================================================================================


                                   $34,000,000

                                CREDIT AGREEMENT

                          Dated as of December 31, 1998

                                      among

                              AUDIO BOOK CLUB, INC.

                                  as Borrower,

                      THE BANKS, FINANCIAL INSTITUTIONS AND
                    OTHER INSTITUTIONAL LENDERS NAMED HEREIN,

                               as Initial Lenders,

                              FLEET NATIONAL BANK,

                            as Initial Issuing Bank,
                               as Swing Line Bank
                                       and
                             as Administrative Agent


================================================================================

<PAGE>


                                TABLE OF CONTENTS



ARTICLE 1

         DEFINITIONS AND ACCOUNTING TERMS......................................2
         SECTION 1.1  Certain Defined Terms....................................2
         SECTION 1.2  Computation of Time Periods.............................32
         SECTION 1.3  Accounting Terms........................................32
         SECTION 1.4  Other Definitional Provisions...........................33

ARTICLE 2

         AMOUNTS AND TERMS OF THE ADVANCES
         AND THE LETTERS OF CREDIT............................................34
         SECTION 2.1  The Advances............................................34
         SECTION 2.2  Making the Advances.....................................36
         SECTION 2.3  Issuance of and Drawings and Reimbursement
                            Under Letters of Credit...........................39
         SECTION 2.4  Repayment of Advances...................................40
         SECTION 2.5  Termination or Reduction of the Commitments.............42
         SECTION 2.6  Prepayments.............................................43
         SECTION 2.7  Interest................................................46
         SECTION 2.8  Fees....................................................47
         SECTION 2.9  Conversion of Advances..................................48
         SECTION 2.10 Increased Costs, Etc....................................49
         SECTION 2.11 Payments and Computations...............................51
         SECTION 2.12 Taxes...................................................52
         SECTION 2.13 Sharing of Payments, Etc................................54
         SECTION 2.14 Use of Proceeds.........................................55
         SECTION 2.15 Defaulting Lenders......................................55

ARTICLE 3

         CONDITIONS OF LENDING................................................58
         SECTION 3.1  Conditions Precedent to Initial Extension of Credit.....58
         SECTION 3.2  Conditions Precedent to Each Borrowing and Issuance.....65
         SECTION 3.3  Determinations Under Section 3.1........................66



                                       ii

<PAGE>

ARTICLE 4

         REPRESENTATIONS AND WARRANTIES OF THE BORROWER.......................67
         SECTION 4.1  Organization............................................67
         SECTION 4.2  Subsidiaries............................................67
         SECTION 4.3  Corporate Power, Authorization..........................75
         SECTION 4.4  Governmental Authorizations, Approvals..................68
         SECTION 4.5  Due Execution, Validity, Enforceability.................68
         SECTION 4.6  Financial Statements....................................69
         SECTION 4.7  Pro Forma Financial Statements..........................70
         SECTION 4.8  Accurate Information....................................70
         SECTION 4.9  Litigation..............................................70
         SECTION 4.10 Regulation U............................................71
         SECTION 4.11 ERISA...................................................71
         SECTION 4.12 Casualty................................................71
         SECTION 4.13 Environmental Matters...................................71
         SECTION 4.14 Restrictive Agreements..................................72
         SECTION 4.15 Priority of Liens.......................................72
         SECTION 4.16 Taxes...................................................72
         SECTION 4.17 Compliance with Securities Laws.........................73
         SECTION 4.18 Solvency................................................73
         SECTION 4.19 Debt....................................................73
         SECTION 4.20 No Defaults, Compliance with Laws.......................74
         SECTION 4.21 Owned Real Property.....................................74
         SECTION 4.22 Leased Real Property....................................74
         SECTION 4.23 Material Contracts......................................75
         SECTION 4.24 Investments.............................................75
         SECTION 4.25 Intellectual Property...................................75
         SECTION 4.26 Acquisition Documents...................................76
         SECTION 4.27 Fees....................................................76
         SECTION 4.28 Government Consents for Conduct of Business.............76

ARTICLE 5

         AFFIRMATIVE COVENANTS................................................77
         SECTION 5.1  Compliance with Law.....................................77
         SECTION 5.2  Payment of Taxes, Etc...................................77
         SECTION 5.3  Compliance with Environmental Laws......................77
         SECTION 5.4  Preparation of Environmental Reports....................78
         SECTION 5.5  Maintenance of Insurance................................78
         SECTION 5.6  Preservation of Corporate Existence, Etc................79
         SECTION 5.7  Visitation Rights.......................................79
         SECTION 5.8  Keeping of Books........................................79
         SECTION 5.9  Maintenance of Properties, Etc..........................79


                                       iii

<PAGE>


         SECTION 5.10 Compliance with Terms of Leaseholds.....................80
         SECTION 5.11 Performance of Material Contracts.......................80
         SECTION 5.12 Transactions with Affiliates............................80
         SECTION 5.13 Agreement to Grant Additional Security..................80
         SECTION 5.14 Performance of Acquisition Documents....................82
         SECTION 5.15 Year 2000 Compatibility.................................82

