----------------------------------------
provision  of this  Agreement  or any of the other Loan  Documents,  and without
affecting  in any manner the rights of Lender  under the other  sections of this
Agreement,  Lender shall not be required to make the initial Loans  requested by
Borrowers unless, on or before March 21, 1997, each of the following  conditions
has been and continues to be satisfied:

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

                  9.1.2.  Evidence  of  Perfection  and  Priority  of  Liens  in
                          ------------------------------------------------------
Collateral.  Lender  shall  have  received  copies  of all  filing  receipts  or
-----------
acknowledgments  issued by any governmental  authority to evidence any filing or
recordation  necessary  to  perfect  the Liens of Lender in the  Collateral  and
evidence in form  satisfactory  to Lender that such Liens  constitute  valid and
perfected  security  interests and Liens, and that there are no other Liens upon
any Collateral except for Permitted Liens.

                  9.1.3. Articles of Incorporation. Lender shall have received a
                         --------------------------
copy of the Articles or Certificate of Incorporation  of each Borrower,  and all
amendments  thereto,  certified by the  Secretary of State or other  appropriate
official of the jurisdiction of each Borrower's incorporation.

                  9.1.4. Good Standing Certificates.  Lender shall have received
                         ---------------------------
good standing  certificates for each Borrower,  issued by the Secretary of State
or other appropriate  official of each Borrower's  jurisdiction of incorporation
and each jurisdiction where the conduct of a Borrower's  business  activities or
ownership of its Property necessitates qualification.

                  9.1.5. Opinion Letter. Lender shall have received a favorable,
                         ---------------
written  opinion  of Battle  Fowler  LLP,  general  counsel  to  Borrowers,  and
Borrowers' special Vermont counsel and special Massachusetts  counsel, as to the
transactions  contemplated by this Agreement, to be in substantially the form of
Exhibit F hereto.

                  9.1.6. Disbursement Letter. Lender shall have received written
                         --------------------
instructions  from  Borrowers  directing  application of proceeds of the initial
Loans made pursuant to this Agreement, and an initial Borrowing Base Certificate
from Borrowers, in form satisfactory to Lender.

      9.2.  Conditions  Precedent to all Credit Extensions.  Notwithstanding any
            -----------------------------------------------
other  provision  of this  Agreement  or any of the other  Loan  Documents,  and
without affecting in any manner the rights of Lender under the other sections of
this  Agreement,  Lender  shall not be  required  to make any Loan or  otherwise
extend any credit or other  financial  accommodations  to or for the  benefit of
Borrowers,  unless  and  until  each of the  following  conditions  has been and
continues to be satisfied:

<PAGE>

                  9.2.1.  Required  Document  Deliveries.  Borrowers  shall have
                          -------------------------------
delivered or caused to be delivered all  documents  with respect to each Pledged
Loan in accordance with the provisions of Section 4.6 of this Agreement.

                  9.2.2. No Default.  No Default or Event of Default shall exist
                         -----------
at the time of, or after giving effect to, any funding of a Revolver Loan.

                  9.2.3.  Satisfaction  of Conditions  in Other Loan  Documents.
                          ------------------------------------------------------
Each of the conditions precedent set forth in any other Loan Document shall have
been and shall remain satisfied.

                  9.2.4. 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.

                  9.2.5.  Material Adverse Effect.  No event shall have occurred
                          ------------------------
and no  condition  shall exist which has or may be  reasonably  likely to have a
Material Adverse Effect.

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

       10.1.  Events  of  Default.  The  occurrence  of any  one or  more of the
              --------------------
following events or conditions shall constitute an "Event of Default":

                  10.1.1.  Payment of  Obligations.  Borrowers shall fail to pay
                           ------------------------
any of the Obligations on the due date thereof  (whether due at stated maturity,
on demand, upon acceleration or otherwise).

                  10.1.2.  Misrepresentations.  Any representation,  warranty or
                           -------------------
material  statement  made or  furnished  to  Lender  by or on  behalf  of either
Borrower, 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.  Either Borrower shall
                           ------------------------------
fail or neglect to perform,  keep or observe any covenant  contained in Sections
4.4, 8.1.1,  8.1.3, 8.2 or 8.3 hereof on the date that such Borrower is required
to perform, keep or observe such covenant.

                  10.1.4. Breach of Other Covenants.  Either 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  Lender's
satisfaction within 15 days after the sooner to occur of such Borrower's receipt
of notice  of such  breach  from  Lender or the date on which  such  failure  or
neglect first becomes known to any officer of such Borrower;  provided, however,
                                                              --------  -------
that such  notice  and  opportunity  to cure  shall not apply in the case of any
failure to perform,  keep or observe any covenant  which is not capable of being
cured at all or within  such 15 day  period,  or which has been the subject of a
prior  failure  within the preceding 180 days, or which is a willful and knowing
breach by either Borrower.

<PAGE>

                  10.1.5. Default Under Security Documents/Other Agreements. Any
                          --------------------------------------------------
event of default  shall occur under,  or either  Borrower  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 either  Borrower  under any  agreement,  document  or
instrument to which such Borrower is a party or by which such Borrower or any of
its  Property is bound,  creating  or  relating  to any Debt for Money  Borrowed
(other  than  the  Obligations)  if the  payment  or  maturity  of such  Debt is
accelerated  in  consequence  of such event of default or demand for  payment of
such Debt is made.

                  10.1.7.  Insolvency  and Related  Proceedings.  Any Loan Party
                           -------------------------------------
shall cease to be Solvent or any Insolvency  Proceeding shall be commenced by or
against  any Loan Party (if  against an Loan  Party,  the  continuation  of such
proceeding  for more than 30 days),  or any Loan  Party  shall make any offer of
settlement, extension or composition to such unsecured creditors generally.

                  10.1.8. Business Disruption.  There shall occur a cessation of
                          --------------------
a  substantial  part of the business of either  Borrower or any other Loan Party
for a period which may be reasonably  expected to have Material  Adverse Effect;
or either  Borrower or any other Loan Party shall suffer the loss or  revocation
of any license or permit now held or hereafter acquired by such Borrower or such
other Loan Party which is necessary to the continued or lawful  operation of its
business and such license or permit shall not have been  reinstated on or before
the thirtieth day after the loss or revocation  thereof;  or either  Borrower or
any other Loan Party 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.

                  10.1.9. ERISA. A Reportable Event shall occur which Lender, 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 either  Borrower,  any Subsidiary of either 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 such  Borrower's or
such Guarantor's complete or partial withdrawal from such Plan.

                  10.1.10. Challenge to Agreement.  Either Borrower or any other
                           -----------------------
Loan Party,  or any Affiliate of any of them,  shall challenge or contest in any
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 Lender.

                  10.1.11.  Servicer Defaults.  Any Servicer shall repudiate the
                            ------------------
Agency Agreement  (Servicing Agent) or the Servicing  Agreement executed by such
Servicer,  or such  Servicer  shall resign and a successor  acceptable to Lender
shall  not be  appointed  within 20 days  thereafter,  or shall  default  in the
observance or  performance  of any material  term or provision  contained in the
Agency  Agreement  (Servicing  Agent) and shall fail to cure same within 15 days
after written notice thereof is received by such Servicer from Lender.

                  10.1.12.   Criminal  Forfeiture.   Either  Borrower  shall  be
                             ---------------------
criminally  indicted or convicted  under any law that could lead to a forfeiture
of any Property of either Borrower.

<PAGE>

                  10.1.13.  Portfolio  Default.  On any date, 50% or more of all
                            -------------------
Pledged Loans  outstanding  that are A&D Loans,  or 20% or more of Pledged Loans
outstanding that are  Hypothecation  Loans,  are in default,  whether or not any
such default has resulted  from the failure of an Obligor to pay any amounts due
with  respect to any of such  Pledged  Loans on the due date  thereof or for any
other cause and  regardless  of whether or not any such  default has been waived
(orally or in writing) by either Borrower.

      10.2.  Acceleration  of the  Obligations.  Without in any way limiting the
             ----------------------------------
right of Lender 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  of an Event of  Default  (and for so long as such  Event of  Default
exists),  all or any portion of the  Obligations  shall, at the option of Lender
and without presentment,  demand protest or further notice by Lender,  become at
once due and payable  and  Borrowers  shall  forthwith  pay to Lender,  the full
amount of such Obligations;  provided, however, that upon the commencement of an
Insolvency  Proceeding by either Borrower,  all of the Obligations  shall become
automatically due and payable without declaration, notice or demand by Lender.

       10.3.  Other  Remedies.  Upon and  after  the  occurrence  of an Event of
              ----------------
Default (and for so long as such Event of Default exists), Lender 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 UCC or under other  Applicable Laws, and all other legal and equitable
rights to which Lender may be entitled under any of the Loan  Documents,  all of
which rights and remedies  shall be  cumulative  and 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  Borrowers  to  assemble  the  Collateral,  at
Borrowers'  expense,  and make it available to Lender at a place  designated  by
Lender  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
either  Borrower,  then such  Borrower  agrees not to charge  Lender for storage
thereof).

                  10.3.3.  The right to sell or otherwise  dispose of all or any
Collateral in its then condition,  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 Lender, in its sole discretion, may deem advisable. Each Borrower agrees that
any requirement of notice to Borrowers of any proposed public or private sale or
other  disposition  of  Collateral by Lender shall be deemed  reasonable  notice
thereof  if given at least 10 days prior  thereto,  and such sale may be at such
locations as Lender may designate in said notice. Lender shall have the right to
conduct such sales on either Borrower's premises,  without charge therefor,  and
such sales may be  adjourned  from time to time in  accordance  with  Applicable
Laws.  Lender 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  Lender  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 reasonable costs and expenses, and
attorneys' fees, incurred by Lender in collecting the Obligations,  in enforcing

<PAGE>

the  rights of Lender  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, each Borrower and each Guarantor shall remain jointly and severally
liable to Lender therefor.

Lender is hereby granted,  effective upon or after the occurrence of an Event of
Default  (and for so long as such Event of Default  exists),  a license or other
right to use, without charge, each Borrower's labels, any intellectual property,
rights of use of any name,  software,  telephone  number,  or any  Property of a
similar  nature,  as it  pertains  to the  Collateral,  for the sole and limited
purpose of enabling Lender to collect, sell or otherwise realize upon any of the
Collateral.

       10.4.  Setoff.  In  addition to any Liens  granted  under any of the Loan
              ------- 
Documents  and any rights now or  hereafter  available  under  Applicable  Laws,
Lender  is  hereby  authorized  by each  Borrower  at any time  that an Event of
Default exists,  without notice to either Borrower or any other Person (any such
notice being hereby expressly waived) to set off and to appropriate and to apply
any  and  all  deposits,   general  or  special  (including  Debt  evidenced  by
certificates  of deposit whether  matured or unmatured (but  notincluding  trust
accounts))  and any  other  Debt at any  time  held or owing  by  Lender  or its
Affiliates to or for the credit or the account of either Borrower against and on
account of the  Obligations  of Borrowers  arising  under the Loan  Documents to
Lender,  including all Loans and all claims of any nature or description arising
out of or in connection with this Agreement,  irrespective of whether or not (i)
Lender shall have made any demand  hereunder or (ii) Lender shall have  declared
the principal of and interest on the Loans and other amounts due hereunder to be
due and payable as permitted by this Agreement and even though such  Obligations
may be contingent or unmatured.

      10.5.  Remedies   Cumulative;   No  Waiver.  All  covenants,   conditions,
             ------------------------------------
provisions,  warranties,  guaranties,  indemnities,  and other  undertakings  of
Borrowers  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 Lender or contained in
any  other   agreement   between   Lender  and  either   Borrower,   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  Borrowers  herein  contained.  The failure or delay of Lender to
require strict performance by Borrowers 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  Borrowers  to  Lender  shall  have  been  fully
satisfied.  None of the  undertakings,  agreements,  warranties,  covenants  and
representations  of Borrowers  contained  in this  Agreement or any of the other
Loan Documents and no Event of Default by Borrowers  under this Agreement or any
other Loan Documents shall be deemed to have been suspended or waived by Lender,
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 Lender
and directed to Borrowers.

SECTION 11. MISCELLANEOUS

      11.1. Power-of-Attorney.  Borrowers shall join with Lender and Servicer in
            ------------------
executing  and  delivering  the  Power-of-Attorney  on the Closing  Date. 

<PAGE>

      11.2.Indemnity. Each Borrower hereby agrees to indemnify and defend Lender
           ----------
and hold Lender  harmless from and against any Claims against Lender  (including
reasonable  attorneys' fees and legal expenses) as the result of such Borrower's
failure  to  observe,  perform  or  discharge  any  of  such  Borrower's  duties
hereunder.  In addition, each Borrower shall indemnify and defend Lender against
and save Lender  harmless  from all Claims of any Person with  respect to any of
the Pledged Loans or Pledged Loan Collateral. Without limiting the generality of
the foregoing,  these  indemnities  shall extend to any Claims asserted  against
Lender by any Person under any  Environmental  Laws or similar laws by reason of
either  Borrower's or any other Person's  failure to comply with laws applicable
to solid or hazardous waste materials or other toxic  substances.  Additionally,
if any Taxes  (excluding taxes imposed upon or measured solely by the net income
of Lender,  but including,  any  intangibles  tax,  stamp tax,  recording tax or
franchise  tax) shall be payable by Lender,  either  Borrower  or any other Loan
Party  on  account  of the  execution  or  delivery  of this  Agreement,  or the
execution,  delivery,  issuance or recording of any of the other Loan Documents,
or the creation of any of the Obligations  hereunder,  by reason of any existing
or  hereafter  enacted  federal,  state,  foreign  or  local  statute,  rule  or
regulation,  Borrowers  will  pay (or will  promptly  reimburse  Lender  for the
payment of) all such Taxes,  including any interest and penalties  thereon,  and
will indemnify and hold Lender harmless from and against liability in connection
therewith.  The  provisions of this Section 11.2 shall not be deemed to obligate
Borrowers  to  indemnify  Lender  for any  claim by  Lender  for  lost  profits.
Notwithstanding  any contrary  provision in this  Agreement,  the  obligation of
Borrowers  under this  Section  11.2 shall  survive  the  payment in full of the
Obligations and the termination of this Agreement.

      11.3. Modification of Agreement;  Sale of Interest. This Agreement may not
            ---------------------------------------------
be modified,  altered or amended,  except by an  agreement in writing  signed by
Borrower and Lender.  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 Borrower's rights, title,  interests,  remedies,
powers,  and duties hereunder or thereunder.  Lender may not participate,  sell,
assign, transfer or otherwise dispose of this Agreement or any of the other Loan
Documents,  or of any portion  hereof or  thereof,  including  Lender's  rights,
title, interests,  remedies, powers, and duties hereunder or thereunder, without
the prior  written  consent of Borrower.  In the case of an  assignment to which
Borrower has  provided its written  consent,  the  assignee  shall have,  to the
extent of such assignment, the same rights, benefits and obligations as it would
if it were "Lender"  hereunder  and Lender shall be relieved of all  obligations
hereunder upon any such  assignment.  Borrower  agrees that it will use its best
efforts to assist and cooperate with Lender in any manner  reasonably  requested
by Lender to effect the sale of  participations  in or assignments of any of the
Loan Documents or any portion thereof or interest  therein to which Borrower has
provided  its  written  consent,  including  assisting  in  the  preparation  of
appropriate  disclosure  documents.  Borrower  further  agrees  that  Lender may
disclose credit information regarding Borrower and its Subsidiaries,  if any, to
any  potential  participant  or  assignee  with  respect to which  Borrower  has
provided its prior written consent.

      11.4.  Severability.  Wherever possible,  each provision of this Agreement
             -------------
shall  be  interpreted  in  such  manner  as to be  effective  and  valid  under
Applicable  Laws, but if any provision of this Agreement  shall be prohibited by
or invalid under  Applicable  Laws, 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.

      11.5. 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 each Borrower and Lender  permitted under Section 11.3
hereof.

      11.6.  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 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.

      11.7.  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.

      11.8. Notice. All notices,  requests and demands to or upon a party hereto
            -------
shall be in writing and shall be sent by certified or  registered  mail,  return
receipt  requested,  personal delivery against receipt or by telecopier or other
facsimile transmission and shall be deemed to have been validly served, given or
delivered when delivered against receipt or 5 Business Days after deposit in the
U.S. mail,  postage  prepaid,  or, in the case of facsimile  transmission,  when
received at the office where the noticed party's telecopier is located,  in each
case addressed as follows:

            If to Lender:             Green Tree Financial Servicing Corporation
                                      100 North Point Center East
                                      Suite 200
                                      Alpharetta, Georgia  30202-4168
                                      Attention:  Loan Administration Manager
                                      Facsimile No.: (770) 410-9693

            If to Borrowers:          Litchfield Financial Corporation
                                      789 Main Road
                                      Stamford, Vermont  05352
                                      Attention:  President
                                      Facsimile No.: (802) 694-1237

or to such other  address as each party may designate for itself by notice given
in  accordance  with this  Section  11.8;  provided,  however,  that any notice,
                                           --------   -------
request or demand to or upon Lender  pursuant to Section  3.1.1 or 4.2.2  hereof
shall not be effective  until  received by Lender.  Any written notice or demand
that is not sent in conformity with the provisions hereof shall  nevertheless be
effective  on the date that such  notice is  actually  received  by the  noticed
party.

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

      11.10.  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.

<PAGE>

      11.11. 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,  drafted  or
dictated such provision.

      11.12.  Lender's  Consent.  Whenever  Lender's  consent is  required to be
              ------------------
obtained under any of the Loan Documents as a condition to any action, inaction,
condition or event,  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.

      11.13.  Credit  Inquiries.  Each Borrower  hereby  authorizes  and permits
              ------------------
Lender (but Lender shall have no  obligation)  to respond to usual and customary
credit  inquiries  from third  parties  concerning  such  Borrower or any of its
Subsidiaries.

      11.14. Waiver of Defenses. Each Borrower agrees that the joint and several
             -------------------
liability of Borrowers provided for in Section 4.14 hereof shall not be impaired
or affected by (i) any modification,  supplement,  extension or amendment of any
of the Loan  Documents  or any other  contract or  agreement  to which the other
Borrowers  may  hereafter  agree  (other  than an  agreement  signed  by  Lender
specifically  releasing  such  liability),  (ii) any delay,  extension  of time,
renewal, compromise or other indulgence granted by Lender with respect to any of
the  Obligations,  (iii) any release or  subordination  of  Lender's  Liens with
respect to any or all of the  Collateral or any  alteration of any rights of any
Borrower  with  respect  thereto,  (iv) any  increase or decrease in the rate of
interest  with  respect to any of the  Obligations,  the amount of fees  charged
under the Loan  Documents or the amount of the  Obligations,  (v) any release of
any  Borrower,  any  Guarantor  or any  other  Loan  Party,  or (vi)  any  other
agreements or arrangements  whatever with any Borrower or with any other Person,
each  Borrower  hereby  waiving all notices of such delay,  extension,  release,
subordination,  renewal,  compromise,  increase or other indulgence,  and hereby
consenting to be bound thereby as fully and  effectively  as if it had expressly
agreed  thereto  in  advance.  The  liability  of each  Borrower  is direct  and
unconditional  as to all of the  Revolver  Loans,  and may be  enforced  without
requiring  Lender first to resort to any other right,  remedy or security.  Each
Borrower  expressly waives promptness,  diligence,  notice of acceptance and any
other notice with respect to any of the Obligations, this Agreement or any other
Loan  Documents and any  requirement  that Lender  protect,  secure,  perfect or
insure any Lien or any property subject thereto or exhaust any right or take any
action  against any  Borrower  or any Person or any  Collateral,  including  any
rights either  Borrower may otherwise  have under  O.C.G.A.  ss.  10-7-24 or any
similar statute.

      11.15.   Governing  Law;  Consent  To  Forum.   This  Agreement  has  been
               ------------------------------------
negotiated,  executed and  delivered at and shall be deemed to have been made in
Atlanta,  Georgia.  This  Agreement  shall  be  governed  by  and  construed  in
accordance with the laws of the State of Georgia; provided, however, that if any
of the Collateral shall be located in any jurisdiction  other than Georgia,  the
laws of such  jurisdiction  shall govern the method,  manner and  procedure  for
foreclosure  of  Lender's  Lien  upon such  Collateral  and the  enforcement  of
Lender'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
Georgia. As part of the consideration for new value received,  and regardless of

<PAGE>

any present or future domicile or principal place of business of either Borrower
or Lender,  each Borrower  hereby consents and agrees that the Superior Court of
Fulton County, Georgia, or, at Lender's option, the United States District Court
for the Northern District of Georgia,  Atlanta Division, shall have jurisdiction
to hear and  determine  any  claims or  disputes  between  Borrowers  and Lender
pertaining to this  Agreement or to any matter arising out of or related to this
Agreement.  Each  Borrower  expressly  submits  and  consents in advance to such
jurisdiction  in any  action  or suit  commenced  in any  such  Court,  and each
Borrower  hereby  waives any  objection  which such 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.  Nothing in this Agreement shall be deemed or operate
to  affect  the  right of  Lender to serve  legal  process  in any other  manner
permitted  by law, or to preclude the  enforcement  by Lender of any judgment 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.

      11.16.  Waivers by Borrowers.  Each Borrower waives (i) the right to trial
              ---------------------
by jury (which  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 Lender on which such  Borrower  may in any way be liable and
hereby ratifies and confirms whatever Lender may do in this regard; (iii) notice
prior to taking  possession  or control of the  Collateral;  and (iv)  notice of
acceptance hereof.  Each Borrower  acknowledges that the foregoing waivers are a
material  inducement to Lender's entering into this Agreement and that Lender is
relying upon the foregoing  waivers in its future dealings with Borrowers.  Each
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.


<PAGE>




















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

ATTEST:                                   LITCHFIELD FINANCIAL CORPORATION
                                          ("Litchfield")

/s/ Amy S. Backiel                        By:  /s/ Heather A. Sica
------------------------------              ------------------------------- 
Amy S. Backiel, Vice President              Heather  A.   Sica,   Executive
Vice President
[CORPORATE SEAL]

ATTEST:                                   GREEN MOUNTAIN FUNDING CORP.
                                          ("Green Mountain")

/s/ Amy S. Backiel                        By:  /s/ Heather A. Sica
------------------------------              -------------------------------
Amy S. Backiel, Vice President              Heather  A.   Sica,   Executive
Vice President
[CORPORATE SEAL]

                                          Accepted in Atlanta, Georgia:

                                          GREEN TREE FINANCIAL SERVICING 
                                          CORPORATION
                                          ("Lender")

                                          By:  /s/ Chris Gouskos
                                             -----------------------------
                                              Title: Vice President







<PAGE>

                                                                  Exhibit 10.155

                     SECOND AMENDED AND RESTATED LOAN AND
                     ------------------------------------
                               SECURITY AGREEMENT
                               ------------------

SECOND  AMENDED AND  RESTATED  LOAN AND SECURITY  AGREEMENT  dated May 28, 1997,
among  BANKBOSTON,  N.A.,  f/k/a The First  National Bank of Boston,  a national
banking  association  with  its  head  office  at 100  Federal  Street,  Boston,
Massachusetts  02110 and with a place of business in Pittsfield,  Massachusetts,
as agent (the  "Agent"),  various  financial  institutions  as are or may become
parties  hereto   (collectively,   the  "Lenders"),   and  LITCHFIELD  FINANCIAL
CORPORATION,  a Massachusetts  corporation with a principal place of business in
Stamford, Vermont ("Borrower").

The Lenders as of the date of this  Agreement  are  BANKBOSTON,  N.A.  f/k/a The
First National Bank of Boston ("BankBoston") and FLEET BANK-NH ("Fleet").

his Second  Amended and Restated  Loan and Security  Agreement,  the Notes,  the
Collateral  Assignment of Contracts,  the Financing  Statements,  all as defined
herein, and all other documents and instruments executed in connection with this
Agreement, are collectively referred to as the "Loan Documents".

                             PRELIMINARY STATEMENT
                             ---------------------

Pursuant to an Amended and Restated Loan and Security Agreement dated October 2,
1996, as amended by Amendment No. 1 dated  December 26, 1996 and Amendment No. 2
dated April 4, 1997 (collectively,  the "Prior Agreement"), the Lenders provided
to Borrower a revolving  credit facility in the original  principal amount of up
to $30,000,000.

Borrower   desires  to  increase   Borrower's   revolving   credit  facility  to
$50,000,000,  and the Lenders  have agreed to offer  Borrower  revolving  credit
facilities in the aggregate amount of up to $50,000,000 (the "Loans").

This  Agreement  sets forth the terms and conditions of the Loans and amends and
restates in its entirety the Prior Agreement.

                                   AGREEMENT
                                   ---------

IT IS THEREFORE AGREED AS FOLLOWS:

1. DEFINED TERMS. In addition to terms defined elsewhere in this Agreement,  the
   --------------
following  terms  shall  have the  meanings  indicated  in this  Section  1. The
singular  shall  include the plural and the  masculine  gender shall include the
feminine and neuter and  vice-versa as the context  requires.  Accounting  terms
used herein shall be given their customary  meaning in accordance with generally
accepted accounting principles,  unless such terms are otherwise defined herein.
Terms defined in the Uniform Commercial Code as in effect in the Commonwealth of
Massachusetts  (the "UCC") shall be used herein as defined therein,  unless such
terms are otherwise defined herein.

1.1 "Assignee Lender" shall have the meaning provided in Section 11.7.1 herein.
     ---------------

<PAGE>

1.2  "Authorized  Officer"  shall mean an officer of Borrower  who has been duly
      -------------------
authorized  by  Borrower  to  execute  and  deliver  to  Agent   Borrowing  Base
Certificates  and other  certificates,  each of whom is listed on  Schedule  1.2
attached hereto, as such schedule may be amended by Borrower from time to time.

1.3  "Available  Consumer  Loan  Collateral  Amount"  shall  mean the  aggregate
      ---------------------------------------------
principal  amount  outstanding  from time to time of Uncommitted  Consumer Loans
pledged as Consumer Loan Collateral.

1.4 "Available  Dealer Loan Collateral  Amount" shall mean the sum of the Dealer
     -----------------------------------------
Loan Collateral Amounts for all Eligible Dealers.

1.5  "BankBoston Note" shall have the meaning provided in Section 2.1 herein.
      ---------------

1.6  "Borrowing  Base"  shall  mean at any time the sum of (i) 80 percent of the
      ---------------
aggregate of the Available Dealer Loan Collateral  Amount and (ii) 80 percent of
the aggregate of the Available  Consumer  Loan  Collateral  Amount and (iii) the
Excess Principal.

1.7 "Borrowing Base Certificate"  shall mean a certificate  substantially in the
     --------------------------
form of Exhibit 1.7 attached  hereto or in such form as shall be  acceptable  to
Agent and certifying  (a) the Available  Dealer Loan  Collateral  Amount (in the
aggregate and by individual  dealer),  the  Available  Consumer Loan  Collateral
Amount and the Excess  Principal;  (b) that all loans  constituting  Dealer Loan
Collateral  and  Consumer  Loan  Collateral  are not in  default;  and (c)  that
Borrower  knows of no defenses  assertable  against any loans  constituting  the
Dealer  Loan  Collateral  or  Consumer  Loan  Collateral.   Any  Borrowing  Base
Certificate  delivered  on the first day of a month  shall be  accompanied  by a
trial balance of the Consumer Loan Collateral acceptable to Agent.

1.8  "Collateral" shall have the meaning provided in Section 3.1 herein.
      ----------

1.9  "Collateral  Assignment  of Contracts"  shall have the meaning  provided in
      ------------------------------------
Section 3.3 herein.

1.10 "Collection Account" shall have the meaning provided in Section 2.9 herein.
      ------------------

1.11 "Committed  Consumer Loan  Collateral"  shall mean Consumer Loan Collateral
      ------------------------------------
securing a dealer loan pledged as Dealer Loan Collateral.

1.12  "Consolidated  Interest Expense" shall mean, with reference to any period,
       ------------------------------
all interest  charges  (excluding  amortization of debt discount and expense and
imputed interest on capitalized lease  obligations) for such period,  determined
on a consolidated  basis for Borrower and its  Subsidiaries  in accordance  with
generally accepted accounting principles consistently applied.

1.13  "Consolidated  Net  Income"  for any  period  shall mean the net income of
       -------------------------
Borrower  and its  Subsidiaries  for such period as  computed on a  consolidated
basis in accordance with generally accepted accounting  principles  consistently
applied, and, without limiting the foregoing,  after deduction from gross income
of all expenses  and  reserves,  including  reserves for taxes on or measured by
income, but excluding any extraordinary profits or losses and also excluding any
taxes on such extraordinary profit or loss.

<PAGE>

1.14 "Consumer Loan Collateral" shall have the meaning provided in Section 3.1.2
      ------------------------
herein.

1.15 "Consumer Loan Cover Sheet" shall mean a document  prepared by Borrower and
      -------------------------
executed  by an  Authorized  Officer  of  Borrower  indicating  the  outstanding
principal  amount of such consumer loan and certifying that (a) attached to such
cover  sheet  are the  Required  Consumer  Loan  Documents,  (b)  all  submitted
documents are consistent as to borrower  name,  property  address,  loan amount,
interest  rate  and  loan  term,  (c)  the  note  or  comparable  instrument  or
installment sales contract  evidencing such loan bears an original  signature or
signatures  which  appear to be those of the maker or  makers,  (d)  except  for
endorsements to Borrower or Agent or in blank, none of the documents contain any
irregular writings which appear to affect the validity thereof, (e) the loan has
all of the  characteristics  of an Eligible  Consumer  Loan;  and (f) (1) if the
collateral  securing  the loan shall be real  property,  the  assignment  of the
mortgage or  equivalent  security  instrument is in proper form for recording or
filing  in the  jurisdiction  where  the  collateral  is  located  and  would be
effective upon recording or filing, or (2) if the collateral  securing such loan
shall not be real property,  the assignment of the security  instrument creating
such  security  interest  is (i) in proper  form for filing in the  jurisdiction
where the  Collateral is located and would be effective upon recording or filing
or (ii) effective without recording or filing. On each Consumer Loan Cover Sheet
related to any  Uncommitted  Consumer  Loans,  Borrower  shall add the following
language:  "Borrower has good and marketable title to the consumer loans pledged
herewith free and clear of all liens,  mortgages,  pledges,  security interests,
encumbrances  or charges of any kind."  Borrower  shall be entitled to deliver a
Consumer  Loan  Cover  Sheet or Sheets  relating  to  multiple  consumer  loans;
provided that Borrower shall, at the time of delivery of any Collateral, deliver
at least one Consumer Loan Cover Sheet for each Eligible Dealer Loan relating to
Committed Consumer Loan Collateral securing such Eligible Dealer Loan.

1.16 "Dealer Loan  Collateral"  shall have the meaning provided in Section 3.1.1
      -----------------------
herein.

1.17 "Dealer Loan  Collateral  Amount"  shall mean with respect to each Eligible
      -------------------------------
Dealer the principal amount outstanding from time to time of any Eligible Dealer
Loan pledged as Dealer Loan Collateral, provided that the amount included in the
calculation of Dealer Loan  Collateral  Amount for any Eligible Dealer shall not
exceed the lesser of (a) such dealer's  Maximum Dealer Amount or (b) the greater
of (1)  $1,000,000  or (2) the  product  of (i) 20% times  (ii) the  outstanding
principal balance of the Loans.

1.18 "Dealer  Loan Cover  Sheet" shall mean a document  prepared by Borrower and
      -------------------------
executed by an Authorized  Officer of Borrower  indicating  (i) the  outstanding
principal  amount of such dealer loan and (ii) the outstanding  principal amount
of Consumer Loan  Collateral  securing such dealer loan and certifying  that (a)
attached to such cover sheet are the  Required  Dealer Loan  Documents,  (b) all
submitted  documents are  consistent as to dealer name and loan amount,  (c) the
note  evidencing  such  loan  bears  an  original  signature,   (d)  except  for
endorsements to Borrower or Agent or in blank, none of the documents contain any
irregular  writings which appear to affect the validity thereof and (e) the loan
has all of the characteristics of an Eligible Dealer Loan.

1.19  "Delinquency  Ratio"  shall mean for any  period the ratio of Total  Gross
       ------------------
Delinquencies to Total Loan Portfolio.

1.20 "EBITDA" shall mean, with reference to any period,  Consolidated Net Income
      ------
for such period plus all amounts  deducted in arriving at such  Consolidated Net
Income in respect of (i)  Consolidated  Interest  Expense for such period,  plus

<PAGE>

(ii)  federal,  state and local  income  taxes for such  period,  plus (iii) all
charges for depreciation of fixed assets and amortization or organizational  and
financing costs for such period, determined in each case on a consolidated basis
for  Borrower  and  its  Subsidiaries  in  accordance  with  generally  accepted
accounting principles consistently applied.

1.21 "Eligible  Consumer Loan" shall mean a loan to a consumer borrower with all
      -----------------------
of the following characteristics:

1.21.1  The loan shall be made to a  resident  of the  United  States who is the
occupant or owner of the collateral securing such loan, shall be payable in U.S.
dollars,  and  shall  be in  accordance  with  Borrower's  general  underwriting
criteria;

1.21.2 (i) The  collateral  securing  such loan  shall be one of the  following:
undeveloped  real property,  real property  improved by completed  single-family
residences,  real property improved by mobile homes or manufactured  housing, or
interests  in  so-called  time  share  units  acceptable  to Agent  and (ii) all
improvements located at the property shall be constructed in compliance with all
applicable laws and serviced by utilities necessary for their intended use;

1.21.3 (i) If the collateral securing such loan shall be real property, the loan
shall be  secured  by a valid  first  mortgage  lien of record on the  mortgaged
property (or similar first  priority lien created by deed of trust or equivalent
security  instrument) or (ii) if the Collateral  securing such loan shall not be
real  property,  the loan shall be secured by a valid  perfected  first priority
security  interest;  in either case, subject only to (a) liens for taxes not yet
due and payable, and (b) easements,  restrictions and encumbrances acceptable to
Agent and which do not  materially  affect the value of the  collateral for such
loan;
      1.21.4 If  pledged to Agent as  Consumer  Loan  Collateral,  the pledge by
Borrower to Agent of such loan and related rights is effective to grant to Agent
a first  priority  security  interest in such loan and  related  rights free and
clear of any liens or claims of any other person;

1.21.5 All  agreements  in  connection  with such loan are the legal,  valid and
binding  obligations  of the  consumer  borrower,  in full  force and effect and
enforceable in accordance with their terms;

1.21.6 The loan complies in all respects with all requirements of all applicable
state and Federal law, including, without limitation, state laws and regulations
governing sales of time share units,  applicable usury limitations,  real estate
settlement  procedures,  the Securities Act of 1933, the Securities Exchange Act
of 1934,  the Interstate  Land Sales Full  Disclosure  Act, the Consumer  Credit
Protection  Act of 1968,  the  Consumer  Leasing Act of 1976,  the Equal  Credit
Opportunity  Act,  the Truth in Lending  Act,  and  Regulation Z of the Board of
Governors of the Federal Reserve System;

1.21.7  All  applicable  recission  or  cancellation  periods  relating  to such
consumer  loan shall have expired,  no payments  shall be more than 60 days late
and no other defaults shall have occurred with respect to such loan;

1.21.8  Borrower has no knowledge or notice of any of the  following  conditions
existing or in connection  with the  collateral  securing  such loan:  hazardous
wastes or hazardous  substances  prohibited  by  applicable  law or  regulation,
asbestos or urea formaldehyde insulation, or any release of any of the foregoing
prohibited by applicable law or regulation;

<PAGE>

1.21.9 In connection  with each such loan pledged as Consumer  Loan  Collateral,
Borrower shall have delivered the Required Consumer Loan Documents; and

1.21.10  Such other characteristics as Agent may require from time to time.

1.22  "Eligible  Dealer"  shall mean each dealer  approved by Agent from time to
       ----------------
time in Agent's sole  discretion  to whom Borrower has or may loan money secured
by  Eligible  Consumer  Loans.  The  Eligible  Dealers as of the date hereof are
listed on Schedule 1.22 attached  hereto.  Borrower shall be entitled to propose
and Agent shall be entitled to accept new Eligible  Dealers without the need for
further amendment of this Second Restated Loan and Security Agreement.  Borrower
shall submit such documents and opinions as Agent in its sole  discretion  shall
require prior to Agent's  acceptance of any new Eligible Dealer.  The Collateral
protocol for such additional Eligible Dealers shall be established by Agent from
time to time.

1.23  "Eligible  Dealer  Loan"  shall  mean a loan  made by the  Borrower  to an
       ----------------------
Eligible Dealer with all of the following characteristics:

1.23.1  The  dealer  loan has been made in the  ordinary  course  of  Borrower's
business and is in accordance with Borrower's general underwriting criteria;

1.23.2 The amount outstanding on such dealer loan shall not exceed 85 percent of
the outstanding  principal amount in the aggregate of Eligible Consumer Loans in
which Borrower has a first priority  perfected  security  interest securing such
dealer loan;

1.23.3  The pledge to  Borrower  by the dealer of  Eligible  Consumer  Loans and
related  rights  as  security  for such  dealer  loan is  effective  to grant to
Borrower a perfected first priority  security interest in such Eligible Consumer
Loans  and  related  rights  free and  clear of any liens or claims of any other
person;

1.23.4 All agreements  entered into by the dealer in connection with such dealer
loan are the legal,  valid and binding  obligations of the dealer, in full force
and effect and enforceable in accordance with their terms;

1.23.5 The  agreements  between the dealer and  Borrower  related to such dealer
loan provide  that any loan for which a payment  shall be more than 60 days late
shall be  excluded  from  dealer's  borrowing  base and shall not be included in
calculation of collateral  used to determine  availability  of credit under such
dealer loan;

1.23.6 No defaults in payment or otherwise  shall have  occurred with respect to
such loan;

1.23.7 The loan complies in all respects with all requirements of all applicable
state and Federal law, including,  without limitation, if applicable, state laws
and regulations  governing sales of time share units,  usury  limitations,  real
estate  settlement  procedures,  the  Securities  Act of  1933,  the  Securities
Exchange  Act of 1934,  the  Interstate  Land Sales  Full  Disclosure  Act,  the
Consumer  Credit  Protection Act of 1968, the Consumer  Leasing Act of 1976, the
Equal Credit  Opportunity  Act, the Truth in Lending Act and Regulation Z of the
Board of Governors of the Federal Reserve System;

<PAGE>

1.23.8  In  connection  with each  such  dealer  loan  pledged  as  Dealer  Loan
Collateral,  Borrower  shall have  delivered to Agent the  Required  Dealer Loan
Documents; and

1.23.9  Such other characteristics as Agent may require from time to time.

1.24  "Event of Default" shall have the meaning provided in Section 8 herein.
       ----------------

1.25  "Excess Principal" shall have the meaning provided in Section 2.9 herein.
       ----------------

1.26  "Financial  Statements"  shall have the meaning  provided in Section 5.1.3
       ---------------------
herein.