ARTICLE 6

         NEGATIVE COVENANTS...................................................83
         SECTION 6.1  Liens, Etc..............................................83
         SECTION 6.2  Debt....................................................84
         SECTION 6.3  Accounts Payable........................................86
         SECTION 6.4  Fundamental Changes.....................................86
         SECTION 6.5  Sales, Etc. of Assets...................................87
         SECTION 6.6  Investments in Other Persons............................88
         SECTION 6.7  Dividends, Etc..........................................89
         SECTION 6.8  Change in Nature of Business............................90
         SECTION 6.9  Charter Amendments......................................90
         SECTION 6.10 Accounting Changes......................................91
         SECTION 6.11 Prepayments, Etc. of Debt...............................91
         SECTION 6.12 Amendment, Etc. of Acquisition Documents................91
         SECTION 6.13 Amendment, Etc. of Material Contracts, Including Debt. .91
         SECTION 6.14 Negative Pledge.........................................93
         SECTION 6.15 Partnerships, New Subsidiaries..........................93
         SECTION 6.16 Speculative Transactions................................93
         SECTION 6.17 Capital Expenditures....................................93
         SECTION 6.18 Issuance of Stock.......................................94
         SECTION 6.19 Operating Subsidiary....................................95
         SECTION 6.20 Management Fees.........................................95
         SECTION 6.21 Shelf Registration......................................95

ARTICLE 7

         REPORTING REQUIREMENTS...............................................96
         SECTION 7.1  Default Notice..........................................96
         SECTION 7.2  Monthly Financials......................................96
         SECTION 7.3  Quarterly Financials....................................96
         SECTION 7.4  Annual Financials.......................................97
         SECTION 7.5  Annual Forecasts........................................98
         SECTION 7.6  ERISA Events and ERISA Reports..........................98
         SECTION 7.7  Plan Terminations.......................................98
         SECTION 7.8  Actuarial Reports.......................................98
         SECTION 7.9  Plan Annual Reports.....................................98


                                       iv

<PAGE>


         SECTION 7.10 Annual Plan Summaries...................................98
         SECTION 7.11 Multiemployer Plan Notices..............................99
         SECTION 7.12 Litigation..............................................99
         SECTION 7.13 Securities Reports......................................99
         SECTION 7.14 Creditor Reports........................................99
         SECTION 7.15 Agreement Notices.......................................99
         SECTION 7.16 Revenue Agent Reports..................................100
         SECTION 7.17 Environmental Conditions...............................100
         SECTION 7.18 Real Property..........................................100
         SECTION 7.19 Insurance..............................................100
         SECTION 7.20 [Intentionally left blank.]............................100
         SECTION 7.21 Management Letters.....................................100
         SECTION 7.22 Permitted Acquisition Documents........................100
         SECTION 7.23 Other Information......................................100

ARTICLE  8

         FINANCIAL COVENANTS.................................................101
         SECTION 8.1   Minimum EBITDA........................................101
         SECTION 8.2   Consolidated Senior Debt to EBITDA Ratio..............102
         SECTION 8.3   Consolidated Debt to EBITDA Ratio.....................102
         SECTION 8.4   Interest Coverage Ratio...............................103
         SECTION 8.5   Fixed Charge Coverage Ratio...........................104

ARTICLE 9

         EVENTS OF DEFAULT...................................................105
         SECTION 9.1  Payment................................................105
         SECTION 9.2  Representations and Warranties.........................105
         SECTION 9.3  Certain Covenants......................................105
         SECTION 9.4  Other Covenants........................................105
         SECTION 9.5  Other Defaults.........................................105
         SECTION 9.6  Bankruptcy, Etc........................................106
         SECTION 9.7  Judgments..............................................106
         SECTION 9.8  Loan Documents.........................................106
         SECTION 9.9  Liens..................................................106
         SECTION 9.10 Change of Control......................................107
         SECTION 9.11 ERISA Events...........................................107
         SECTION 9.12 Subordination Provisions...............................107
         SECTION 9.13 Management.............................................107
         SECTION 9.14 No Pledge of Certain Stock.............................108



                                        v

<PAGE>


ARTICLE 10

         THE ADMINISTRATIVE AGENT............................................109
         SECTION 10.1 Authorization and Action...............................109
         SECTION 10.2 Agent's Reliance, Etc..................................110
         SECTION 10.3 Fleet and Affiliates...................................110
         SECTION 10.4 Lender Party Credit Decision...........................111
         SECTION 10.5 Indemnification........................................111
         SECTION 10.6 Successor Administrative Agents........................112
         SECTION 10.7 Events of Default......................................113

ARTICLE 11

         MISCELLANEOUS.......................................................113
         SECTION 11.1  Amendments, Etc.......................................113
         SECTION 11.2  Notices Etc...........................................114
         SECTION 11.3  No Waiver; Remedies; Counterclaims....................116
         SECTION 11.4  Costs and Expenses....................................116
         SECTION 11.5  Right of Set-off......................................118
         SECTION 11.6  Binding Effect........................................118
         SECTION 11.7  Assignments and Participations........................119
         SECTION 11.8  Execution in Counterparts.............................122
         SECTION 11.9  No Liability of the Issuing Bank......................122
         SECTION 11.10 Confidentiality.......................................122
         SECTION 11.11 Survival of Agreements and Representations; 
                         Construction........................................123
         SECTION 11.12 Assurances............................................123
         SECTION 11.13 Severability..........................................123
         SECTION 11.14 JURISDICTION, ETC.....................................124
         SECTION 11.15 GOVERNING LAW.........................................124
         SECTION 11.16 WAIVER OF JURY TRIAL..................................125
         SECTION 11.17 FINAL AGREEMENT.......................................125



                                       vi

<PAGE>


EXHIBITS

Exhibit A         -        Form of Assignment and Acceptance
Exhibit B         -        Form of Revolving Credit Note
Exhibit C         -        Form of Term Note
Exhibit D         -        Form of Notice of Borrowing
Exhibit E         -        Form of Security Agreement
Exhibit F         -        [Intentionally Omitted]
Exhibit G         -        Form of Intellectual Property Security Agreement
Exhibit H         -        Form of Subsidiary Guaranty
Exhibit I         -        Form of Swing Line Note


SCHEDULES

Schedule I                 Commitments and Applicable Lending Offices
Schedule 4.2               Organization and Subsidiaries
Schedule 4.4               Required Authorizations and Approvals
Schedule 4.9               Disclosed Litigation
Schedule 4.11              Welfare Plans
Schedule 4.13              Environmental Assessment Reports
Schedule 4.14              Restrictive Agreements
Schedule 4.16              Open Tax Years
Schedule 4.19(a)           Existing Debt
Schedule 4.19(b)           Surviving Debt
Schedule 4.20              No Defaults
Schedule 4.21              Owned Real Estate
Schedule 4.22              Leased Real Estate
Schedule 4.23              Material Contracts
Schedule 4.24              Investments
Schedule 4.25              Intellectual Property
Schedule 5.5               Insurance
Schedule 5.12              Certain Transactions
Schedule 6.1(c)            Liens
Schedule 6.6(a)            Investments in Subsidiaries
Schedule 6.6(e)            Existing Investments
Schedule 6.18              Existing Issuances, Etc. of Stock



<PAGE>


                                CREDIT AGREEMENT


     CREDIT  AGREEMENT,  dated as of December 31, 1998,  by and among AUDIO BOOK
CLUB, INC., a Florida corporation (the "Borrower" or the "Company"),  the banks,
financial  institutions and other institutional  lenders listed on the signature
pages hereof as the Initial  Lenders (the  "Initial  Lenders"),  FLEET  NATIONAL
BANK, as Initial Issuing Bank (the "Initial Issuing Bank"), FLEET NATIONAL BANK,
as the Swing Line Bank (the  "Swing  Line  Bank") and FLEET  NATIONAL  BANK,  as
administrative  agent (together with any successor appointed pursuant to Article
10, the "Administrative Agent") for the Lender Parties (as hereinafter defined).

                             PRELIMINARY STATEMENTS:

     (a) Pursuant to an Asset Purchase Agreement,  dated as of December 30, 1998
(the "CH  Acquisition  Agreement"),  by and among the  Borrower and The Columbia
House Company, the Borrower or a Wholly-Owned  Subsidiary of the Borrower agreed
to purchase all or substantially all of the assets of the audio book division of
The Columbia House Company (such  division,"Columbia  House") (such  transaction
being hereinafter called the "CH Acquisition");

     (b) Pursuant to an Asset Purchase Agreement,  dated as of December 11, 1998
(the "Premier  Acquisition  Agreement"),  by and among  Borrower,  Classic Radio
Acquisition Corp., a Delaware  corporation  indirectly  wholly-owned by Borrower
("Acquisition Corp."), and Premier Electronic Laboratories,  Inc., a Connecticut
corporation  ("Premier"),  Acquisition  Corp.  purchased  all of the  assets  of
Premier (such transaction being hereinafter called the "Premier Acquisition");

     (c) Pursuant to an Asset Purchase Agreement,  dated as of December 11, 1998
(the "AIC Acquisition Agreement"), by and among Borrower,  Acquisition Corp. and
Metacom, Inc., a Minnesota corporation ("Metacom"),  Acquisition Corp. purchased
all of the assets of the  Adventures  in Cassettes  division  ("AIC") of Metacom
(such transaction being hereinafter called the "AIC Acquisition")

     (d)  Pursuant  to an  Agreement  and  Plan  of  Merger  and a  Supplemental
Agreement,  each  dated as of  December  11,  1998 (the  "Radio  Spirits  Merger
Agreement"),  by and among  Borrower,  Classic Radio Holding  Corp.,  a Delaware
corporation and wholly-owned subsidiary of Borrower ("Holding Corp."), and Radio
Spirits,  Inc., an Illinois corporation ("Radio Spirits"),  Radio Spirits merged
with and into Holding Corp.  (such  transaction,  together with the transactions
described in the following  subsection (e), being hereinafter  called the "Radio
Spirits Acquisition";

     (e) In addition,  Acquisition Corp. acquired from Carl Amari ("Amari"), the
sole  shareholder  of Radio Spirits,  pursuant to an Asset  Purchase  Agreement,
dated as of December 11, 1998 (the "Buffalo Productions Acquisition Agreement"),
by and among Borrower,  Acquisition  Corp. and Carl Amari,  all of the assets of
Buffalo Productions, Inc., ("Buffalo


<PAGE>


Productions") and Acquisition Corp. also acquired from Carl Amari, Amari's fifty
percent (50%) joint  venture  interest in the Old Time Radio Joint Venture ("OTR
Joint Venture") between Amari and Dick Brescia  Associates,  pursuant to a Joint
Venture  Interest  Purchase and Assignment  Agreement,  dated as of December 11,
1998 (the "JV Acquisition Agreement") by and among Acquisition Corp. and Amari;