1.27  "Financing  Statements"  shall have the  meaning  provided  in Section 3.5
       ---------------------
herein.

1.28  "Fleet Note" shall have the meaning provided in Section 2.1 herein.
       ----------

1.29  "Indebtedness" shall have the meaning provided in Section 3.1 herein.
       ------------

1.30 "Interest  Coverage Ratio" shall have the meaning  provided in Section 5.15
      ------------------------
herein.

1.31  "Leverage"  shall mean the ratio of total  indebtedness  as  reflected  on
       --------
Borrower's Financial Statements to Tangible Net Worth.

1.32 "Lender's  Percentage" shall mean, with respect to any Lender, a percentage
      --------------------
which shall be equal to the amount of such Lender's Loan divided by $50,000,000.

1.33 "Lock-Box Accounts" shall have the meaning provided in Section 2.8 herein.
      -----------------

1.34 "Loss Coverage  Ratio" shall mean for any period the ratio of (i) NIBT plus
      --------------------
(ii) Provision for Losses to Net Charge-Offs for the same period.

1.35 "Maturity  Date" shall mean April 30, 2000,  unless extended as provided in
      --------------
Section 2.7 herein.

1.36 "Maximum  Dealer  Amount" shall mean with respect to each Eligible  Dealer,
      -----------------------
the  lesser of (1) the lesser of (a) the  principal  amount  outstanding  of any
Eligible  Dealer Loan  pledged as Dealer Loan  Collateral,  or (b) 80% times the
Eligible  Consumer  Loans  securing  such dealer loan  pledged as Consumer  Loan
Collateral,  (2) the  greater of (c)  $1,000,000  or (d) the  product of (i) 20%
times (ii) the outstanding  principal  balance of the Loans and (3) the limit on
the Dealer Loan Collateral Amount from such dealer determined by Agent from time
to time in its sole discretion. The establishment of a Maximum Dealer Amount for
any dealer shall in no way limit the amount of dealer  loans which  Borrower may
pledge hereunder or impair the  effectiveness of the pledge or grant of security
interest in Collateral related to any dealer loans.

1.37 "Net Charge-Offs"  shall mean the amount of net charge offs as reflected on
      ---------------
Borrower's Financial Statements, less amounts charged to the purchase allocation
as reported to Agent in writing from time to time.

1.38  "NIBT"  shall mean net income  before  taxes as  reflected  on  Borrower's
       ----
Financial Statements.

<PAGE>

1.39  "Notes" shall have the meaning provided in Section 2.1 herein.
       -----

1.40  "Provision  for Losses"  shall mean  provision  for losses as reflected on
       ---------------------
Borrower's Financial Statements.

1.41  "Required  Consumer Loan  Documents"  shall mean with respect to each loan
       ----------------------------------
included within Consumer Loan Collateral, the following:

1.41.1 (i) Original promissory note or comparable instrument,  endorsed in blank
by the respective dealer or other payee, or if endorsed to Borrower, endorsed in
blank by an Authorized  Officer of Borrower or (ii) original  installment  sales
contract (a) in which Borrower has a perfected first priority  security interest
(b) accompanied by a copy of a recorded UCC financing statement or statements in
favor of Borrower  evidencing  Borrower's  perfected  security  interest in such
contract,  (c) in which Agent has a perfected first priority security  interest,
and (d) which is  adequately  described in recorded UCC  financing  statement or
statements in favor of Agent evidencing  Agent's perfected  security interest in
such contract;

1.41.2 (i) If the  collateral  securing  such loan shall be real  property,  the
original  or copy  time-stamped  by  appropriate  recording  office  (or in lieu
thereof other  evidence of recording  consistent  with  Borrower's  underwriting
practices  and  acceptable  to  Agent,  to be  replaced  as soon  as  reasonably
practicable with an original or time-stamped  copy) of the recorded  mortgage or
deed of trust or equivalent  security instrument  acceptable to Agent,  securing
the note or  installment  sales  contract  referred to in Section  1.419.1,  and
original or copy time-stamped by appropriate  recording office of all amendments
and  assignments  of such  mortgage  or deed of  trust  or  equivalent  security
instrument showing an unbroken chain of title from the originator to Borrower(or
in lieu thereof  copies of title reports or other  evidence of an unbroken chain
of title  consistent  with Borrower's  underwriting  practices and acceptable to
Agent), or (ii) if the collateral securing such loan shall not be real property,
original assignment of such collateral acceptable to Agent, securing the note or
installment sales contract referred to in Section 1.41.1,  and any amendments or
assignments  of the  same  showing  an  unbroken  chain  of  ownership  from the
originator to Borrower;

1.41.3 (i) If the collateral securing such loan shall be real property, original
assignment(s) of mortgage or equivalent security instrument in blank, or (ii) if
the  collateral  securing  such loan shall not be real  property,  (a)  original
assignment of non-real  estate  collateral in blank, in form ready for filing or
recording if applicable,  and accompanied by UCC-1 or UCC-3 financing  statement
if applicable,  and  acceptable to Agent or (b) if the collateral  securing such
loan shall be governed by a certificate  of title,  the original  certificate of
title (x)  endorsed in blank and in proper form for filing or  recording  or (y)
accompanied by executed assignment of title or change in ownership form;

1.41.4 (i) If the collateral  securing such loan shall be real  property,  title
insurance  policy,  if  obtained  by the dealer or  Borrower,  insuring  Agent's
interest as first mortgagee in the mortgaged property, in the full amount of the
pledged note, from a title company  approved by Agent, or equivalent  acceptable
to Agent (such as opinion from a attorney  acceptable to Agent that the mortgage
or equivalent  creates a first priority lien on the underlying  property subject
only to exceptions acceptable to Agent), or (ii) if the collateral securing such
loan  shall not be real  property,  if  requested  by Agent an  opinion  from an
attorney acceptable to Agent that the grant of security interest is effective to
grant to Agent a first  priority lien subject only to  exceptions  acceptable to
Agent;

<PAGE>

1.41.5 If requested by Agent,  original  notice to consumer  borrower  signed by
payee of note that payments  shall be made to Agent or its designee  ("Notice to
Maker");

1.41.6 If requested by Agent in connection  with each such loan which has at any
time been  subject to any security  interest,  pledge or  hypothecation  for the
benefit of any person, a certification or release by the former secured party in
form acceptable to Agent that such security interest has been released;

1.41.7  Consumer Loan Cover Sheet; and

1.41.8  Other documents required by Agent from time to time.

1.42  "Required  Dealer  Loan  Documents"  shall mean with  respect to each loan
       ---------------------------------
included within Dealer Loan Collateral, the following:

1.42.1 Original  promissory note, endorsed in blank by the respective dealer, or
if endorsed to Borrower, endorsed in blank by an Authorized Officer of Borrower;

1.42.2 Originals of the following  documents  related to the note referred to in
Section  1.42.1:  loan  agreements,  guaranties,  and  if  applicable  custodial
agreements;

1.42.3 Copies or originals of all other  documents  related to the note referred
to in Section 1.42.1 as may be requested by Agent from time to time,  including,
without  limitation,  assignments of purchase  agreements,  mortgages,  deeds of
trust, collateral assignment of agreements,  insurance policies, title insurance
policies,  subordination  agreements,  agency  agreements,  insurance  policies,
assignments of insurance policies, servicing agreements, corporate documents and
opinions of counsel;

1.42.4  If  requested  by Agent,  original  consent  by  dealer  to  pledge  and
assignment of dealer loan to Agent in form acceptable to Agent;

1.42.5 If requested by Agent,  original consents by any custodians or agents who
hold collateral securing such loan or who collect money related to such loan;

1.42.6  Original  unrecorded  UCC-3  assignments  in blank in form  suitable for
recording  for any  UCC-1  financing  statements  filed by dealer  and  original
unrecorded  assignments of mortgage or equivalent  security  instrument in blank
and in form  suitable  for  recording  for any  mortgages  in favor of  Borrower
granted by dealer;

1.42.7  Dealer Loan Cover Sheet; and

1.42.8  Other documents required by Agent from time to time.

1.43 "Required  Lenders" shall mean at any time Lenders holding at least 66 2/3%
      -----------------
of the then outstanding principal amount of the Notes.

<PAGE>

1.44 "Subsidiary"  shall mean any corporation or other entity of which more than
      ----------
fifty  percent  (50%)  of the  outstanding  voting  stock or  comparable  equity
interests (including interests as a limited partner in a limited partnership) is
at the time  directly or  indirectly  owned by  Borrower,  by one or more of its
Subsidiaries, or by Borrower and one or more of its Subsidiaries.

1.45  "Tangible  Net Worth"  shall  mean net worth as  reflected  on  Borrower's
       -------------------
Financial  Statements,  excluding  goodwill and all  intangibles,  but including
retained interests in loan sales.

1.46 "Total Gross  Delinquencies"  shall mean the aggregate  principal amount of
      --------------------------
loans  contained in the Total Loan  Portfolio for which  payments shall be 30 or
more days in arrears.

1.47 "Total Serviced Portfolio" shall mean the aggregate principal amount of the
      ------------------------
Borrower's entire loan portfolio, including loans serviced for others.

1.48  "Uncommitted  Consumer  Loans"  shall  mean  Eligible  Consumer  Loans not
       ----------------------------
constituting Committed Consumer Loan Collateral. In addition to the requirements
for Eligible  Consumer Loans,  for any  Uncommitted  Consumer Loans secured by a
pledge of  collateral  which shall (a) be real  property  related to a so-called
time share  interest or (b) not be real  property,  the first  required  monthly
payment  shall have been made in a timely  manner.  The Required  Consumer  Loan
Documents for  Uncommitted  Consumer  Loans pledged as Consumer Loan  Collateral
shall include,  in addition to those documents specified in Section 1.41, (i) an
appraisal of the Collateral securing such loan (or a statement that an appraisal
is not  required by  Borrower's  general  underwriting  criteria);  (ii) closing
opinion of an  attorney  acceptable  to Agent  addressed  to Agent or upon which
Agent  shall be  entitled  to  rely,  if  obtained  by  Borrower,  (iii) a title
insurance policy or equivalent as described in Section 1.41.4(i), if obtained by
Borrower;  and (iv) in  connection  with  each  Eligible  Consumer  Loan with an
outstanding principal balance of $100,000 or greater, a Notice to Maker.

2.  TERMS OF THE LOANS.
    -------------------

2.1 The Notes. Simultaneously with the execution of this Agreement, (a) Borrower
    ----------
is executing a Revolving Line of Credit Promissory Note payable to BankBoston in
the original principal amount of up to $30,000,000 (the "BankBoston  Note"), and
(b) Borrower is executing a Revolving Line of Credit  Promissory Note payable to
Fleet in the original  principal  amount of up to $20,000,000  (the "Fleet Note"
and collectively with the BankBoston Note, the "Notes").

2.2  Advances  on the  Loans.  Balances  outstanding  on the date  hereof on the
     ------------------------
$20,000,000  revolving  credit  facility  from  BankBoston  to Borrower (and any
overlines from BankBoston to Borrower) and on the $10,000,000  revolving  credit
facility from Fleet to Borrower (and any overlines from Fleet to Borrower) shall
be paid on the date  hereof by  advances on the Loans.  Borrower  shall  request
further  advances  from time to time in any manner  acceptable  to Borrower  and
Agent,  and Agent shall credit  advances by  depositing  such sums in Borrower's
account at Agent, Account Number 51233985. Immediately upon notice from Agent of
an advance,  each Lender shall  reimburse  Agent in an amount equal to the total
advance times such Lender's  Percentage.  Advances on the Loans shall be limited
in amount to no more than the  Borrowing  Base as reported  in a Borrowing  Base
Certificate  delivered to Agent and each Lender simultaneously with each request

<PAGE>

for an advance. By requesting an advance,  Borrower shall be deemed to represent
and warrant that the information in the most recent  Borrowing Base  Certificate
remains true and accurate as of the time of such request,  and that after giving
effect to the requested advance,  the outstanding  principal amount of the Loans
shall not exceed the Borrowing Base. In the event that the aggregate outstanding
principal  amount of the Loans  shall at any time exceed the  Borrowing  Base as
determined by Agent, Borrower shall immediately and without notice or demand pay
to Agent the amount of such excess. Borrower shall make payments on the Loans to
Agent,  and Agent shall  immediately  pay to each Lender an amount  equal to the
total payment times such Lender's Percentage.

2.3  Nonreceipt of Funds by Agent from Lender.  Unless Agent shall have received
     -----------------------------------------
notice  from any  Lender  prior to the date on which  such  Lender is to provide
funds to Agent for an advance to Borrower  that such Lender shall have  demanded
its Note,  Agent may assume that all Lenders shall make such funds  available to
Agent on the date of such  advance,  and Agent in its sole  discretion  may, but
shall not be obligated to, in reliance upon such  assumption,  make available to
Borrower on such date a  corresponding  amount.  If and to the extent that Agent
shall make an advance to Borrower and any Lender shall not immediately reimburse
Agent,  such Lender  shall  repay to Agent  forthwith  on demand  such  Lender's
Percentage of such advance together with interest thereon, for each day from the
date such amount is made  available  to  Borrower  until the date such amount is
repaid to Agent, at the customary rate set by Agent for the correction of errors
among banks for three  business days and  thereafter at the Agent's base rate as
announced  from  time  to  time.  If any  Lender  shall  not pay  such  Lender's
Percentage of any advance  forthwith upon Agent's demand  therefor,  Agent shall
promptly notify  Borrower,  and Borrower shall  immediately  repay to Agent such
amount  with  interest  thereon,  for each day from the date such amount is made
available to Borrower until the date such amount is repaid to Agent, at the rate
of interest provided in the Notes.

2.4Nonreceipt of Funds by Agent from Borrower.  Unless Agent shall have received
   -------------------------------------------  
notice from  Borrower  prior to the date on which any payment is due to Agent or
Lenders  hereunder  that Borrower will not make such payment in full,  Agent may
assume  that  Borrower  has made such  payment in full to Agent on such date and
Agent in its sole  discretion  may, but shall not be  obligated  to, in reliance
upon such assumption, cause to be distributed to each Lender on such due date an
amount equal to the amount then due such Lender.  If and to the extent  Borrower
shall not have so made such  payment in full to the  Agent,  each  Lender  shall
repay to Agent  forthwith  on demand  such  amount  distributed  to such  Lender
together  with  interest  thereon,  for each day from the date  such  amount  is
distributed  to such  Lender  until the date such  Lender  repays such amount to
Agent,  at the  customary  rate set by Agent for the  correction of errors among
banks  for  three  business  days and  thereafter  at the  Agent's  base rate as
announced from time to time.

2.5 Borrowing Base Certificates.  Borrower shall submit to Agent and each Lender
    ----------------------------
a Borrowing Base  Certificate  (a) from time to time as requested by Agent;  (b)
simultaneously with each request for an advance on the Loans, (c) simultaneously
with each request for a release of  Collateral,  and (d) weekly at any time that
any amounts are outstanding on the Loans.

2.6  Commitment  Fee.  On January 1, April 1, July 1 and October 1 of each year,
     ----------------
Borrower shall pay to Agent a commitment fee equal to one-quarter of one percent
(.25%) per annum times the  average  daily  unused  balance of the Loans for the
preceding quarter, as calculated by Agent.

2.7 Extension.  At least ninety days prior to (i) the first  anniversary of this
    ---------- 
Agreement and (ii) each anniversary of this Agreement thereafter, Borrower shall
be entitled to request by notice to Agent and Lenders that the Maturity  Date be

<PAGE>

extended for an additional  year. Agent and Lenders in their sole discretion may
extend the Maturity  Date.  Unless the Agent  notifies  Borrower  that Agent and
Lenders  shall  extend the Maturity  Date within  sixty days after  receipt of a
request to extend the Maturity Date,  then the Loans shall be due and payable on
the  Maturity  Date or earlier as  provided  herein or in the Notes  without any
extension.

2.8 Lock-Box  Accounts.  Pursuant to lock-box  agreements  acceptable  to Agent,
    -------------------
Agent shall  establish two lock-box  accounts (the "Lock-Box  Accounts") at Bank
One or other financial  institution  acceptable to Agent into which all payments
or proceeds with respect to any  Collateral  shall be deposited.  Borrower shall
deposit any  payments or proceeds  with  respect to the  Collateral  received by
Borrower into one of the Lock-Box Accounts or the Collection  Account.  Borrower
shall cause each servicer which  collects or processes  payments with respect to
the  Collateral  to deposit such  payments  into one of the  Lock-Box  Accounts.
Borrower and Agent shall cause the financial  institution  at which the Lock-Box
Accounts shall be located to transfer to the Collection Account by wire transfer
on a schedule  approved by Agent but no less  frequently than once each week all
funds in the Lock-Box Accounts.

2.9  Collection  Account.  Pursuant to a Collection  Account  Agreement  between
     --------------------
Borrower  and  Agent  entered  into  simultaneously  herewith,   Borrower  shall
establish a collection account with Agent (the "Collection  Account").  Borrower
shall ensure that all payments and  proceeds  from the  Collateral  from time to
time shall be paid into the Collection Account.

2.9.1 All  payments  into the  Collection  Account  which  constitute  principal
payments shall be applied to reduce the principal balance of the Loans; provided
that for any Loans for which the Borrower  has selected the Adjusted  Eurodollar
Rate (as  defined  in the  Note),  such  principal  amounts  ("Excess  Principal
Amounts") shall be retained in the Collection Account, and such Excess Principal
Amounts  shall be applied  to reduce  the Loans  only at the end of an  Interest
Period (as defined in the Notes). All payments into the Collection Account which
constitute  interest  payments  shall be  applied  to the  monthly  payments  of
interest and other charges due pursuant to the Notes and this Agreement.

2.9.2  Borrower  shall  provide to Agent such reports as Agent shall  require to
identify  the  allocations  of funds paid into the  Collection  Account  between
interest and principal,  including,  without  limitation,  monthly  reports from
servicers of the loans which  constitute  Collateral.  Any amounts paid into the
Collection  Account and not  identified to Agent's  satisfaction  to be interest
payments shall be considered to be principal  payments and the Agent shall apply
such payments to reduce the principal balance of the Loans.

2.9.3  After each  monthly  payment of  interest on the Loans as provided in the
Notes,  Borrower shall be entitled to withdraw excess interest  amounts from the
Collection  Account with Agent's  approval and by such  procedures  as Agent and
Borrower shall determine from time to time.


3.  SECURITY INTERESTS; COLLATERAL; GUARANTIES
    ------------------------------------------

3.1 Grants of Security Interest. In order to secure payment of the Notes and the
    ----------------------------
performance  of the  obligations  of the Borrower  under this  Agreement and all
other Loan  Documents  and all  liability  to Agent and each Lender  jointly and
severally,  now  existing or which may  hereafter be incurred or arise by future
advances or otherwise, direct or indirect, absolute or contingent (collectively,
the  "Indebtedness"),  simultaneously  with  the  execution  of this  Agreement,
Borrower is granting to Agent individually and as Agent for each Lender security
interests in the following (collectively, the "Collateral"):

<PAGE>

3.1.1  Dealer  Loans.  From time to time  Borrower  shall  deliver  to Agent the
       --------------
Required  Dealer Loan  Documents  for dealer  loans  selected by  Borrower,  and
Borrower hereby pledges to Agent and grants to Agent a security  interest in all
of Borrower's  right,  title and interest in each such dealer loan, now existing
or hereafter arising,  the original promissory note for which shall from time to
time be in the possession of Agent (collectively, "Dealer Loan Collateral").

3.1.2  Consumer  Loans.  From time to time  Borrower  shall deliver to Agent the
       ----------------   
Required  Consumer Loan Documents for consumer  loans selected by Borrower,  and
Borrower hereby pledges to Agent and grants to Agent a security  interest in all
of Borrower's right, title and interest in each such consumer loan, now existing
or hereafter arising,  the original  promissory note,  comparable  instrument or
installment  sales  contract  for  which  shall  from  time  to  time  be in the
possession of Agent or its agents (collectively, "Consumer Loan Collateral").

3.1.3 Related Rights. Borrower hereby grants to Agent a security interest in the
      ---------------
following  rights now  existing  or  hereafter  arising  related to Dealer  Loan
Collateral and Consumer Loan Collateral (collectively, the "Related Rights"):

3.1.3.1  Rights Under  Related  Documents.  All of Borrower's  right,  title and
         ---------------------------------
interest  in and under any  documents  related  to each  such  loan,  including,
without  limitation,  all promissory  notes or other agreements for payment (and
specifically  including  the right to collect all  payments due pursuant to such
notes  or  agreements),  loan  agreements,  mortgages,  deeds  of trust or other
security documents,  guaranties,  insurance policies (and specifically including
the  right to  assert  and  collect  any  claims  thereunder),  title  insurance
policies,  subordinations,  custodial agreements,  agency agreements,  servicing
agreements,   corporate  documents,   appraisals,  site  assessments,   surveys,
opinions, instruments, drafts, acceptances, and chattel paper;

3.1.3.2 Rights in Collateral  Securing Loans. All of Borrower's right, title and
        -------------------------------------
interest in any  collateral  pledged to Borrower  or in which  Borrower  has any
lien, mortgage or security interest in connection with each such loan.

3.1.3.3 Take-Out Commitments. To the extent that such rights are assignable, all
        ---------------------
of Borrower's rights (but not obligations)  under any agreements related to each
such loan under which any party agrees to purchase such loan or any underwriting
agreements related to such loan and all rights to deliver such loan to investors
and purchasers pursuant thereto and all proceeds resulting therefrom;

3.1.3.4 Servicing Rights. To the extent that such rights are assignable,  all of
        -----------------
Borrower's  rights to  administer,  service and  collect  each such loan and all
rights to payment therefor;

3.1.3.5 Dealer Claims.  All of Borrower's  rights against dealers or others from
        --------------
whom  it has  acquired  each  such  loan or  security  interests  in such  loan,
including, without limitation, all payments, rights to receive payment or retain
money on account of loans returned, charged back or repurchased by the dealer or
others from whom Borrower has acquired  such loan,  and rights under any related
guaranties or letters of credit;

<PAGE>

3.1.3.6 Records and Cabinets.  All of Borrower's related documentation and other
        ---------------------
supporting  evidence related to each such loan or other  Collateral,  including,
without limitation,  computer programs, disks, tapes and related electronic data
processing media, applications,  account cards, payment records, correspondence,
insurance  certificates,  books of account,  ledgers,  and cabinets in which the
same are reflected or maintained;

3.1.3.7 Collection  Account;  Lock-Box Accounts.  The Collection Account and all
        ----------------------------------------
funds and proceeds from time to time in each of the  Collection  Account and the
Lock-Box Accounts; and

3.1.3.8 Other Related Rights and Receivables. All of Borrower's right, title and
        -------------------------------------
interest  in any other  rights  related  to each such loan,  including,  without
limitation,  accounts,  accounts  receivable,  contract  rights,  pre-authorized
account debit agreements, and general intangibles.

3.1.4  Proceeds,  Etc.  With  respect  to each of the  Dealer  Loan  Collateral,
       ---------------
Consumer  Loan  Collateral,   and  Related  Rights,   all  accessions   thereto,
substitutions and replacements  therefor,  additions,  renewals and replacements
thereof,  all  proceeds  and  products  from  the  sale,  exchange,  collection,
foreclosure,  liquidation or other  disposition of any of the foregoing and from
any such proceeds or products, and any proceeds of insurance related thereto.

3.2  Collateral Procedures.
     ----------------------

3.2.1  Delivery of Collateral.  Borrower shall deliver to Agent Required  Dealer
       -----------------------
Loan  Documents and Required  Consumer Loan  Documents from time to time to such
locations  and in such manner  acceptable  to Agent as Borrower  and Agent shall
determine.  With  the  prior  consent  of Agent  in each  instance,  in its sole
discretion,  Borrower shall be entitled to effect  delivery to Agent by delivery
to a custodian  approved by Agent acting on Agent's behalf. All dealer loans and
consumer  loans  delivered  by  Borrower to Agent  shall be  accompanied  by the
Required  Dealer  Loan  Documents  or  the  Required  Consumer  Loan  Documents,
respectively,  and  Borrower  shall  be  deemed  to  represent  and  warrant  in
connection  with all such  loans  delivered  to  Agent  that the  certifications
required to be included  in the Dealer  Loan Cover Sheet and the  Consumer  Loan
Cover  Sheet,  respectively,  are  true  even if no such  cover  sheet  shall be
delivered by Borrower.  Borrower shall  promptly  deliver to Bank any additional
documents  related to any Dealer Loan  Collateral  or Consumer  Loan  Collateral
which  Borrower  acquires  after  delivery to Agent of the Required  Dealer Loan
Documents or the Required  Consumer  Loan  Documents.  After  delivery to Agent,
Agent shall utilize custodial  services  acceptable to Agent, and Borrower shall
reimburse  Agent for all of Agent's  costs and  expenses  therefor.  Some of the
procedures for delivery of Dealer Loan  Collateral and Consumer Loan  Collateral
are set out more  fully on  Schedule  3.2.1  attached  hereto  and  incorporated
                            ---------------
herein, as amended from time to time.

3.2.2  Agent's  Obligations.  Agent shall be under no obligation to review or in
----------------------------
any manner approve any Collateral delivered to Agent from time to time, although
nothing  herein shall preclude Agent from  conducting  whatever  review it deems
appropriate.  Agent may in its  discretion  require  Collateral  to be delivered
three business days prior to any advance for which such Collateral shall be part
of the Borrowing Base. Agent shall have no  responsibility  for taking any steps
necessary  to  preserve  rights  against  other  parties  or  any  other  rights
pertaining to Collateral. Agent shall not be required to perfect or maintain the
perfection  of its security  interests.  No loss of or damage to any  Collateral
shall  release  Borrower  from the  Indebtedness.  At any time after an Event of
Default,  Agent shall be entitled to, but shall not be  obligated  to, take such
action as it shall deem appropriate at Borrower's  expense to collect or enforce

<PAGE>

any loan  pledged to Agent  hereunder  which shall be in default and Agent shall
not be liable to  Borrower  for any  action  or  omission  taken by Agent in the
collection  or  enforcement  of  such  loans.  Agent  shall  not  be  liable  or
responsible  in any  way  for  any  loss  or  damage  to the  Collateral  or any
diminution in the value thereof, except if caused by Agent's gross negligence or
willful misconduct.  Agent shall not be liable or responsible in any way for any
act of any  custodian,  carrier or any other person  whatsoever,  and all of the
same shall be at Borrower's  sole risk.  Agent shall not be responsible  for any
excise,  property or other taxes  related to the  Collateral or the sale thereof
and all such  taxes  shall be the  responsibility  of  Borrower.  The  grants of
security interest herein shall not obligate or be construed to obligate Agent to
perform any of the terms  contained in the agreements  constituting  Dealer Loan
Collateral  or Consumer  Loan  Collateral  or  otherwise to impose any duty upon
Agent with respect to the same.

3.2.3  Release of  Collateral.  At  Borrower's  request  and in the absence of a
       -----------------------
default  or  event  of  default,  Agent  shall  release  Collateral  in  Agent's
possession from time to time in the manner  instructed by Borrower,  but only if
after such  release  the  outstanding  principal  balance of the Loans shall not
exceed the Borrowing  Base, as shown on a Borrowing Base  Certificate  delivered
simultaneously with a request for release.

3.2.4 Servicing;  Collection of Payments. Prior to an Event of Default, Borrower
      -----------------------------------
and its agents  shall  continue to service  and  administer  loans  constituting
Collateral  in the  ordinary  course of  business;  provided  that  proceeds and
payments  are paid as required by Section 2.9 herein.  Upon the  occurrence  and
continuation of an Event of Default, Agent shall be entitled (but not obligated)
to assume the  administration and servicing of such loans (after giving required
notices to borrowers).

3.3  Assignment  of  Contracts.   Simultaneously  with  the  execution  of  this
     --------------------------
Agreement,  Borrower  shall assign to Agent  individually  and as Agent for each
Lender all of Borrower's rights in contracts constituting Collateral,  including
without  limitation,  contracts  with dealers,  pursuant to a Second Amended and
Restated  Collateral  Assignment  of Contracts  (the  "Collateral  Assignment of
Contracts") acceptable to Agent.

3.4 Further  Security.  Borrower  hereby grants to Agent and each Lender a first
    ------------------
lien security  interest in any and all property  which is or may hereafter be in
the  possession  of Agent or any  Lender  in any  capacity,  including,  without
limitation,  all moneys owed, or to be owed, by Agent or any Lender to Borrower.
Without limiting any other right of Agent or any Lender,  and without  requiring
Agent or any  Lender  to first  proceed  against  any other  security  interest,
whenever Agent or any Lender has the right to declare the Notes,  or any of them
to be immediately due and payable (whether or not it has so declared),  Agent or
Lenders,  at their  option,  may set off  against the  Indebtedness  any and all
moneys then owed by Agent or any Lender to Borrower in any capacity,  whether or
not due; and Agent or Lenders  shall be deemed to have  exercised  such right of
set off immediately at the time of such election even though any charge therefor
is made or entered on Agent's or Lender's records subsequent thereto.

3.5 Filing and Recording.  Borrower  shall,  at its cost and expense,  cause all
    ---------------------
instruments  and documents  evidencing the security  interests given pursuant to
this Agreement,  including,  without limitation, UCC-1 financing statements (the
"Financing  Statements")  to  be  duly  recorded  and/or  filed  in  all  places
necessary,  in the opinion of Agent, to perfect and protect the lien or security
interest  of Agent and  Lenders . At Agent's  request,  Borrower  shall,  at its
expense,  cause all assignments of mortgages or equivalent and UCC-3 assignments
included in the Required  Dealer Loan  Documents and the Required  Consumer Loan

<PAGE>

Documents  to be  recorded  or filed in all places  necessary  in the opinion of
Agent to perfect the interests of Agent and Lenders. Borrower hereby irrevocably
designates  Agent,  its  agents,  representatives  and  designees  as agents and
attorneysinfact  for  Borrower  to sign on  behalf  of  Borrower  and  file  any
financing  statement  or  extension  of  financing  statement  in respect of any
security interest created pursuant to this Loan and Security Agreement which may
at any time be  required or which,  in the opinion of Agent,  may at any time be
desirable.  In the event that any rerecording or refiling thereof (or the filing
of any  statement)  is  required  to protect or  preserve  such lien or security
interest hereunder, Borrower shall at its cost and expense, cause the same to be
rerecorded  and/or  refiled  at the time and in the manner  requested  by Agent.
Borrower  shall pay on demand  all  reasonable  costs and  expenses  of Agent in
connection with any such filing and recording.

4.  REPRESENTATIONS AND WARRANTIES
    ------------------------------

In  connection  with the  execution of this Loan and Security  Agreement and the
Loan  Documents  and to induce the Lenders to make the Loans,  and to induce the
Agent to act as agent,  Borrower  represents  and warrants  (and, so long as any
Indebtedness  shall remain  outstanding shall be deemed to represent and warrant
continuously) to Agent and Lenders jointly and severally as follows:

4.1 Authority; No Violation of Agreements.  Borrower is duly organized,  validly
    --------------------------------------
existing  and  in  good  standing  under  the  laws  of  the   Commonwealth   of
Massachusetts  and under the laws of every  state in which  the  conduct  of its
business  requires it to so qualify or be licensed,  except where the failure to
be so qualified and in good standing does not have a material  adverse affect on
Borrower's  financial  condition or on Borrower's ability to exercise its rights
in any Consumer Loan  Collateral or Dealer Loan  Collateral.  Borrower has filed
all documents and registrations,  including tradename registrations, required by
the laws of the  Commonwealth  of  Massachusetts,  the State of Vermont  and all
other states in which the conduct of its  business  requires it to so qualify or
be licensed,  except where the failure to be so qualified  and in good  standing
does not have a material adverse affect on Borrower's  financial condition or on
Borrower's  ability to exercise its rights in any Consumer  Loan  Collateral  or
Dealer Loan Collateral.  Schedule 4.1,  attached hereto and incorporated  herein
                         ------------
contains a list of all locations  where  Borrower is qualified and duly licensed
to conduct business. Borrower has the power and authority to (a) own and operate
its  properties  and conduct its  business  and (b) execute and deliver the Loan
Documents and perform the transactions  contemplated  thereby. The execution and
delivery  of  the  Loan  Documents  and  the  performance  of  the  transactions
contemplated  thereby (i) have been duly  authorized by all necessary  corporate
action and (ii) do not and will not  constitute a breach or violation of (a) any
mortgage,  deed of trust,  lease,  loan or credit  agreement,  trust  agreement,
bylaws, shareholders agreement or other instrument or contract to which Borrower
is a  party  or  by  which  it  may  be  bound  or  affected  or  (b)  any  law,
administrative regulation or court decree or any obligation by which Borrower is
bound. The consent or approval of any governmental authority is not required for
Borrower to execute and deliver the Loan Documents and perform the  transactions
contemplated thereby. Borrower is not in default under any indenture,  mortgage,
deed of trust,  agreement or other instrument to which it is a party or by which
it may be bound or affected.

4.2  Shareholders;  Subsidiaries.  Schedule 4.2 attached hereto and incorporated
     ----------------------------
herein  contains a list of all  Borrower's  Subsidiaries  and the  percentage of
issued and outstanding  shares of each class of capital stock owned by Borrower.
Each Subsidiary is duly organized,  validly  existing and in good standing under

<PAGE>

the laws of its state of  incorporation  and in every state in which the conduct
of its  business  requires  it to so qualify or be  licensed,  except  where the
failure to be so qualified and in good standing does not have a material adverse
affect on Borrower's  financial  condition or on Borrower's  ability to exercise
its rights in any Consumer Loan  Collateral or Dealer Loan  Collateral.  No such
subsidiary has any ownership or security interest in the Collateral.

4.3 Validity of Loan Documents.  This Loan and Security  Agreement and all other
    ---------------------------
Loan  Documents  contemplated  hereby  are valid,  binding  and  enforceable  in
accordance with their terms.

4.4 Absence of Actions.  There is no pending or threatened  action or proceeding
    -------------------
against or affecting Borrower before any court, governmental agency, arbitrator,
or otherwise  which may, in one case or in the aggregate,  materially  adversely
affect the validity or  enforceability of this Loan and Security  Agreement,  or
the  priority  of the lien  thereof,  or the  financial  condition,  operations,
properties,  or business of Borrower,  or which would prevent or impair Borrower
from  complying  with or performing any of the provisions of this Loan Agreement
or the other Loan  Documents.  Borrower  is not in default  with  respect to any
statute, rule, judgment, decision, order, writ, injunction, decree, or demand of
any court or any governmental authority.

4.5 Good Title to Borrower's Property. Borrower has good and marketable title to
    ----------------------------------
the  Collateral  free  and  clear of all  liens,  mortgages,  pledges,  security
interests,  encumbrances and charges of any kind, except for security  interests
granted  hereunder or disclosed on Schedule 4.5 attached hereto and incorporated
herein,  and Borrower shall defend the Collateral against all claims and demands
of all persons at any time claiming the same or any interest  therein adverse to
Agent or Lenders.  Except for liens  disclosed on Schedule 4.5, this  Agreement,
the  Collateral  Assignment  of  Contracts,  the  Financing  Statements  and the
delivery  to Agent  from time to time of  Required  Dealer  Loan  Documents  and
Required Consumer Loan Documents create valid, perfected first priority security
interests in the  Collateral.  Upon  recording or filing of the  assignments  of
mortgage,  UCC-3 financing  statements,  or other documents  delivered to Agent,
Agent will have a valid,  perfected  first  priority  security  interest  in all
collateral  securing the loans  pledged as Consumer Loan  Collateral  and Dealer
Loan Collateral.

4.6 Assignability.  Each Required Dealer Loan Document delivered and/or assigned
    --------------
to Agent in connection with each loan pledged as Dealer Loan Collateral and each
Required Consumer Loan Document delivered and/or assigned to Agent in connection
with each loan pledged as Consumer Loan  Collateral  contains no prohibitions on
assignment  (other than  prohibitions  which have been waived with all necessary
consents  obtained),  and upon the  exercise  of Agent's or  Lenders'  rights as
secured party,  Agent or Lenders shall be entitled to the same benefits pursuant
to each such document as Borrower is entitled.

4.7 Taxes.  Borrower  has filed or caused to be filed all  federal,  state,  and
    ------
local  tax  returns  required  to be filed and has paid or caused to be paid all
taxes, assessments,  and governmental charges and levies thereon,  including any
interest and penalties,  to the extent the same have been due.  Borrower has set
up reserves  which are  believed  by Borrower to be adequate  for the payment of
such  taxes  for the years  that have not been  audited  by the  respective  tax
authorities.  Nothing  contained in this subsection  shall prevent Borrower from
contesting in good faith any tax assessment assessed against Borrower so long as
adequate reserves for payment of the same have been made and verified to Agent.

4.8 Financial Condition.  The balance sheets,  statements of income and retained
    --------------------
earnings, federal tax returns, and other financial statements and financial data
of Borrower  furnished  to Agent to induce  Agent and Lenders to enter into this
Loan and Security  Agreement  are  complete  and correct and fairly  present the

<PAGE>

financial condition of Borrower,  as of the dates thereof and the results of the
operations of Borrower and its Subsidiaries,  if any, for the periods covered by
such statements, all in accordance with generally accepted accounting principles
consistently  applied.  There are no liabilities of Borrower or any  subsidiary,
fixed or  contingent,  which are material but are not reflected in the financial
statements and notes thereto supplied to Agent and Lenders. Borrower has paid no
dividends  and  has  made  no  distributions   (of  cash  or  property)  to  its
shareholders  or partners  since the date of such  financial  statements,  which
distributions are not reflected in the financial  statements.  There has been no
material adverse change in the business,  operations or condition,  financial or
otherwise,  of Borrower since the date of the most recent  financial  statements
delivered to Agent.