     (f) The CH Acquisition Agreement,  the Radio Spirits Merger Agreement,  the
Buffalo Productions  Acquisition Agreement,  the JV Acquisition  Agreement,  the
Premier  Acquisition  Agreement  and the AIC  Acquisition  Agreement  are herein
referred to collectively as the "Acquisition  Agreements" and individually as an
"Acquisition Agreement"; the CH Acquisition,  the Radio Spirits Acquisition, the
Premier  Acquisition and the AIC Acquisition are herein referred to collectively
as the "Acquisitions" and individually as an "Acquisition");

     (g) The  Borrower has  requested  that the Lender  Parties (as  hereinafter
defined)  make  loans to the  Borrower  and issue  letters  of credit  having an
aggregate  principal  and  face  amount  at any one  time  outstanding  of up to
Thirty-Four  Million  Dollars  ($34,000,000)  to be used by the  Borrower (a) to
finance,  in part, the  Acquisitions,  (b) to pay fees and expenses  incurred in
connection with the Acquisitions, (c) to refinance certain existing indebtedness
of  the  Borrower  and  (d) to  provide  working  capital  and  finance  capital
expenditures  for the Borrower,  and the Lender Parties have agreed to make such
loans and issue  such  letters  of credit  all on and  subject  to the terms and
conditions of this Agreement.

     NOW,  THEREFORE,  in  consideration  of the  premises  and  of  the  mutual
covenants and agreements  contained  herein,  the parties hereto hereby agree as
follows:


                                    ARTICLE 1

                        DEFINITIONS AND ACCOUNTING TERMS

     SECTION 1.1 Certain Defined Terms. As used in this Agreement, the following
terms shall have the following  meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):

     "Acquisition(s)" has the meaning specified in the Preliminary Statements.

     "Acquisition  Agreement(s)"  has the meaning  specified in the  Preliminary
Statements.

     "Acquisition  Dates" means the dates on which the  Acquisitions  shall have
been consummated in accordance with the Acquisition Documents.

     "Acquisition  Documents"  means  the  Acquisition  Agreements,   the  other
agreements   entered  into  in  connection   therewith  (other  than  immaterial
agreements and certificates) including,  without limitation,  (i) the employment
agreement between the Borrower (or one of its subsidiaries) and


                                        2

<PAGE>

Carl Amari, (ii) the Mailing Agreement and the Transitional  Services Agreements
relating to the CH Acquisition, and (iii) and all schedules and exhibits related
to each such agreement, all as such agreements, instruments and documents are in
effect  as of the  Closing  Date,  and as  they  may be  amended  to the  extent
permitted under Section 6.12 hereof.

     "Acquisition  Puts"  means the  obligation  of the  Borrower  or any of its
Subsidiaries  to  repurchase  any of  Borrower's  Common  Stock or other  Equity
Interests as may be required by the Acquisition Documents.

     "Acquisition  Target"  shall mean each of Columbia  House,  Radio  Spirits,
Buffalo Productions, OTR Joint Venture, Premier and AIC.

     "Additional  Collateral  Documents"  has the meaning  specified  in Section
5.13(e).

     "Administrative  Agent" has the meaning specified in the recital of parties
to this Agreement.

     "Administrative  Agent's  Account" means the account of the  Administrative
Agent maintained by the  Administrative  Agent with Fleet at its office at Fleet
National Bank, One Federal  Street,  Boston,  Massachusetts  02110,  Account No.
151035103156, Attention: Loan Administration.

     "Advance" means a Term Advance,  a Revolving  Credit Advance,  a Swing Line
Advance or a Letter of Credit Advance.

     "Affiliate"  means,  as to any Person,  any other Person that,  directly or
indirectly,  controls,  is  controlled  by or is under common  control with such
Person  or is a  director  or  officer  of such  Person.  For  purposes  of this
definition,   (a)  the  term  "control"   (including  the  terms  "controlling,"
"controlled  by"  and  "under  common  control  with")  of a  Person  means  the
possession,  direct or indirect,  of the power to vote 50% or more of the Voting
Stock of such Person or to direct or cause the direction of the  management  and
policies of such  Person,  whether  through the  ownership of Voting  Stock,  by
contract or otherwise and (b) the families of any one or more of Norton Herrick,
Howard  Herrick and Michael  Herrick shall be deemed to be Affiliates of each of
them.  Without  limiting the foregoing,  a trust shall be deemed an Affiliate of
the trust's trustee.

     "After-Acquired Mortgaged Property" means any parcel (or adjoining parcels)
of real property (including any leaseholds) acquired by any Loan Party after the
Closing Date subject to a Mortgage granted to the  Administrative  Agent for the
benefit of the Secured Parties pursuant to Section 5.13.

     "AIC" has the meaning specified in the Preliminary Statements.


                                        3

<PAGE>


     "Applicable  Lending Office" means, with respect to each Lender Party, such
Lender Party's  Domestic  Lending Office in the case of a Prime Rate Advance and
such Lender Party's  Eurodollar  Lending Office in the case of a Eurodollar Rate
Advance.

     "Applicable  Margin"  means at any time and from time to time a  percentage
per annum  determined  pursuant  to the last  paragraph  of this  definition  by
reference to the ratio of Consolidated Debt to EBITDA at such time, as set forth
below:

                              Applicable Margin for
                   Revolving Credit Advances and Term Advances

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
Consolidated Debt                        Applicable Margin for            Applicable Margin for
to EBITDA Ratio                          Eurodollar Rate Advances         Prime Rate Advances
-----------------------------------------------------------------------------------------------
<S>                                              <C>                             <C>  
Greater than or equal to 5.0:1.0                 3.25%                           2.00%
-----------------------------------------------------------------------------------------------
Greater than or equal to 4.0:1.0 but             3.00%                           1.75%
less than 5.0:1.0
-----------------------------------------------------------------------------------------------
Greater than or equal to 3.5:1.0 but             2.75%                           1.50%
less than 4.0:1.0
-----------------------------------------------------------------------------------------------
Less than 3.5:1.0                                2.50%                           1.25%
-----------------------------------------------------------------------------------------------
</TABLE>

     Notwithstanding the above rates, prior to the date which is six months from
the date hereof, the Applicable Margin for a Revolving Credit Advance and a Term
Advance shall be 3.25% for a Eurodollar  Rate Advance and 2.00% for a Prime Rate
Advance.

     The Applicable  Margin for each Prime Rate Advance and each Eurodollar Rate
Advance shall be determined  by reference to the ratio of  Consolidated  Debt to
EBITDA which shall be determined three Business Days after the date on which the
Administrative  Agent receives financial  statements  pursuant to Section 7.3 or
7.4  and  a  certificate  of  the  Chief  Financial   Officer  of  the  Borrower
demonstrating  the ratio of Consolidated Debt to EBITDA. If the Borrower has not
submitted to the  Administrative  Agent the  information  described above as and
when  required  under  Section  7.3 or 7.4,  as the case may be, the  Applicable
Margin shall be as determined by the Administrative  Agent in its discretion for
so long as such information has not been received by the  Administrative  Agent.
The Applicable Margin shall be adjusted,  if applicable,  as of the first day of
the month  following  the date of  determination  described in the two preceding
sentences.  In the event that the  financial  statements  received  pursuant  to
Section 7.4  indicate  that the  Applicable  Margin  determined  on the basis of
financial  statements  theretofore received pursuant to Section 7.3 is different
from the Applicable  Margin that would have been  determined on the basis of the
Section  7.4  financial  statements,  the  Applicable  Margin  shall be adjusted
retroactively for the relevant period.


                                        4

<PAGE>


     "Asset  Disposition"  shall mean the disposition of any or all of the fixed
assets  of the  Borrower  or any of its  Subsidiaries  whether  by sale,  lease,
transfer,  loss,  damage,  destruction,  condemnation  or  otherwise;  provided,
however, that for purposes of Section 2.6(b), the term "Asset Disposition" shall
not include any sale,  lease,  transfer or other disposition of Inventory in the
ordinary course of business or any sale pursuant to Section 6.5(b), (e) or (f).

     "Assignment and Acceptance" means an assignment and acceptance entered into
by a Lender Party and an Eligible  Assignee,  and accepted by the Administrative
Agent and, so long as no Event of Default shall have occurred and be continuing,
by the Borrower,  in accordance with Section 11.7 and in substantially  the form
of Exhibit A hereto.

     "Available  Amount" of any Letter of Credit means, at any time, the maximum
amount  available to be drawn under such Letter of Credit at such time (assuming
compliance at such time with all conditions to drawing).

     "Bank Hedge  Agreement"  means any interest rate Hedge Agreement  permitted
under this  Agreement  that is entered  into by and between the Borrower and any
Lender.

     "Borrower"  has the  meaning  specified  in the  recital of parties to this
Agreement.

     "Borrower's  Account"  means the account of the Borrower  maintained by the
Borrower with Fleet National Bank at its office at One Federal  Street,  Boston,
Massachusetts 02110, Account No. 9417544039.

     "Borrowing" means a Term Borrowing, a Revolving Credit Borrowing or a Swing
Line Borrowing.

     "Business  Day" means a day of the year on which banks are not  required or
authorized by law to close in Boston,  Massachusetts and New York, New York and,
if the applicable Business Day relates to any Eurodollar Rate Advances, on which
dealings are carried on in the London interbank market.

     "Capital Expenditures" means, for any Person for any period, the sum of all
expenditures  made,  directly  or  indirectly,  by  such  Person  or  any of its
Subsidiaries  during such period for Equipment,  fixed assets,  real property or
improvements,  and including computer software and internet development costs or
other costs typically treated as capital  expenditures  pursuant to GAAP, or for
replacements or substitutions  therefor or additions thereto,  that have been or
should be, in accordance with GAAP, reflected as additions to property, plant or
Equipment on a Consolidated balance sheet of such Person; provided, that Capital
Expenditures  shall not  include  capital  expenditures  to the extent that such
expenditures  constitute  a  reinvestment  of Net Cash  Proceeds  from any Asset
Disposition  permitted  under this  Agreement  in similar  fixed  assets,  which
investment  is made  before or within one hundred  eighty days after  receipt of
such Net Cash Proceeds.


                                        5

<PAGE>


     "Capitalized  Leases"  means all  leases  that  have been or should  be, in
accordance with GAAP, recorded as capitalized leases.