4.9 No  Untrue  or  Omitted  Statements.  No part of the Loan  Documents  or any
    ------------------------------------
certificate  or statement  furnished by or on behalf of Borrower to Agent or any
Lender  contains or shall contain any material  misstatement of fact or omits to
state a  material  fact or any fact  necessary  in order to make the  statements
contained  herein or therein not  misleading.  To the best knowledge of Borrower
there is no fact (other  than facts  relating  to general  economic  conditions)
which  materially   adversely   affects  the  business,   operations,   affairs,
conditions,  properties or assets of Borrower  which has not been set forth in a
document, certificate or statement furnished to Agent prior to or on the date of
delivery hereof.

4.10 Location of Borrower's Offices and Records.  The chief place of business of
     -------------------------------------------
Borrower and the office where Borrower  keeps its records  concerning any of the
Collateral is located at Stamford, Vermont.

4.11  Operation  of  Business.   Borrower   possesses  all  licenses,   permits,
      ------------------------
franchises, patents, copyrights,  trademarks, and tradenames, or rights thereto,
necessary to conduct Borrower's  business  substantially as now conducted and as
presently proposed to be conducted,  and is not in violation of any valid rights
of others with respect to any of the  foregoing.  The  operation  of  Borrower's
business  complies  with all zoning,  environmental,  public  health and safety,
banking, securities, lending and other similar laws and regulations.

4.12 Financing  Statement  Filing  Locations.  Schedule 4.12 attached hereto and
     ----------------------------------------
incorporated herein lists the locations where the Financing Statements have been
or will be filed.  Those  locations are the only locations  necessary for filing
the  Financing  Statements  in order to perfect the  security  interests  in the
Collateral  described  therein  capable  of being  perfected  by the  filing  of
financing statements.

4.13 Survival.  Borrower  understands  and agrees that Agent and each Lender are
     ---------
relying upon the above  representations and warranties in extending the Loans to
Borrower.  The foregoing  representations  and warranties shall be continuing in
nature  and  shall  remain  in full  force  and  effect  until  such time as the
Indebtedness shall be paid in full, or until this Agreement shall be terminated,
whichever is the last to occur.

5.  AFFIRMATIVE COVENANTS.
    ----------------------

Borrower  covenants and agrees with Agent and each Lender that,  except with the
prior written  consent of Agent (which shall not be unreasonably  withheld),  so
long as any of the Notes or any Indebtedness shall remain outstanding,  in whole
or in part,  or Agent or any Lender  shall have any  commitment  under this Loan
Agreement, Borrower shall comply with each of the following covenants:

<PAGE>

5.1 Financial Statements and Other Information. Borrower shall furnish to Agent:
    -------------------------------------------

5.1.1 Audited  Annual  Statement of Borrower.  Within 90 days after the close of
      ---------------------------------------
each  fiscal  year,  audited  consolidated   financial  statements  relating  to
Borrower,  including a balance sheet,  statement of income and retained earnings
as at the end of that fiscal year setting  forth  corresponding  figures for the
previous fiscal year in comparative  form, all such statements to be prepared in
accordance with generally accepted accounting principles consistently applied by
an independent  certified public accountant acceptable to Agent, and accompanied
within 120 days after the close of each fiscal year by copies of all  management
letters from such accountant to Borrower.

5.1.2  Quarterly  Statement of Borrower.  Within 45 days after the close of eac
       ---------------------------------
fiscal  quarter,  copies of 10Q reports,  or if such reports  shall no longer be
prepared, unaudited financial statements in the form described in Section 5.1.1.

5.1.3 Tax Returns.  Within 30 days after filing, Borrower shall furnish to Agent
      ------------
a copy of its  federal  income tax return,  with all  schedules.  The  financial
statements  referred  to in  Sections  5.1.1,  5.1.2 and 5.1.3 are  collectively
referred to herein as "Financial Statements".

5.1.4 Dealer Credit  Information.  Promptly  after  completion,  Borrower  shall
      ---------------------------
deliver to Agent copies of its internal  credit  write-ups and dealer  financial
statements and regular  updates of the same and such other  information as Agent
may request from time to time regarding Eligible Dealers. Promptly upon receipt,
Borrower  shall deliver to Agent all borrowing  base  certificates  delivered to
Borrower by dealers related to loans pledged as Dealer Loan Collateral.

5.1.5 Additional Information. With reasonable promptness, such other information
      -----------------------
relating to the Collateral, and the business, operations and financial condition
of Borrower  as Agent or any Lender may  reasonably  request  from time to time.
Agent and each  Lender,  pursuant  to an  authorized  request  and  after  prior
notification  to  Borrower,  are  hereby  authorized  to  deliver  a copy of any
financial  statement  or  any  other  information   relating  to  the  business,
operations or financial  condition of Borrower which may be furnished to them or
come  to  their  attention  pursuant  to this  Agreement  or  otherwise,  to any
regulatory body or agency having jurisdiction over Agent or any Lender or to any
person which has, or shall have any right or obligation to succeed to all or any
part of Agent's or Lender's interest in this Loan and Security Agreement.

5.2  Statements  as to Defaults and  Computations.  With each of the  statements
     ---------------------------------------------
referred  to in  Sections  5.1.1 and 5.1.2  hereof,  an  Authorized  Officer  of
Borrower shall certify to Agent (1) the Interest  Coverage Ratio; (2) Borrower's
Leverage;  (3) Borrower's Loss Coverage Ratio; (4) Borrower's  Delinquency Ratio
and (5) that (a), as of the date of the such  statements,  no event has occurred
and is continuing to occur and no condition  exists which  constitutes or, after
notice or lapse of time or both,  would constitute a default or event of default
under any of the Loan  Documents  or (b), if any such event has  occurred and is
continuing or such condition exists, such statement shall specify the nature and
period of  existence  thereof and the action  proposed to be taken with  respect
thereto.  Borrower shall immediately give notice to Agent upon the occurrence of
an Event of Default.

5.3 Taxes and  Claims.  Borrower  shall  duly pay and  discharge  (a) all taxes,
    ------------------
assessments  and  governmental  charges upon or against it or its  properties or
assets prior to the date on which penalties  attach  thereto,  unless and to the

<PAGE>

extent  that  such  taxes  are  being  diligently  contested  in good  faith  by
appropriate proceedings, and appropriate reserves therefor have been established
with the  consent  of Agent,  and (b) all  lawful  claims,  whether  for  labor,
materials,  supplies, services or anything else which could, if unpaid, become a
lien or charge upon the  Collateral,  unless and to the extent that the same are
being  diligently  contested in good faith and by  appropriate  proceedings  and
appropriate reserves therefor have been established with the consent of Agent.

5.4  Insurance.
     ----------

5.4.1 Public Liability Insurance; Etc. During the following times Borrower shall
      --------------------------------
maintain the following insurance coverage:

(a)At all times during the term of this  Agreement,  broad form coverage  public
liability insurance with minimum coverage of Five Million Dollars. The amount of
such  coverage  shall be reviewed  annually  by Agent and may,  in Agent's  sole
discretion and at Borrower's  expense, be increased or decreased during the term
of this Agreement.  Borrower shall obtain a new or revised policy within 20 days
of receipt of notice from Agent of a revision in the amount of public  liability
insurance required;

(b)Workers'  compensation  insurance  and  such  other  insurance  as  shall  be
necessary or prudent for the operation of Borrower's business,  all with minimum
coverage at least equal to that in effect on the date of this Agreement.

5.4.2 Terms of Insurance.  Each such policy of insurance shall be with insurance
      -------------------
carriers and in form and amount acceptable to Agent.

5.4.3 Evidence of Insurance.  Borrower shall,  from time to time upon Agent's or
      ----------------------
any  Lender's  request,  promptly  furnish  or cause to be  furnished  to Agent,
evidence of the  maintenance  of the  insurance  required by this  Section  5.4,
including,  without limitation, such originals or copies as Agent may request of
policies,  certificates of insurance,  riders and endorsements  relating to such
insurance and proof of premium payments.

5.5 Books  and  Reserves.  Borrower  shall (a)  maintain  at all times  true and
    ---------------------
complete books,  records and accounts in which true and correct entries shall be
made  of  all  business  transactions  in  accordance  with  generally  accepted
accounting principles;  and (b), by means of appropriate entries, reflect in its
accounts and in all Financial Statements, prior liabilities and reserves for all
taxes from which  Borrower  is not  otherwise  exempt  and proper  reserves  for
depreciation,  renewals and  replacements,  obsolescence and amortization of its
properties and bad debts, all in accordance with generally  accepted  accounting
principles consistently applied.

5.6 Inspection of Books and Records.  Borrower shall permit Agent or any Lender,
    --------------------------------
or its authorized  attorneys,  accountants,  and  representatives to examine the
books,  accounts,  records,  ledgers and assets of every kind and description of
Borrower at all  reasonable  times upon oral or written  request of Agent or any
Lender,  such  examination to include the making of copies and abstracts of such
materials at Borrower's expense.

5.7 Preserve Collateral. Borrower shall: (a) keep the Collateral in good repair,
    --------------------
working order and condition;  (b) from  timetotime make all necessary and proper

<PAGE>

repairs, renewals,  replacements,  additions and improvements to the Collateral,
so that the business  carried on by Borrower may be properly and  advantageously
conducted at all times in accordance with prudent business  management;  (c) use
the Collateral and operate its business in compliance with all applicable  laws,
statutes,  ordinances,  rules  and  regulations;  (d) not waste or  destroy  the
Collateral;  (e) defend the  Collateral  against  the claims and  demands of all
other parties;  (f) permit Agent or its  representatives  or designee to inspect
the  Collateral at all times upon prior notice to Borrower;  and (g) prevent the
Collateral  or any part  thereof  from being or becoming an  accession  to other
goods not covered by a security  interest in favor of Agent and Lenders  created
by the Loan Documents or from being or becoming a fixture,  except at Borrower's
business.

5.8  Notification  of Litigation.  Borrower  shall promptly  inform Agent of the
     ----------------------------
commencement of any action, suit,  proceeding or investigation against it or the
making of any counterclaim against it in any action, suit or proceeding.

5.9 Preserve Existence. Borrower shall preserve and maintain its name, existence
    -------------------
and good standing in the jurisdiction of its organization and qualify and remain
qualified  as  a  foreign   corporation  in  each  jurisdiction  in  which  such
qualification is required.

5.10  Permits.  Borrower  shall obtain and maintain all  necessary  licenses and
      --------
permits to operate its business.

5.11  Underwriting  Criteria.  All Eligible  Dealer Loans and Eligible  Consumer
      -----------------------
Loans  pledged to Agent  pursuant to this Loan and  Security  Agreement  will be
consistent with Borrower's general underwriting  criteria as of the date of this
Agreement.  Borrower shall not alter its general  underwriting  criteria without
prior notice to Agent.

5.12 Agreements Constituting Collateral. Borrower shall comply with all terms of
     -----------------------------------
any  agreements   related  to  any  Dealer  Loan  Collateral  or  Consumer  Loan
Collateral,  and  Borrower  shall  immediately  notify  Agent of any defaults or
events of defaults  under any such  agreements.  Except for  prepayments  in the
ordinary  course of business,  Borrower  shall not modify,  compromise,  extend,
rescind or cancel any agreements  related to Dealer Loan  Collateral or Consumer
Loan  Collateral  without  the  prior  consent  of  Agent,  which  shall  not be
unreasonably withheld.

5.13  Additional  Costs,  Etc. If any present or future  applicable  law,  which
      ------------------------
expression,  as used herein, includes statutes, rules and regulations thereunder
and  interpretations  thereof by any competent  court or by any  governmental or
other  regulatory  body or  official  charged  with  the  administration  or the
interpretation  thereof  and  policies,  requests,   directives,   instructions,
guidelines and notices at any time or from time to time  thereafter made upon or
otherwise  issued to Agent or any Lender by any  central  bank or other  fiscal,
monetary or other authority (whether or not having the force of law), shall:

      (a)subject  Agent or any Lender to any tax, levy,  impost,  duty,  charge,
      fee,  deduction or withholding of any nature with respect to this Loan and
      Security  Agreement,  the other Loan  Documents  or the Loans  (other than
      taxes  based  upon or  measured  by the  income or profits of Agent or any
      Lender); or

      (b)materially change the basis of taxation (except for changes in taxes on
      income or profits) of payments to Agent or any Lender of the  principal of
      or the interest on the Loans or any other amounts  payable to Agent or any
      Lender under this Loan and Security Agreement or the other Loan Documents;
      or

<PAGE>

      (c)impose  or  increase  or render  applicable  (other  than to the extent
      specifically  provided for elsewhere in this Loan and Security  Agreement)
      any special deposit, reserve,  assessment,  liquidity, capital adequacy or
      other  similar  requirements  (whether  or not  having  the  force of law)
      against assets held by, or deposits in or for the account of, or loans by,
      or commitments of an office of Agent or any Lender; or

      (d)impose on Agent or any Lender any other conditions or requirements with
      respect to this Loan and Security Agreement,  the other Loan Documents, or
      the Loans; and the result of any of the foregoing is:

            (i) to increase the cost to Agent or any Lender of making,  funding,
            issuing, renewing, extending or maintaining the Loans; or

            (ii) to reduce the amount of  principal,  interest  or other  amount
            payable to Agent or any Lender hereunder on account of the Loans; or

            (iii) to  require  Agent or any  Lender  to make any  payment  or to
            forego any  interest or other sum payable  hereunder,  the amount of
            which  payment or foregone  interest or other sum is  calculated  by
            reference  to the  gross  amount  of any sum  receivable  or  deemed
            received by Agent or any Lender from Borrower  hereunder,  then, and
            in each such case,  Borrower shall, upon demand made by Agent or any
            Lender  at any  time  and  from  time to time  and as  often  as the
            occasion therefor may arise, pay to Agent such additional amounts as
            will be  sufficient  to  compensate  Agent  or any  Lender  for such
            additional cost,  reduction,  payment or foregone  interest or other
            sum.
5.14  Capital  Adequacy.  If any  present  or future law  affects  the amount of
      ------------------
capital  required  or expected  to be  maintained  by Agent or any Lender or any
corporation  controlling  Agent or any Lender and Agent or any Lender determines
that the amount of capital  required to be  maintained  by it is increased by or
based upon the existence of the Loans made or deemed to be made pursuant hereto,
then Agent or any Lender may notify  Borrower of such fact,  and Borrower  shall
pay to Agent or any Lender  from time to time on demand,  as an  additional  fee
payable  hereunder,  such amount as Agent or any Lender shall  determine in good
faith and certify in a notice to  Borrower to be an amount that will  adequately
compensate  Agent or any Lender in light of these  circumstances  for Agent's or
any Lender's  increased  costs of  maintaining  such capital.  Agent and Lenders
shall allocate such cost increases among their customers in good faith and on an
equitable basis.

5.15  Interest  Coverage  Ratio.  Borrower  shall,  as of the end of each fiscal
      --------------------------
quarter,  maintain the ratio of EBITDA for the four fiscal  quarters of Borrower
then ended to Consolidated  Interest  Expense for the same period (the "Interest
Coverage Ratio") of greater than 2.0 to 1.0.

5.16 Leverage.  Until the  Indebtedness  shall have been paid in full,  Borrower
     ---------
shall maintain Leverage of not more than 4.0 to 1.

5.17 Minimum Loss Coverage  Ratio.  As of the end of each fiscal quarter for the
     -----------------------------
four fiscal  quarters then ended,  Borrower shall maintain a Loss Coverage Ratio
equal to or greater than 5.0 to 1.

<PAGE>

5.18 Maximum Delinquency.  As of the end of each fiscal quarter,  Borrower shall
     --------------------
maintain a  Delinquency  Ratio of (a) no more than an average of 10.0% as of the
end of any month for the previous three months then ended;  and (b) no more than
an average of 9.25% as of the end of any month for the  previous  twelve  months
then ended.

6.  NEGATIVE COVENANTS.
    -------------------

6.1 Agent Consent  Required.  From the date hereof until the Indebtedness  shall
    ------------------------
have been paid in full,  without the prior written  consent of Agent which shall
not be unreasonably withheld:

6.1.1 Liens.  Borrower shall not in any way create,  incur, assume, or suffer to
      ------
exist any security interest,  mortgage,  pledge,  lien or other encumbrance upon
the Collateral other than those created by or referred to in this Agreement.

6.1.2  Covenant  Against  Alienation.  Borrower  shall  not in any way (a) sell,
       ------------------------------
convey, lease or transfer any of its assets other than in the ordinary course of
its  business;  (b) enter  into any  transaction  of  merger,  consolidation  or
reorganization; or (c) reclassify its capital stock.

6.1.3 Management. Borrower shall not make any change in the management personnel
      -----------
of its business  without  notice to Agent,  and shall not make any change in the
chairman,  president  or  other  officer  having  substantial  control  over the
operations of the Borrower's business.

6.1.4 Indebtedness.  Borrower shall not incur any additional indebtedness of any
      -------------
kind,  except (a) customary trade debt and obligations in the ordinary course of
business;  (b) so-called  "off balance sheet"  indebtedness  in the form of loan
sales or increases in the Borrower's commercial paper facilities;  and (c) other
new secured financing not to exceed $5,000,000 in the aggregate annually.

6.2 Notice to Agent Required.  From the date hereof until the Indebtedness shall
    -------------------------
have been paid in full, without prior notice to Agent, Borrower shall not in any
way (a) become a guarantor (other than for loan sales with recourse),  surety or
otherwise liable for the debts or other  obligations of any other person,  firm,
corporation or company;  or (b) make any investment in or loan or advance to any
other  person,  firm,  corporation  or  company,  in  excess of  $1,000,000  (or
$10,000,000  in the case of loans to  dealers  secured  by  pledges  of loans to
consumer borrowers).

6.3 Other  Secured  Indebtedness.  Nothing in this Loan and  Security  Agreement
    -----------------------------
shall operate or be construed to prevent  Borrower from  incurring  indebtedness
and securing such indebtedness with a pledge of loan receivables;  provided that
(1) the collateral for such  indebtedness  shall not be Dealer Loan  Collateral,
Consumer  Loan  Collateral  and  the  Related  Rights   hereunder  and  (2)  the
requirements  of Section 6.1.4 are met. In connection with such a pledge of loan
receivables,  Borrower shall be entitled to grant to a secured lender a security
interest in the rights related to any loan the  promissory  note for which is in
the  possession  of such lender free and clear of any lien  created by this Loan
and Security Agreement.

7.  CONDITIONS PRECEDENT TO ADVANCE.
    --------------------------------

7.1 Agent and Lenders  shall have no  obligation  to make any advance  under the
Loans unless:

<PAGE>

7.1.1   Representations  and  Warranties  True.  All  of  the   representations,
        ---------------------------------------
warranties,  covenants, terms and conditions contained in this Loan and Security
Agreement  and the other Loan  Documents  are true and correct as of the date of
making  such  advance,  with  the same  effect  as if such  representations  and
warranties were made on and as of the date of such advance.

7.1.2 No Default. No default or event of default under any Loan Documents or any
      -----------
other  agreements  between  Agent or any Lender and Borrower  shall exist on the
date of such advance, and no condition,  omission, or act shall have occurred or
come into  existence  which,  upon the giving of notice or the  passage of time,
would ripen into a default or Event of Default.

7.1.3 No Adverse Change.  No material  adverse change shall have occurred in the
      ------------------
financial condition of Borrower,  in the business operations of Borrower,  or in
the condition of the Collateral or Borrower's business from the date of the most
recent financial statements delivered to Agent.

7.1.4  Acceptance of Advances.  Each  acceptance by Borrower of an advance under
       -----------------------
the Loans shall  constitute  a  representation  by Borrower  that the  foregoing
conditions in Sections 7.1.1, 7.1.2 and 7.1.3 have been satisfied.

7.2  Audits.  Agent and each  Lender  shall  have the right to audit  Borrower'
     -------
operations and the Collateral from time to time at Borrower's  expense and Agent
and each  Lender  shall be entitled  to  condition  advances on the Loans on the
results of such  audits.  Agent and each Lender shall be entitled to conduct due
diligence audits at Borrower's expense at least twice each year, and Agent shall
be entitled to conduct due diligence  audits at  Borrower's  expense at any time
when the Delinquency Ratio shall exceed (a) an average of 8.00% as of the end of
any month for the previous three months then ended or (b) an average of 7.25% as
of the end of month for the previous  twelve months then ended. At the direction
of Agent,  Agent's counsel shall be entitled to conduct a fair lending review at
Borrower's expense at least once each year.

8.  EVENTS OF DEFAULT.
    ------------------

Each of the following events shall constitute an "Event of Default" hereunder:

8.1 Payment Default.  Borrower shall default in making any payment of principal,
    ----------------
interest or other  charges when the same shall become due under the Notes or the
Loan Documents.

8.2 Other Default.  Borrower  shall default in the  performance of any covenant,
    --------------
agreement,  term or condition  of this Loan and Security  Agreement or any other
Loan  Document,  other than as set forth in Section  8.1 above,  or in any other
subsection  of this  Section  8 other  than  this  subsection  8.2,  within  any
applicable  grace period  provided  therefor or, if no grace period is provided,
and provided Borrower has not intentionally  concealed or negligently  failed to
report such  default to Agent,  such  default  shall  continue for ten (10) days
after Agent shall give written notice of such default to Borrower.

8.3 Default in Other Obligations. Borrower shall default (and such default shall
    -----------------------------
not be cured  within any  applicable  grace  period) in making any  payments for
borrowed  money or in respect of any extensions of credit or  accommodations  or
under any  lease,  in each case where the total  obligation  of  Borrower  shall
exceed $200,000.

<PAGE>

8.4 Insolvency;  Suspension of Business.  Commencement of proceedings  under any
    ------------------------------------
bankruptcy or insolvency law by or against Borrower or the admission by Borrower
of  Borrower's  inability  to pay its debts as they mature or become due; or the
general  failure by  Borrower  to pay its debts as they mature or become due; or
the making of a general assignment for the benefit of creditors by Borrower;  or
the suspension of business of Borrower;  or the appointment of a trustee,  trust
mortgagee,  custodian  or  receiver  of all or any  portion of the  property  of
Borrower.

8.5  Representations.  Any representation or warranty,  statement or information
     ----------------
under any instrument or agreement  constituting or relating to any Collateral or
made by Borrower  herein,  in the Loan  Documents  or in any other  certificate,
statement, information or document delivered to Agent or any Lender by, on
behalf of or at the  request of  Borrower or relating to the Loans shall fail to
be true and correct when made or furnished.

8.6 Adverse  Change.  Any material  adverse change in the business,  operations,
    ----------------
properties or condition  (financial or otherwise) of Borrower or the Collateral,
which, in the opinion of Agent or any Lender,  impairs its security or increases
its risk, including,  without limitation, if any financial information furnished
to Agent or any Lender shall indicate any operating loss or total liabilities in
excess of total assets,  as determined in  accordance  with  generally  accepted
accounting principles.

8.7 Levy.  Commencement of any levy, seizure,  attachment or sale upon execution
    -----
against any Collateral or other proceedings of any nature whereby Borrower shall
or may be deprived of title or right of possession to the Collateral or any part
thereof.

8.8  Dissolution;  Termination.  The  dissolution or termination of existence of
     --------------------------
Borrower.

8.9 Uninsured Loss. Any loss,  theft,  or damage to the Collateral  which is not
    ---------------
fully  covered by  insurance  and which,  in the opinion of Agent or any Lender,
impairs its security or increases its risk.

8.10 Tax Law Changes. The enactment after the date hereof of any law amending or
     ----------------
changing in any way the laws with  respect to the taxation of mortgages or debts
secured  thereby,  or the manner of the  collection of any such taxes,  so as to
materially  affect  adversely the interests of Agent or any Lender as determined
in good faith by Agent or any Lender.

8.11  Conveyance  of  Collateral.  The  conveyance,  assignment,  sale,  pledge,
      ---------------------------
transfer, hypothecation or other disposition (which shall include execution of a
contract for sale) of legal or equitable ownership of any part of the Collateral
other than in the ordinary course of business.

9.  REMEDIES UPON DEFAULT.
    ----------------------

9.1 Remedies Upon Default. If an Event of Default shall occur, Agent and Lenders
    ----------------------
shall not have any obligation to permit any further borrowing  hereunder and may
declare the  Indebtedness,  including  the Notes,  immediately  due and payable,
without  presentment,  protest,  demand or notice of any kind,  all of which are
hereby expressly waived by Borrower; and shall have all rights and remedies of a
secured party under the UCC and any other applicable law then in effect; and may
pursue any and all remedies provided for hereunder and in any one or more of the
Loan  Documents  or at law or in  equity,  including,  without  limitation,  the
following:

<PAGE>

9.1.1  Exercise all rights of a secured party under the UCC, or otherwise,  with
respect to the Collateral;

9.1.2  Deliver  Notices  to Maker and  other  notices  to  account  debtors  and
servicers  that  payments  should  be made  directly  to  Agent,  record or file
assignments  of  mortgages  and  UCC-3  financing  statements,   complete  blank
endorsements  and take such other  actions  as Agent  shall  deem  necessary  to
exercise rights in the Collateral or assign the Collateral;

9.1.3 Require  Borrower to pay over to Agent all sums  collected with respect to
the  Collateral,  to be  applied in Agent's  sole  discretion  to such costs and
expenses as Agent shall determine;

9.1.4  Require  Borrower to give notice to account  debtors and  servicers  that
payment should be made directly to Agent;

9.1.5 Require Borrower to assemble  Collateral and make it available to Agent at
a place designated by Agent which is reasonably convenient;

9.1.6 If in the event of the sale or other  disposition of the  Collateral,  the
proceeds  thereof  are  insufficient  to pay all  amounts to which  Agent or any
Lender is legally entitled,  Borrower shall be liable for the deficiency and the
reasonable  fees of any agents and attorneys  employed by Agent or any Lender to
collect such  deficiency.  Borrower agrees that if any  notification of intended
disposition of any of the Collateral is required by law, such notification shall
be deemed  reasonably and properly given if deposited in the mails,  first class
postage prepaid, addressed as provided in Section 11.9 of this Loan and Security
Agreement and at least ten (10) days before such intended disposition; and

9.1.7 Set off and apply against any  Indebtedness  any  indebtedness  owing from
Agent or any Lender to  Borrower  or  Borrower at any time and from time to time
either before or after maturity and without demand upon or notice to anyone.

No  remedy  conferred  upon or  reserved  to  Agent  or any  Lender  in the Loan
Documents is intended to be exclusive of any other available remedy or remedies,
but each and every such remedy shall be  cumulative  and shall be in addition to
any other  remedy  given  hereunder  or in any  other  Loan  Document  or now or
hereafter  existing  at law or in equity or by statute  and the  exercise of any
remedy or remedies  shall not be an election of the  remedies.  The remedies and
rights of Agent  and  Lenders  may be  exercised  concurrently,  alone or in any
combination.  The  inclusion  of Events of  Default  in this  Agreement  and the
occurrence of  non-occurrence of an Event of Default shall in no manner restrict
the Agent's or any Lender's  ability to demand amounts due pursuant to the Notes
or any other demand obligation.

9.2 Cooperation of Borrower. Borrower shall cooperate with Agent and each Lender
    ------------------------
in effectuating the purposes hereof notwithstanding any unanticipated  inability
of Borrower to pay the Notes or otherwise  perform the  obligations of this Loan
and Security Agreement or any other Loan Document.

9.3 Payment of Costs.  Borrower shall pay all of the costs and expenses incurred
    -----------------
by  Agent  (including  reasonable  attorney's  fees) in (1)  enforcing  the Loan
Documents,  (2)  resorting  to the  Collateral,  (3) the  care,  processing  and
preservation  of the Collateral,  and (4) collecting the outstanding  balance of
principal,  interest and delinquent  charges under the Notes. All such costs and
expenses  shall be deemed  additional  principal  due under the Notes and may be

<PAGE>

deducted  from the  proceeds  of  disposition  of the  Collateral,  or any other
security interests held by Agent and Lenders. Agent and Lenders may apply any or
all of the proceeds of disposition of the Collateral to the payment or reduction
of the Notes in such amounts as Agent and Lenders may, in their sole discretion,
determine  even if that portion of the Notes shall be contingent  and unmatured;
and in the case of any deficiency Borrower shall remain liable therefor.

9.4  Preservation;  Notice.  Agent and Lenders shall have no obligation to take,
     ----------------------
and  Borrower  shall have the  responsibility  for taking,  any and all steps to
preserve  rights  against any and all prior parties to any instrument of chattel
paper whether in Borrower's possession or in Agent's or any Lender's possession.
Borrower  waives protest of any instrument  constituting  Collateral at any time
held by Agent or any  Lender on which  Borrower  is in any way liable and waives
notice of any other action taken by Agent or any Lender. Borrower shall have the
responsibility  for  notifying  Agent or any Lender in writing that it wishes to
take advantage of any redemption, conversion or other similar right with respect
to any Collateral held by Agent or any Lender.

9.5 Right to Possession.  Unless otherwise provided by law, Agent shall have the
    --------------------
right  at all  times  to the  immediate  possession  of all  Collateral  and its
products  and  proceeds,  and in its sole  discretion  may  operate  and use the
Collateral,  complete  work in process,  or sell the  Collateral  without  being
liable to the Borrower on account of any losses,  damage,  or depreciation  that
any occur as a result thereof.  Unless  otherwise  provided by law, Agent may at
all  times,  at the  expense  of  Borrower,  enter  upon any  premises  on which
Collateral  may be situated  and remove any  Collateral  to such other places as
Agent  determines.  Unless  otherwise  provided  by law,  Agent  may at any time
transfer any Collateral into its own name or that of its nominee and receive the
income  thereon and hold the same,  as security for  liabilities  or apply it to
principal or interest due on the Indebtedness.

10. THE AGENT.
    ----------

10.1 Actions.  Each Lender hereby appoints BankBoston as its agent under and for
     --------
purposes of this Agreement,  the Notes and each other Loan Document. Each Lender
hereby irrevocably appoints and authorizes Agent to take such action as agent on
its behalf and to exercise such powers under this  Agreement as are delegated to
Agent  by the  terms  hereof,  together  with  such  powers  as  are  reasonably
incidental  thereto.  Without  limiting the  generality of the  foregoing,  each
Lender hereby  irrevocably  authorizes Agent to hold and exercise control of the
Collateral,  to file as Agent for Lenders financing statements,  and to be named
as  Agent  for  the  Lenders  in  assignments  of  collateral,  and to  exercise
discretion  with  regard  to the  acceptance  of  Collateral  and  inclusion  of
Collateral  in the  Borrowing  Base  from  time  to  time.  Notwithstanding  the
foregoing,  each Lender shall be entitled to review Collateral and Agent's files
with respect to  Collateral  from time to time upon  reasonable  prior notice to
Agent, and Agent shall cooperate with each Lender in each such review. The grant
of particular  powers and authority to Agent in some  circumstances and to Agent
and Lenders in others  shall not be deemed to limit the power and  authority  of
Agent  in  any  instance.   The  duties  of  Agent  shall  be   mechanical   and
administrative  in nature and Agent shall not by reason of this  Agreement  be a
trustee  or   fiduciary   for  any  Lender.   Agent  shall  have  no  duties  or
responsibilities  except those expressly set forth herein. As to any matters not
expressly  provided  for by this  Agreement,  Agent  shall  not be  required  to
exercise  any  discretion  or take any action.  Except for actions  described in
Section 11.12  herein,  Agent shall be required to act or to refrain from acting
upon the instructions of the Required Lenders,  and such  instructions  shall be
binding upon all Lenders and all holders of Notes; provided, however, that Agent
shall not be  required  to take any action  which  exposes the Agent to personal
liability or which is contrary to this Agreement or applicable law.

<PAGE>

10.2 Actions Requiring Consent.  Notwithstanding the grant of authority to Agent
     --------------------------
hereunder,  the  following  actions by Agent  shall  require  the consent of the
Required Lenders:

10.2.1 A declaration of an Event of Default hereunder;

10.2.2 A demand for payment of all Indebtedness; or

10.2.3 The  commencement of any actions to exercise rights to sell Collateral or
to take any other actions  authorized  under Section 9.1 herein  (except for any
rights  to   set-off,   which  each   Lender   shall  be  entitled  to  exercise
independently).

Each Lender  shall be entitled to declare an event of default or demand  payment
of amounts due  pursuant  to its Note  without the consent of the Agent or other
Lenders,  but in the absence of consent of the Required Lenders, the Agent shall
not take the actions specified in Sections 10.2.1, 10.2.2, or 10.2.3 herein.

10.3  Liability  of Agent.  Neither  Agent nor any of its  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 any other  Loan
Document  in the  absence  of its or  their  own  gross  negligence  or  willful
misconduct.  Without  limiting the foregoing,  Agent: (1) may treat the payee of
any Note as the holder  thereof until the Agent  receives  written notice of the
assignment or transfer thereof signed by such payee and in form  satisfactory to
Agent;  (2) may consult with legal  counsel  (including  counsel for  Borrower),
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; (3) makes
no warranty or  representation to any Lender and shall not be responsible to any
Lender  for  any  statements,  warranties,  or  representations  made  in  or in
connection with this  Agreement;  (4) shall not have any duty to ascertain or to
inquire as to the performance or observance of any of the terms,  covenants,  or
conditions of this Agreement on the part of Borrower, or to inspect the property
(including  the  books  and  records)  of  Borrower,  and any  such  inquiry  or
inspection  shall  not  obligate  the  Agent  to make  any  further  inquiry  or
inspection;  (5) shall not be  responsible  to any Lender for the due execution,
legality, validity,  enforceability,  genuineness,  perfection,  sufficiency, or
value of this Agreement or any other instrument or document  furnished  pursuant
thereto:  and (6) shall incur no liability under or in respect of this Agreement
by acting upon any notice, consent,  certificate, or other instrument or writing
(which may be by telegram,  telex, or facsimile  transmission) believed by it to
be genuine and signed or sent by the proper party or parties. Each Lender hereby
indemnifies  (which  indemnity  shall survive any termination of this Agreement)
and holds harmless the Agent,  pro rata  according to such Lender's  Percentage,
                               --------
from and against any and all liabilities,  obligations, losses, damages, claims,
costs or  expenses  of any kind or  nature  whatsoever  which may at any time be
imposed on,  incurred by, or asserted  against,  Agent in any way relating to or
arising out of this Agreement, the Notes and any other Loan Document,  including
reasonable  attorneys'  fees  and  expenses,  and as to which  the  Agent is not
reimbursed  by the  Borrower;  provided  that no Lender  shall be liable for the
payment  of any  portion  of such  liabilities,  obligations,  losses,  damages,
claims,  costs  or  expenses  which  are  determined  by a  court  of  competent
jurisdiction  in a final  proceeding to have resulted  solely from Agent's gross
negligence or willful misconduct. Agent shall not be required to take any action

<PAGE>

hereunder,  under the Notes or under any other Loan  Document or to prosecute or
defend  any suit in  respect  of this  Agreement,  the Notes or any  other  Loan
Document,  unless Agent is  indemnified  hereunder to its  satisfaction.  If any
indemnity  in favor  of Agent  shall be or  become,  in  Agent's  determination,
inadequate, Agent may call for additional indemnification from Lenders and cease
to do the acts indemnified against hereunder until such additional  indemnity is
given. Without limitation of the foregoing, each Lender shall to reimburse Agent
(to the extent not reimbursed by Borrower)  promptly upon demand for its ratable
share of any out-of-pocket expenses (including reasonable counsel fees) incurred
by Agent in connection with the preparation,  administration, or enforcement of,
or legal advice in respect of rights or responsibilities under this Agreement.

10.4  Successor.  Agent  may  resign  as such at any time upon at least 30 days'
      ----------
prior notice to Borrower and all Lenders. If the Agent at any time shall resign,
the Required Lenders may appoint another Lender as a successor Agent which shall
thereupon become the Agent  hereunder.  If no successor Agent shall have been so
appointed by the Required  Lenders,  and shall have accepted  such  appointment,
within 30 days after the retiring Agent's giving notice of resignation, then the
retiring Agent may, on behalf of the Lenders,  appoint a successor Agent,  which
shall be one of the Lenders or a commercial banking institution  organized under
the laws of the U.S.  (or any  State  thereof)  or a U.S.  branch or agency of a
commercial banking institution,  and having a combined capital and surplus of at
least $5,000,000,000.  Upon the acceptance of any appointment as Agent hereunder
by a successor Agent, such successor Agent shall be entitled to receive from the
retiring Agent such documents of transfer and assignment as such successor Agent
may reasonably  request,  and shall thereupon  succeed to and become vested with
all  rights,  powers,  privileges  and  duties of the  retiring  Agent,  and the
retiring Agent shall be discharged  from its duties and  obligations  under this
Agreement.  After any retiring Agent's  resignation  hereunder as the Agent, the
provisions of this Section shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was the Agent under this Agreement.

10.5 Loans by BankBoston and Lenders.  BankBoston shall have the same rights and
     --------------------------------
powers with respect to (x) the Loans made by it, and (y) the Notes held by it as
any  other  Lender  and may  exercise  the  same as if it  were  not the  Agent.
BankBoston may accept deposits from, lend money to, and generally  engage in any
kind of business with Borrower or any subsidiary or affiliate of the Borrower as
if  BankBoston  were not the Agent  hereunder.  Each Lender shall be entitled to
accept  deposits  from,  lend  money to,  and  generally  engage in any  banking
business with Borrower or any subsidiary or affiliate of Borrower  independently
of the  Loans.  Each  Lender  shall  be  entitled  to  apply  proceeds  from any
collateral to the Loans or to any other  indebtedness  from Borrower in its sole
discretion.

10.6 Credit Decisions.  Each Lender  acknowledges that it has,  independently of
     -----------------
Agent and each other Lender,  and based on such Lender's review of the financial
information of Borrower, this Agreement, the other Loan Documents (the terms and
provisions of which being satisfactory to such Lender) and such other documents,
information and  investigation as such Lender has deemed  appropriate,  made its
own credit  decision to make the Loans.  Each Lender also  acknowledges  that it
will,  independently  of Agent and each  other  Lender,  and based on such other
documents,  information and  investigations  as it shall deem appropriate at any
time,  continue  to make  its  own  credit  decisions  as to  exercising  or not
exercising  from time to time any rights and  privileges  available  to it under
this Agreement or any other Loan Document.

10.7 Copies,  etc.  Agent shall give prompt notice to each Lender of each notice
     -------------
or request  required or permitted  to be given to Agent by Borrower  pursuant to
the  terms of this  Agreement  (unless  concurrently  delivered  to  Lenders  by

<PAGE>

Borrower),  and Agent  shall  deliver to each  Lender  within 10 days of receipt
copies of Financial  Statements and other  documents  (excluding the Collateral)
provided by Borrower.  Agent will distribute to each Lender from time to time as
requested by each Lender each  document or  instrument  received for its account
and  copies of all other  communications  received  by Agent from  Borrower  for
distribution to Lenders by Agent in accordance with the terms of this Agreement.
Except for notices,  reports,  and other  documents  and  information  expressly
required to be furnished to Lenders by the Agent hereunder, the Agent shall have
no duty or  responsibility  to  provide  any  Lender  with any  credit  or other
information concerning the affairs,  financial condition or business of Borrower
which may come into the possession of the Agent or any of its affiliates.