     "Cash Equivalents"  means any of the following,  to the extent owned by the
Borrower  or any of its  Subsidiaries,  free and clear of all Liens  other  than
Liens created under the  Collateral  Documents:  (a) readily  marketable  direct
obligations   of  the   Government  of  the  United  States  or  any  agency  or
instrumentality  thereof or obligations  unconditionally  guaranteed by the full
faith and credit of the Government of the United States having a maturity of not
greater  than  one  year  from  the  date  of  issuance  thereof,   (b)  insured
certificates  of deposit of or time  deposits  having a maturity  of not greater
than one year from the date of  issuance  thereof  with , or  overnight  Federal
Funds  transactions  that are issued or sold by, any  commercial  bank that is a
Lender  Party or a member of the  Federal  Reserve  System  that  issues (or the
parent of which issues) commercial paper rated as described in clause (c) and is
organized  under the laws of the  United  States or any  State  thereof  and has
combined  capital and surplus of at least 500  million,  (c)  commercial  paper,
including  asset-backed  commercial paper, having a maturity of not greater than
one year from the date of issuance  thereof,  in an aggregate  amount of no more
than  $2,500,000 per issuer  outstanding at any time,  issued by any corporation
organized  under the laws of any State of the  United  States and rated at least
"Prime-1" (or the then equivalent grade) by Moody's Investors  Service,  Inc. or
"A-1" (or the then  equivalent  grade) by Standard & Poor's  Ratings Group or an
equivalent  rating  of  any  other  nationally  recognized  rating  agency,  (d)
eurodollar  time  deposits  maturing not more than one year after such time with
any  commercial  bank of the stature  referred  to in clause (b) above;  (e) any
repurchase  agreement  entered  into  with any  commercial  bank of the  stature
referred to in clause (b) or a registered  broker/dealer of the stature referred
to in clause (f) below which is (i) secured by a perfected  security interest in
any  obligation of the type  described in any of the clauses (a) through (d) and
(ii) has a market value at the time such  repurchase  agreements is entered into
of not less than 100% of the repurchase  obligation of such  commercial  bank or
broker/dealer  thereunder,   (f)  investments  in  short-term  asset  management
accounts managed by any commercial bank of the stature referred to in clause (b)
or a registered  securities  broker/dealer having regulatory net capital, as per
its most recently  filed FOCUS report , of not less than $100,000  million which
are invested in  indebtedness  of any state or municipality of the United States
and which are rated under one of the two  highest  ratings  from any  nationally
recognized rating agency and/or general investment  contracts and/or investments
of the type  described  in clauses (a)  through  (e) above or (g) insured  money
market  funds  investing  primarily  in  investments  of the types  described in
clauses (a) through (f).

     "CERCLA" means the Comprehensive  Environmental Response,  Compensation and
Liability Act of 1980, 42 U.S.C. ss. 9601 et seq., as amended from time to time.

     "CERCLIS" means the Comprehensive Environmental Response,  Compensation and
Liability  Information  System maintained by the U.S.  Environmental  Protection
Agency.

     "Change of Control" means any of the following: (a) Norton Herrick, Michael
Herrick and/or Howard Herrick, together with their Affiliates, shall at any time
cease to own and control

                                        6

<PAGE>


any of the  following  set forth in clauses (i),  (ii),  (iii) and (iv):  (i) at
least 35% of the  common  stock of the  Borrower  outstanding  at any time on or
prior to June 30,  1999,  (ii) at least 30% of the common  stock of the Borrower
outstanding  at any time from July 1, 1999 through  December 31, 1999,  (iii) at
least 25% of the  common  stock of the  Borrower  outstanding  at any time after
January 1, 2000,  and (iv) an aggregate of the  outstanding  common stock of the
Borrower  that exceeds the  aggregate  amount held by any other Person  together
with such  Person's  Affiliates;  or (b) during  any  period of two  consecutive
years,  individuals who at the beginning of such period constituted the Board of
Directors of the Borrower  shall cease for any reason to  constitute  at least a
majority  thereof  unless the election,  or the  nomination  for election by the
Borrower's shareholders,  of each new director shall be approved by a vote of at
least  two-thirds (2/3) of the directors then still in office who were directors
at the beginning of the period. For purposes of this definition "control",  when
used with  respect  to any  specified  Person,  means  the  power to direct  the
management and policies of such Person, directly or indirectly,  whether through
the  ownership of voting  securities,  by contract,  by family  relationship  or
otherwise;  and the  terms  "controlling"  and  "controlled"  have the  meanings
correlative to the foregoing.

     "CH Subsidiary" means CH Acquisitions Corp.

     "CH Deferred  Purchase  Price Rights" means the right of Columbia  House to
receive deferred purchase price pursuant to Section 2.2(a) of the CH Acquisition
Agreement and pursuant to Section 1(c)(i) of the Transitional Services Agreement
(forming a part of the  Acquisition  Documents  relating  to the CH  Acquisition
Agreement)  collections of accounts  receivable of the Borrower  covered by such
Transitional  Services  Agreement up to (but not exceeding) the amount specified
in such Section 1(c)(i) of such Transitional Services Agreement.

     "Closing Date" means the date on which all of the conditions  precedent set
forth in  Section  3.1 to the  Initial  Extension  of  Credit  shall  have  been
satisfied or waived.