10.8  Sharing of  Payments.  If any Lender  shall  obtain any  payment  (whether
      ---------------------
voluntary,  involuntary,  through  the  exercise  of any  right  of  setoff,  or
otherwise)  on  account  of the  Notes  held  by it in  excess  of its  Lender's
Percentage  of  payment  on  account  of all of the  Notes,  such  Lender  shall
distribute  the excess payment  ratably to each of the other Lenders,  provided,
however,  that  if all or any  portion  of such  excess  payment  is  thereafter
recovered  by  Borrower  from  the  Lender  making  such  a  distribution,  such
distribution  to each other Lender shall be rescinded and each such other Lender
shall repay to the distributing Lender its ratable share of the distribution.

11.  MISCELLANEOUS.
     --------------

11.1 Power of Attorney.  Borrower  hereby  appoints and  irrevocably  designates
     ------------------
Agent and each Lender, its agents,  representatives  and designees as agents and
attorneysinfact for Borrower,  granting unto said attorneys full power to do all
things and acts  necessary  to implement  and fully  execute any power or rights
granted to Agent and each Lender under this  Agreement,  including  the right to
give written  notice,  at any time,  to such office and  officials at the United
States Post  Office to effect such change of address so that all mail  addressed
to such Borrower may be delivered directly to Agent or any Lender, and the right
to execute trust receipts,  conditional  sale contracts or other title retention
or security instruments.

11.2 Indemnity.  Borrower hereby  indemnifies (which indemnity shall survive any
     ----------
termination of this Agreement) and holds Agent and each Lender harmless from and
against all liabilities, obligations, losses, damages, claims, costs or expenses
(including reasonable attorney's fees and expenses) of any kind whatsoever which
may at any time be imposed  on,  incurred by or  asserted  against  Agent or any
Lender in any way relating to or arising out of this Loan and Security Agreement
or any of the Loan Documents  (including,  without  limitation,  any claim for a
commission or fee in connection  with any Loan  Documents),  any Agent or Lender
actions taken in good faith thereunder, or the operation of Borrower's business.

11.3 Expenses.  Borrower shall pay all costs and expenses  incurred by Agent and
     ---------
each Lender in connection with the preparation,  execution, delivery, filing and
administration of the Loan and any Loan Documents including, but not limited to,
reasonable  fees of  counsel  to Agent and each  Lender  and any  local  counsel
retained by them,  with respect to the Loans and with respect to advising  Agent
and  each  Lender  as to  their  rights  and  responsibilities  under  the  Loan
Documents,  all  reasonable  costs and expenses in connection  with  protecting,
storing,   warehousing,   insuring,  handling,   maintaining  and  shipping  the
Collateral,  in  connection  with  enforcement  of  the  Loan  Documents,  title
insurance premiums,  survey and site assessment costs, appraisal fees, brokerage
fees or  commissions,  mortgage and  financing  statements  recording and filing
fees,  syndication fees (with prior notice to Borrower),  and any other expenses

<PAGE>

whether  incurred before or after the closing of the Loans.  Borrower shall hold
Agent and each Lender harmless from any liabilities with respect to or resulting
from any delay in paying or omission to pay such fees and expenses.

If Borrower shall fail to maintain the insurance required by Section 5.4, or pay
the taxes, assessments,  charges or claims referred to in Section 5.3 hereof, or
fail to perform any of its  obligations  hereunder  Agent,  at its  option,  may
maintain  such  insurance or pay such taxes,  assessments,  charges or claims or
perform  any or all such  obligations  and  Borrower  shall  pay on  demand  any
premiums,  taxes,  assessments,  charges or claims so paid by Agent or  expenses
incurred by Agent or such amounts shall be deemed  additional  indebtedness  due
under the Notes, in Agent's sole discretion.

Agent  shall be  entitled,  at  Borrower's  sole  cost and  expense,  to  obtain
appraisals of the Collateral,  from time to time, as Agent deems necessary or as
may be required by applicable law.

All  references  to  attorneys  in the Loan  Documents  shall  include,  without
limitation, Agent's or any Lender's inhouse counsel.

11.4 Further  Assurances.  Borrower shall, at Borrower's cost and expense,  upon
     --------------------
request of Agent or any Lender,  duly execute and  deliver,  or cause to be duly
executed and delivered,  to Agent or any Lender such further  instruments and do
and cause to be done such further acts as may be reasonably  necessary or proper
in the  opinion  of  Agent or any  Lender  to carry  out  more  effectually  the
provisions and purposes of the Loan Documents.

11.5 Severability.  If any provision of any Loan Document is deemed by any court
     -------------
having jurisdiction  thereon invalid or unenforceable,  the balance of that Loan
Document  shall  remain in effect;  if any  provision  of that Loan  Document is
deemed by any such court to be unenforceable because such provision is too broad
in scope such  provisions  thereafter  shall be read to be consistent  with such
Court's  decision  to  make  it  enforceable;  and if any  provision  is  deemed
inapplicable  by  any  such  Court  to  any  person  or  circumstance  it  shall
nevertheless be construed to apply to all other persons and circumstance.

11.6 Governing Law; Effect. This Agreement and the other Loan Documents shall be
     ----------------------
governed  by  and  construed  in  accordance  with  the  substantive  law of the
Commonwealth of Massachusetts and shall have the effect of a sealed instrument.

11.7 Sale and Transfer of Loans and Note; Participations in Loans and Note. Each
     ----------------------------------------------------------------------
Lender may  assign,  or sell  participations  in, its Loans to one or more other
persons in accordance with this Section 11.7.

11.7.1  Assignments.  Any Lender,  (a) with the written consent of (i) Agent and
        ------------
(ii), in the absence of an Event of Default,  Borrower (which consents shall not
be  unreasonably  withheld)  may at any time assign and  delegate to one or more
commercial  banks or  other  financial  institutions,  and (b)  with  notice  to
Borrower and Agent,  but without the consent of the  Borrower or the Agent,  may
assign and delegate to any of its affiliates or to any other Lender (each Person
described  in either of the  foregoing  clauses as being the person to whom such
assignment and  delegation is to be made,  being  hereinafter  referred to as an
"Assignee  Lender"),  all or any  fraction of such  Lender's  total Loans (which
assignment and delegation shall be of a constant, and not a varying,  percentage
of  all  the  assigning  Lender's  Loans)  in  a  minimum  aggregate  amount  of
$5,000,000;  provided, that any such Assignee Lender will comply, if applicable,

<PAGE>

with the  provisions of this Agreement and all other Loan  Documents.  Borrower,
each other Lender and the Agent shall be entitled to continue to deal solely and
directly  with such Lender in  connection  with the  interests  so assigned  and
delegated to a Assignee  Lender until (c) written notice of such  assignment and
delegation,   together   with  payment   instructions,   addresses  and  related
information with respect to such Assignee  Lender,  shall have been given to the
Borrower  and the Agent by such Lender and such  Assignee  Lender,  and (d) such
Assignee  Lender shall have  executed  and  delivered to Borrower and Agent such
documents as Agent shall  reasonably  request to confirm such Assignee  Lender's
agreement to comply with the terms of the Loan Documents.

From and after the date that the Agent  accepts such Lender as Assignee  Lender,
(x) the Assignee Lender thereunder shall be deemed  automatically to have become
a party hereto and to the extent that rights and obligations hereunder have been
assigned  and  delegated  to such  Assignee  Lender,  shall  have the rights and
obligations of a Lender  hereunder and under the other Loan  Documents,  and (y)
the assignor  Lender,  to the extent that rights and obligations  hereunder have
been assigned and delegated by it in connection with such  assignment,  shall be
released  from its  obligations  hereunder  and under the other Loan  Documents.
Within  five  business  days  after its  receipt  of notice  from Agent of a new
Assignee  Lender,  Borrower shall,  upon delivery to Borrower of the predecessor
Note marked  "exchanged",  execute and  delivered to Agent (for  delivery to the
relevant  Assignee Lender) a new Note evidencing such Assignee Lender's assigned
Loans and, if the assignor  Lender has retained Loans  hereunder,  a replacement
Note in the  principal  amount of the Loans and retained by the assignor  Lender
hereunder  (such Note to be in  exchange  for,  but not in payment of, that Note
then held by such  assignor  Lender).  Each such Note shall be dated the date of
the  predecessor  Note.  Any attempted  assignment  and  delegation  not made in
accordance with this Section 11.7.1 shall be null and void.

11.7.2 Participations. Any Lender may at any time sell to one or more commercial
       ---------------
banks or other  persons  participating  interests in any of the Loans,  or other
interests  of  such  Lender  hereunder;  provided,  that  (a)  no  participation
contemplated  in this Section 11.7 shall relieve such Lender from its Commitment
or its other obligations  hereunder or under any other Loan Documents,  (b) such
Lender shall remain solely  responsible  for the  performance of its obligations
hereunder, and (c) Borrower and Agent shall continue to deal solely and directly
with such Lender in connection with such Lender's  rights and obligations  under
this Agreement and each of the other Loan Documents.

11.8  Assignment of Loan  Agreement by Borrower.  Neither this Loan and Security
      ------------------------------------------
Agreement nor the proceeds of the Loans shall be assignable by Borrower  without
Agent's and each Lender's prior written  consent which shall not be unreasonably
withheld,  and any attempted  assignment without Agent's and each Lender's prior
written consent shall, after closing, create a default in the Loans.

11.9 Notices. Any demand upon or notice to Borrower hereunder shall be effective
     --------
when delivered by hand or when properly  deposited in the mails postage prepaid,
or sent by telex,  answerback received,  or electronic  facsimile  transmission,
receipt acknowledged,  or delivered to a telegraph company or overnight courier,
in each case  addressed to Borrower at the address  shown below or as it appears
on the books and  records of Agent.  Demands or notices  addressed  to any other
address at which Agent or any Lender customarily communicates with Borrower also
shall be effective. Any notice by Borrower to Agent or Lenders shall be given as
aforesaid, addressed at the addresses shown below or such other address as Agent
or any Lender may advise Borrower in writing.

<PAGE>

Agent:      
BankBoston, N.A.
99 West Street
Pittsfield, MA 01201
Attention: Thomas Morris
Telecopier: 4134426983

Copy to:    
Steven Taylor Smith, Esquire
Cain, Hibbard, Myers & Cook
66 West Street
Pittsfield, MA 01201
Telecopier: 413-443-7964

BankBoston: 
Thomas Morris, Vice President
99 West Street
Pittsfield, MA 01201
Telecopier: 413-442-6983

Copy to:    
Steven Taylor Smith, Esquire
Cain, Hibbard, Myers & Cook
66 West Street
Pittsfield, MA 01201
Telecopier: 413-443-7694

Fleet Bank: Fleet Bank-NH
1155 Elm Street
Manchester, NH 03101
Attention: David Canedy

Copy to:    
Curtis W. Little, Jr.
Cook, Little, Rosenblatt & Manson, PLLC
650 Elm Street
Manchester, NH 03101
Telecopier: 603-621-7111

Borrower:  
Litchfield Financial Corporation
789 Main Road
Stamford, VT 05352
Telecopier: 802-694-1552

<PAGE>


Copy to:
Thomas Camp, Essquire
Hutchins, Wheeler and Dittmar
101 Federal Street
Boston, MA 02110
Telecopier: 617-951-1295

11.10  Successors.  This Loan and Security  Agreement  shall be binding upon and
       -----------
inure to the benefit of the parties hereto, their successors and assigns and all
other subsequent holders of the Notes.

11.11 Entire Agreement. This Loan and Security Agreement and the other documents
      -----------------
referred to herein contain a complete statement of the undertakings  between the
parties with respect to its subject matter,  and supersedes all prior agreements
and undertakings.  There are no  representations  not set forth in this Loan and
Security Agreement (including the Exhibits and Schedules attached hereto) or the
other Loan Documents which have been relied upon by the parties.

11.12 Modification. No modification, rescission, waiver, release or amendment of
any provision of the Loan Documents,  shall be effective  unless made in writing
and signed by a duly  authorized  officer of Agent and each  Lender and the same
shall then be effective  only for the period and on the  conditions  and for the
specific purposes  specified in such writing,  it being expressly  understood by
the parties hereto that no such amendment, modification or waiver which would:

11.12.1 modify any requirement  hereunder that any particular action be taken by
all the Lenders or by the Required  Lenders shall be effective  unless consented
to by each Lender;

11.12.2 modify this Section 11.12,  change the definition of "Required Lenders",
reduce any fees,  or release  any  substantial  amount of  collateral  security,
except as otherwise  specifically  provided in any Loan Document,  shall be made
without the consent of each Lender and each holder of a Note;

11.12.3  increase the amount of commitment  for any of the Loans,  or extend the
Maturity  Date of,  or  extend  the due date for or  reduce  the  amount  of any
scheduled  repayment or  prepayment of principal of or interest on the Loans (or
reduce the  principal  amount of or rate of interest on the Loans) shall be made
without the consent of the holder of that Note evidencing such Loan; or

11.12.4 affect  adversely the  interests,  rights or obligations of the Agent as
the Agent shall be made without the consent of the Agent.

11.13 Captions. The captions of the various sections and paragraphs of this Loan
      ---------
and Security  Agreement have been inserted only for the purpose of  convenience;
such  captions are not a part of this Loan and Security  Agreement and shall not
be deemed in any  manner to modify,  explain,  enlarge  or  restrict  any of the
provisions of this Loan and Security Agreement.

11.14  Counterparts.  This Loan and  Security  Agreement  may be executed by the
       -------------
parties hereto individually or in any combination,  in one or more counterparts,
each of which shall be an original  and all of which shall  together  constitute
one and the same agreement.

<PAGE>

11.15  Waiver of Rights  of Agent or any Lender. Neither the failure of Agent or
       -----------------------------------------
any Lender to exercise,  nor the delay of Agent or any Lender in exercising  any
right,  power, or privilege  under this Loan and Security  Agreement or any Loan
Document  shall  operate  as a waiver  thereof,  nor shall any single or partial
exercise or any right, power or privilege preclude any other or further exercise
of any other right, power or privilege.

11.16  Agreement not Intended as  Partnership or Agency.  The parties  expressly
       -------------------------------------------------
disclaim any  intention to create a partnership  or joint venture  pertaining to
the subject matter of this Loan and Security Agreement.  The parties intend that
their  relationship  shall  be  that  of  borrower  and  lenders,  whether  that
relationship  is  relevant  for  purposes  of  the  parties'   dealings  between
themselves or with third persons.  Neither  Borrower nor Agent nor Lenders shall
be deemed an agent of any other for any  purpose,  except  that  Agent  shall be
agent for Lenders on the terms and conditions set forth in this Agreement.

11.17  Survival.  This Loan and Security  Agreement shall survive the closing of
       ---------
the Loans and each and every one of the obligations and undertakings of Borrower
set forth in this Loan and Security  Agreement  shall be continuing  obligations
and undertakings  and shall not cease or terminate until the entire  outstanding
principal  amount of the Loans,  together with all interest and fees due thereon
and any other  amounts  which  may be due  pursuant  to this  Loan and  Security
Agreement,  shall  have  been  paid in  full,  and  until  the  obligations  and
undertakings of Borrower shall have been fully completed and discharged.

11.18 WAIVER OF JURY TRIAL.  BORROWER,  AGENT AND EACH LENDER HEREBY WAIVE TRIAL
      --------------------
BY JURY IN ANY  LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION  WITH, OR
ARISING OUT OF: (A) THIS LOAN AND SECURITY AGREEMENT,  THE NOTES, THE OTHER LOAN
DOCUMENTS,  OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED IN CONNECTION WITH THE
LOANS; (B) THE VALIDITY,  INTERPRETATION,  COLLECTION OR ENFORCEMENT THEREOF; OR
(C) ANY OTHER CLAIM OR DISPUTE HOWEVER ARISING AMONG BORROWER, AGENT OR LENDERS.
NONE OF THE BORROWER,  AGENT OR LENDERS NOR ANY ASSIGNEE OR SUCCESSOR  SHALL (1)
SEEK A JURY TRIAL IN ANY LAWSUIT,  PROCEEDING,  COUNTERCLAIM OR ANY OTHER ACTION
BASED UPON OR ARISING OUT OF THE FOREGOING OR (2) SEEK TO  CONSOLIDATE  ANY SUCH
ACTION  WITH ANY  OTHER  ACTION  IN WHICH A JURY  TRIAL  CANNOT  OR HAS NOT BEEN
WAIVED.  THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY  DISCUSSED BY BORROWER
AND AGENT AND LENDERS,  AND THESE  PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS.
NEITHER AGENT NOR ANY LENDER NOR BORROWER HAS AGREED WITH OR  REPRESENTED TO THE
OTHER THAT THE  PROVISIONS OF THIS  PARAGRAPH  WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.



<PAGE>


      Signed and sealed on the date first above written.

WITNESS:                                         LITCHFIELDFINANCIAL CORPORATION


                                                 By:  /s/ Heather A.Sica
---------------------------                         ----------------------------
                                                  Its:  Executive Vice President



                                                 BANKBOSTON, N.A., AS AGENT


                                                 By:  /s/ Thomas J. Morris
---------------------------                         ----------------------------
                                                  Its:  Vice President


                                                BANKBOSTON, N.A.


                                                By:  /s/ Thomas J. Morris
---------------------------                         ----------------------------
                                                  Its:  Vice President


                                                FLEET BANK-NH


/s/ Curtis W. Little Jr.                        By:  /s/ David Canedy
---------------------------                         ----------------------------
                                                  Its:  Vice President




<PAGE>

                                                                  Exhibit 10.156

                                                         EXECUTION COPY






LITCHFIELD FINANCIAL CORPORATION


$20,000,000 IN AGGREGATE PRINCIPAL AMOUNT
OF
9.30% NOTES DUE MARCH 31, 2004







NOTE PURCHASE AGREEMENT



Dated as of April 7, 1997






<PAGE>


TABLE OF CONTENTS


Page


SECTION 1.        ISSUANCE OF NOTES.  1
           ss.1.1   Authorization of Notes  1
           ss.1.2   Purchase and Sale of Notes  2
           ss.1.3   Use of Proceeds  2
           ss.1.4   Definitions, etc.  2

SECTION 2.        GENERAL REPRESENTATIONS AND WARRANTIES.  3
         ss.2.1   Capital Stock; Subsidiaries 3
         ss.2.2   Organization and Authority 3
         ss.2.3   Business 3
         ss.2.4   Financial Statements and Other Information;  Financial   
                  Condition 4
         ss.2.5   No Material Adverse Change  5
         ss.2.6   Licenses, Registrations, etc.  5
         ss.2.7   Title to Properties; Leases  5
         ss.2.8   Compliance with Other Instruments, etc.  6
         ss.2.9   No Materially Adverse Contracts, etc.  6
         ss.2.10  Compliance with Law, etc.  7
         ss.2.11  Compliance with ERISA; Multiemployer Plans  7
         ss.2.12  Pending Litigation, etc.  8
         ss.2.13  Taxes  8
         ss.2.14  Holding Company Act; Investment Company Act  9
         ss.2.15  No Foreign Assets Control Regulation Violation  9
         ss.2.16  No Margin Regulation Violation 10
         ss.2.17  Outstanding Securities 10
         ss.2.18  Corporate Proceedings 10
         ss.2.19  Consent, etc. 10
         ss.2.20  No Event of Default 11
         ss.2.21  Compliance with Environmental Laws 11
         ss.2.22  Validity of Agreement, Notes 12
         ss.2.23  Labor Relations 13
         ss.2.24  Broker's or Finder's Commissions 13
         ss.2.25  Insurance 13
         ss.2.26  Offerees 13
         ss.2.27  Solvency 13
         ss.2.28  Ranking 14
         ss.2.29  Full Disclosure 14

SECTION 3.        REPRESENTATIONS OF THE PURCHASERS. 15
         ss.3.1   Investment Intent, etc. 15
         ss.3.2   ERISA Representations 15

<PAGE>

SECTION  4.       CONDITIONS OF OBLIGATION TO PURCHASE NOTES. 16
         ss.4.1   Opinion of Special Counsel for You 16
         ss.4.2   Opinions of Counsel for the Company 16
         ss.4.3   Performance of Obligations 17
         ss.4.4   Representations True; No Event of Default 17
         ss.4.5   Private Placement Number 17
         ss.4.6   Fees and Disbursements of Special Counsel for You 17
         ss.4.7   Legality 17
         ss.4.8   Consents and Approvals 17
         ss.4.9   Taxes. 18
         ss.4.10  Dissolution; No Merger or Change in Control 18
         ss.4.11  Funding Instructions 18
         ss.4.12  Changes of Law 18
         ss.4.13  Proceedings, Instruments, etc 18

SECTION 5.        EXPENSES. 18

SECTION 6.        CERTAIN SPECIAL RIGHTS. 20
         ss.6.1   Home Office Payment 20
         ss.6.2   Delivery Expenses 20
         ss.6.3   Issuance Taxes 20

SECTION 7.        NOTE PREPAYMENTS. 20
         ss.7.1   Required Prepayments. 20
         ss.7.2   Optional Prepayments with Premium 21
         ss.7.3   Mandatory Offer to Prepay in a Put Event 22
         ss.7.4   Notice of Determination of Make-Whole Amount 2
         ss.7.5   Partial Prepayment Pro Rata 24
         ss.7.6   Acquisition of Notes 24

SECTION 8.        REGISTRATION, EXCHANGE AND REPLACEMENT OF NOTES. 24
         ss.8.1   Registration 24
         ss.8.2   Exchange 24
         ss.8.3   Replacement 25

SECTION 9.        CERTAIN COVENANTS OF THE COMPANY. 25
         ss.9.1   Maintenance of Office 25
         ss.9.2   Corporate Existence 25
         ss.9.3   General Maintenance of Properties and Business,  etc 26 
         ss.9.4   Notice of  Certain  Events and  Conditions  27 
         ss.9.5   Inspection  27
         ss.9.6   Compliance with Law, etc 28 
         ss.9.7   Payment of Taxes and Claims 28 
         ss.9.8   ERISA 29 
         ss.9.9   Transactions  with  Affiliates  29
         ss.9.10  Consolidation and Merger 29 
         ss.9.11  Consolidated  Tangible Net Worth 30 
         ss.9.12  Consolidated Net Earnings  Available for Fixed Charges 30

<PAGE>

         ss.9.13  Limitations  on  Indebtedness  30  
         ss.9.14  Limitation  on Restricted  Payments  31 
         ss.9.15  Restricted  Investments  31 
         ss.9.16  Liens 31 
         ss.9.17  Restrictions  on  Distributions  and  Issuances  of Equity 
                  Interests 32 
         ss.9.18  Maintenance of Allowance for Loan Losses 32 
         ss.9.19  Maintenance  of  Unencumbered  Assets to Total  Unsecured
                  Indebtedness  32  
         ss.9.20  Limitation  on Gain on  Sales  of Loans 32
         ss.9.21  Repurchase of Notes 32 
         ss.9.22  Tax  Consolidation 33 
         ss.9.23  Environmental Law Compliance 33
         ss.9.24  Ranking 34

SECTION 10.       INFORMATION TO BE FURNISHED TO HOLDERS OF NOTES. 33
           ss.10.1  Financial Statements of the Company 33
           ss.10.2  Other Information 35
           ss.10.3  Officer's Certificates 37
           ss.10.4  Accountants' Certificates. 37

SECTION 11.       DEFAULTS AND REMEDIES. 38
           ss.11.1  Events of Default; Acceleration of Notes 38
           ss.11.2  Default  Remedies  42 ss.11.3  Notice of Claimed  Default 42
           ss.11.4 Annulment of Acceleration of Notes 43

SECTION 12.       INTERPRETATION OF AGREEMENT AND NOTES. 43
           ss.12.1  Definitions 43
           ss.12.2  Directly or Indirectly 59
           ss.12.3  Accounting Terms 59
           ss.12.4  GOVERNING LAW 59
           ss.12.5  Independence of Covenants 59
           ss.12.6  Saturdays, Sundays, Holidays, etc. 60
           ss.12.7  Headings. 60

SECTION 13.       MISCELLANEOUS. 60
           ss.13.1  Notices 60
           ss.13.2  Survival 60
           ss.13.3  Successors  and  Assigns;   Transfer  of  Notes  61  
           ss.13.4  Amendment   and   Waiver  61  
           ss.13.5  Confidentiality   62  
           ss.13.6  Indemnification  Against Claims,  etc. 62 
           ss.13.7  Indemnity for Funds Availability   at  Closing  63   
           ss.13.8  Counterparts   64 
           ss.13.9  Reproduction  of Documents 64 
           ss.13.10 Consent to  Jurisdiction  and Venue 64

<PAGE>


SCHEDULE I  Purchaser of the Notes
SCHEDULE II Information to be Furnished to the Purchaser  
SCHEDULE III-A Opinion of Special Counsel to the Purchaser 
SCHEDULE III-B Opinion of Special Counsel to the Company

EXHIBIT A         Form of Note
EXHIBIT B         Form of Subordination Provisions



<PAGE>


LITCHFIELD FINANCIAL CORPORATION
789 Main Road
Stamford, Vermont  05352

Telephone:  (802) 694-1200
Telecopier: (802) 694-1237


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

NOTE PURCHASE AGREEMENT

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



Dated as of April 7, 1997



To the Purchaser of the
Notes (as defined herein)
Named in Schedule I hereto

Ladies and Gentlemen:

     The  undersigned,   Litchfield  Financial   Corporation,   a  Massachusetts
corporation,  having its  principal  office at the address set forth above (said
corporation,   together  with  its  permitted  successors  and  assigns,   being
hereinafter called the "Company"), hereby agrees with you as follows:
                        -------

SECTION 1.  ISSUANCE OF NOTES.

     ss.1.1  Authorization of Notes. The Company has authorized the issuance and
             -----------------------
sale of up to $20,000,000 in aggregate  principal amount of its 9.30% Notes, due
March 31,  2004,  substantially  in the form  annexed  hereto as  Exhibit A (the
                                                                  ---------
"Notes").  Each Note shall bear  interest  from the date thereof until such Note
 -----
shall  become due and payable in  accordance  with the terms  thereof and hereof
(whether at maturity,  by  acceleration  or  otherwise) at the rate of 9.30% per
annum,  payable  semi-annually  on each  March  31 and  September  30  (each  an
"Interest Payment Date"),  commencing September 30, 1997 and shall have a stated
 ---------------------
maturity of March 31, 2004. Interest on each Note shall be computed on the basis
of a three  hundred  sixty (360) day year of twelve (12) thirty (30) day months.
Each Note shall bear  interest on any overdue  principal,  including any overdue
payment or  prepayment  of  principal  and  premium,  if any, and (to the extent
permitted by applicable law) on any overdue installment of interest, at the rate
of two  percent  (2%) above the  interest  rate  applicable  to timely  payments
thereon. If the Company shall have paid or agreed to pay any interest or premium
on any Note in excess of that permitted by law, then it is the express intent of
the Company and the holder thereof that all excess amounts previously paid or to
be paid by the Company be applied to reduce the principal  balance of such Note,
and the  provisions  thereof  immediately  be deemed  reformed  and the  amounts

<PAGE>

thereafter  collectable  thereunder  reduced,   without  the  necessity  of  the
execution of any new document, so as to comply with the then applicable law, but
so as to  permit  the  recovery  of the  fullest  amount  otherwise  called  for
thereunder.

     ss.1.2 Purchase and Sale of Notes. In reliance on your  representations set
            ---------------------------
forth in  Section  3 hereof,  the  Company  agrees to sell to you,  and upon and
subject  to  the  terms  and   conditions   hereof  and  in  reliance  upon  the
representations  and warranties of the Company  contained  herein,  you agree to
purchase from the Company,  Notes in the aggregate  principal  amount  specified
opposite  your  name in  Schedule  I hereto  at a  purchase  price  equal to the
principal  amount thereof (the "Purchase  Price").  The Notes are to be sold and
delivered  at one  closing to be held on April 7, 1997 at 10:00  A.M.,  New York
City time,  or such  other date and time as shall be agreed  upon by you and the
Company, and in any event not later than April 7, 1997 unless the parties hereto
agree  otherwise  in writing  (such date and time being  hereinafter  called the
"Closing Date"), at the offices of Orrick, Herrington & Sutcliffe LLP, 666 Fifth
Avenue,  Eighteenth  Floor,  New York, New York 10103.  On the Closing Date, the
Company  will deliver to you one or more duly  executed  Notes dated the Closing
Date,  registered  in your name or the name of your nominee and in the principal
amount or amounts specified opposite your name in Schedule I hereto.

     If at the closing the Company  shall fail to tender any of the Notes to you
as provided above in this ss.1.2, or any of the conditions  specified in Section
4 hereof shall not have been  fulfilled to your  satisfaction,  at your election
you shall be relieved of all obligations  under this Agreement,  without thereby
waiving  any  other  rights  you may  have by  reason  of such  failure  or such
nonfulfillment.

     ss.1.3  Use of  Proceeds.  The  proceeds  of the  sale of the  Notes on the
             -----------------
Closing Date shall be used by the Company to originate loans, temporarily reduce
borrowings under existing lines of credit with senior lenders of the Company and
for general corporate purposes.

     ss.1.4  Definitions,  etc. Certain terms used in this Agreement are defined
             ------------------
in Section 12 hereof;  references  to a  "Schedule"  or  "Exhibit"  are,  unless
otherwise  specified,  to the Schedules and Exhibits attached to this Agreement.
All of the  Schedules  and  Exhibits  attached  to  this  Agreement  are  hereby
incorporated by reference herein in their entirety.

SECTION 2.  GENERAL REPRESENTATIONS AND WARRANTIES.

     Prior to giving effect to the transactions contemplated herein, the Company
hereby represents and warrants to you as follows:

     ss.2.1 Capital Stock; Subsidiaries. (a) The authorized capital stock of the
            ----------------------------
Company  consists of 8,000,000 shares of common stock, par value $.01 per share,
of which 5,444,731  shares are issued and  outstanding  and 1,000,000  shares of
preferred  stock, par value $.01 per share,  none of which are outstanding.  All
such outstanding shares have been duly authorized,  validly issued and are fully
paid,  nonassessable  and free of preemptive  rights. No shares of voting common
stock or non-voting common stock are held in the treasury of the Company.  There
are no subscriptions, options, warrants or calls relating to the issuance by the
Company of any shares of its capital stock, including any right of conversion or
exchange under any outstanding  security or other instrument,  other than as set
forth in Part I of Item 2.1(a) of Schedule II hereto. There are no voting trusts
                                  -----------
or other agreements or understandings  with respect to the voting of the capital
stock of the Company.

<PAGE>

     (b) The only  Subsidiaries  of the  Company are as listed in Part 1 of Item
2.1(b) of Schedule II hereto. Part 1 of said Item 2.1(b) correctly sets forth as
to each Subsidiary its name and jurisdiction of its formation.

      ss.2.2   Organization   and  Authority.   Each  of  the  Company  and  its
               ------------------------------
      Subsidiaries:

             (i) is a corporation  duly organized,  validly existing and in good
      standing under the laws of the jurisdiction of its incorporation;

            (ii) has all requisite power and authority  (corporate and other) to
     own and operate its  properties  and to conduct its  business as  currently
     conducted and as currently proposed to be conducted; and

            (iii) has duly qualified to do business as a foreign corporation and
     is in good  standing  in each  jurisdiction  in  which  the  failure  to so
     qualify,  either  individually  or in the  aggregate,  would  reasonably be
     likely to have a Material Adverse Effect.

     ss.2.3  Business.  (a) The  Private  Placement  Memorandum  distributed  in
             ---------
January 1997 and supplemented in March 1997 (the "Offering Memorandum") contains
accurate  descriptions  of the general nature of the business of the Company and
its Subsidiaries as presently conducted and the major properties owned or leased
by the  Company  and  its  Subsidiaries.  Neither  the  Company  nor  any of its
Subsidiaries is presently engaged in any material line of business not disclosed
in such documents,  and none of them owns or leases any  significant  properties
not so disclosed.

     (b) The  address of the  principal  place of business  and chief  executive
office of the Company is accurately set forth at the head of this Agreement.

     ss.2.4   Financial Statements and Other Information; Financial Condition.
              ----------------------------------------------------------------

(a)  The  Company  has  furnished  to  you  complete  and  accurate   copies  of
consolidated  financial  statements of the Company and its  Subsidiaries for the
Fiscal Year ended December 31, 1996, including the consolidated balance sheet of
the  Company  and its  Subsidiaries  as of the end of such  Fiscal  Year and the
consolidated  statements of income,  stockholders'  equity and cash flows of the
Company and its Subsidiaries  for such Fiscal Year (the financial  statements of
the  Company  and its  Subsidiaries  and other  information  referred to in this
ss.2.4  being  referred  to  as  the  "Financial  Statements").   The  Financial
Statements have been prepared in accordance with generally  accepted  accounting
principles applied on a consistent basis during the respective  periods,  except
as noted in the Offering Memorandum.  The Financial Statements so provided are a
complete copy of such  Financial  Statements  and present fairly in all material
respects the consolidated financial position of the Company and its Subsidiaries
as of such dates and the results of their operations and cash flows, as the case
may be, for such periods.  Neither the Company nor any of its  Subsidiaries  has
any material obligation or liability,  individually or in the aggregate,  of the
nature  required to be disclosed on a balance sheet prepared in accordance  with
generally accepted accounting  principles that is not disclosed by the Financial
Statements referred to above, except as noted in the Offering  Memorandum.  Item
2.4(a) of Schedule II hereto sets forth a complete  and correct  list of (i) all
outstanding  Indebtedness of the Company or any of its Subsidiaries in excess of
$500,000, (ii) all bank facilities and revolving credit agreements the aggregate
amount  available  under which is in excess of $500,000 and (iii) the  aggregate
amount  of all  other  outstanding  Indebtedness  of the  Company  or any of its
Subsidiaries.

<PAGE>

     (b) The  Company  has  furnished  to you copies of certain  forward-looking
financial information for the Company and its Subsidiaries  telecopied to you on
February 5, 1997,  consisting of projected  financial  statements of the Company
and its  Subsidiaries  for each of the Fiscal  Years  ended  December  31,  1997
through December 31, 1999,  including  forecasted  balance sheets of the Company
and its  Subsidiaries  as of the end of each  such  Fiscal  Year and  forecasted
statements  of income of the Company and its  Subsidiaries  for each such Fiscal
Year (collectively,  the  "Projections").  The Projections have been prepared by
the Company in good faith, based on assumptions which were reasonable when made;
provided,  however,  that the Projections are subject to uncertainty inherent in
all forward-looking  statements, and there is no representation or warranty that
the results reflected therein will in fact be achieved.  No fact has come to the
attention of the Company which causes it to believe that such assumptions are no
longer reasonable.

     ss.2.5 No Material Adverse Change.  Since December 31, 1996, there has been
            ---------------------------
no material  adverse change in the business,  earnings,  properties or condition
(financial  or other) of any of the  Company  and its  Subsidiaries,  taken as a
whole.  Since December 31, 1996, neither the Company nor any of its Subsidiaries
has directly or indirectly declared, ordered, paid, made or set apart any sum or
property  for any  Restricted  Payment or agreed to do so,  except as  expressly
disclosed in the Financial Statements.

     ss.2.6  Licenses,   Registrations,   etc.  Each  of  the  Company  and  its
             ---------------------------------
Subsidiaries owns or possesses,  and holds free from burdensome  restrictions or
known material conflicts with the rights of others, all licenses, registrations,
permits, copyrights, trademarks, service marks, trade names and patents, and all
rights  with  respect to the  foregoing,  (collectively  "Intellectual  Property
Rights"),  necessary  for the conduct of its  business as now  conducted  and as
proposed  to be  conducted,  except to the extent  that the failure to so own or
possess any such  Intellectual  Property  Right,  either  individually or in the
aggregate, would not reasonably be likely to have a Material Adverse Effect.

     ss.2.7  Title  to  Properties;   Leases.   Each  of  the  Company  and  its
             --------------------------------
Subsidiaries  has  good  and  marketable  title  to all  assets  and  properties
reflected as being owned by it in the Financial  Statements  for the Fiscal Year
ended December 31, 1996, as well as to all assets and properties  acquired since
said date (except property disposed of since said date in the ordinary course of
business).  Except for the Liens set forth on Item 2.7 of Schedule II hereto and
Liens of the type  described in clauses (a),  (b) and (c) of the  definition  of
"Permitted Liens" in ss.12.1 hereof, there are no Liens on any of such assets or
properties. Each of the Company and its Subsidiaries has the right to, and does,
enjoy peaceful and undisturbed  possession under all material leases under which
it is leasing property as a lessee. All such leases are valid, subsisting and in
full force and effect, and none of such leases is in default,  except where such
default,  either  individually  or in the  aggregate,  could not have a Material
Adverse Effect.

     ss.2.8 Compliance with Other Instruments,  etc. Neither the Company nor any
            ----------------------------------------
of its  Subsidiaries is: (a) in violation of its certificate of incorporation or
bylaws;  or (b) in default in the performance,  observance or fulfillment of any
of the obligations,  covenants or conditions  contained in, and is not otherwise
in  default  under,  (i) any  evidence  of  Indebtedness  or any  instrument  or
agreement  under or pursuant  to which any  evidence  of  Indebtedness  or other
evidence  of  Indebtedness  has been  issued;  or (ii) any other  instrument  or
agreement  to  which  it is a  party  or by  which  it is  bound  or  any of its

<PAGE>

properties  is  affected.  Neither the Company nor any of its  Subsidiaries  has
defaulted  in,  nor has any of them  failed  to make at the  time  contemplated,
payment of any dividends or any mandatory  redemption  payments of any preferred
stock,  distributions  or any  principal  of, or  premium  or  interest  on, any
Indebtedness.  Neither the execution, delivery or performance of this Agreement,
nor the offer,  issuance,  sale or  delivery of the Notes by the Company nor the
performance  of the Notes by the  Company  does or will:  (A)  conflict  with or
violate the certificate of incorporation or bylaws;  (B) conflict with or result
in a breach of any of the terms,  conditions or  provisions  of, or constitute a
default under, or result in the creation of any Lien on any of the properties or
assets of the  Company or any of its  Subsidiaries  pursuant to the terms of any
evidence of  Indebtedness,  or any instrument or agreement  under or pursuant to
which any evidence of Indebtedness  has been issued,  or any other instrument or
agreement  referred  to in  this  ss.2.8  to  which  the  Company  or any of its
Subsidiaries  is a party or by which it is bound; or (C) require the consent of,
or other action by, any  stockholder,  trustee or any creditor of, any lessor to
or any  investor  in,  the  Company  or any of  its  Subsidiaries  or any  other
non-governmental Person, which have not been obtained.

     ss.2.9 No Materially  Adverse  Contracts,  etc. (a) Neither the Company nor
            ----------------------------------------
any of  its  Subsidiaries  is a  party  to or  bound  by  (nor  is any of  their
respective properties affected by) any contract or agreement,  or subject to any
order,  writ,  injunction  or  decree  or  other  action  of  any  court  or any
governmental  department,  commission,  bureau,  board or  other  administrative
agency  or  official,   or  any  charter  or  other   corporate  or  contractual
restriction, which, either individually or in the aggregate, would reasonably be
likely to have a Material  Adverse Effect,  or in the future would reasonably be
likely to have a Material Adverse Effect.

     (b) Except as set forth in Item 2.9 of Schedule II, neither the Company nor
                                            -----------
any of its  Subsidiaries  is a party  to any  contract  or  agreement  with  any
Affiliate  the  terms  of  which  are not  commercially  reasonable  or are less
favorable to it than it would obtain in a  comparable  arm's length  transaction
with a Person other than an Affiliate.

     ss.2.10  Compliance with Law, etc. Each of the Company and its Subsidiaries
              -------------------------
is in full  compliance with all laws and ordinances and all  governmental  rules
and regulations to which it is subject, except to the extent that non-compliance
therewith,  either  individually or in the aggregate,  could not have a Material
Adverse  Effect.  Neither  the  execution,   delivery  or  performance  of  this
Agreement, nor the offer, issuance, sale or delivery of the Notes by the Company
or the performance of the Notes by the Company does or will cause the Company or
any of its  Subsidiaries to be in violation of any statute,  law or ordinance or
any judgment,  decree,  writ,  injunction,  order,  award or other action of any
court or governmental  authority or arbitrator or any order, rule or regulation,
of any  federal,  state,  county,  municipal  or other  governmental  or  public
authority or agency.

     ss.2.11  Compliance  with  ERISA;  Multiemployer  Plans.  (a)  Neither  the
              -----------------------------------------------
execution and delivery of this  Agreement by the Company,  the offer,  issuance,
sale and delivery of the Notes by the Company,  the  acquisition of the Notes by
you,  the  application  by the Company of the proceeds of the sale of the Notes,
nor the  consummation  of any of the  other  transactions  contemplated  by this
Agreement  will  constitute a  "prohibited  transaction"  (within the meaning of
                                -----------------------
Section  4975 of the Code or Section 406 of ERISA).  The  representation  by the
Company in the  preceding  sentence is made in reliance  upon and subject to the
accuracy of the  representations  made by you in ss.3.2 hereof.  The Company has
delivered  to you a complete and correct list of all Plans with respect to which
the  Company,  any of its  Subsidiaries  or any ERISA  Affiliate  is a "party in
                                                                        --------
interest"  (within  the  meaning of Section  3(14) of ERISA) or with  respect to
--------
which its  securities are "employer  securities"  (within the meaning of Section
                           --------------------
407(d)(1) of ERISA).

<PAGE>

     (b) Each Plan of each of the Company and its  Subsidiaries is in compliance
in all material  respects  with  applicable  provisions  of ERISA,  the Code and
applicable  foreign law. Each of the Company and its  Subsidiaries  has made all
contributions to the Plans required to be made by it.

     (c) Except for liabilities to make  contributions  and to pay PBGC premiums
and  administrative  costs,  neither the Company nor any of its Subsidiaries has
incurred  any material  liability to or on account of any Plan under  applicable
provisions of ERISA, the Code or applicable foreign law, and no condition exists
which  presents a material  risk to the  Company or any of its  Subsidiaries  of
incurring any such liability.

     (d) None of the Plans is a Pension Plan or Multiemployer  Plan, and none of
the Company,  any of its  Subsidiaries or any ERISA Affiliate has maintained any
Pension Plan or has  contributed  or been obligated to contribute to any Pension
Plan or Multiemployer Plan at any time within the preceding six (6) years.

     ss.2.12 Pending Litigation,  etc. There is no action at law, suit in equity
             -------------------------
or other proceeding or investigation,  including, without limitation,  Metroplex
Homesteads  Inc., et al. v. Litchfield  Financial  Corporation,  (whether or not
purportedly on behalf of the Company or any of its Subsidiaries) in any court or
by or before  any other  governmental  or public  authority  or  agency,  or any
arbitrator  or  arbitration  panel  pending  or,  to the best  knowledge  of the
Company, threatened against or affecting the Company, any of its Subsidiaries or
any  of  their  respective  properties  that,  either  individually  or  in  the
aggregate,  (a) would  reasonably be likely to have a Material Adverse Effect or
(b) could  question  the  validity or  enforceability  of this  Agreement or the
Notes.  None of the Company and its  Subsidiaries  is in default with respect to
any  order,  writ,  injunction,  judgment  or  decree  of  any  court  or  other
governmental or public  authority or agency or arbitrator or arbitration  panel.
Item 2.12 of  Schedule  II  hereto  sets  forth a  description  of all  material
litigation  in  which  the  Company  or  any of its  Subsidiaries  is  currently
involved.

     ss.2.13 Taxes. All federal,  state and other tax returns of the Company and
             ------
each of its  Subsidiaries  required by law to be filed have been duly filed or a
valid  extension for such filing has been obtained,  and all federal,  state and
other taxes,  assessments,  fees and other governmental charges upon the Company
or any of its  Subsidiaries  or upon any of their  properties,  income or assets
that are due and  payable  have been  paid.  No  extensions  of the time for the
assessment of  deficiencies  have been granted by the Company.  The Company does
not know of any  proposed,  asserted  or  assessed  tax  deficiency  against the
Company  or  any  of  its  Subsidiaries.  Neither  the  Company  nor  any of its
Subsidiaries  is a party to or bound by or  obligated  under any tax  sharing or
similar agreement. Except as set forth in Item 2.13 of Schedule II hereto, there
are  no  Liens  on  any  properties  or  assets  of  the  Company  or any of its
Subsidiaries  imposed or arising  as a result of the  delinquent  payment or the
non-payment of any tax, assessment,  fee or other governmental  charge.  Federal
income  tax  returns  for the  Company  and each of its  Subsidiaries  have been
audited by the Internal Revenue Service or the applicable statutes of limitation
with respect to such obligations have expired for the Fiscal Year ended December
31, 1994 and all prior Fiscal Years; to the knowledge of the Company, no federal
or  state  income  tax  return  of the  Company  or any of its  Subsidiaries  is
currently  under  audit by the  Internal  Revenue  Service  or any other  taxing
authority.  None of the Company or any of its Subsidiaries (a) has assumed or is
liable for any federal, state or other income tax liability of any other Person,

<PAGE>

including any predecessor corporation,  as a result of any purchase of assets or
other business acquisition transaction (other than a merger in which the Company
or any Subsidiary was the surviving  corporation or a consolidation)  or (b) has
indemnified  any other Person or otherwise  agreed to pay on behalf of any other
Person any tax liability growing out of or which may be asserted on the basis of
any tax  treatment  adopted with respect to all or any aspect of such a business
acquisition  transaction.  The charges,  accruals and  reserves,  if any, on the
books of each of the Company and its  Subsidiaries in respect of federal,  state
and local  corporate  franchise and income taxes for all fiscal  periods to date
are  adequate  and have been  prepared in  accordance  with  generally  accepted
accounting principles, and the Company knows of no additional unpaid assessments
for such periods or of any basis therefore.  There are no applicable taxes, fees
or other governmental  charges payable by the Company or any of its Subsidiaries
in connection  with the  execution and delivery of this  Agreement or the offer,
issuance, sale and delivery of the Notes.

     ss.2.14  Holding  Company  Act;  Investment  Company  Act.  (a) Neither the
              -------------------------------------------------
Company nor any of its  Subsidiaries is a "public utility company" or a "holding
company", or a "subsidiary company" of a "holding company", or an "affiliate" of
a "holding company" or of a "subsidiary company" of a "holding company", as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended;
or a "public utility" within the meaning of the Federal Power Act, as amended.

     (b)  Neither  the Company  nor any of its  Subsidiaries  is an  "investment
company"  or an  "affiliated  person" of an  "investment  company"  or a company
"controlled"  by an  "investment  company"  as such  terms  are  defined  in the
Investment  Company Act of 1940, as amended.  Neither the Company nor any of its
Subsidiaries  is  an  "investment  adviser"  or  an  "affiliated  person"  of an
"investment adviser" as such terms are defined in the Investment Advisers Act of
1940, as amended.

     ss.2.15  No  Foreign  Assets  Control  Regulation  Violation.  None  of the
              ----------------------------------------------------
transactions contemplated by this Agreement will result in a violation of any of
the foreign assets control regulations of the United States Treasury Department,
31 C.F.R., Subtitle B, Chapter V, as amended (including, without limitation, the
Foreign Assets Control  Regulations,  the Regulations  Prohibiting  Transactions
Involving the Shipment of Certain  Merchandise  Between Foreign  Countries,  the
Cuban Assets Control Regulations,  the Libyan Sanctions Regulations, the Iranian
Assets Control  Regulations,  the Iranian  Transactions  Regulations,  the Iraqi
Sanctions   Regulations,   the  Federal  Republic  of  Yugoslavia   (Serbia  and
Montenegro)  and Bosnian Serb -  Controlled  Areas of the Republic of Bosnia and
Herzegovina  Sanctions  Regulations  and Unita  (Angola)  Sanctions  Regulations
contained in said Chapter V), or any ruling  issued  thereunder  or any enabling
legislation or Presidential  Executive Order granting  authority  therefor,  nor
will the  proceeds  of the sale of the Notes be used by the  Company in a manner
that would violate any thereof.


     ss.2.16  No  Margin   Regulation   Violation.   None  of  the  transactions
              ------------------------------------
contemplated by this Agreement  (including,  without  limitation,  the direct or
indirect use of the proceeds  from the sale of the Notes) will violate or result
in a  violation  of  Section 7 of the  Exchange  Act or any  regulations  issued
pursuant thereto, including,  without limitation,  Regulation G (12 C.F.R., Part
207), as amended,  Regulation T (12 C.F.R., Part 220), as amended,  Regulation U
(12 C.F.R.,  Part 221), as amended,  and Regulation X (12 C.F.R.,  Part 224), as
amended,  of the Board of Governors of the Federal Reserve System. The assets of
the Company do not include  any "margin  securities"  within the meaning of such
                                 ------------------
Regulation  G, and the Company does not have any present  intention of acquiring
any such margin securities.

<PAGE>

     ss.2.17  Outstanding   Securities.   All  securities  (as  defined  in  the
              -------------------------
Securities Act) of each of the Company and its  Subsidiaries  have been offered,
issued,  sold and delivered in compliance  with, or pursuant to exemptions from,
all applicable  federal and state laws, and the rules and regulations of federal
and state regulatory bodies governing the offering,  issuance, sale and delivery
of securities.

     ss.2.18 Corporate  Proceedings.  The Company has taken all corporate action
             -----------------------
necessary  to be taken by it to  authorize  the  execution  and delivery of this
Agreement,  the  offer,  issuance,  sale  and  delivery  of the  Notes  and  the
performance  of all  obligations  to be performed by it under this Agreement and
the Notes.

     ss.2.19  Consent,  etc. Any prior consent,  approval or  authorization  of,
              --------------
registration,  qualification, designation, declaration or filing with, or notice
to any federal,  state or local  governmental or public authority or agency that
is or will be required for the valid execution,  delivery or performance of this
Agreement by the Company or the valid offer,  issuance,  sale or delivery of the
Notes or the performance of the Notes by the Company has been obtained.  Each of
the Company  and its  Subsidiaries  has  obtained  all  consents,  approvals  or
authorizations  of, made all declarations or filings with, and given all notices
to, all federal,  state or local  governmental or public authorities or agencies
which  are  necessary  for  the  continued   conduct  by  the  Company  and  its
Subsidiaries of their  respective  businesses as now conducted or as proposed to
be conducted, other than such consents, approvals, authorizations, declarations,
filings and notices,  which either  individually or in the aggregate,  could not
have a Material Adverse Effect.

     ss.2.20 No Event of Default.  No event has occurred and is continuing,  and
             --------------------
no condition exists,  that, if the Notes had been issued and were outstanding on
the date hereof, would constitute a Default or an Event of Default.

     ss.2.21 Compliance with Environmental Laws. (a) Each of the Company and its
             -----------------------------------
Subsidiaries is, and will continue to be, in full compliance with all applicable
federal,   state  and  local  environmental  laws,  regulations  and  ordinances
governing  its  business,  products,  properties  or assets with  respect to all
discharges into the ground and surface water, emissions into the ambient air and
generation,  accumulation,  storage,  treatment,  transportation,   labeling  or
disposal of waste materials or process by-products (collectively, "Environmental
                                                                   -------------
Laws") for which failure to comply,  either  individually  or in the  aggregate,
----
would  reasonably be likely to have a Material  Adverse Effect,  and to the best
knowledge of the Company, none of the Company and its Subsidiaries is liable for
any  penalties,  fines or  forfeitures  for  failure  to comply  with any of the
foregoing.  All licenses,  permits or registrations  required for the respective
businesses  of the Company and its  Subsidiaries,  as  presently  conducted  and
proposed to be conducted,  under  federal,  state or local  environmental  laws,
regulations  or  ordinances  have been  secured  and each of the Company and its
Subsidiaries   is  in   compliance   therewith,   except  to  the  extent   that
non-compliance,  either  individually  or in the  aggregate,  could  not  have a
Material Adverse Effect.

     (b) As used herein, the term "Hazardous  Material" shall mean any hazardous
                                   -------------------
or toxic  substance,  material,  pollutant  or waste which is  regulated  by any
federal, state or local governmental authority,  including,  but not limited to,
the  following:   hazardous   substances  as  defined  under  the  Comprehensive

<PAGE>

Environmental  Response,  Compensation and Liability Act, as amended,  42 U.S.C.
ss. 9601 et seq.; hazardous waste as defined under the Solid Waste Disposal Act,
as amended,  42 U.S. C. ss. 6901 et seq.;  air  pollutants  regulated  under the
                                 ------
Clean Air Act as  amended,  42 U.S.C.  ss. 7401 et seq.;  pollutants  as defined
                                                ------
under the Clean Water Act, as amended, 33 U.S.C. ss. 1251 et seq.; any pesticide
                                                          ------
as defined by the  Federal  Insecticide,  Fungicide,  and  Rodenticide  Act,  as
amended,  7 U.S.C. ss. 136 et seq.; any hazardous  chemical substance or mixture
                           ------
or imminently  hazardous  substance or mixture regulated by the Toxic Substances
Control Act, as amended, 15 U.S.C. ss. 2601 et seq.; any substance listed in the
                                            ------
United  States  Department  of  Transportation  Table  at 49  CFR  172.101;  any
petroleum  product,  any explosives,  any radioactive  material and any asbestos
containing material.

     (c) No release,  emission or discharge of any  Hazardous  Material into the
environment (including the soil,  groundwater,  surface water or waterways,  and
air) is presently  occurring or has in the past occurred on or from any property
owned,  leased or  operated  by the  Company or any of its  Subsidiaries  except
pursuant to and in compliance with a federal,  state or local permit, and except
to the extent that liability therefor,  either individually or in the aggregate,
could not have a Material Adverse Effect.

     (d) No  Hazardous  Material is located or is suspected to be located in the
soil,  groundwater,  surface water, or waterways at or under any property owned,
leased or operated by the Company or any of its  Subsidiaries  in  quantities or
concentrations sufficient to require investigation, removal or remediation under
the  above-referenced  Comprehensive  Environmental  Response,  Compensation and
Liability  Act,  as  amended,  or any other  federal,  state or local  law,  the
existence or liability for which, either individually or in the aggregate, would
reasonably be likely to have a Material Adverse Effect.

     (e) Neither the  Company  nor any of its  Subsidiaries  has ever (i) owned,
occupied or operated a site or structure on or in which any  Hazardous  Material
was or is stored,  transported or disposed of; (ii)  transported or arranged for
the  transportation of any Hazardous  Material for recycling or disposal;  (iii)
caused or been held legally responsible for any release or threatened release of
any Hazardous Material;  (iv) received  notification from any federal,  state or
other  governmental   authority  of  potential  liability  for  any  release  or
threatened release of Hazardous Material;  or (v) been required to pay the costs
or expenses  incurred  for the release or  threatened  release of any  Hazardous
Material, except to the extent that such action did not and, either individually
or in the aggregate, could not have a Material Adverse Effect.

     ss.2.22 Validity of Agreement, Notes. This Agreement has been duly executed
             -----------------------------
and  delivered  by the  Company  and  constitutes  the legal,  valid and binding
obligation of the Company,  enforceable  against the Company in accordance  with
its terms.  Upon receipt by the Company of payment for the Notes, the Notes will
be duly  issued by the  Company  and will  constitute  legal,  valid and binding
obligations of the Company,  enforceable  against the Company in accordance with
their respective terms.

     ss.2.23 Labor Relations. Neither the Company nor any of its Subsidiaries is
             ----------------
engaged in any unfair labor practice which would  reasonably be likely to have a
Material Adverse Effect. There is (a) no unfair labor practice complaint pending
or, to the best knowledge of the Company,  threatened against the Company or any
of its  Subsidiaries  before the  National  Labor  Relations  Board  which would
reasonably  be likely to have a  Material  Adverse  Effect and no  grievance  or
arbitration proceeding arising out of or under a collective bargaining agreement
is so pending or threatened;  (b) no strike, labor dispute, slowdown or stoppage
pending or, to the best knowledge of the Company, threatened against the Company
or any of its Subsidiaries;  and (c) no union  representation  question existing
with respect to the employees of the Company or any of its  Subsidiaries  and no
union organizing activities are taking place with respect to any thereof.

<PAGE>

     ss.2.24 Broker's or Finder's Commissions. No broker's or finder's placement
             ---------------------------------
fee or  commission  will be payable by the Company with respect to the issuance,
sale and  delivery  of the  Notes  or with  respect  to any of the  transactions
contemplated hereby.

     ss.2.25  Insurance.  The Company and its Subsidiaries have, with respect to
              ----------
the properties and businesses of the Company and its Subsidiaries,  insurance of
the  types,  with the  insurers  and in the  amounts  set  forth in Item 2.25 of
Schedule II hereto, all of which satisfy the requirements of ss.9.3 hereof.

     ss.2.26 Offerees.  The Company represents that none of the Company,  any of
             ---------
its  Subsidiaries,  the Agent nor any other Person  authorized by the Company to
act as an agent, broker,  dealer or otherwise in connection with the offering or
sale of the Notes has, either directly or through any agent,  offered any of the
Notes or any similar  securities for sale to, or solicited any offers to buy any
thereof from, or otherwise approached or negotiated in respect thereof with, any
Person  or  Persons  other  than  you and  not  more  than  fifteen  (15)  other
Institutional  Investors. The Company agrees that neither it, nor any agent will
on behalf of it, sell or offer any of the Notes or any similar securities to, or
solicit  offers to buy any thereof from,  or otherwise  approach or negotiate in
respect thereof with, any other Person or Persons whomsoever,  or take any other
action,  so as to bring the  issuance  and sale of any of the Notes  within  the
provisions  of Section 5 of the  Securities  Act or the  provisions of any state
securities  law  requiring  registration  of  securities,  notification  of  the
issuance and sale thereof or confirmation  of the  availability of any exemption
from registration thereof.

     ss.2.27  Solvency.  Each  of the  Company  and  its  Subsidiaries  is  and,
              ---------
immediately  after  giving  effect  to the  issue  and sale of the Notes and the
consummation of the other transactions  contemplated by this Agreement, will be,
Solvent.

     For purposes of this ss.2.27,  the term "Solvent"  shall mean, with respect
                                              -------
     to any Person, that:

            (a) the assets of such Person, at a fair valuation, exceed the total
     liabilities (including contingent, subordinated, unmatured and unliquidated
     liabilities) of such Person;

            (b) based on  current  projections,  which  are based on  underlying
     assumptions  which provide a reasonable basis for the projections and which
     reflect such Person's  judgment based on present  circumstances of the most
     likely set of conditions and such Person's most likely course of action for
     the period  projected,  such Person believes it has sufficient cash flow to
     enable it to pay its debts as they mature;

            (c) such Person does not have an  unreasonably  small  capital  with
     which to engage in its anticipated business; and

            (d) the obligations of such Person, if any, are not in default as to
     principal and interest.

<PAGE>

     For purposes of this  ss.2.27,  the "fair  valuation"  of the assets of any
                                          ---------------
Person  shall be  determined  on the basis of the amount  which may be  realized
within a reasonable  time,  either through  collection or sale of such assets at
the regular  market  value,  conceiving  the latter as the amount which could be
obtained  for the  property  in  question  within  such  period by a capable and
diligent  businessman  from an interested buyer who is willing to purchase under
ordinary selling conditions.

     ss.2.28 Ranking.  All obligations and liabilities of the Company under this
             --------
Agreement  and the Notes  will  constitute  direct,  unconditional  and  general
obligations  of the Company and will rank in right of payment  pari passu to all
                                                               ---- -----
other  Indebtedness of the Company,  except for such  Indebtedness to the extent
preferred  as a result of being  secured  (but  then only to the  extent of such
security).

     ss.2.29  Full  Disclosure.  This  Agreement,  the Offering  Memorandum  (as
              -----------------
updated by this Agreement,  including all Exhibits and Schedules  hereto and any
other  agreements  or documents  delivered on the Closing  Date) reports and all
financial  statements  referred to in ss.2.4 hereof,  and those items previously
delivered  to you and set forth in Item 2.29 of Schedule  II hereto,  taken as a
whole, do not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements  contained  herein or therein not
misleading;  provided,  however,  that no representation is made with respect to
the projections contained in the Offering Memorandum.  There is no fact known to
the Company or any of its  Subsidiaries  that has not been  disclosed  to you in
writing that (a) has a Material  Adverse Effect or would reasonably be likely to
have a Material Adverse Effect,  or (b) adversely effects or would be reasonably
likely to adversely affect the ability of the Company to perform its obligations
under this Agreement or the Notes.

SECTION 3.  REPRESENTATIONS OF THE PURCHASERS.

     ss.3.1  Investment  Intent,  etc. You represent that you are purchasing the
             -------------------------
Notes to be purchased by you hereunder on the Closing Date without a view to the
distribution of such Notes, but subject, nevertheless, to the disposition of all
of your assets  (including,  without  limitation,  the Notes) being at all times
within  your  control to the  fullest  extent  required  by any  applicable  law
including,  without  limitation,  applicable  insurance law. The Company and you
each  acknowledge  that each of the  Notes are  securities  (as  defined  in the
Securities Act and the Exchange Act).

     ss.3.2  ERISA  Representations.  You  represent  that,  with respect to the
             -----------------------
source of funds to be used by you to purchase the Notes (the "Source"):
                                                              ------

            (a) you are an  insurance  company  and  either (i) the Source is an
     "insurance  company general  account"  (within the meaning of Department of
     Labor Prohibited  Transaction Class Exemption  ("PTCE") 95-60) and there is
     no "employee benefit plan" (within the meaning of Section 3(3) of ERISA) or
     "plan" (within the meaning of Section 4975(e)(1) of the Code),  treating as
     a  single  plan  all  plans   maintained  by  the  same  employer  (or  its
     "affiliates" as defined in PTCE 95-60 ss. V(a)(1)) or employee organization
                                ----
     (each,  a "Plan"),  with  respect to which (A) the amount of  reserves  and
                ----
     liabilities,  as  defined  by  the  annual  statement  for  life  insurance
     companies approved by the National  Association of Insurance  Commissioners
     (the "NAIC  Statement"),  for all general  account  contracts held by or on
           ---------------
     behalf of such Plan exceeds (B) ten percent (10%) of the total reserves and
     liabilities   of  such  general   account   (excluding   separate   account
     liabilities),  plus surplus as set forth in the NAIC  Statement  filed with
     your state of domicile;  (ii) the Source is a  "governmental  plan" (within
     the meaning of Section  3(32) of ERISA);  (iii) the Source is an "insurance

<PAGE>

     company pooled separate  account" (within the meaning of PTCE 90-1) and you
     have  identified  in writing to the Company  each Plan whose assets in such
     pooled  separate  account  exceed 10% of the total assets in that  account;
     (iv) the Source is an "investment fund" (within the meaning of Part V(b) of
     PTCE 84-14) managed by an identified "qualified professional asset manager"
     (within  the  meaning of Part V(a) of PTCE  84-14);  or (v) the Source is a
     specific Plan and you have provided in writing to the Company  complete and
     accurate information as to the identity of that Plan; or

            (b) you are an entity other than an insurance company and either (i)
     the Source is not a Plan or an entity whose underlying assets include "plan
     assets"  by  reason  of the  investment  in the  entity  by a Plan  and the
     application  of the  Department  of Labor's  "plan asset  regulations,"  29
     C.F.R.  ss.  2510.3-101  (1995);  (ii) the Source is a "governmental  plan"
     (within  the  meaning  of Section  3(32) of  ERISA);  (iii) the Source is a
     "collective  investment  fund  maintained by a bank" (within the meaning of
     PTCE 91-38) and you have  identified  in writing to the  Company  each Plan
     whose  assets in such bank  collective  investment  fund exceed ten percent
     (10%) of the total assets in that fund;  (iv) the Source is an  "investment
     fund"  (within  the  meaning  of Part  V(b) of PTCE  84-14)  managed  by an
     identified  "qualified  professional  asset manager" (within the meaning of
     Part V(a) of PTCE 84-14); or (v) the Source is a specific Plan and you have
     provided in writing to the Company complete and accurate  information as to
     the identity of that Plan.

SECTION  4. CONDITIONS OF OBLIGATION TO PURCHASE NOTES.

     Your  obligation  to purchase  and pay for the Notes to be purchased by you
hereunder on the Closing Date shall be subject to the satisfaction,  prior to or
concurrently with such purchase and payment, of the following conditions:

     ss.4.1  Opinion of Special  Counsel for You. You shall have  received  from
             ------------------------------------
Orrick, Herrington & Sutcliffe LLP, who are acting as special counsel for you in
connection  with  the  transactions  contemplated  by this  Agreement  ("Special
                                                                         -------
Counsel"),  an opinion, dated the Closing Date, in form and substance reasonably
-------
satisfactory to you, to the effect set forth in Schedule III-A hereto.
                                                --------------

     ss.4.2  Opinions of Counsel for the Company.  You shall have  received from
             ------------------------------------
Hutchins, Wheeler & Dittmar, A Professional Corporation, special counsel for the
Company, an opinion,  dated the Closing Date, in form and substance satisfactory
to you and your  Special  Counsel,  to the  effect set forth in  Schedule  III-B
                                                                 ---------------
hereto.  The Company  hereby  covenants  and agrees to instruct  such counsel to
prepare  and deliver to you  pursuant  to this  ss.4.2 its  opinion  referred to
above.

     ss.4.3 Performance of Obligations.  The Company shall have performed all of
            ---------------------------
its  obligations to be performed  hereunder prior to or on the Closing Date, and
you shall have  received an  Officer's  Certificate  of the  Company,  dated the
Closing Date, to such effect.

     ss.4.4  Representations  True; No Event of Default. The representations and
             -------------------------------------------
warranties  of the  Company  contained  herein  shall  be  true on and as of the
Closing Date with the same effect as though such  representations and warranties
had been made on and as of the  Closing  Date.  There shall exist on the Closing
Date no Event of Default or Default,  assuming  for this  purpose that the Notes
had been outstanding at all times from and after the date hereof. You shall have
received an Officer's Certificate of the Company, dated the Closing Date, to the
effect of each of the foregoing sentences.

<PAGE>

     ss.4.5  Private  Placement  Number.  The CUSIP Service Bureau of Standard &
             ---------------------------
Poor's  Ratings  Group,  a division of  McGraw-Hill,  shall have assigned to the
Notes a private placement number, and evidence thereof shall have been delivered
to you and your Special Counsel.

     ss.4.6 Fees and  Disbursements  of Special  Counsel for You.  Your  Special
            -----------------------------------------------------
Counsel shall have received payment by wire transfer of the invoice rendered for
its fees and  disbursements  posted  through the date of such invoice  (with the
understanding   that  a  supplemental   statement  for  fees  and  disbursements
subsequently  posted is to be rendered at a later date) in connection  with your
purchase of the Notes hereunder.

     ss.4.7  Legality.  The Notes shall  qualify as a legal  investment  for you
             ---------
under all applicable laws of any  jurisdiction to which you are subject (without
reference to any  so-called  "basket  clause" of any such law or any clause that
imposes  limitations  on  particular  investments,  whether in the  aggregate or
individually),  and the Company shall have delivered to you any evidence thereof
which you or your Special Counsel may reasonably request.

     ss.4.8  Consents and Approvals.  The Company shall have delivered to you an
             -----------------------
Officer's  Certificate,  dated the Closing Date,  certifying  that any necessary
consents,  waivers,  approvals,   authorizations,   registrations,  filings  and
notifications of the character referred to in ss.2.19 hereof, have been obtained
or made and are in full force and effect.

     ss.4.9 Taxes. Any taxes,  fees and other charges due in connection with the
            ------
issuance and sale of the Notes shall have been paid in full by the Company.

     ss.4.10 Dissolution;  No Merger or Change in Control. The Company shall not
             ---------------------------------------------
have  dissolved  nor shall the Company have  consolidated  or merged with,  been
wound up into or sold,  leased or  otherwise  disposed of its  properties  as an
entirety or substantially as an entirety to, any Person.

     ss.4.11 Funding  Instructions.  At least two (2) Business Days prior to the
             ----------------------
Closing Date, you shall have received written payment instructions  addressed to
you and  executed  by an  authorized  officer of the Company  setting  forth the
Purchase  Price of the  Notes to be  purchased  by you on the  Closing  Date and
directing the manner of payment of such Purchase  Price by setting forth (a) the
name of the bank to which such  payment is to be made (the  "Transferee  Bank"),
(b) the ABA number of the  Transferee  Bank,  (c) the account name and number at
the  Transferee  Bank  into  which  the  Purchase  Price  for the Notes is to be
deposited and (d) the name and telephone number of the account representative at
the Transferee Bank responsible for verifying receipt of such funds.

     ss.4.12  Changes of Law.  There  shall have  occurred  no change in any law
              ---------------
which would reasonably be likely to have a Material Adverse Effect.

     ss.4.13 Proceedings, Instruments, etc. All proceedings and actions taken on
             ------------------------------
or prior to the Closing Date in connection with the transactions contemplated by
this  Agreement  and all  instruments  incident  thereto  shall  be in form  and
substance satisfactory to you and your Special Counsel, and you and your special
counsel shall have received copies of all documents that you or they may request
in  connection  with such  proceedings,  actions  and  transactions  (including,
without  limitation,  copies of court documents,  certifications and evidence of
the  correctness  of the  representations  and warranties  contained  herein and
certifications and evidence of the compliance with the terms and the fulfillment
of the conditions of this Agreement,  in form and substance  satisfactory to you
and your Special Counsel).

<PAGE>

     ss.4.14  Release of Liens.  The First  National  Bank of Boston  shall have
              -----------------
released  the lien on the  Company's  assets  pursuant to the Loan and  Security
Agreement dated March 31, 1995 between The First National Bank of Boston and the
Company.

SECTION 5.  EXPENSES.

     Whether  or not  the  Notes  shall  be  sold or  this  Agreement  shall  be
terminated,  the  Company  agrees  to pay,  and to  hold  you  harmless  against
liability  for, all costs and  expenses  relating to this  Agreement,  any other
documents prepared in connection herewith and the Notes and to any modification,
amendment, alteration or enforcement of this Agreement, any additional documents
prepared  in  connection  herewith,  the Notes or any  agreement  or  instrument
contemplated  hereby  (whether  or not the same  shall  have come into  effect),
including, without limitation:

            (a) the cost of preparing and reproducing this Agreement,  any other
     documents prepared in connection  herewith,  the Notes and every instrument
     of modification, amendment or alteration hereof or thereof;

            (b) the fees and disbursements of Special Counsel for you (including
     local counsel,  if any), which fees and  disbursements the Company will pay
     on the Closing Date to the extent reflected on any invoices delivered on or
     prior to such date, and of all counsel for the Company;

            (c) the cost of delivering to your home office,  to your  depository
     or as you may  otherwise  instruct in writing,  insured to your  reasonable
     satisfaction, the Notes purchased by you on the Closing Date;

            (d) all costs and expenses  (including,  without  limitation,  legal
     fees of  special  counsel  and any  disbursements  and other  out-of-pocket
     expenses)  relating to any modifications,  amendments,  waivers or consents
     involving the provisions of this Agreement, any other documents prepared in
     connection  herewith,  or the Notes or relating to the  enforcement of this
     Agreement,  any other  documents  prepared  in  connection  herewith or the
     Notes; provided,  that, the Company shall not be required to pay legal fees
     for any in-house counsel;

            (e) all costs and expenses  (including,  without  limitation,  legal
     fees of special counsel and investment  advisor fees and any  disbursements
     and other  out-of-pocket  expenses)  relating  to any  Default  or Event of
     Default or during any workout or restructuring;

            (f) the broker's or finder's fees of any Person in  connection  with
     the sale of the Notes; and

            (g) the  fees of the  CUSIP  Service  Bureau  of  Standard  & Poor's
     Ratings Group  required to be paid in connection  with the  assignment of a
     private placement number by it with respect to the Notes.

<PAGE>

The obligations of the Company under this Section 5 shall survive the payment or
prepayment of the Notes and the termination of this Agreement.

SECTION 6.  CERTAIN SPECIAL RIGHTS.

     ss.6.1 Home Office Payment.  Notwithstanding  any provision to the contrary
            --------------------
in this Agreement or the Notes,  the Company will  punctually pay in immediately
available funds by 11:00 A.M. New York City time, on the date payment is due all
amounts  payable to you with  respect  to any Notes held by you or your  nominee
(without the necessity for any presentation or surrender thereof or any notation
of such  payment  thereon)  in the manner and at the  address  for such  purpose
specified  below your name in Schedule I hereto,  or at any other address as you
                              ----------
may from time to time  direct  in  writing.  You  agree  that,  as  promptly  as
practicable  after the payment or prepayment in whole of any Note held by you or
your  nominee  and  receipt  by you of a written  request  from the  Company  to
surrender  such Note to the Company for  cancellation,  you will  surrender such
Note at the office of the  Company  maintained  pursuant to ss.9.1  hereof.  You
agree that if you sell, assign or transfer any Note, you will, prior to any such
sale,  assignment or transfer,  make a proper notation  thereon of the amount of
principal paid thereon as of the date of such sale, assignment or transfer.

     ss.6.2  Delivery  Expenses.  If you shall surrender any Note to the Company
             -------------------
pursuant to this Agreement,  or if the Company shall issue any new Note pursuant
to this  Agreement,  the Company will pay all  reasonable  costs and expenses of
delivery  of the  surrendered  Note and any Note or Notes  issued in exchange or
replacement  for, or on registration of transfer of, the surrendered Note or any
such new  Note,  as the case may be,  in each case  insured  to your  reasonable
satisfaction. The obligations of the Company under this ss.6.2 shall survive the
payment or prepayment of the Notes and the termination of this Agreement.

     ss.6.3  Issuance  Taxes.  The Company will pay all taxes in connection with
             ----------------
the execution and delivery of this Agreement, the issuance and sale of the Notes
by the Company,  and any  modification  of this Agreement or the Notes issued by
it, and will save you and any subsequent  holder of the Notes harmless,  without
limitation  as to time,  against  any and all  liabilities  (including,  without
limitation,  any interest or penalty for nonpayment or delay in payment,  or any
income  taxes paid by you by reason of any  reimbursement  by the Company of any
such taxes paid by you) with respect to all such taxes.  The  obligations of the
Company  under this ss.6.3 shall  survive the payment or prepayment of the Notes
and the termination of this Agreement.

SECTION 7.  NOTE PREPAYMENTS.

     ss.7.1 Required  Prepayments.  The Company shall,  without notice,  prepay,
            ----------------------
without  premium,  on March 31, 2001 Notes in an aggregate  principal  amount of
$7,500,000  million and on each March 31,  thereafter  until and including March
31, 2003, Notes in an aggregate  principal amount of $6,000,000 million and will
pay at maturity  Notes in an  aggregate  principal  amount of $500,000  (or such
lesser  principal amount as may then be  outstanding),  together,  in each case,
with  interest  accrued  on the  amount  to be  prepaid  or paid to the  date of
prepayment  or  payment.  Except as  otherwise  provided in this  Agreement,  no
payments of  principal of the Notes are  required  prior to March 31, 2001.  Any
amounts  prepaid  pursuant to ss.7.2 hereof shall be applied in an inverse order
of maturity to reduce each of the then remaining prepayments required under this
ss.7.1 and the payment of the Notes required at maturity and any amounts prepaid
pursuant to ss.7.3  hereof  shall be applied pro rata to reduce each of the then
remaining  prepayments  required  under this ss.7.1 and the payment of the Notes
required at maturity.  Notwithstanding anything contained in this ss.7.1, on the
maturity  date of the  Notes,  the  full  principal  amount  of the  Notes  then
outstanding,  if any, together with accrued interest  thereon,  shall be due and
payable.

     ss.7.2 Optional Prepayments with Premium. (a) Upon the terms and subject to
            ----------------------------------
the conditions hereinafter set forth, the Company, at its option, upon notice as
provided in ss.ss.7.2(b) and 7.4 hereof, may prepay the Notes beginning one year
after the Closing  Date either in whole or from time to time in any part (but if
in part, then in units of $5,000,000 or integral multiples of $100,000 in excess
thereof),  at a prepayment price equal to the aggregate  principal amount of the
Notes so to be prepaid, plus interest accrued on the amount to be prepaid to the
date fixed for prepayment, plus a premium equal to the Make-Whole Amount.