     "Collateral" means all "Collateral" referred to in the Collateral Documents
and all other property that is or is intended to be subject to any Lien in favor
of the Administrative Agent for the benefit of the Secured Parties.

     "Collateral  Documents"  means the  Security  Agreement,  the  Intellectual
Property Security Agreement,  each Collateral Assignment of Lease, the Mortgages
and any other  agreement  that  creates or purports to create a Lien in favor of
the Administrative  Agent for the benefit of the Secured Parties,  including the
Additional Collateral Documents delivered pursuant to Section 5.13.

     "Columbia House" has the meaning specified in the Preliminary Statements.

     "Commitment"  means a Term Commitment,  a Revolving Credit  Commitment or a
Letter of Credit Commitment.

     "Company"  has the  meaning  specified  in the  recital  of parties to this
Agreement.


                                        7

<PAGE>


     "Compliance Certificate" with respect to the Borrower and its Subsidiaries,
a  certificate  to  the  effect  that:  (a)  as of  the  effective  date  of the
certificate, no Default or Event of Default under this Agreement exists or would
exist after giving effect to the action  intended to be taken by any Loan Party,
as  described  in such  certificate,  including,  without  limitation,  that the
covenants  set forth in  Article 8 hereof  would not be  breached  after  giving
effect to such action,  together with a calculation in reasonable detail, and in
form reasonably  satisfactory to the  Administrative  Agent, of such compliance,
and (b) the  representations  and  warranties  contained in Article 4 hereof are
true and with the same effect as though such representations and warranties were
made on the date of such  certificate,  unless  stated to  relate to a  specific
earlier date in which case such specified  representations  and warranties shall
be true and  correct as of such  earlier  date,  and,  except for changes in the
ordinary  course of business not  prohibited by this  Agreement,  none of which,
either singly or in the  aggregate,  have had a Material  Adverse  Effect on the
Borrower  and its  Subsidiaries  taken as a whole,  which  certificate  shall be
executed and delivered by the chief financial officer of the Borrower.

     "Confidential Information" means information that the Borrower furnishes to
the  Administrative  Agent or any Lender  Party other than any such  information
that is or becomes generally available to the public other than as a result of a
breach  by the  Administrative  Agent or any  Lender  Party  of its  obligations
hereunder or that is or becomes  available to the  Administrative  Agent or such
Lender Party from a source  other than the Borrower  that is not, to the best of
the Administrative Agent's or such Lender Party's knowledge, acting in violation
of a  confidentiality  agreement with the Borrower,  provided that  Confidential
Information  shall  include  the  Information  Memorandum  and all  projections,
forecasts,  budgetary data, business plans and other forward-looking information
of the Borrower and its Subsidiaries  unless such  information  becomes publicly
available as described above.

     "Consolidated"  refers to the consolidation of accounts, in accordance with
GAAP,  of any  Person and all of its  Subsidiaries,  and if not  specified,  the
Borrower and all of its Subsidiaries.

     "Consolidated  Debt to EBITDA" has the same meaning as Consolidated Debt to
EBITDA Ratio.

     "Consolidated  Debt to EBITDA Ratio" means,  for any fiscal  quarter of the
Borrower, a ratio of (a) Debt of the Borrower and its Subsidiaries as at the end
of such fiscal quarter to (b) EBITDA for the most recently completed four fiscal
quarters of the Borrower and its Subsidiaries.

     "Conversion",  "Convert"  and  "Converted"  each refer to a  conversion  of
Advances of one Type into  Advances of the other Type pursuant to Section 2.9 or
2.10.

     "Current  Assets" of any Person means all assets of such Person that would,
in accordance with GAAP, be classified as current assets of a company conducting
a  business  the same as or  similar  to that of such  Person,  after  deducting
adequate  reserves in each case in which a reserve is proper in accordance  with
GAAP.


                                        8

<PAGE>


     "Current  Liabilities" of any Person means (a) Debt of such Person,  except
Funded Debt,  that by its terms is payable on demand or matures  within one year
after the date of determination (excluding any Debt renewable or extendible,  at
the  option  of such  Person,  to a date  more  than one year  from such date or
arising under a revolving credit or similar  agreement that obligates the lender
or  lenders  to  extend  credit  during a period of more than one year from such
date),  (b) all  amounts of Funded  Debt of such  Person  required to be paid or
prepaid within one year after such date and (c) all other items (including taxes
accrued  as  estimated)  that in  accordance  with GAAP would be  classified  as
current liabilities of such Person.

     "Debt" of any Person means, without duplication, the following:

     (a) all indebtedness of such Person for borrowed money;

     (b) all  Obligations  of such  Person for the  deferred  purchase  price of
property or services other than accounts payable and accrued  expenses  included
in Current  Liabilities  which payables and expenses were incurred in respect of
property or services purchased in the ordinary course of business;

     (c) all Obligations of such Person evidenced by notes, bonds, debentures or
other similar borrowing or securities instruments;

     (d) all Obligations of such Person created or arising under any conditional
sale or other title  retention  agreement  with respect to property  acquired by
such Person  (even  though the rights and remedies of the seller or lender under
such  agreement in the event of default are limited to  repossession  or sale of
such property);

     (e) all Obligations of such Person as lessee under Capitalized Leases;