     (b) Notice of any  prepayment  of Notes  pursuant to this  ss.7.2  shall be
given to each  holder of the Notes not less than thirty (30) nor more than sixty
(60) days before the date fixed for prepayment (the "Optional  Prepayment Date")
                                                     -------------------------
and shall be accompanied by an Officer's  Certificate of the Company  certifying
as to: (i) the Optional  Prepayment Date; (ii) the aggregate principal amount of
the Notes to be prepaid on such Optional  Prepayment  Date;  (iii) the aggregate
principal amount of the Notes and the principal amount of each such Note held by
such  holder  to be  prepaid;  (iv) the  aggregate  amount of  accrued  interest
applicable to such  prepayment;  and (v) the aggregate amount of the premium (if
any) that the Company would be required to pay if such  prepayment  were made on
the date notice is being given under this  ss.7.2,  together  with the  detailed
calculations used in determining the amount of such premium (which  calculations
shall be provided whether or not a premium is calculated to be due and payable).
In  addition,  the  Company  shall  subsequently  provide  notice  of the  final
determination of any Make-Whole Amount as required by ss.7.3 hereof.  Any notice
of  prepayment  pursuant to this  ss.7.2  having  been so given,  the  aggregate
principal  amount of Notes specified in such notice,  together with the premium,
if any,  and  accrued  interest  thereon,  shall  become due and payable on such
Optional Prepayment Date.

     ss.7.3   Mandatory Offer to Prepay in a Put Event.
              -----------------------------------------

     (a) In the event of the  occurrence of a Put Event (as defined in ss.7.3(d)
hereof),  the Company shall (i) deliver to each holder of a Note a ss.7.3 Notice
and Offer to Prepay  pursuant  to  ss.7.3(b)  hereof and (ii) unless such holder
declines  prepayment  as to one or more Notes it holds by delivering a ss.7.3(c)
Response pursuant to ss.7.3(c) hereof, prepay all, but not less than all, of the
Notes held by such holder as to which prepayment is not declined, as hereinafter
provided.  Any  prepayment  of Notes  pursuant to this ss.7.3 shall be made at a
prepayment price (the "Special Prepayment Price") equal to 101% of the par value
of the Notes to be prepaid,  together with interest  accrued thereon to the date
of prepayment.

     (b) On a date more than  thirty (30) days and not more than sixty (60) days
following the  occurrence of a Put Event,  the Company shall give written notice
to each Noteholder of the occurrence thereof and of such holder's right to elect
to be prepaid  hereunder arising as a result thereof (a "ss.7.3 Notice and Offer
                                                         -----------------------
to Prepay").  Such ss.7.3 Notice and Offer to Prepay shall state:  (i) that such
---------
notice  is  delivered  pursuant  to  this  ss.7.3(b);  (ii)  the  date  of and a
description of the circumstances  surrounding such Put Event;  (iii) the date by
which a  Noteholder  must  deliver a ss.7.3(c)  Response  pursuant to  ss.7.3(c)
hereof in order to decline  prepayment;  and (iv) the date on which the  Company
will prepay the Notes held by such Noteholder if the Noteholder does not deliver
a ss.7.3(c)  Response pursuant to ss.7.3(c) hereof,  which prepayment date shall

<PAGE>

be a Business  Day not more than  twenty-five  (25) days after the date on which
such ss.7.3  Notice and Offer to Prepay is delivered by the Company (the "ss.7.3
                                                                          ------
Special  Prepayment Date"). No failure by the Company to deliver a ss.7.3 Notice
------------------------
and Offer to Prepay to any  Noteholder  shall limit such  Noteholder's  right to
exercise such election.  In the event that the Company fails to deliver a ss.7.3
Notice and Offer to Prepay to any  Noteholder  within  sixty (60) days after the
occurrence of the Put Event, such Noteholder shall be deemed for the purposes of
this  ss.7.3 to have  received  such  ss.7.3  Notice  and Offer to Prepay on the
earlier of (i) date on which it first obtains actual knowledge of a Put Event or
(ii) the date which is sixty (60) days  after the  occurrence  of such Put Event
and the  ss.7.3  Special  Prepayment  Date  shall be deemed to be the  fifteenth
(15th)  Business Day  following  such date.  Unless such  Noteholder  delivers a
ss.7.3(c)  Response pursuant to ss.7.3(c)  hereof,  the Company shall prepay the
Notes held by such Noteholder on the deemed ss.7.3 Special Prepayment Date.

     (c) To decline  prepayment  pursuant  to this  ss.7.3 of one or more of the
Notes held by it, a  Noteholder  shall  deliver to the  Company,  such  holder's
notice that it declines  prepayment  pursuant to this ss.7.3 with respect to the
Notes  designated  therein (a "ss.7.3(c)  Response "). Such  ss.7.3(c)  Response
                               -------------------
shall be  delivered  to the  Company (i) on or before the  fifteenth  (15th) day
prior to the ss.7.3 Special  Prepayment Date designated in the ss.7.3 Notice and
Offer to Prepay  or (ii) at any time on or prior to the  deemed  ss.7.3  Special
Prepayment  Date if the Company  fails to delivery a ss.7.3  Notice and Offer to
Prepay.  The ss.7.3(c)  Response shall set forth the name of such holder and the
statement  that it declines  prepayment  pursuant to this ss.7.3 with respect to
the Notes designated therein.  Promptly and in any event within two (2) Business
Days after receipt of a Noteholder's  ss.7.3(c) Response,  the Company shall, by
written notice to such Noteholder,  acknowledge  receipt thereof. If the Company
has delivered a ss.7.3 Notice and Offer to Prepay to each  Noteholder and, on or
prior to the fifteenth  (15th) day prior to the ss.7.3 Special  Prepayment Date,
the Company shall not have received a ss.7.3(c)  Response from a Noteholder  (or
shall have  received a ss.7.3(c)  Response  with respect to some but not all the
Notes held by such Noteholder),  (i) the Company shall promptly, but in any case
within one  Business Day after the  expiration  of such 15-day  period,  deliver
written notice to such  Noteholder that all of the Notes held by such Noteholder
(or  all of the  Notes  held by such  Noteholder  with  respect  to  which  such
Noteholder  shall not have declined  prepayment in such  Noteholder's  ss.7.3(c)
Response)  will  be  prepaid  pursuant  to this  ss.7.3  on the  ss.7.3  Special
Prepayment  Date and (ii) the  Special  Prepayment  Price  shall  become due and
payable on the ss.7.3 Special Prepayment Date.

     (d) For  purposes of this  ss.7.3,  a "Put  Event"  shall be deemed to have
                                            ----------
occurred if any two (2) or more of the five (5) Key Persons cease to be employed
by the Company (other than, in the case of Mr. Greenholtz,  upon his retirement,
so long as he is replaced  within  forty-five  days of the date he retires) with
management  responsibilities  substantially comparable to their responsibilities
at the Closing Date (or, in the case of any person  substituted as a Key Person,
with  management  responsibilities   substantially  comparable  to  his  or  her
responsibilities as of the date so substituted in accordance with the definition
of "Key Person"),  unless (i) after taking into account the  substitution of one
or more new Key Persons for the  departing  Key  Persons,  at least four (4) Key
Persons  continue to be employed by the Company with the  applicable  management
responsibilities,  or (ii) the Required Noteholders shall have agreed in writing
that,  notwithstanding  the departure of such Key Persons, a Put Event shall not
have occurred.

     ss.7.4 Notice of  Determination  of Make-Whole  Amount.  Additional  notice
            ------------------------------------------------
shall be given in the case of any  prepayment  pursuant to ss.7.2  hereof or any

<PAGE>

acceleration  pursuant to ss.11.1 hereof promptly upon the Company becoming able
to calculate  the premium,  if any, that the Company shall be required to pay in
connection with such prepayment or acceleration,  but in no event less than five
(5) days prior to the appropriate  prepayment date or payment date, and shall be
accompanied  by an Officer's  Certificate  certifying  the premium,  if any, and
setting  forth the  calculation  thereof  that the Company is required to pay in
connection with such  prepayment or acceleration  and certifying that the amount
of such premium was  calculated in accordance  with the  provisions of ss.7.2 or
ss.11.1  hereof,  as the case may be,  the  definition  of the term  "Make-Whole
Amount" in ss.12.1  hereof and the other defined terms used in such  definition.
Any Noteholder shall have the right to contest the methodology or the arithmetic
accuracy of any calculation of any premium calculated by the Company pursuant to
the provisions of this  Agreement or any  prepayment  received by any Noteholder
pursuant  to such  provisions  of  this  Section  7 or in  connection  with  any
acceleration  pursuant to the provisions of ss.11.1 hereof by delivering written
notice to the Company setting forth such Noteholder's objection. Within five (5)
days of receipt by the Company of such notice, the Company shall respond to such
objection and shall notify each  Noteholder of the nature of such  objection and
of the Company's response thereto.  Any adjustment to the premium as a result of
such  objection and response  shall be made to each  Noteholder in proportion to
the amount  prepaid or to be prepaid to such  Noteholder.  The acceptance by any
Noteholder  of any  prepayment  shall  not be  deemed  to be a  waiver  by  such
Noteholder or the Company of any rights to contest the amount of such prepayment
hereunder.

     ss.7.5 Partial Prepayment Pro Rata. The aggregate  principal amount of each
            ----------------------------
partial  prepayment  of Notes  pursuant  to  ss.7.1 or  ss.7.2  hereof  shall be
allocated  among  the  holders  of  the  Notes  in  proportion,   as  nearly  as
practicable,  to the respective unpaid principal amounts of such Notes then held
thereby,  with  adjustments,  to the extent  practicable,  to compensate for any
prior prepayments not made in exactly such proportion.

     ss.7.6  Acquisition of Notes. The Company will not, and will not permit any
             ---------------------
Subsidiary or Affiliate to, purchase,  prepay,  redeem or otherwise  acquire any
Note except as expressly permitted by the terms hereof and of such Note.

SECTION 8.  REGISTRATION, EXCHANGE AND REPLACEMENT OF NOTES.

     ss.8.1  Registration.  The Notes  issuable  under this  Agreement  shall be
             -------------
registered notes. The Company will keep, at its office required to be maintained
pursuant  to ss.9.1  hereof,  books for the  registration  and  registration  of
transfer of the Notes.  Prior to  presentation  of any Note for  registration of
transfer,  the  Company  shall  treat  the  Person  in whose  name  such Note is
registered  as the owner and  holder of such Note for all  purposes  whatsoever,
whether or not such Note shall be overdue, and the Company shall not be affected
by notice to the contrary.

     ss.8.2 Exchange. The holder of any Note, at its option, may in person or by
            ---------
duly  authorized  attorney  surrender  the  same  for  exchange  at  the  office
maintained  pursuant  to  ss.9.1  hereof,  and  promptly  thereafter  and at the
Company's expense, except as provided below, receive in exchange therefor one or
more new Note or Notes of the same Series, each in the denomination requested by
such holder,  dated the date to which  interest shall have been paid on the Note
so surrendered or, if no interest shall have yet been so paid, dated the date of
the Note so surrendered  and registered in the name of such Person or Persons as
shall have been  designated  in writing by such holder or its  attorney  for the
same  principal  amount  as the  then  unpaid  principal  amount  of the Note so
surrendered.  Subject to ss.9.1 hereof, the Company may require payment of a sum
sufficient  to cover any stamp or other tax or  governmental  charge  imposed in
respect of any transfer involved in such exchange.

<PAGE>

     ss.8.3  Replacement.  Upon  receipt by the Company of  evidence  reasonably
             ------------
satisfactory  to it of the  ownership  of and the loss,  theft,  destruction  or
mutilation  of any Note and (a) in the case of loss,  theft or  destruction,  of
indemnity reasonably  satisfactory to it; provided,  however, that if the holder
of such Note is the  original  purchaser of the Note listed on Schedule I hereto
or any Affiliate or nominee thereof or any Institutional Investor or any nominee
thereof,  its own  unsecured  agreement  of  indemnity  shall  be  deemed  to be
satisfactory;  or (b) in the case of  mutilation,  upon surrender  thereof,  the
Company,  at its  expense,  will  execute and deliver in lieu thereof a new Note
executed in the same manner as the Note being  replaced,  in the same  principal
amount as the unpaid  principal  amount of such Note and dated the date to which
interest  shall  have been paid on such Note or, if no  interest  shall have yet
been so paid, dated the date of such Note.

SECTION 9.  CERTAIN COVENANTS OF THE COMPANY.

     The  Company  covenants  and agrees  that so long as any of the Notes shall
remain outstanding:

     ss.9.1  Maintenance  of Office.  The  Company  will  maintain at the office
             -----------------------
located at the address for notices to the Company  provided in ss.13.1 hereof an
office where notices, presentations and demands in respect of this Agreement and
the Notes may be given to and made upon it; provided,  however, that the Company
                                            --------   -------
may, upon fifteen (15) Business Days' prior written notice to the holders of the
Notes, move such office to any other location within the continental  boundaries
of the United States.  The Company hereby agrees that it will pay, and will save
any  Noteholder  harmless  against  liability  for,  any  stamp or other  tax or
governmental  charge imposed in respect of any transfer of a Note resulting from
such change in office;  and said  obligation  of the Company  shall  survive the
payment or prepayment of the Notes and the termination of this Agreement.

     ss.9.2  Corporate   Existence.   The  Company  will,  and  will  cause  its
             ----------------------
Subsidiaries  to,  take and  fulfill,  or cause to be taken and  fulfilled,  all
actions and  conditions  necessary to preserve and keep in full force and effect
its existence, rights and privileges as a corporation, and will not liquidate or
dissolve  and will take and  fulfill,  or cause to be taken and  fulfilled,  all
actions and  conditions  necessary to qualify,  and to preserve and keep in full
force and effect its qualification,  to do business as a foreign corporation, as
the case may be, in the  jurisdictions  in which the conduct of its  business or
the  ownership  or  leasing  of  its  properties  requires  such  qualification 
provided,  however,  that  this  ss.9.2  shall not be  deemed  to  prohibit  any
--------   -------
transaction  permitted by ss.9.10 hereof and shall not be deemed to prohibit the
dissolution  or  liquidation  of  any  Subsidiary  which  is  immaterial  to the
operations or financial condition of the Company and its Subsidiaries,  taken as
a whole.

      ss.9.3  General  Maintenance  of  Properties  and  Business,  etc. (a) The
              ----------------------------------------------------------
Company will, and will cause its Subsidiaries to:

                    (i)  maintain  or cause  to be  maintained  in good  repair,
            working  order and  condition,  usual  wear and tear  excepted,  all
            properties  used or useful in its business  and make all  reasonable
            and necessary  renewals,  replacements,  additions,  betterments and
            improvements thereof and thereto, so that the business carried on in
            connection  therewith may be conducted in the ordinary course at all
            times;

<PAGE>

                   (ii)  maintain or cause to be  maintained,  with  financially
            sound insurers of nationally  recognized stature and responsibility,
            insurance  with  respect  to its  property  and  business  of such a
            nature,  with such terms and in such  amounts,  as a prudent  person
            would  maintain  with  respect to similar  properties  and a similar
            business,  and, in any event,  will  maintain  insurance  on all its
            property of a character  usually  insured by Persons  engaged in the
            same or a similar business similarly situated against loss or damage
            of the kinds and in the amounts  customarily insured against by such
            Persons,  and carry or cause to be  carried,  with such  insurers in
            customary amounts, such other insurance,  including public liability
            insurance, as is usually carried by Persons engaged in the same or a
            similar business similarly  situated;  provided,  however,  that all
                                                   --------   -------
            insurance  maintained  pursuant to this clause (ii) shall be carried
            in amounts  sufficient to prevent it from  incurring  liability as a
            co-insurer  under  law or the  terms  of the  applicable  policy  or
            policies;

                  (iii)  keep  proper  books of  record  and  accounts  in which
            entries will be made of its business transactions in accordance with
            and  to  the  extent  required  by  generally  accepted   accounting
            principles; and

                   (iv) set aside on its books from its earnings for each Fiscal
            Year, in amounts deemed  adequate in the  reasonable  opinion of the
            Company,  all proper  accruals and reserves that, in accordance with
            generally accepted accounting  principles,  should be set aside from
            such earnings in connection  with its business,  including  reserves
            for  depreciation,  obsolescence  and/or  amortization,  third-party
            insurance  payment  and claims and  accruals  for taxes  based on or
            measured by income or profits and for all other taxes.

            (b) Neither the Company nor any  Subsidiary  will engage in any line
of business other than (i) providing  financing for consumer debt to individuals
with  credit  characteristics  substantially  similar to those of the  Company's
historic  consumer base,  (ii) providing  financing to lenders and to developers
secured  by loans to  individuals  described  in  clause  (i),  (iii)  providing
financing to developers  for the  acquisition  and  development  of property for
resale and (iv) any related business of the same general type.

            (c) Neither the Company nor any Subsidiary  will apply  underwriting
criteria in evaluating  prospective  loans which are  materially  less stringent
than those used by the Company on the Closing Date.

     ss.9.4  Notice of Certain  Events and  Conditions.  The  Company  will give
             ------------------------------------------
prompt  written  notice to each  Noteholder of any event of default  (including,
without  limitation,  any Event of  Default)  or any event  which with notice or
lapse of time or both would constitute an event of default  (including,  without
limitation,  any  Default)  under any  evidence  or  evidences  of  Indebtedness
(including the Notes) in an aggregate  principal amount of $1,000,000 or more of
the Company  and/or any  Subsidiary  or under any  indenture,  mortgage or other
agreement or instrument relating to any such evidence of Indebtedness (including
this Agreement) or under any other agreement or instrument relating to preferred
stock (or comparable  equity interest) of the Company or any Subsidiary or under
any material  lease for or in respect of which the Company or any Subsidiary may
be liable.

<PAGE>

     ss.9.5  Inspection.  The Company and its Subsidiaries  each will permit the
             -----------
Required Noteholders, by their representative, agent or attorney, to examine all
books of account,  records,  reports and other  papers of it, to make copies and
take extracts from any thereof, to discuss the affairs, finances and accounts of
it with its officers and independent  certified public  accountants (and by this
provision the Company  hereby  authorizes  said  accountants to discuss with any
such  holders the  finances  and  accounts of the Company and its  Subsidiaries;
provided  that  representatives  of the  Company  shall be  present  at any such
meeting with the accountants  unless an Event of Default shall have occurred and
be  continuing)  and to visit and inspect,  at  reasonable  times during  normal
business hours and following  reasonable  notice,  the properties of the Company
and its Subsidiaries.  Each such inspection shall be made during the continuance
of a  Default  or an Event of  Default  (in which  event,  the  expense  of such
inspection  shall  be  borne  by the  Company).  Notwithstanding  the  foregoing
sentence,  it is  understood  and agreed by the  Company  that all  expenses  in
connection with any such  inspection  incurred by the Company or any Subsidiary,
any officers and employees  thereof and the attorneys and independent  certified
public  accountants  therefor shall be expenses payable by the Company and shall
not be expenses of the Person making the inspection.  Prior to the occurrence of
an Event of Default,  inspections  pursuant to this Section 9.5 shall not exceed
two per calendar year.

     ss.9.6  Compliance  with Law, etc.  Neither the Company nor any  Subsidiary
             --------------------------
will (a) violate any laws,  ordinances or  governmental  rules or regulations to
which  it is or may  become  subject,  the  violation  of  which  could,  in the
aggregate,  have a Material Adverse Effect or (b) fail to obtain or maintain any
patents,  trademarks,  service marks, trade names,  copyrights,  design patents,
licenses,  permits, franchises or other governmental authorizations necessary to
the  ownership of its property or to the conduct of its  business,  except where
the failure so to obtain or maintain the foregoing,  either  individually  or in
the aggregate, could not have a Material Adverse Effect.

      ss.9.7 Payment of Taxes and Claims.  The Company and its Subsidiaries each
             ----------------------------
will pay and discharge promptly when due:

            (a) all  taxes,  assessments  and  governmental  charges  and levies
     imposed upon it, its income or profits or any of its properties, before the
     same shall become delinquent; and

            (b)  all  lawful  claims  of   materialmen,   mechanics,   carriers,
     warehousemen,  landlords  and other similar  Persons for labor,  materials,
     supplies  and rentals  that,  if unpaid,  might by law become a Lien (other
     than a Permitted Lien) upon any of its property;

provided,  however,  that no amount due with respect to clause (a) or clause (b)
--------   -------
above  need be paid  while  the  same  is  being  contested  in  good  faith  by
appropriate  proceedings  diligently  conducted so long as (i) adequate reserves
shall have been established and maintained in accordance with generally accepted
accounting  principles  with respect  thereto,  (ii) title of the Company or any
Subsidiary, as the case may be, to the particular property shall not be divested
thereby,  and (iii)  the  right of the  Company  or such  Subsidiary  to use the
particular  property shall not be materially  adversely  affected  thereby.  The
Company  and its  Subsidiaries  each will file within the period  prescribed  by
applicable law and regulations  (including any extensions  legally  provided for
and validly obtained) all federal, state and local tax returns and all other tax
reports as required by applicable law.

     ss.9.8  ERISA.  (a) Each of the  Company,  its  Subsidiaries  and the ERISA
             ------
Affiliates  will take all  actions  and  fulfill  all  conditions  necessary  to

<PAGE>

maintain  any  and  all  Plans  in  substantial   compliance   with   applicable
requirements of ERISA, the Code and applicable  foreign law until such Plans are
terminated,   and  the  liabilities  thereof  discharged,   in  accordance  with
applicable law.

     (b)  No  domestic  Pension  Plan  will  incur  any   "accumulated   funding
deficiency"  (within the meaning of Section 412(a) of the Code),  and no foreign
Pension  Plan  will  be in  violation  of any  funding  requirement  imposed  by
applicable foreign law, which deficiency or violation would reasonably be likely
to have a Material Adverse Effect.

     ss.9.9 Transactions with Affiliates. Neither the Company nor any Subsidiary
            -----------------------------
will enter into any transaction  (including,  without limitation,  the purchase,
sale or exchange of  property,  the  rendering of any services or the payment of
management  fees)  with any  Affiliate,  except in the  ordinary  course of, and
pursuant to the reasonable  requirements of, its business, and in good faith and
upon  commercially  reasonable terms that are no less favorable to it than would
obtain in a  comparable  arm's-length  transaction  with a Person  other than an
Affiliate.

     ss.9.10  Consolidation  and Merger.  Neither the Company nor any Subsidiary
              --------------------------
will merge into or consolidate  with any other Person or permit any other Person
to merge into or consolidate with it except:

            (a) the  Company  may  permit any Person to merge into it so long as
     (i) the Company shall be the surviving entity,  and (ii) immediately before
     and after giving effect to the transaction,  no Default or Event of Default
     shall exist; and

            (b) the  Company  may  merge  into or  consolidate  with  any  other
     corporation  so long as (i) the  corporation  which survives such merger or
     results from such  consolidation  (the  "surviving  corporation")  shall be
     organized  under the laws of the United States of America or a jurisdiction
     thereof;  (ii) the surviving  corporation  shall  assume,  by an instrument
     reasonably  satisfactory in form and substance to the Required Noteholders,
     the  obligations of the Company under the Notes and this  Agreement;  (iii)
     immediately  before and after giving effect to the transaction,  no Default
     or Event of Default  shall  exist;  and (iv) an  opinion of counsel  (which
     counsel and the form and  substance of which  opinion  shall be  reasonably
     satisfactory  to the  Required  Noteholders)  shall  be  delivered  to each
     Noteholder upon consummation of the transaction to the effect that, subject
     to such exceptions and limitations as are customarily  contained in similar
     opinions  of  counsel,  (A) this  Agreement,  the Notes and the  instrument
     referred to in the foregoing  subclause  (ii) are legal,  valid and binding
     obligations of the surviving corporation, enforceable against the surviving
     corporation in accordance  with their  respective  terms and (B) as to such
     other matters as the Required  Noteholders may reasonably  request that are
     reasonably  related to the issue of the  enforceability  of the obligations
     under the Notes,  this  Agreement  and the  instrument  referred  to in the
     foregoing subclause; and

            (c) any  Wholly-Owned  Subsidiary may merge into or consolidate with
     the  Company  if the  Company  is the  surviving  entity,  or with  another
     Wholly-Owned  Subsidiary,  in each case, so long as, immediately before and
     after  giving  effect to the  transaction,  no  Default or Event of Default
     shall exist.

      ss.9.11 Consolidated  Tangible Net Worth. The Company will not at any time
              ---------------------------------
permit  Consolidated  Tangible  Net  Worth  to be  less  than  the  sum  of  (i)
$34,000,000 plus (ii) fifty percent (50%) of Cumulative Net Earnings.

<PAGE>

     ss.9.12  Consolidated Net Earnings Available for Fixed Charges. The Company
              ------------------------------------------------------
will not at any time permit the ratio of Consolidated Net Earnings Available for
Fixed Charges for the period of four (4) most recently ended consecutive  Fiscal
Quarters to Fixed Charges for such period to be less than 2.00 to 1.00.

     ss.9.13  Limitations on  Indebtedness.  (a) The Company will not permit the
              -----------------------------
ratio of Total  Indebtedness to the sum of Consolidated  Tangible Net Worth plus
Total Subordinated  Indebtedness (the "Leverage Ratio") as of December 31 of any
Fiscal Year to exceed 4.00 to 1.00; provided,  however, that if at any such time
                                    --------   -------
the sum of Consolidated Net Tangible Worth plus Total Subordinated  Indebtedness
is equal to or  greater  than  $55,000,000,  the  Company  will not  permit  the
Leverage Ratio at such time to exceed 5.00 to 1.00. Any such Indebtedness  shall
be maintained in accordance with ss.9.17.

            (b) The Company  will not,  and will not permit any  Subsidiary  to,
directly or indirectly, incur, create, assume, guarantee or become liable in any
manner with respect to any  Indebtedness  unless after giving effect thereto the
Leverage  Ratio will not exceed  4.00 to 1.00 and no Default or Event of Default
will exist; provided,  however, that if at any such time the sum of Consolidated
            --------   -------
Net Tangible Worth plus Total  Subordinated  Indebtedness is equal to or greater
than  $55,000,000,  the Company may, and may permit any  Subsidiary  to,  incur,
create,  assume,  guarantee  or become  liable in any manner with respect to any
Indebtedness  so long as after giving effect thereto the Leverage Ratio will not
exceed 5.00 to 1.00 and no Default or Event of Default shall exist.

                  (c)  The  Company  will  not  permit  any  one or  more of its
Subsidiaries  to incur  unsecured  Indebtedness  in excess of  $1,000,000 in the
aggregate other than Indebtedness owing to the Company or another Subsidiary.


     ss.9.14 Limitation on Restricted Payments.  (a) Neither the Company nor any
             ----------------------------------
Subsidiary will at any time,  directly or indirectly,  declare,  make or pay, or
incur any  liability to make or pay, or cause or permit to be declared,  made or
paid, any  Restricted  Payment  unless the aggregate  amount of such  Restricted
Payment and all other Restricted  Payments made by the Company or any Subsidiary
on or after the date  hereof  would not exceed 50% of  Cumulative  Net  Earnings
(excluding   Consolidated   Net  Earnings  for  any  Fiscal  Quarter  for  which
Consolidated  Net Earnings is a loss) plus net proceeds  received by the Company
or any  Subsidiary  on or after the date hereof in respect of any  issuance  and
sale by the Company or any Subsidiary of any equity securities.

     (b) The Company shall not declare any Restricted  Payment payable more than
sixty (60) days  after the date of  declaration  thereof.  For  purposes  of any
calculation  pursuant to the foregoing clause (a), any Restricted  Payment which
is declared and paid in  compliance  with the first  sentence of this clause (b)
shall be  deemed to have been  paid at the date of  declaration  thereof,  after
giving effect to any Indebtedness incurred through the date of determination and
the  subsequent  payment of such  Restricted  Payment  shall not be treated as a
separate and additional Restricted Payment.

      ss.9.15  Restricted  Investments.  Neither the Company nor any  Subsidiary
               ------------------------
will make any Restricted Investment.

<PAGE>

     ss.9.16 Liens.  Neither the Company nor any Subsidiary shall grant,  create
             ------
or  assume a Lien on  substantially  all of the  assets of the  Company  and its
Subsidiaries taken as a whole (determined without regard to the assets described
in clauses (a) through  (d) of the  definition  of  "Consolidated  Net  Tangible
Assets" in ss.12.1 below) for the benefit of one or more holders of Indebtedness
under a single credit facility.

      ss.9.17  Restrictions on Distributions  and Issuances of Equity Interests.
               -----------------------------------------------------------------
(a) After the date hereof,  the Company will not permit any  Subsidiary to enter
into any agreement, instrument or other document which prohibits or restricts in
any way the payment of  dividends or other  distributions  on or with respect to
the capital stock (or other comparable  indicia of ownership if such Person is a
business entity other than a corporation) of any Subsidiary.

     (b) No Subsidiary shall issue Voting Stock,  non-voting stock, or any other
equity  interest in such  Subsidiary,  except to the  Company or a  Wholly-Owned
Subsidiary;  provided,  however,  that in connection with the acquisition of the
             --------   -------
business  and assets of another  Person,  the Company may create a  Wholly-Owned
Subsidiary  and permit such  Subsidiary  to issue shares of common stock of such
Subsidiary  to one or more Persons to be employed as a member of the  management
team of such Subsidiary so long as the aggregate number of shares so issued does
not at any time exceed five (5%) of the number of  outstanding  shares of Voting
Stock of such  Subsidiary;  and,  provided  further,  that  notwithstanding  the
                                  --------  -------
foregoing,  but subject to the  foregoing  limitation on the issuance of capital
stock, any such Subsidiary  shall be deemed to be a Wholly-Owned  Subsidiary for
all purposes of this Agreement; and, provided, further, that notwithstanding the
                                     --------  -------
foregoing,  a  Subsidiary  may issue not in excess of 20% of its  Voting  Stock,
non-voting  stock,  or any other equity interest in such  Subsidiary,  to one or
more Persons with which the Company  pursues a joint  venture or other  business
opportunities;  and, provided,  further,  that notwithstanding the foregoing,  a
                     --------   -------
Subsidiary  which has been  formed  solely for the purpose of  facilitating  the
securitization  and sale of assets of the Company may sell equity  interests  to
the purchasers of such securitization interests.

     ss.9.18  Maintenance  of  Allowance  for  Loan  Losses.  The  Company  will
              ----------------------------------------------
maintain,  on the last day of each month,  a ratio of Allowances for Loan Losses
to Net Write-offs for the most recently ended Fiscal Year of 1.50 to 1.00.

      ss.9.19   Maintenance   of   Unencumbered   Assets   to  Total   Unsecured
                ----------------------------------------------------------------
Indebtedness.  The Company will maintain, on the last day of each month, a ratio
-------------
of Unencumbered Assets to Total Unsecured Indebtedness of 1.40 to 1.00.

     ss.9.20  Limitation on Gain on Sales of Loans.  The Company will not at any
              -------------------------------------
time permit the aggregate amount of consolidated revenues of the Company and its
Subsidiaries  constituting  Gain  on  Sale  of  Loans  for  the  period  of four
consecutive   Fiscal  Quarters  then  most  recently  ended  to  exceed  45%  of
consolidated revenues of the Company and its Subsidiaries for such period.

     ss.9.21  Repurchase  of Notes.  Except as  otherwise  required or permitted
              ---------------------
under Section 7 hereof, neither the Company nor any Subsidiary nor any Affiliate
will,  directly or  indirectly,  repurchase or make any offer to repurchase  any
Notes.

     ss.9.22  Tax  Consolidation.  The  Company  will not file or consent to the
              -------------------
filing of any  consolidated  income  tax  return  with any  Person  other than a
Subsidiary, and if the Company and any Subsidiary file a consolidated income tax

<PAGE>

return,  the Company  will not pay an amount of the taxes  payable in respect of
such  return (net of any amount of such taxes paid or  reimbursed  by such other
Person) in excess of the amount  which the Company  would have been  required to
pay in respect of such taxes if the  Company  had filed an income tax return for
the Company.

      ss.9.23  Environmental  Law  Compliance.  (a)  Hazardous  Substances.  The
               -------------------------------       ----------------------
Company  shall at all times comply and cause each  Subsidiary to comply with all
Environmental  Laws the  failure to comply with  which,  individually  or in the
aggregate,  would  reasonably  be likely to have a Material  Adverse  Effect and
indemnify,  pay and hold each  Noteholder  harmless from and against any and all
losses,  costs (including  attorneys' fees),  liabilities and damages whatsoever
incurred by such Noteholder by reason of (i) any liability of the Company or any
of its  Subsidiaries  under  any  applicable  Environmental  Laws,  or (ii)  any
violation of any applicable  Environmental  Laws for which the Company or any of
its  Subsidiaries  is liable  or which is  related  to any real  estate or other
facility owned, leased or operated by the Company or any of its Subsidiaries, or
(iii) the imposition of any governmental  Lien for the recovery of environmental
cleanup or response costs expended by reason of any such liability or violation.

     (b) Cleanup  Orders;  Further  Assurance.  The Company  shall  provide each
         -------------------------------------
Noteholder  promptly  with a copy of any notice  received  by the Company or any
Subsidiary  from  any  governmental  agency  stating  that the  Company  or such
Subsidiary  has  become  liable  for the  cost  of  investigating,  removing  or
remediating  Hazardous  Materials or subject to a cleanup order or decree,  or a
fine or penalty  issued or imposed,  by an agency having  jurisdiction  over the
Company or any such  Subsidiary  if the Company  believes or  reasonably  should
believe that the matter that is the subject of such notice is,  individually  or
in the aggregate,  would reasonably be likely to have a Material Adverse Effect.
Upon receipt of such notice,  or if any  Noteholder at any time has a reasonable
basis to believe that any facility  owned,  leased or operated by the Company or
any of its  Subsidiaries  has  become  contaminated  or  subject to a cleanup or
mitigation  order or  decree,  or a fine or  penalty,  issued or  imposed by any
federal,  state or local  governmental  agency,  then the Company  agrees,  upon
request from such  Noteholder,  to provide  such  Noteholder,  at the  Company's
expense, with such reports,  certificates,  engineering studies or other written
material or data as such Noteholder may reasonably require.

     ss.9.24  Ranking.  The  Company  shall  ensure  that,  at  all  times,  all
              --------
obligations  and  liabilities  of the Company under this Agreement and the Notes
will constitute direct, unconditional and general obligations of the Company and
will  rank in right of  payment  pari  passu to all  other  Indebtedness  of the
                                 ----  -----
Company  except for such  Indebtedness  to the extent  preferred  as a result of
being secured (but then only to the extent of such security).


SECTION 10. INFORMATION TO BE FURNISHED TO HOLDERS OF NOTES.

     ss.10.1 Financial  Statements of the Company.  The Company shall deliver to
             -------------------------------------
each holder of any Note two (2) copies of the following:

            (a) as soon as practicable and, in any case,  within sixty (60) days
     after the end of each of the first  three  Fiscal  Quarters  in each Fiscal
     Year,  unaudited  consolidated  financial statements of the Company and the
     Subsidiaries  setting forth the consolidated  balance sheets of the Company
     and the  Subsidiaries  as at the end of each such  Fiscal  Quarter  and the

<PAGE>

     consolidated  income statements and statements of cash flows of the Company
     and the Subsidiaries for each such Fiscal Quarter and for the year to date,
     and setting forth in comparative form figures as of the corresponding  date
     and for the  corresponding  periods of the  preceding  Fiscal Year,  all in
     reasonable detail and certified by the Company's chief financial officer as
     to the fairness of such  financial  statements  and that the same have been
     prepared  in  accordance  with  generally  accepted  accounting  principles
     consistently applied (except as specifically set forth therein), subject to
     changes  resulting  from  normal  year-end  audit  adjustments;   provided,
     however,  that at such time and so long as the Company shall be required to
     file reports with the Commission pursuant to the Exchange Act, the delivery
     of its  quarterly  reports on Form 10-Q shall satisfy the  requirements  of
     this 10.1(a) with respect to consolidated financial statements;

            (b) as soon as  practicable  and,  in any case,  within one  hundred
     twenty (120) days after the end of each Fiscal Year,  audited  consolidated
     financial statements of the Company and its Subsidiaries, setting forth the
     consolidated  balance sheets of the Company and its  Subsidiaries as of the
     end of  such  Fiscal  Year  and  the  consolidated  income  statements  and
     statements  of  retained  earnings  and cash flows of the  Company  and its
     Subsidiaries  for  such  Fiscal  Year,  setting  forth  in  each  case,  in
     comparative  form,  the  figures  for the  preceding  Fiscal  Year,  all in
     reasonable  detail,  such  financial  statements  to be  accompanied  by an
     opinion thereon of Ernst & Young LLP or other independent  certified public
     accountants  selected  by the  Company  of  good  and  recognized  national
     standing  in the  United  States  or  other  independent  certified  public
     accountants  reasonably  acceptable to you,  relating to such  consolidated
     financial  statements,  which  report  and  opinion  shall be  prepared  in
     accordance  with  generally  accepted  accounting   standards  relating  to
     reporting  and  not  subject  to  any  material  qualifications;  provided,
     however,  that at such time and so long as the Company shall be required to
     file reports with the Commission pursuant to the Exchange Act, the delivery
     of its annual  report on Form 10-K shall satisfy the  requirements  of this
     ss.10.1(b) with regard to consolidated  financial  statements to the extent
     that  the  consolidated   financial  statements  of  the  Company  and  its
     Subsidiaries   are  audited  and  the  opinion  with  respect   thereto  is
     unqualified;

            (c) as soon as practicable and, in any case, within sixty (60) days
     after the end of each of the first  three  Fiscal  Quarters  in each Fiscal
     Year  in  which  the   Company   has  a  material   operating   Subsidiary,
     consolidating  financial  statements  of the Company  and the  Subsidiaries
     setting  forth  the  consolidating  balance  sheet of the  Company  and the
     Subsidiaries   as  at  the  end  of  each  such  Fiscal   Quarter  and  the
     consolidating  income  statements of the Company and the  Subsidiaries  for
     each such Fiscal Quarter,  and setting forth in comparative form figures as
     of  the  corresponding  date  and  for  the  corresponding  periods  of the
     preceding  Fiscal  Year,  all in  reasonable  detail and  certified  by the
     Company's  chief  financial  officer as to the  fairness of such  financial
     statements  and  that  the same  have  been  prepared  in  accordance  with
     generally accepted accounting principles;

            (d) as soon as  practicable  and,  in any case,  within one  hundred
     twenty  (120) days after the end of each  Fiscal  Year in which the Company
     has a material operating subsidiary,  consolidating financial statements of
     the Company and its Subsidiaries,  setting forth the consolidating  balance
     sheet of the Company and its Subsidiaries as of the end of such Fiscal Year
     and the consolidating income statements of the Company and its Subsidiaries
     for such  Fiscal  Year,  all in  reasonable  detail  and  certified  by the
     Company's  chief  financial  officer as to the  fairness of such  financial
     statements  and  that  the same  have  been  prepared  in  accordance  with
     generally accepted accounting principles.

<PAGE>

     ss.10.2 Other Information.  The Company shall deliver to each holder of any
             ------------------
Note the following:

            (a) promptly after the  submission  thereof to the Company copies of
     any detailed reports (including the auditors' comment letter to management,
     if any such letter is prepared) submitted to the Company,  respectively, by
     its independent auditors in connection with each annual or interim audit of
     the accounts of the Company made by such accountants;

            (b) promptly upon distribution  thereof,  copies of all financial or
     other statements  (including proxy statements),  reports and notices as the
     Company or any Subsidiary shall send to any class of its shareholders,  any
     of its bank lenders or any holder of any of its Indebtedness;

            (c)  promptly  after  filing  thereof,  copies  of all  regular  and
     periodic reports and registration  statements,  and current reports on Form
     8-K,  which the Company may file with the  Commission  or any  governmental
     agency  substituted  therefor and,  promptly upon written request therefor,
     copies of any financial statements which the Company may file annually with
     any state regulatory agency or agencies;

            (d)  promptly  and,  in any event,  within  thirty  (30) days after,
     notice of the  institution  of any suit,  action or proceeding  against the
     Company  or any  Subsidiary  which  could,  either  individually  or in the
     aggregate, have a Material Adverse Effect;

            (e) promptly  upon and, in any event  within five (5) Business  Days
     after,  any Officer of the Company shall have knowledge of any condition or
     event  which  constitutes  a Default or an Event of Default and in no event
     more than twenty (20) Business Days after the occurrence of such Default or
     Event of Default,  an Officer's  Certificate of the Company  specifying the
     nature and period of existence  thereof,  what action the Company has taken
     or is taking or proposes to take with respect  thereto,  and an estimate of
     the time necessary to cure such condition or event;

            (f) promptly upon becoming  aware of the occurrence of any (i) ERISA
     Termination  Event;  (ii) "prohibited  transaction"  (within the meaning of
                                -----------------------
     Section 4975 of the Code or Section 406 of ERISA),  other than one to which
     an exemption  applies;  (iii) failure to make a timely  contribution to any
     Plan, if such failure has given rise to a lien under Section  412(n) of the
     Code or any comparable provision of applicable foreign law; or (iv) actual,
     asserted or alleged violation of ERISA, the Code or applicable foreign law,
     that, with respect to any of the events set forth in the foregoing  clauses
     (i) through (iv), is reasonably likely to result in the imposition of a tax
     or other penalty on the Company or any  Subsidiary  in connection  with any
     Plan,  a written  notice  specifying  the nature  thereof,  what action the
     Company is taking or proposes to take with respect thereto;

            (g) promptly upon the formation or the acquisition  thereof,  notice
     of the  formation or  acquisition,  as the case may be, of any new material
     operating Subsidiary of the Company;

            (h) at any time that the  Company is not  subject  to the  reporting
     requirements  of Section 13 or Section  15(d) of the  Exchange  Act (having
     been  previously  subject to such  requirement),  promptly upon the written

<PAGE>

     request  of the  holder  of any  Note  and to  the  extent  not  previously
     provided,  (i)(x) a brief  statement  of the nature of the  business of the
     Company and its  Subsidiaries  and the products and services they offer and
     (y) the  Company's  most  recent  balance  sheet  and  profit  and loss and
     retained earnings  statements,  together with similar financial  statements
     for its  two (2)  preceding  Fiscal  Years,  in  each  case  audited  by an
     independent certified public accountant to the extent reasonably available;
     the most recent  balance  sheet to be as of a date less than  sixteen  (16)
     months  prior  to the  date of such  request  and the  profit  and loss and
     retained earnings statements to be for the twelve (12) months preceding the
     date of such balance  sheet and, if such balance  sheet is not as of a date
     less  than six (6)  months  before  the date of such  request,  it shall be
     accompanied  by  additional  statements  of  profit  and loss and  retained
     earnings  for a period from the date of such  balance  sheet to a date less
     than six (6)  months  before the date of such  request,  or (ii) such other
     information  as shall then be  required to permit a resale of Notes by such
     holder pursuant to Rule 144A of the Securities Act (or any superseding rule
     providing an  exemption  from  registration  under the  Securities  Act for
     resales to Qualified  Institutional  Buyers);  provided,  however, that, if
     such request shall so indicate,  the statement and financial  statements or
     other information shall be delivered to any named prospective  purchaser of
     a Note as well as to the requesting  holder,  so long as the request states
     that such holder  reasonably  believes such  prospective  purchaser to be a
     Qualified Institutional Buyer;

            (i)  promptly,   and  in  any  event  within  ten  (10)  days  after
     transmission  thereof,  copies of all press  releases and other  statements
     made available  generally by the Company or any of its  Subsidiaries to the
     public;

            (j)  within  one  hundred  twenty  (120)  days after the end of each
     Fiscal  Year, a  description  of any changes in the  employment  of any Key
     Person and the reasons for any such changes;

            (k) promptly  upon request  therefor,  such other date,  filings and
     information as any Noteholder may from time to time reasonably request.

     ss.10.3 Officer's  Certificates.  The Company will deliver with each set of
             ------------------------
financial  statements  delivered  pursuant to  subsection  (a) or (b) of ss.10.1
hereof an  Officer's  Certificate  (i)  stating,  in the opinion of each officer
executing  such  Officer's  Certificate  and to the  best of his  knowledge  and
belief,  that upon the date of such  certificate  no Default or Event of Default
exists (provided,  however, that, in the event that any such Default or Event of
Default exists,  such certificate  shall so specify and shall state whether such
Default or Event of Default has been cured or is continuing  and, if continuing,
what steps the  Company  has taken or is taking or proposes to take to cure such
Default or Event of Default and an estimate of the time  necessary  to cure such
Default or Event of Default) and (ii)  setting  forth in  reasonable  detail the
calculations  made  during  such  period  and as of the  end of such  period  in
determining compliance with the provisions of ss.ss.9.9, 9.11, 9.12, 9.13, 9.14,
9.15, 9.17, 9.18, 9.19 and 9.20 hereof.

     ss.10.4  Accountants'  Certificates.   Each  set  of  financial  statements
              ---------------------------
delivered pursuant to subsection (b) of ss.10.1 hereof shall be accompanied by a
report of the independent  certified public  accountants who shall have reported
on such  financial  statements  (i)  setting  forth  in  reasonable  detail  the
calculations  made as of the end of such period in determining  compliance  with
the provisions of ss.ss.9.9,  9.11, 9.12, 9.13, 9.14, 9.15, 9.17, 9.18, 9.19 and
9.20  hereof,  including,  in  the  event  of a  change  in  generally  accepted
accounting  principles  applied in the  preparation  of the Company's  financial
statements,  a  reconciliation  of those  principles and the generally  accepted
accounting  principles  previously  applied  and the  changes,  if  any,  to the
calculations  made  in  determining  compliance  with  the  provisions  of  said
ss.ss.9.9, 9.11, 9.12, 9.13, 9.14, 9.15, 9.17, 9.18, 9.19 and 9.20 hereof.

<PAGE>

SECTION 11. DEFAULTS AND REMEDIES.

     ss.11.1 Events of Default;  Acceleration  of Notes. If any of the following
             -------------------------------------------
conditions or events ("Events of Default") shall occur and be continuing:
                       -----------------

            (a) any payment or prepayment of principal of or premium on any Note
     shall not be made by the Company  when the same  becomes  due and  payable,
     whether at maturity,  at a date fixed for prepayment,  upon acceleration or
     otherwise; or

            (b) any  payment  of  interest  on any Note shall not be made by the
     Company  when the same  becomes  due and  payable  and such  default  shall
     continue for five (5) days following the date on which such payment was due
     and payable; or

            (c) any  representation  or  warranty  of the  Company or any of its
     Subsidiaries  contained in this Agreement or in any agreement,  instrument,
     certificate, statement or other writing furnished in connection herewith or
     therewith or pursuant  hereto or thereto  shall prove to have been false or
     inaccurate  in  any  material   respect  on  the  date  as  of  which  such
     representation or warranty was made;

            (d) the Company shall default in the due and punctual performance of
     or compliance with any covenant,  condition or agreement to be performed or
     observed by it under  ss.ss.9.9,  9.11, 9.12, 9.13, 9.14, 9.15, 9.17, 9.18,
     9.19 and 9.20,  inclusive,  and ss.10.2(e) hereof or shall use the proceeds
     of sale of the Notes other than as described in ss.1.3 hereof; or

            (e) the Company shall default in the due and punctual performance of
     or  compliance  with any covenant,  condition or agreement  (other than any
     referred to in clause (d) of this  ss.11.1) to be  performed or observed by
     it  under  any  provision  hereof  and  any  such  failure  shall  continue
     unremedied for thirty (30) days; or

            (f) the Company shall, in respect of any of its  Indebtedness  which
     is outstanding in a principal amount,  individually or in the aggregate, of
     at least $1,000,000  (excluding the Notes), (i) fail to pay any amount when
     due, whether at maturity, at a date fixed for prepayment, upon acceleration
     or otherwise  after any  applicable  grace  period,  or (ii) default in the
     performance  or  observance  of  any  other  provision   contained  in  any
     instrument or agreement  evidencing such  Indebtedness or pursuant to which
     such Indebtedness was issued or incurred (which default shall not have been
     waived),  if the effect of such  default  described  in clause (ii) (or the
     existence of any condition) is to cause the holder of such  Indebtedness or
     a trustee or agent  thereof  to cause,  such  Indebtedness  to become or be
     declared due and payable prior to its scheduled maturity; or

            (g) a final  judgment or  judgments  entered by a court of competent
     jurisdiction  for the  payment  of money in  excess  of  $2,000,000  in the
     aggregate shall be rendered  against the Company or any of its Subsidiaries
     and shall  remain in force  undischarged  and unstayed for a period of more
     than sixty (60) days; or

<PAGE>

            (h) the  Company or any  Subsidiary  shall (i)  commence a voluntary
     case under any chapter of the Federal  Bankruptcy  Code as now or hereafter
     in effect,  or shall consent to (or fail to controvert in a timely  manner)
     the  commencement  of an  involuntary  case  against  the  Company  or  any
     Subsidiary  under said Code; (ii) institute  proceedings  for  liquidation,
     rehabilitation,  readjustment or composition (or for any related or similar
     purpose)  under any law (other than the Federal  Bankruptcy  Code as now or
     hereafter in effect)  relating to  financially  distressed  debtors,  their
     creditors  or property,  or shall  consent to (or fail to  controvert  in a
     timely manner) the institution of any such proceedings  against the Company
     or any Subsidiary; (iii) make an assignment for the benefit of creditors or
     enter into any  arrangement  for the  adjustment or composition of debts or
     claims;  (iv)  apply for or consent  to the  appointment  of, or the taking
     possession  by, a receiver,  liquidator,  assignee,  trustee,  custodian or
     sequestrator (or other similar  official) of itself or any of its property;
     or (v)  take  corporate  action  for the  purpose  or with  the  effect  of
     authorizing,  acknowledging  or  confirming  the taking or existence of any
     action or condition specified in clause (i), (ii), (iii) or (iv) above; or

            (i) the Company or any  Subsidiary  shall be  insolvent  (within the
     meaning  of any  applicable  law),  or shall be unable,  or shall  admit in
     writing  its  inability,  to pay its  debts  as they  become  due,  or take
     corporate  action  for the  purpose or with the  effect of  authorizing  or
     confirming the taking or existence of any action or condition  specified in
     this subsection (i); or

            (j) a  court  or  other  governmental  authority  or  agency  having
     jurisdiction  in the  premises  shall  enter a decree  or order (i) for the
     appointment  of a receiver,  liquidator,  assignee,  trustee,  custodian or
     sequestrator  (or other similar  official) of the Company or any Subsidiary
     or of any part of its property, or for the winding-up or liquidation of its
     affairs,  and such decree or order shall remain in force  undischarged  and
     unstayed  for a  period  of more  than  sixty  (60)  days  or (ii)  for the
     sequestration  or  attachment  of any material  part of the property of the
     Company  or  any  Subsidiary  without  its  unconditional   return  to  the
     possession of the Company or any  Subsidiary or its  unconditional  release
     from such sequestration or attachment within sixty (60) days thereafter; or

            (k) a court having jurisdiction in the premises shall enter an order
     for relief in any  involuntary  case  commenced  against the Company or any
     Subsidiary under the Federal Bankruptcy Code as now or hereafter in effect,
     and such order shall remain in force undischarged and unstayed for a period
     of more than ninety (90) days; or

            (l) a  court  or  other  governmental  authority  or  agency  having
     jurisdiction  in the  premises  shall enter a decree or order  approving or
     acknowledging  as properly  filed or  commenced  against the Company or any
     Subsidiary  a petition  or  proceedings  for  liquidation,  rehabilitation,
     readjustment or composition  (or for any related or similar  purpose) under
     any law (other  than the Federal  Bankruptcy  Code as now or  hereafter  in
     effect)  relating to financially  distressed  debtors,  their  creditors or
     property,  and such petition or proceedings  shall not be dismissed  within
     ninety (90) days of the date of filing or commencement; or

            (m) (i) any domestic  Plan (other than a  Multiemployer  Plan) shall
     incur an "accumulated  funding  deficiency"  (within the meaning of Section
               --------------------------------
     412 of the Code) with respect to any plan year; or (ii) any waiver shall be
     sought or granted  under  Section  412(d) of the Code; or (iii) any foreign
     Pension Plan shall  violate any funding  requirement  imposed by applicable
     foreign law; or (iv) any Pension Plan shall be or have been  terminated  or
     the subject of termination  proceedings  under ERISA; or (v) the Company or

<PAGE>

     any Subsidiary shall incur or have incurred a liability to or on account of
     a Pension  Plan  under  Section  4062,  4063,  4064 or 4201 of ERISA or any
     comparable provision of applicable foreign law, and there shall result from
     one or more of the events set forth in the  foregoing  clauses  (i) through
     (v) either a liability  or a material  risk of incurring a liability to the
     PBGC,  any  foreign  governmental  entity or a Plan,  which  could,  either
     individually or in the aggregate, have a Material Adverse Effect;


     then

                  (i) upon the occurrence  and  continuance of any of the Events
            of Default set forth in clauses (h) through (l), inclusive,  of this
            ss.11.1,  the Notes  shall  automatically  mature and become due and
            payable,  together with interest accrued thereon,  plus any premium,
            without presentment,  demand,  protest or notice of any kind, all of
            which are hereby expressly waived;

                  (ii) upon the occurrence and  continuance of any of the Events
            of Default  set forth in  clauses  (a) or (b) of this  ss.11.1,  any
            holder or holders of Notes may, in respect of the Notes then held by
            such  holder or holders,  at any time  (unless  all  defaults  shall
            theretofore have been waived or remedied) at its or their option, by
            written notice or notices to the Company,  declare the Notes held by
            such holder or holders,  as the case may be, to be due and  payable,
            whereupon the same shall mature and become due and payable, together
            with   interest   accrued   thereon,   plus  any  premium,   without
            presentment, demand, protest or notice of any kind, all of which are
            hereby expressly waived; or

                  (iii) upon the occurrence and continuance of any of the Events
            of Default  set forth in clauses  (a)  through  (g),  inclusive,  or
            clause (m) of this ss.11.1,  the Required Holders, by written notice
            or notices to the Company, may declare all of the Notes, as the case
            may be, to be due and payable,  whereupon  the same shall mature and
            become due and payable, together with interest accrued thereon, plus
            any premium,  without presentment,  demand, protest or notice of any
            kind, all of which are hereby expressly waived; or

If the maturity of any Note shall be accelerated under this ss.11.1 by reason of
the  occurrence of an Event of Default,  there shall become due and payable (and
the Company will pay), as  compensation  to the holder of such Note for the loss
of its  investment  opportunity  and not as a  penalty,  an amount  equal to the
difference  between (i) the optional  prepayment  price that would have been due
and payable if such Note had been prepaid in full pursuant to ss.7.2 hereof upon
the date of such acceleration and (ii) the unpaid principal amount of such Note.

     ss.11.2  Default  Remedies.  If an  Event of  Default  shall  occur  and be
              ------------------
continuing,  the holder of any Note then  outstanding  may  exercise  any right,
power or remedy permitted to it by law, either by suit in equity or by action at
law, or both,  whether for  specific  performance  of any  covenant or agreement
contained in this  Agreement  or in such Note,  or for an  injunction  against a
violation of any of the terms of this  Agreement or such Note,  or in aid of the
exercise of any power granted in this  Agreement or in such Note, or may proceed
to enforce payment of such Note or to enforce any other legal or equitable right

<PAGE>

of the holder of such Note. No remedy herein conferred upon any holder of a Note
is intended to be  exclusive of any other remedy and each and every remedy shall
be cumulative and shall be in addition to every other remedy given  hereunder or
now or hereafter existing at law, in equity, by statute or otherwise.  No course
of dealing on the part of any holder of any Note, or any delay or failure on the
part of any holder of any Note to exercise any right or power,  shall operate as
a waiver of such right or power or otherwise  prejudice  the rights,  powers and
remedies of such holder or of any other holder. No failure to insist upon strict
compliance  with  any  covenant,  term,  condition  or other  provision  of this
Agreement  or the Notes  shall  constitute  a waiver by any holder of any of the
Notes of any such covenant, term, condition or other provision or of any Default
or Event of Default in  connection  therewith.  To the  extent  effective  under
applicable law, the Company hereby agrees to waive,  and does hereby  absolutely
and  irrevocably  waive  and  relinquish,  the  benefit  and  advantage  of  any
valuation, stay, appraisement, extension or redemption laws now existing or that
may hereafter  exist that,  but for this  provision,  might be applicable to any
sale made under any judgment, order or decree of any court, or otherwise,  based
on the Notes or on any claim for  interest on the Notes.  If an Event of Default
shall occur, the Company will pay to the holders of the Notes, to the extent not
prohibited  by  applicable  law,  such further  amount as shall be sufficient to
cover the  reasonable  costs and  expenses  of  collection  and of the taking of
remedial  actions and the  maintenance  of enforcement  proceedings,  including,
without  limitation,  attorneys'  fees and  expenses.  All sums  payable  by the
Company under the Notes shall be paid without counterclaim, setoff, deduction or
defense and without abatement, suspension, deferment, diminution or reduction.

     ss.11.3 Notice of Claimed Default. If the holder of any Note shall give any
             --------------------------
notice or take any other action with respect to a claimed  Default,  the Company
shall  forthwith  give  written  notice  thereof  to all  holders  of Notes then
outstanding,  describing  the  notice or action  and the  nature of the  claimed
Default.

     ss.11.4  Annulment of  Acceleration  of Notes.  If notice is delivered  (a)
              -------------------------------------
pursuant to clause (ii) of ss.11.1  hereof by any holder or holders of a Note or
Notes then such  holder or each of such  holders,  as the case may be,  may,  by
written  instrument  filed with the  Company,  rescind and annul its  respective
declaration and the  consequences  thereof;  and (b) pursuant to clause (iii) of
ss.11.1  hereof,  the holders of more than sixty six and two-thirds  percent (66
2/3%) of the aggregate principal amount of the Notes then outstanding (excluding
any Notes directly or indirectly owned by the Company or any Affiliate  thereof)
may,  by written  instrument  filed  with the  Company,  rescind  and annul such
declaration and the consequences thereof or of such Event of Default pursuant to
this  Agreement;  provided,  however,  that  at the  time  of an  annulment  and
                  --------   -------
rescission pursuant to this ss.11.4(b):

            (i) no judgment or decree shall have been entered for payment of any
     monies due pursuant to the Notes or this Agreement;

            (ii) all arrears of  principal,  premium and  interest  upon all the
     Notes  and all other  sums  payable  under  the  Notes  and this  Agreement
     (including  reasonable  costs  and  expenses  of the  holders  incurred  in
     connection  with such notice under ss.11.1  hereof or annulment  under this
     ss.11.4,  but  excluding  any principal or interest on the Notes that shall
     have become due and payable by reason of such notice under  ss.11.1  hereof
     or the happening of such Event of Default) shall have been duly paid; and

<PAGE>

            (iii) each and every other  Default  hereunder  and Event of Default
     shall have been waived pursuant to this ss.11.4 or cured.

No such  rescission  or annulment  pursuant to this  ss.11.4  shall extend to or
affect any  subsequent  Default or Event of Default or impair any right or power
consequent thereon.

SECTION 12. INTERPRETATION OF AGREEMENT AND NOTES.

     ss.12.1  Definitions.  Except as the context shall otherwise  require,  the
              ------------
following  terms  shall have the  following  meanings  for all  purposes of this
Agreement (the  definitions to be applicable to both the singular and the plural
form of the terms defined, where either such form is used in this Agreement):

            The term "Affiliate", with respect to any Person, shall mean (a) any
                      ---------
     director,  officer or employee of such Person,  (b) any Person  directly or
     indirectly  controlling or controlled by or under direct or indirect common
     control with such Person, and (c) any Person beneficially owning or holding
     5% or more of the Voting Stock (or other comparable indicia of ownership if
     such Person is a business  entity other than a corporation)  of such Person
     on a Fully  Diluted  Basis or any  business  entity  of which  such  Person
     beneficially  owns or holds,  in the  aggregate,  5% or more of the  Voting
     Stock;  provided,  however,  that  neither  you nor any Person  directly or
     indirectly  controlled by you nor any other Person which is an  institution
     shall be deemed to be an Affiliate of the Company or any Subsidiary  solely
     by reason of  ownership of the Notes or by reason of having the benefits of
     any agreements or covenants of the Company contained in this Agreement. The
     term "control" means the possession,  directly or indirectly,  of the power
     to  direct or cause the  direction  of the  management  and  policies  of a
     Person,  whether  through the  ownership  of Voting  Stock,  by contract or
     otherwise.  The term  "Affiliate",when used herein without reference to any
     Person, shall mean an Affiliate of the Company.

            The term  "Allowances for Loan Losses" shall mean, as of any date of
                       --------------------------
     determination,  that portion of losses of the Company and its Subsidiaries,
     determined  on a  consolidated  basis  and  in  accordance  with  generally
     accepted accounting principles, constituting losses on outstanding mortgage
     loans  and  reported  as  "Allowances  for Loan  Losses"  in the  financial
     statements  filed  by the  Company  with  the  Commission  as  part  of the
     Company's  most  recently  filed  Form  10-Q or  10-K,  as the case may be;
     provided, however, that with respect to any date of determination occurring
     on a date other than the last day of a Fiscal Quarter, "Allowances for Loan
     Losses"  shall be  calculated  and reported in the same manner and shall be
     based on the same  assumptions  as the  "Allowances  for  Loan  Losses"  so
     reported in the Company's financial statements.

            The term "Business Day" shall mean any day on which commercial banks
                      ------------
     are  not   authorized  or  required  to  close  in  New  York,   New  York,
     Williamstown, Massachusetts or Stamford, Vermont.

            The term  "Closing  Date" shall have the meaning set forth in ss.1.2
                       -------------
     hereof.

            The term "Code"  shall mean the Internal  Revenue  Code of 1986,  as
                      ----
     amended  from time to time.  Reference  to a  specific  section of the Code
     shall include such section, any regulations  promulgated thereunder and any
     comparable provision of any future legislation  amending,  supplementing or
     superseding such section.

<PAGE>

            The  term  "Commission"  shall  mean  the  Securities  and  Exchange
                        ----------
     Commission (or any successor thereto performing similar functions).

            The term "Company"  shall have the meaning set forth in the preamble
                      -------
     hereto.

            The term "Consolidated",  when used with reference to Current Assets
                      ------------
     or Current  Liabilities  shall  mean the  aggregate  of  Current  Assets or
     Current  Liabilities,   as  the  case  may  be,  of  the  Company  and  its
     Subsidiaries,  after  eliminating all offsetting debits and credits between
     the  Company  and its  Subsidiaries  and all  other  items  required  to be
     eliminated in accordance with generally accepted accounting principles.

            The term "Consolidated Net Earnings" shall mean, for any period, the
                      -------------------------
     consolidated  net income (or loss) of the Company and its  Subsidiaries for
     such period  determined in accordance  with generally  accepted  accounting
     principles  applied on a consistent  basis  (except for express  changes in
     generally accepted accounting  principles),  after excluding net income (or
     loss)  attributable  to Minority  Interests and  eliminating all offsetting
     debits and credits between the Company and its Subsidiaries and other items
     to  be  eliminated  in  accordance  with  generally   accepted   accounting
     principles, but, in any event, excluding:

                  (a) any gains or losses  on the sale or other  disposition  of
     investments or fixed or capital assets other than in the ordinary course of
     business,  and any taxes on such excluded  gains and any tax  deductions or
     credits on account of any such excluded losses;

                  (b) net earnings and losses of any Subsidiary accrued prior to
     the date it became a Subsidiary;

                  (c) net  earnings  and  losses  of any  Person  (other  than a
     Subsidiary),  substantially  all the assets of which have been  acquired by
     the Company or any Subsidiary in any manner,  realized by such other Person
     prior to the date of such acquisition;

                  (d) net  earnings  and  losses  of any  Person  (other  than a
     Subsidiary)  which  shall have been merged  into or  consolidated  with the
     Company  or  any   Subsidiary   prior  to  the  date  of  such   merger  or
     consolidation;

                  (e) net  earnings  and  losses  of any  Person  (other  than a
     Subsidiary)  in  which  the  Company  or any  Subsidiary  has an  ownership
     interest  except to the extent such net earnings  shall have  actually been
     received  by  the  Company  or  such   Subsidiary   in  the  form  of  cash
     distributions;

                  (f) any portion of the net  earnings of any  Subsidiary  which
     for any reason is unavailable for payment of dividends to the Company;

                  (g) earnings  resulting from any  reappraisal,  revaluation or
     write-up of assets during such period;

                  (h) any income  resulting from any excess of the equity in any
     Person at the date of acquisition  thereof over the amount invested in such
     Person;

<PAGE>

                  (i) any gain arising from the acquisition of any capital stock
     or other securities of the Company or any Subsidiary;

                  (j) any net gain from the  collection  of the proceeds of life
     insurance policies; and

                  (k) an amount equal to the  aggregate  amount of  consolidated
     revenues  of the Company and its  Subsidiaries  for each Fiscal  Quarter in
     such period  constituting Gain on Sale of Loans to the extent, with respect
     to each Fiscal Quarter,  that such portion of consolidated revenues exceeds
     35% of consolidated  revenues of the Company and its  Subsidiaries for such
     Fiscal Quarter.

            The term  "Consolidated  Net Earnings  Available for Fixed  Charges"
                       --------------------------------------------------------
     shall mean, for any period,  (a) Consolidated Net Earnings for such period,
     plus (b) to the extent actually  deducted in determining  Consolidated  Net
     Earnings  for such  period,  (i) Fixed  Charges  for such  period  and (ii)
     provision for taxes imposed on or measured by income or excess  profits for
     such period.

            The term  "Consolidated  Net Tangible  Assets" shall mean, as of the
                       ----------------------------------
     date of any  determination  thereof,  all  assets  of the  Company  and its
     Subsidiaries,  on a  consolidated  basis,  (less  depreciation,  depletion,
     obsolescence,  amortization and all other reserves properly  established in
     accordance  with  generally  accepted  accounting  principles)  except  (a)
     goodwill (whether representing the excess of cost over book value of assets
     acquired or  otherwise),  patents,  trade  names,  trademarks,  copyrights,
     franchises,   research  and  development  expense,   organization  expense,
     unamortized  debt discount and expense,  deferred assets other than prepaid
     insurance,  prepaid taxes and deferred taxes,  the excess of cost of shares
     acquired  over book  value of related  assets and such other  assets as are
     properly  classified as  "intangible  assets" in accordance  with generally
     accepted accounting principles, (b) treasury stock of the Subsidiaries, (c)
     all items (other than capital stock of any class, capital surplus, retained
     earnings,  deferred  income taxes and Funded Debt) which in accordance with
     generally accepted  accounting  principles would be included in determining
     total  liabilities  of the  Company  and its  Subsidiaries  as shown on the
     liability  side of the  consolidated  balance  sheet of the Company and its
     Subsidiaries  as at the date of  determination  and (d) any write-up of the
     book value of any assets of the Company and its Subsidiaries resulting from
     revaluation  thereof  subsequent  to December 31, 1996,  in each case after
     eliminating  all offsetting  debits and credits between the Company and its
     Subsidiaries  and all other items  required to be  eliminated in accordance
     with generally accepted accounting principles.

      The term  "Consolidated  Tangible Net Worth" shall mean, as of the date of
                 --------------------------------
     determination  thereof,  after excluding Minority Interests and eliminating
     all offsetting  debits and credits between the Company and its Subsidiaries
     and all other items to be eliminated in accordance with generally  accepted
     accounting principles, (a) the value of Consolidated Net Tangible Assets as
     shown on the latest  balance sheet  submitted  pursuant to ss.10.1  hereof,
     less (b)  Total  Indebtedness,  less (c) an amount  equal to the  aggregate
     amount of  consolidated  revenues of the Company and its  Subsidiaries  for
     each Fiscal Quarter ending on or after April 1, 1997,  constituting Gain on
     Sale of Loans to the extent, with respect to each Fiscal Quarter, that such
     portion of consolidated  revenues  exceeds 35% of consolidated  revenues of
     the Company and its Subsidiaries for such Fiscal Quarter.

<PAGE>

            The term "Cumulative Net Earnings" shall mean, as of the date of any
                      -----------------------
      determination  thereof,  the sum of  Consolidated  Net  Earnings  for each
      Fiscal  Quarter during the period  beginning  April 1, 1997, and ending on
      the last day of the most recently ended Fiscal Quarter.

            The term "Current Assets",  with respect to any Person,  shall mean,
                      --------------
      as of the date of any  determination  thereof,  the current assets of such
      Person  determined  in  accordance  with  generally  accepted   accounting
      principles  applied on a consistent  basis (except for express  changes in
      generally accepted accounting principles).

            The term "Current  Liabilities",  with respect to any Person,  shall
                      --------------------
      mean, as of the date of any determination thereof, the current liabilities
      of such Person determined in accordance with generally accepted accounting
      principles  applied on a consistent  basis (except for express  changes in
      generally accepted accounting principles).

            The term  "Default"  shall mean an event which,  with the passage of
                       -------
      time or the giving of notice, or both, would become an Event of Default.

            The term  "Environmental  Laws"  shall have the meaning set forth in
                       -------------------
      ss.2.21(a) hereof.

            The term "ERISA" shall mean the Employee  Retirement Income Security
                      -----
      Act of 1974, as amended from time to time. Reference to a specific section
      of  ERISA  shall  include  such  section,   any  regulations   promulgated
      thereunder  and  any  comparable   provision  of  any  future  legislation
      amending, supplementing or superseding such section.

            The term  "ERISA  Affiliate"  shall mean any  Person  which is under
                       ----------------
      "common  control" (within the meaning of Section 414(b) or (c) of the Code
      or  Section  4001(a)(14)  of ERISA)  with the  Company  or any  Subsidiary
      thereof.

            The term  "ERISA  Termination  Event"  shall mean (a) a  "reportable
                       -------------------------
      event" (within the meaning of Section  4043(b) of ERISA) with respect to a
      Pension Plan (other than a "reportable  event" as to which the PBGC has by
      regulation  waived the 30-day notice  requirement under Section 4043(a) of
      ERISA);  provided,  however,  that a failure to meet the  minimum  funding
      standards of Section 412 of the Code shall be an ERISA  Termination  Event
      regardless of the issuance of any waiver under Section 412(d) of the Code;
      (b) the withdrawal of the Company,  any Subsidiary or any ERISA  Affiliate
      from a  Pension  Plan  during a plan  year in which it was a  "substantial
      employer"  (within the meaning of Section  4001(a)(2)  of ERISA);  (c) the
      complete or partial withdrawal of the Company, any Subsidiary or any ERISA
      Affiliate from a  Multiemployer  Plan under Section 4201 or 4204 or ERISA;
      (d) the receipt by the Company,  any Subsidiary or any ERISA  Affiliate of
      notice from a Multiemployer  Plan that is in  reorganization  or insolvent
      under Section 4241 or 4245 of ERISA or that it intends to terminate or has
      terminated  under Section 4041A of ERISA; (e) the providing of a notice of
      intent to terminate a Pension Plan pursuant to Section 4041(a)(2) of ERISA
      or the  treatment  of a Pension  Plan  amendment  as a  termination  under
      Section  4041(e) of ERISA;  (f) the institution of proceedings by the PBGC
      to terminate a Pension Plan or the  appointment of a trustee to administer
      any  Pension  Plan under  Section  4042 of ERISA;  (g) the  receipt by the
      Company,  any  Subsidiary  or any  ERISA  Affiliate  of a notice  from any
      Multiemployer  Plan that any action described in clause (f) has been taken
      with  respect to that  Multiemployer  Plan;  or (h) any event or condition
      which  constitutes  or is reasonably  likely to  constitute  grounds under
      Section  4042 of ERISA for the  termination  of, or the  appointment  of a
      trustee to administer, any Pension Plan.

<PAGE>

            The term  "Event of  Default"  shall have the  meaning  set forth in
                       -----------------
      ss.11.1 hereof.

            The term "Exchange  Act" shall mean the  Securities  Exchange Act of
                      -------------
      1934, as amended from time to time.

            The term "Financial  Statements" shall have the meaning set forth in
                      ---------------------
      ss.2.4 hereof.

            The  term  "Fiscal  Quarter"  shall  mean a  fiscal  quarter  of the
                        ---------------
      Company,  which shall be any quarterly period ending on March 31, June 30,
      September 30 or December 31 of any year.

            The term  "Fiscal  Year"  shall mean a fiscal  year of the  Company,
                       ------------
      which as at the Closing Date is the fiscal year ending December 31.

            The term "Fixed  Charges" shall mean, for any period,  the aggregate
                      --------------
      amount of (a)  Interest  Expense for such period,  (b) Rental  Expense for
      such period,  and (c) fees payable by the Company and its  Subsidiaries in
      respect  of  letters  of  credit,  revolving  credit  facilities,  bankers
      acceptances and other similar arrangements for such period.

            The term "Fully  Diluted  Basis"  shall mean,  as of any date,  with
                      ---------------------
      respect to  calculations  involving the capital stock of any Person (or an
      individual  class or  series  thereof),  making  the  assumption  that all
      securities of such Person then outstanding which are convertible into such
      capital stock (or shares of such class or series, as the case may be) were
      converted on such date,  that all options,  warrants and similar rights to
      acquire shares of capital stock of such Person (or shares of such class or
      series) were exercised on such date.

            The term "Gain on Sale of Loans" shall mean, for any Fiscal Quarter,
                      ---------------------
      that portion of consolidated  revenues of the Company and its Subsidiaries
      for such Fiscal Quarter  constituting gain on the sale of loans determined
      on a consolidated basis in accordance with generally  accepted  accounting
      principles.

            The term "generally accepted  accounting  principles" shall mean, as
                      ------------------------------------------
      of the date of any determination with respect thereto,  generally accepted
      accounting  principles as used by the Financial Accounting Standards Board
      and/or the American Institute of Certified Public Accountants.

            The term  "guaranty",  with  respect to any  Person,  shall mean all
                       --------
      obligations  of such Person  guaranteeing  or in effect  guaranteeing  any
      Indebtedness,  dividend or other  obligation  or  investment  of any other
      Person  (the  "primary  obligor")  in  any  manner,  whether  directly  or
      indirectly,  including  without  limitation,  obligations  for which  such
      Person is liable by  reason of such  Person  being a partner  in or of the
      primary  obligor  or a  member  of a joint  venture  that  is the  primary
      obligor,  and  obligations  incurred  through an agreement,  contingent or
      otherwise, (a) to purchase such Indebtedness,  obligation or investment or
      any property or assets constituting  security therefor;  (b) to advance or
      supply  funds  (i) for  the  purchase  or  payment  of such  Indebtedness,
      obligation  or investment  or (ii) to maintain  working  capital or equity

<PAGE>

      capital,  or otherwise to advance or make available funds for the purchase
      or payment of such Indebtedness, obligation or investment; (c) to purchase
      property, securities or services primarily for the purpose of assuring the
      owner of such Indebtedness, obligation or investment of the ability of the
      primary  obligor  to make  payment  of such  Indebtedness,  obligation  or
      investment;  or (d)  otherwise  to assure the owner of such  Indebtedness,
      obligation or investment against loss in respect thereof.

            The term  "Hazardous  Material"  shall have the meaning set forth in
                       -------------------
      ss.2.21 hereof.

            The terms "hereof", "herein", "hereunder" and other words of similar
                       ------    ------    ---------
      import shall be construed to refer to this Agreement as a whole and not to
      any particular Section or other subdivision.

            The term "holder",  with respect to any of the Notes, shall mean the
                      ------
      Person in whose name such Notes shall be registered.

            The term "Indebtedness",  with respect to any Person, shall mean and
                      ------------
      include the aggregate amount of, without duplication:  (a) all obligations
      of such Person for  borrowed  money;  (b) all  obligations  of such Person
      evidenced by bonds, debentures,  notes, or other similar instruments,  and
      all  reimbursement  or other  obligations  of such  Person in  respect  of
      letters  of credit,  banker's  acceptances,  interest  rate swaps or other
      financial products; (c) all obligations of such Person to pay the deferred
      purchase price of assets or services,  exclusive of (i) deferred  payments
      due to former or current  employees,  (ii) trade payables  which, by their
      terms,  are  due and  payable  within  ninety  (90)  calendar  days of the
      creation thereof and (iii) dealer/developer  reserves; (d) all Capitalized
      Lease  Obligations of such Person;  (e) all  obligations or liabilities of
      others  secured by a Lien on any asset owned by such Person,  irrespective
      of whether such  obligation or liability is assumed,  to the extent of the
      lesser of such  obligation  or  liability or the fair market value of such
      asset;  and (f) any  guaranties  of such  Person  of any  Indebtedness  of
      another Person.

            The term  "Indemnified  Party"  shall have the  meaning set forth in
                       ------------------
      ss.13.6 hereof.

            The term "Institutional  Investor" shall mean any one or more of the
                      -----------------------
      following  Persons:  (a) any bank, savings  institution,  trust company or
      national banking association, acting for its own account or in a fiduciary
      capacity;  (b) any  charitable  foundation;  (c) any insurance  company or
      Affiliate  thereof or  fraternal  benefit  association;  (d) any  pension,
      retirement  or  profit-sharing  trust or fund;  (e) any public  employees'
      pension or retirement system or any other governmental  agency supervising
      the  investment  of public  funds;  or (f) any  investment  fund  owned or
      managed by a Person  described in clause (a),  (b), (c), (d) or (e) above,
      or by an Affiliate of such Person.

            The term  "Intellectual  Property Rights" shall have the meaning set
                       -----------------------------
      forth in ss.2.6 hereof.

            The term  "Interest  Expense"  shall mean,  for any period,  without
                       -----------------
      duplication,  the aggregate of all interest accrued by the Company and its
      Subsidiaries  and  amortization  of  debt  discount  during  such  period,
      determined  on  a  consolidated  basis,  including,   without  limitation,
      interest  paid in cash with respect to the Notes and the interest  portion
      of Capitalized  Lease  Obligations,  all as determined in accordance  with
      generally accepted accounting principles.

<PAGE>

            The term "Interest Payment Date" shall have the meaning set forth in
                      ---------------------
      ss.1.1 hereof.

            The term "Key  Persons"  shall mean five  members  of the  Company's
                      ------------
      senior management  selected in accordance with this definition.  As of the
      Closing  Date,  the Key Persons shall be Richard A.  Stratton,  Heather A.
      Sica, Ronald E. Rabidou, Wayne H. Greenholtz,  and James H. Shippee. After
      the Closing  Date,  the Key Persons  shall include the initial Key Persons
      listed  above,   except  to  the  extent  replaced  as  provided  in  this
      definition,  and such other members of the Company's senior  management as
      may be  substituted  therefor from time to time, at the Company's  written
      request and with the consent of the Required  Noteholders,  which  consent
      may be  given or  withheld  by the  Required  Noteholders  in  their  sole
      discretion;  provided,  however, that the Company shall have the right, in
      its sole discretion, to determine the Key Person to succeed Mr. Greenholtz
      in the event of Mr. Greenholtz's retirement from the Company.

            The term  "Leverage  Ratio"  shall  have the  meaning  set  forth in
                       ---------------
      ss.9.13 hereof.

            The term "Lien"  shall mean any  interest  in  property  securing an
                      ----
      obligation  owed to, or a claim by, any Person other than the owner of the
      property,  whether such interest shall be based on the common law, statute
      or contract,  whether or not such interest  shall be recorded or perfected
      and whether or not such interest  shall be contingent  upon the occurrence
      of  some  future  event  or  events  or  the   existence  of  some  future
      circumstance or circumstances, and including the lien or security interest
      arising from a mortgage,  encumbrance,  pledge,  adverse  claim or charge,
      conditional  sale or  trust  receipt,  or  from a  lease,  consignment  or
      bailment  for  security  purposes.  The term  "Lien"  shall  also  include
      reservations,   exceptions,   encroachments,   easements,   rights-of-way,
      covenants, conditions, restrictions, leases and other title exceptions and
      encumbrances  affecting  property.  For the purposes of this Agreement,  a
      Person  shall be deemed to be the owner of any  property  that such Person
      shall have acquired or shall hold subject to a conditional  sale agreement
      or other arrangement  (including a leasing arrangement)  pursuant to which
      title to the property  shall have been retained by or vested in some other
      Person for security purposes.

            The term  "Make-Whole  Amount" shall mean (a) in connection with the
                       ------------------
      prepayment of any Note pursuant to ss.7.2  hereof,  an amount equal to the
      greater  of (i)  zero or (ii)  the  excess  of (x) the sum of the  present
      values,  as at the  prepayment  date,  of the  amount  of  each  remaining
      scheduled  payment of  interest  (excluding  any  interest  accrued to the
      prepayment date) on and principal of such Note, which will not be required
      to be made as a result of such  prepayment  (each such  amount  discounted
      separately  at the Treasury  Rate,  plus  seventy-five  (75) basis points,
      determined  as at the date  three (3) days  before  the  prepayment  date,
      compounded semiannually, from the date such amount would be due), over (y)
      the  principal  amount of such Note to be prepaid,  and (b) in  connection
      with any Note becoming or being declared to be due and payable pursuant to
      ss.11.1  hereof,  an amount  equal to the  greater of (i) zero or (ii) the
      excess  of (x) the sum of the  present  values,  as at the date  such Note
      became  or was  declared  to be due and  payable,  of the  amount  of each
      remaining payment of interest  (excluding any interest accrued to the date
      such Note became or was declared to be due and  payable) on and  principal
      of such Note (each such amount discounted separately at the Treasury Rate,
      plus  seventy-five  (75) basis points,  determined as at the date on which
      such  Note  became  or was  declared  to be due  and  payable,  compounded
      semiannually, from the date such amount would have been due), over (y) the
      outstanding principal amount of such Note.

<PAGE>

            The term "Material Adverse Effect" shall mean (A) a material adverse
                      -----------------------
      effect on the financial condition,  business, properties or profits of the
      Company or of the Company and its  Subsidiaries,  taken as a whole, (B) an
      adverse  effect on the ability of the  Company to perform its  obligations
      under  this  Agreement  or the  Notes,  or (C) an  adverse  effect  on the
      legality, validity or enforceability of this Agreement or the Notes or the
      rights and remedies of the holders of the Notes thereunder.

            The term "Minority  Interests" shall mean, with respect to a Person,
                      -------------------
      any shares of stock of any class of a  Subsidiary  (other than  directors'
      qualifying  shares as  required  by law) that are not owned by that Person
      and/or  one or more of its  Subsidiaries.  "Minority  Interests"  shall be
                                                  -------------------
      valued by valuing "Minority Interests" constituting preferred stock at the
                         ------------------
      voluntary  or  involuntary  liquidation  value  of such  preferred  stock,
      whichever is greater,  and by valuing  "Minority  Interests"  constituting
                                              -------------------
      common stock at the book value of capital and surplus  applicable  thereto
      adjusted, if necessary, to reflect any changes from the book value of such
      common  stock  required  by the  foregoing  method  of  valuing  "Minority
                                                                        --------
      Interests" in preferred stock.
      ---------

            The term "Moody's" shall mean Moody's Investors Service, Inc.
                      -------

            The  term  "Multiemployer  Plan"  shall  mean  any  Plan  that  is a
                        -------------------
      "multiemployer plan" (within the meaning of Section 3(37) of ERISA).

            The term "NAIC Statement" shall have the meaning set forth in ss.3.2
                      --------------
      hereof.

            The term "Net  Write-offs"  shall  mean,  for any Fiscal  Year,  the
                      ---------------
      write-offs   of  the  Company  and  its   Subsidiaries   determined  on  a
      consolidated  basis as reported by the  Company to the  Commission  in the
      Company's  financial  statements  filed as part of its most recently filed
      Form 10-K.

            The term "Noteholder" shall mean each holder from time to time of an
                      ----------
      outstanding Note.

            The term "Notes" shall have the meaning set forth in ss.1.1 hereof.
                      -----

            The term "Offering  Memorandum"  shall have the meaning set forth in
                      --------------------
      ss.2.3(a) hereof.

            The term "Officer's  Certificate" shall mean a certificate  executed
                      ----------------------
      on behalf of the Company by any of its chief executive officer, president,
      chief operating officer or chief financial officer.

            The term "Optional Prepayment Date" shall have the meaning set forth
                      ------------------------
      in ss.7.2(b) hereof.

            The term "outstanding", with respect to any of the Notes shall mean,
                      -----------
      as of the date of determination,  all Notes theretofore delivered pursuant
      to this Agreement, except (i) Notes theretofore cancelled or delivered for
      cancellation,  and (ii) Notes in exchange or  replacement  for which other

<PAGE>

      Notes have been delivered pursuant to this Agreement;  provided,  however,
      that in determining  whether the holders of the requisite aggregate unpaid
      principal amount of the Notes,  outstanding have given any notice or taken
      any action hereunder, the Notes, held or owned, directly or indirectly, by
      the Company,  or by any Subsidiary or any Affiliate,  shall be disregarded
      and deemed not to be outstanding.

            The term "PBGC" shall mean the Pension Benefit Guaranty  Corporation
                      ----
      or any successor thereto.

            The term  "Pension  Plan"  shall mean any Plan that is an  "employee
                       -------------
      pension  benefit  plan"  (within  the  meaning of  Section  3(2) of ERISA)
      subject to Title IV of ERISA.

            The term "Permitted Liens" shall mean:
                      ---------------

                  (a) Liens incurred or deposits made in the ordinary  course of
      business  (i)  in  connection  with  workers'  compensation,  unemployment
      insurance  and other  types of social  security,  or (ii) to secure (or to
      obtain  letters  of  credit  that  secure)  the  performance  of  tenders,
      statutory obligations,  surety and appeal bonds, bids, leases, performance
      bonds,  purchase,  construction  or  sales  contracts  and  other  similar
      obligations;  provided,  however,  that (A) any obligation  secured by any
                    --------   -------
      such Lien shall not be overdue or, if overdue,  is being contested in good
      faith by appropriate actions or proceedings during which there is no right
      to exercise  remedies and adequate book reserves have been  established in
      accordance with generally accepted accounting principles; and (B) all such
      Liens,  pledges and deposits shall not in the aggregate  materially impair
      the use or value of the  properties  of the Company and its  Subsidiaries,
      taken as a whole,  in the  operation of the  respective  businesses of the
      Company and its Subsidiaries;  and, provided further, that this clause (B)
                                          -------- -------
      shall not be deemed to permit any Liens  which may be imposed  pursuant to
      Section 4068 of ERISA;

                  (b) Liens securing taxes, assessments, governmental charges or
      levies, statutory Liens of landlords and Liens of carriers,  warehousemen,
      materialmen,  mechanics  and other like Persons not yet due or the payment
      of which is not then required by ss.9.7 hereof;  provided,  however,  that
      this  clause  (e) shall not be  deemed  to permit  any Liens  which may be
      imposed pursuant to Section 4068 of ERISA; and

                  (c) minor survey exceptions and minor encumbrances,  easements
      or  reservations,  or rights of others for  rights-of-way,  utilities  and
      other similar purposes,  or zoning or other  restrictions as to the use of
      real properties,  which are necessary for the conduct of the activities of
      the obligor or which customarily exist on properties of Persons engaged in
      similar  activities  and similarly  situated and which do not in any event
      materially  impair the use of any of such  properties  in the operation of
      the businesses of the Company and its Subsidiaries.

            The  term   "Person"   shall  mean  any   individual,   corporation,
                         ------
      partnership,  joint  venture,  association,  joint stock  company,  trust,
      estate,  unincorporated  organization  or  government  (or any  agency  or
      political subdivision thereof).

            The term "Plan" shall have the meaning set forth in ss.3.2 hereof.
                      ----

<PAGE>

            The term  "Projections"  shall have the  meaning set forth in ss.2.4
                       -----------
hereof.

            The term "PTCE" shall have the meaning set forth in ss.3.2 hereof.
                      ----

            The term "Purchase Price" shall have the meaning set forth in ss.1.2
                      --------------
      hereof.

            The term  "Purchasers"  shall mean the purchasers of the Notes named
                       ----------
      in Schedule I hereto.

            The term "Put Event"  shall have the meaning set forth in  ss.7.3(d)
                      ---------
hereof.

            The term "Qualified  Institutional Buyer" shall have the meaning set
                      ------------------------------
      forth in Rule 144A of the Securities Act.

            The term "Rental Expense" shall mean, for any period,  the aggregate
                      --------------
      amount of rentals paid by the Company and its Subsidiaries under operating
      leases for which the Company or any  Subsidiary  is directly or indirectly
      liable,  determined on a consolidated  basis in accordance  with generally
      accepted accounting principles.

            The term "Required  Noteholders"  shall mean the holders of at least
                      ---------------------
      (66 2/3%) of the aggregate outstanding principal amount of the Notes.

            The term  "Restricted  Investments"  shall mean, with respect to the
                       -----------------------
      Company  or any  Subsidiary,  any  direct or  indirect  purchase  or other
      acquisition  by such  Person  of stock or other  securities  of any  other
      Person  (other than the Company or a  Subsidiary),  or any other direct or
      indirect loan,  advance (other than advances to officers and employees for
      moving and travel  expenses,  made in the ordinary  course of business) or
      capital  contribution  by such Person to any other  Person,  including all
      Indebtedness  and accounts  receivable for such other Person which are not
      current  assets or did not arise from  sales to such  other  Person in the
      ordinary  course of business (in each case,  an  "Investment");  provided,
                                                        ----------     --------
      however,  that  the  following  Investments  shall  not  be  deemed  to be
      -------
      Restricted Investments:

                  (a) marketable direct  obligations  issued or  unconditionally
            guaranteed by the United States of America or any agency thereof and
            maturing within one (1) year from the date of acquisition thereof;

                  (b) certificate of deposit, maturing no more than one (1) year
            from  the date of  creation  thereof,  issued  by  commercial  banks
            organized  under the laws of the  United  States or any state of the
            United States,  each such commercial  bank having  membership in the
            Federal Deposit  Insurance  Corporation and each having (x) combined
            capital, surplus and undivided profits of not less than $500,000,000
            and (y) an unsecured long-term debt rating of at least "A" or better
            by S&P and Moody's;

                  (c) commercial paper of corporations  organized under the laws
            of a jurisdiction  within the United States of America  maturing not
            more than 270 days from the date of  issuance  thereof  and having a
            rating  of at least  "A-1" or  better  by S&P or "P-1" or  better by
            Moody's;

<PAGE>

                  (d) Investments held on the Closing Date which would otherwise
            constitute  Restricted  investments and are (i) listed or aggregated
            in Item 2.1 of  Schedule  II, or (ii)  Investments  acquired  by the
            Company or a  Subsidiary  that are  permitted  by clause (e) of this
            definition;

                  (e) any Investment  acquired by the Company or a Subsidiary in
            the  ordinary  course of its  business,  as  described  in ss.9.3(b)
            above,  and in compliance with applicable  legal investment laws and
            regulations;

                  (f)  Investments  by the Company or any  Subsidiary in a newly
            formed entity or through the acquisition of an existing  entity,  in
            either  case  where such  entity is engaged in a business  described
            under  Section  9.3(b)  and  where,  after  giving  effect  to  such
            investment or acquisition, the Company or a Subsidiary owns at least
            80% of the voting equity of securities of such entity;

                  (g) any Investments consisting of loans or portfolios of loans
            acquired  by the  Company or a  Subsidiary  of a type  described  in
            ss.9.3(b)  above, and in compliance with applicable legal investment
            laws and regulations;

                  (h)  any  Investment   acquired  by  the  Company  as  partial
            consideration for the transfer to one or more real estate investment
            trusts (REITs) of loans previously acquired by the Company, provided
            that the  consideration for such transfer shall be primarily paid in
            cash and provided  further that such Investment shall not exceed 20%
            of the issued and  outstanding  capital stock (or comparable  equity
            interest) of such REIT; and

                  (i) any other Investments purchased after the Closing Date the
            purchase   price  of  which  does  not,   as  of  the  date  of  any
            determination  hereunder,  in the aggregate exceed five percent (5%)
            of   Consolidated   Net   Tangible   Assets   as  of  such  date  of
            determination.

      In computing the amount of any Restricted Investment, unrealized increases
      or decreases in value,  or  write-ups,  write-downs  or write-offs of such
      Restricted Investment shall be disregarded.

            The term  "Restricted  Payment" shall mean (a) any dividend or other
                       -------------------
      distribution,  direct or indirect, in respect of any shares of the capital
      stock of the  Company  or any  Subsidiary  other than  dividends  or other
      distributions  payable solely in shares of its capital stock, or warrants,
      rights, or options therefor,  and dividends or other  distributions by any
      Subsidiary  to the  Company  or a  Wholly-Owned  Subsidiary;  or  (b)  any
      purchase,  redemption,  retirement or other  acquisition  of any shares of
      capital  stock  of  the  Company  or  any  Subsidiary,  now  or  hereafter
      outstanding,  or of any warrants,  rights or options evidencing a right to
      purchase or acquire any such shares.  The amount of any Restricted Payment
      declared  or paid or  distributed  in  property  shall be deemed to be the
      greater  of its net book value or its fair  value (as  determined  in good
      faith by the Company) at the time of making the Restricted Payment.

<PAGE>

            The term "Rule 144A" shall mean Rule 144A under the Securities  Act,
                      ---------
      as presently in effect and as hereafter  amended from time to time, or any
      superseding  or substituted  rule adopted by the  Commission  from time to
      time.

            The term "S&P" shall mean Standard & Poors Ratings Group.
                      ---

            The term "SEC" shall mean the Securities and Exchange Commission and
                      ---
      any successor organizations.

            The term "ss.7.3  Notice and Offer to Prepay" shall have the meaning
                      ----------------------------------
      set forth in ss.7.3(b) hereof.

            The term  "ss.7.3(c)  Response"  shall have the meaning set forth in
                       -------------------
      ss.7.4(c) hereof.

            The term "ss.7.3 Special Prepayment Date" shall have the meaning set
                      ------------------------------
      forth in ss.7.3(b) hereof.

            The term  "Securities Act" shall mean the Securities Act of 1933, as
                       --------------
      amended from time to time.

            The term  "Series"  or "Series of Notes"  shall have the meaning set
                       ------       ---------------
      forth in ss.1.1 hereof.

            The term  "Solvent"  shall  have the  meaning  set forth in  ss.2.27
                       -------
      hereof.

            The term "Source" shall have the meaning set forth in ss.3.2 hereof.
                      ------

            The term  "Special  Counsel"  shall  have the  meaning  set forth in
                       ----------------
      ss.4.1 hereof.

            The term "Special Prepayment Price" shall have the meaning set forth
                      ------------------------
      in ss.7.3 hereof.

            The term "Subordinated  Indebtedness" shall mean any Indebtedness of
                      --------------------------
      the  Company  subordinated  to the  Notes and  other  Indebtedness  of the
      Company pursuant to provisions in the form set forth in Exhibit B hereto.
                                                              ---------

            The term  "Subsidiary",  with respect to any Person,  shall mean any
                       ----------
      corporation or partnership  organized  under the laws of the United States
      of America or a jurisdiction  thereof,  the financial  statements of which
      are  consolidated  with  the  financial  statements  of  such  Person  for
      generally accepted accounting principles financial reporting purposes. The
      term  "Subsidiary",  when used herein without  reference to any particular
             ----------
      Person, shall mean a Subsidiary of the Company.

            The term "this  Agreement"  shall mean this Note Purchase  Agreement
                      ---------------
      (including  the annexed  Exhibits and  Schedules),  as it may from time to
      time be amended, supplemented or modified in accordance with its terms.

            The term  "Total  Indebtedness"  shall  mean,  as of the date of any
                       -------------------
      determination  thereof,  the aggregate of all  Indebtedness of the Company
      and  its  Subsidiaries,   determined  on  a  consolidated   basis,   after

<PAGE>

      eliminating all offsetting  debits and credits between the Company and its
      Subsidiaries  and all other items  required to be eliminated in accordance
      with generally accepted accounting principles.

            The term "Total  Subordinated  Indebtedness"  shall mean,  as of the
                      ---------------------------------
      date  of  determination   thereof,  all  Subordinated   Indebtedness  then
      outstanding.

            The term  "Transferee  Bank"  shall  have the  meaning  set forth in
                       ----------------
      ss.4.12 hereof.

            The  term   "Treasury   Rate"   shall  mean  for   purposes  of  any
                         ---------------
      determination of the Make-Whole  Amount in respect of any principal amount
      of any Note,  the yield to maturity  for the  actively  traded  marketable
      United States  Treasury  fixed  interest rate  securities  with a maturity
      equal to the remaining  Weighted Average Life to Maturity  (rounded to the
      nearest month) of the Notes as of the date such Make-Whole  Amount becomes
      due and  payable,  as set forth on page "USD" of the  Bloomberg  Financial
      Markets  Service (or, if not available,  any other  nationally  recognized
      trading  screen  reporting  on-line  intraday  trading  in  United  States
      Treasury fixed interest rate securities) at 9:00 a.m. (New York City time)
      as of the third  Business Day  preceding the date such  Make-Whole  Amount
      becomes due and payable.  In the event that no such nationally  recognized
      trading screen  reporting  on-line trading in United States Treasury fixed
      interest  rate  securities is  available,  "Treasury  Rate" shall mean the
      arithmetic mean of the yields reported as weekly averages for the two most
      recently ended weeks so reported under the heading "Week Ending" published
      in  the  Statistical   Release  under  the  caption   "Treasury   Constant
      Maturities"  for the  maturity  corresponding  to the  remaining  Weighted
      Average Life to Maturity (rounded to the nearest month) of the Notes as of
      the date such Make-Whole  Amount becomes due and payable.  For purposes of
      calculating  the  Treasury  Rate,  the  most  recent  Statistical  Release
      published  prior to the date of  determination  of the  Make-Whole  Amount
      shall be used. If no possible  maturity for United States  Treasury  fixed
      interest rate  securities  exactly  corresponds  to such rounded  Weighted
      Average  Life to Maturity,  yields for the two most closely  corresponding
      published  maturities  shall be calculated  and the Treasury Rate shall be
      interpolated from such yields on a straight-line  basis,  rounding in each
      of such  relevant  periods to the  nearest  month.  For  purposes  hereof,
      "Statistical  Release"  shall  mean  the  statistical  release  designated
       --------------------
      "H.15(519)" (or any successor publication which is published weekly by the
      Federal  Reserve System and which  establishes  yields on actively  traded
      United States Treasury fixed interest rate securities adjusted to constant
      maturities)  or such other  reasonably  comparable  index  which  shall be
      designated by the Required Holders.

            The term "Total  Unsecured  Indebtedness"  shall mean the  aggregate
                      ------------------------------
      amount Indebtedness of the Company and its Subsidiaries  included in Total
      Indebtedness  and not secured by any Lien on any assets or  properties  of
      the Company or any of its Subsidiaries.

            The  term  "Unencumbered  Assets"  shall  mean an  amount  equal  to
                        --------------------
      Consolidated  Net Tangible Assets less that portion of Total  Indebtedness
      which is secured by any Lien on assets of the Company or any Subsidiary.

            The term "Voting Stock",  with respect to a corporation,  shall mean
                      ------------
      the stock of such corporation the holders of which are ordinarily,  in the
      absence  of  contingencies,  entitled  to elect  members  of the  Board of
      Directors (or other governing body) of such corporation.

<PAGE>

            The term "Weighted  Average Life to Maturity" of any borrowed funds,
                      ----------------------------------
      as of the date of the  determination  thereof,  shall  mean the  number of
      years  obtained  by  dividing  the  then  Remaining  Dollar-years  of such
      borrowed funds by the then outstanding  principal amount thereof. The term
      "Remaining  Dollar-years"  of any  borrowed  funds  shall  mean the amount
       -----------------------
      obtained  by (a)  multiplying  the amount of each then  remaining  sinking
      fund, serial maturity or other required repayment,  including repayment at
      final  maturity,  by the  number  of  years  (calculated  to  the  nearest
      one-twelfth)  which will elapse  between the time in question and the date
      of the repayment and (b) totaling all of the products obtained in (a).

            The term "Wholly-Owned"  shall mean, as applied to any Subsidiary of
                      ------------
      the Company,  a  Subsidiary  of the Company,  all the  outstanding  shares
      (other than  directors'  qualifying  shares,  if required by law) of every
      class of stock of which are at the time  owned by the  Company,  by one or
      more  Wholly-Owned  Subsidiaries  or by  the  Company,  and  one  or  more
      Wholly-Owned Subsidiaries;  provided,  however, that any Subsidiary of the
                                  --------   -------
      type referred to in the last proviso of ss.9.15(b) also shall be deemed to
      be a Wholly-Owned Subsidiary for all purposes of this Agreement.

      ss.12.2 Directly or Indirectly.  Any provision in this Agreement referring
              -----------------------
to action to be taken by any  Person,  or that such  Person if  prohibited  from
taking,  shall be applicable whether such action is taken directly or indirectly
by such Person.

      ss.12.3  Accounting  Terms.  All accounting terms used herein that are not
               ------------------
otherwise  expressly defined shall have the respective meanings given to them in
accordance with generally accepted accounting principles at the particular time.

      ss.12.4  GOVERNING  LAW. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY
               ---------------
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.

      ss.12.5  Independence  of  Covenants.  Each  covenant  made by the Company
               ----------------------------
herein  is  independent  of each  other  covenant  so made.  The  fact  that the
operation  of any such  covenant  permits  a  particular  action  to be taken or
condition  to  exist  does  not  mean  that  such  action  or  condition  is not
prohibited,  restricted or conditioned by the operation of the provisions of any
other covenant herein.

      ss.12.6 Saturdays,  Sundays,  Holidays,  etc. If the last or appointed day
              -------------------------------------
for the  taking  of any  action  required  or  permitted  hereby or by the Notes
(including,  but not  limited to, the  payment of  principal  of, or interest or
premium,  if any, on, the Notes)  shall be a Saturday,  Sunday or a day which is
not a Business Day in New York,  New York,  then such action may be taken on the
next  succeeding  day which is a Business Day in such city;  provided,  however,
that if, pursuant to the provisions of this ss.12.6, the time for the payment of
any amount in respect of the Notes is  postponed,  interest on such amount shall
continue to accrue during the period of such postponement.

      ss.12.7  Headings.  The headings of the Sections and other  subsections of
               ---------
this  Agreement  have been inserted for  convenience of reference only and shall
not be deemed to constitute a part hereof.

<PAGE>

SECTION 13.       MISCELLANEOUS.

      ss.13.1  Notices.  All  communications  under this Agreement or any of the
               --------
Notes shall be in writing and shall be delivered by (a)  registered or certified
mail with  return  receipt  requested  if the  sender  on the same days  sends a
confirming  copy of such notice by telecopy or (b) by overnight  air courier (i)
if to you, to you at your  address  set forth in  Schedule I hereto,  marked for
attention as there indicated, or at such other address as you may have furnished
to the Company in writing,  (ii) if to any other holder of a Note,  to it at its
address listed in the books for the registration and registration of transfer of
Notes to be  maintained  by the Company  pursuant to ss.8.1  hereof,  or at such
other address as such holder shall have furnished to the Company in writing, and
(iii)  if to the  Company,  to it at the  address  shown  at the  head  of  this
Agreement,  or at such other address as it shall have given notice of to you and
all  other  holders  of  Notes  issued  by it  and at the  time  outstanding  in
accordance with the terms of this ss.13.1. All such written communications shall
be deemed to have been given upon receipt thereof.

      ss.13.2 Survival.  All  representations,  warranties and covenants made by
              ---------
the Company  herein or by the  Company in any  certificate  or other  instrument
delivered under or in connection with this Agreement shall be considered to have
been  relied  upon by you and shall  survive  the  delivery  to you of the Notes
regardless of any investigation made by you or on your behalf. All statements in
any such certificate or other instrument  shall constitute  representations  and
warranties of the Company, as the case may be, as applicable hereunder.

      ss.13.3 Successors and Assigns; Transfer of Notes. This Agreement shall be
              ------------------------------------------
binding upon the parties hereto and their respective successors and assigns, and
shall inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns permitted hereunder;  provided,  however, that
                                                        --------   -------
you shall not have any obligation to purchase Notes of any Person other than the
Company.  Whether or not expressly so stated and subject to the restrictions set
forth  therein,  the  provisions of Sections 5 through 12 of this  Agreement are
intended to be for your  benefit and for the benefit of all holders from time to
time of any of the  Notes  and shall be  enforceable  by you and any other  such
holder whether or not an express  assignment to such holder of rights under this
Agreement  shall  have  been  made by you or your  successors  or  assigns;  and
provided,  further, that the provisions of Section 5 and ss.ss.6.2, 6.3, 9.1 and
--------   -------
9.5 hereof  shall also be for the benefit of, and shall be  enforceable  by, any
Person who shall no longer be a holder of any Note but who shall  have  incurred
any expense or been subjected to any liability  referred to therein while, or on
the basis of being, such a holder.

      ss.13.4  Amendment  and Waiver.  (a) This  Agreement  and the Notes may be
               ----------------------
amended or supplemented, and the observance of any term hereof or thereof may be
waived,  with the  written  consent  of the  Company  and (i) on or prior to the
Closing  Date,  you and (ii)  after the  Closing  Date,  the  Required  Holders;
provided,  however, that no such amendment,  supplement or waiver shall, without
--------   -------
the  written  consent  of the  holders of all the Notes  then  outstanding,  (x)
change, with respect to the Notes, the amount or time of any required prepayment
or payment of  principal  or premium or the rate or time of payment of interest,
or change the funds in which any  prepayment or payment on the Notes is required
to be made; or (y) reduce the  percentage of the aggregate  principal  amount of
Notes required for any amendment, consent or waiver hereunder.

      (b) Any amendment,  supplement or waiver  effected in accordance with this
ss.13.4  shall be binding upon each holder of any Note at the time  outstanding,
each  future  holder  of any Note and the  Company.  Notwithstanding  any  other

<PAGE>

provision of this  Agreement,  no consent to any such  amendment,  supplement or
waiver by any Noteholder, shall have any effect for the purposes of this ss.13.4
if such  amendment,  supplement or waiver was obtained in connection  with or in
anticipation of the purchase by the Company, any Affiliate of the Company or any
other Person of any Note from the holder thereof, unless the holder of each Note
at the time outstanding has executed an amendment,  supplement or waiver, as the
case may be, to  substantially  the same effect as the amendment,  supplement or
waiver obtained from such Noteholder.

      (c) The Company will not solicit, request or negotiate for or with respect
to any proposed  waiver or amendment of any of the  provisions of this Agreement
or the Notes unless each  Noteholder  (irrespective  of the amount of Notes then
owned by it) shall be informed  thereof by the Company and shall be afforded the
opportunity  of  considering  the same and shall be supplied by the Company with
sufficient  information  to enable it to make an informed  decision with respect
thereof.  Executed or true and correct copies of any waiver effected pursuant to
the  provisions of this ss.13.4 shall be delivered by the Company to each holder
of outstanding  Notes forthwith  following the date on which the same shall have
been executed and delivered by the holder or holders of the requisite percentage
of outstanding Notes. The Company will not, directly or indirectly, pay or cause
to be paid  any  remuneration,  whether  by way of  supplemental  or  additional
interest,  fee or otherwise,  to any  Noteholder as  consideration  for or as an
inducement to the entering into by any  Noteholder of any waiver or amendment or
any of the terms and  provisions  of this  Agreement  or the Notes  unless  such
remuneration is  concurrently  paid, on the same terms ratably to the holders of
all of the Notes then outstanding.

      ss.13.5  Confidentiality.  Any  information  contained in any document and
               ----------------
delivered by the Company to, and any other  information  received by, the holder
of any Note  pursuant  to this  Agreement  that  shall have been  designated  in
writing as confidential shall be held in confidence by such holder in accordance
with  such  internal   procedures  as  such  holder  shall  apply  generally  to
confidential information;  provided,  however, that such holder may disclose any
                           --------   -------
such information (a) as has become generally available to the public, (b) as may
be required in any report,  statement or  testimony  required to be submitted to
any  municipal,  state or federal  regulatory  body  having or  claiming to have
jurisdiction  over such  holder  including,  without  limitation,  the  National
Association  of  Insurance  Commissioners  or  similar  organizations  or  their
successors,  (c) as may be required in response to any summons or subpoena or in
connection with any  litigation,  (d) to the extent that such holder believes it
appropriate  in  order to  comply  with any law,  order,  regulation  or  ruling
applicable to such holder,  (e) to a prospective  transferee in connection  with
any contemplated  transfer of a Note by such holder, and (f) otherwise as may be
reasonably  necessary to the enforcement of such holder's rights with respect to
any Notes or under this Agreement.

      ss.13.6   Indemnification  Against  Claims,  etc.  (a)  The  Company  will
                ---------------------------------------
indemnify and hold harmless each of you, your directors, officers, employees and
each Person,  if any, who controls you within the meaning of the  Securities Act
or the  Exchange  Act (any and all of whom are  referred to as the  "Indemnified
                                                                     -----------
Party") from and against any and all losses,  claims,  damages and  liabilities,
-----
joint  or  several  (including,  without  limitation,  all  legal  fees or other
expenses  reasonably  incurred by any  Indemnified  Party in connection with the
preparation  for or  defense  of any  pending  or  threatened  claim,  action or
proceeding,   whether  or  not  resulting  in  any  liability),  to  which  such
Indemnified Party may become subject (whether or not such Indemnified Party is a
party thereto) under any applicable  federal or state law or otherwise caused by
or arising out of, or allegedly  caused by or arising out of, this  Agreement or
any  transaction  contemplated  hereby,  other than losses,  claims,  damages or
liabilities  resulting from any representation  made by you in Section 3 hereof,
any  breach  by you of the terms of this  Agreement,  or any  failure  by you to
comply with government regulations applicable to and to be complied with by you.

<PAGE>

      (b) Promptly after receipt by an Indemnified Party of notice of any claim,
action or proceeding  with respect to which an Indemnified  Party is entitled to
indemnity  hereunder,  such  Indemnified  Party will  notify the Company of such
claim or the commencement of such action or proceeding;  provided, however, that
                                                         --------  -------
the failure of an Indemnified  Party to give notice as provided herein shall not
relieve the Company of its  obligations  under this ss.13.6 with respect to such
Indemnified Party,  except to the extent that the Company is actually prejudiced
by such  failure.  The Company will assume the defense of such claim,  action or
proceeding and will employ counsel  satisfactory  to the  Indemnified  Party and
will pay the fees and expenses of such  counsel.  Notwithstanding  the preceding
sentence, the Indemnified Party will be entitled, at the expense of the Company,
to employ counsel  separate from counsel for the Company and for any other party
in such action if the Indemnified Party reasonably determines that a conflict of
interest or other reasonable basis exists which makes  representation by counsel
chosen by the Company not advisable;  provided,  however, that the Company shall
                                      --------   -------
not be  obligated  to pay for the fees and  expenses of more than one counsel of
all  Indemnified  Parties.  In the  event an  Indemnified  Party  (or any of its
officers,  directors  or  employees)  appears  as a  witness  in any  action  or
proceeding  brought  against  the Company in which an  Indemnified  Party is not
named as a defendant, the Company agrees to reimburse such Indemnified Party for
all  out-of-pocket  expenses  incurred  by it  (including  fees and  expenses of
counsel) in connection  with its appearing as a witness.  The obligations of the
Company  under this ss.13.6 shall survive the payment or prepayment of the Notes
and the termination of this Agreement.

      ss.13.7  Indemnity for Funds  Availability at Closing.  In connection with
               ---------------------------------------------
the  closing  under this  Agreement,  the  Company is  requesting  that you make
available for funding an amount equal to the Purchase Price. If, for any reason,
the closing does not occur as scheduled on the Closing Date,  the Company hereby
agrees to protect,  indemnify and hold you harmless from and against any and all
losses,   liabilities,   obligations,   expenses  (including,  with  limitation,
reasonable attorneys' fees and expenses) imposed upon or incurred by or asserted
against you in any way resulting  from,  caused by or arising out of the failure
of the closing to occur as scheduled  on the Closing  Date,  including,  without
limitation,  any and all losses  resulting  from the  inability  to reinvest any
amounts  reserved,  set aside or otherwise to be made available at the scheduled
closing at a rate of interest  equal to or greater  than the rate of interest on
the Notes.  The  obligations of the Company under this ss.13.7 shall survive the
payment or prepayment of the Notes and the termination of this Agreement.

      ss.13.8 Counterparts.  This Agreement may be executed and delivered to you
              -------------
simultaneously  in one or more  counterparts,  each of which  shall be deemed an
original,  but all such counterparts  shall together  constitute but one and the
same instrument.

      ss.13.9  Reproduction  of  Documents.  This  Agreement,  and all documents
               ----------------------------
relating  hereto  (other than the Notes),  including,  without  limitation,  (a)
consents,  waivers  and  modifications  that  may  hereafter  be  executed,  (b)
documents  received  by you at the closing of your  purchase  of Notes,  and (c)
financial statements, certificates and other information heretofore or hereafter
furnished to you, may be reproduced by you by any  photographic or other similar
process and you may destroy any  original  document so  reproduced.  The Company
agrees and stipulates  that, to the extent permitted by applicable law and court

<PAGE>

or agency rules,  any such  reproduction  shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by you in
the regular course of business) and that any  enlargement,  facsimile or further
reproduction  of such  reproduction  shall be admissible in evidence to the same
extent.

      ss.13.10 Consent to Jurisdiction and Venue. The Company hereby irrevocably
               ----------------------------------
(i) agrees  that any suit,  action or other legal  proceeding  arising out of or
relating  to this  Agreement  or any Note may be brought in a court of record in
the State of New York or in the courts of the United  States of America  located
in such State,  (ii) consents to the jurisdiction of each such court in any such
suit, action or proceeding,  and (iii) waives any objection which it may have to
the laying of venue of any such claim that any such suit,  action or  proceeding
has been brought in an inconvenient forum and covenants that it will not seek to
challenge the jurisdiction of any such court or seek to oust the jurisdiction of
any such court,  whether on the basis of  inconvenient  forum or otherwise.  The
Company  irrevocably  consents to the service of any and all process in any such
suit,  action or proceeding by mail copies of such process to the Company at its
address for notices provided in ss.13.10 hereof. The Company agrees that a final
judgment  in any  such  action  or  proceeding  shall be  conclusive  and may be
enforced in other  jurisdictions  by suit on the judgment or in any other manner
provided by law. All mailings  under this  ss.13.10  shall be by  registered  or
certified mail, return receipt  requested.  Nothing in this ss.13.7 shall affect
your right to serve legal process in any other manner permitted by law or affect
your right to bring any suit, action or proceeding against the Company or any of
its properties in the courts of any other jurisdiction.



<PAGE>


      If the  foregoing  is  satisfactory  to  you,  please  sign  the  form  of
acceptance  on the  enclosed  counterparts  hereof  and  return  the same to the
Company,  whereupon this Note Purchase Agreement, as so accepted, shall become a
binding contract between you and the undersigned.

                                Very truly yours,

                                LITCHFIELD FINANCIAL CORPORATION



                                By: /s/ Ronald Rabiodu
                                   -----------------------------
                                  Name:  Ronald Rabidou
                                  Title: Chief Financial Officer


The foregoing Note Purchase Agreement is hereby accepted.

TEACHERS INSURANCE AND ANNUITY ASSOCIATION
  OF AMERICA

By:    /s/ Sanjeev Handa
   --------------------------
    Name:  Sanjeev Handa
    Title: Associate Director
           Private Placements