     (f)  all  Obligations,  contingent  or  otherwise,  of  such  Person  under
acceptance, letter of credit or similar facilities;

     (g) all Obligations of such Person to purchase,  redeem, retire, defease or
otherwise make any payment in respect of any capital stock of or other ownership
or profit interest in such Person or any other Person or any warrants, rights or
options to acquire such capital stock other than the Obligations of the Borrower
or its  Subsidiaries  pursuant to the  Acquisition  Puts and Future  Acquisition
Puts,  provided that in the event such Acquisition  Puts and Future  Acquisition
Puts are converted into  indebtedness  of the Borrower or its  Subsidiaries  any
such amounts owed in respect thereof shall be deemed to be "Debt";

     (h) all Debt of others  referred  to in clauses  (a)  through  (g) above or
clause (i) below guaranteed directly or indirectly in any manner by such Person,
or in effect  guaranteed  directly  or  indirectly  by such  Person  through  an
agreement (A) to pay or purchase such Debt or to advance or supply funds for the
payment or purchase of such


                                        9

<PAGE>


Debt,  (B) to  purchase,  sell or lease (as  lessee or lessor)  property,  or to
purchase or sell  services,  primarily for the purpose of enabling the debtor to
make payment of such Debt or to assure the holder of such Debt against loss, (C)
to supply funds to or in any other manner  invest in the debtor  (including  any
agreement to pay for property or services  irrespective of whether such property
is received or such services are rendered) primarily for the purpose of enabling
the  debtor to make  payment  of such Debt or to assure  the holder of such Debt
against loss, or (D) otherwise to assure a creditor against loss; and

     (i) all Debt referred to in clauses (a) through (h) above of another Person
secured  by (or for  which  the  holder  of such  Debt  has an  existing  right,
contingent  or  otherwise,  to be secured by) any Lien on  property  (including,
without  limitation,  accounts,  contract  rights  or  inventory)  owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Debt;

provided,  however,  that for purposes of clarification,  customary  indemnities
issued by Borrower or its  Subsidiaries in the ordinary course of business shall
not be deemed to be Debt.

     "Debt  Issuance"  means any  issuance  or sale or other  incurrence  by the
Borrower or any of its  Subsidiaries of any Debt;  provided,  however,  that for
purposes of  determination of Net Cash Proceeds under Section  2.6(b)(iii),  the
term "Debt  Issuance"  shall not include the incurrence of Debt permitted  under
Section 6.2.

     "Default" means any Event of Default or any event that would  constitute an
Event of Default but for the requirement  that notice be given or time elapse or
both.

     "Defaulted  Advance"  means,  with respect to any Lender Party at any time,
the  portion of any  Advance  required  to be made by such  Lender  Party to the
Borrower  pursuant  to Section 2.1 or 2.2 at or prior to such time which has not
been made by such Lender Party or by the Administrative Agent for the account of
such Lender Party  pursuant to Section 2.2(e) as of such time. In the event that
a portion  of a  Defaulted  Advance  shall be deemed  made  pursuant  to Section
2.15(a),  the remaining  portion of such Defaulted Advance shall be considered a
Defaulted Advance originally  required to be made pursuant to Section 2.1 on the
same date as the Defaulted Advance so deemed made in part.

     "Defaulted Amount" means, with respect to any Lender Party at any time, any
amount required to be paid by such Lender Party to the  Administrative  Agent or
any other Lender Party hereunder or under any other Loan Document at or prior to
such  time  which  has not  been so paid  as of such  time,  including,  without
limitation, any amount required to be paid by such Lender Party to (a) the Swing
Line Bank  pursuant  to  Section  2.2(b) to  purchase  a portion of a Swing Line
Advance made by the Swing Line Bank,  (b) the Issuing  Bank  pursuant to Section
2.3(c) to purchase a portion of a Letter of Credit  Advance  made by the Issuing
Bank, (c) the  Administrative  Agent pursuant to Section 2.2(e) to reimburse the
Administrative  Agent for the amount of any Advance  made by the  Administrative
Agent for the account of such Lender Party,  (d) any other Lender Party pursuant
to Section 2.13 to purchase any participation in Advances


                                       10

<PAGE>


owing to such other Lender Party and (e) the Administrative Agent or the Issuing
Bank  pursuant to Section  10.5 to  reimburse  the  Administrative  Agent or the
Issuing Bank for such Lender Party's  ratable share of any amount required to be
paid by the Lender  Parties to the  Administrative  Agent or the Issuing Bank as
provided  therein.  In the event that a portion of a Defaulted  Amount  shall be
deemed paid pursuant to Section 2.15(b), the remaining portion of such Defaulted
Amount shall be  considered a Defaulted  Amount  originally  required to be paid
hereunder  or under any other Loan  Document  on the same date as the  Defaulted
Amount so deemed paid in part.

     "Defaulting  Lender"  means,  at any time,  any Lender Party that,  at such
time, (a) owes a Defaulted  Advance or a Defaulted  Amount or (b) shall take any
action or be the  subject of any action or  proceeding  of a type  described  in
Section 9.6.

     "Disclosed Litigation" has the meaning specified in Section 4.9.

     "Disposal"  means the discharge,  deposit,  injection,  dumping,  spilling,
leaking or placing of any solid  waste or  hazardous  waste,  as those terms are
defined by any  federal,  state,  local or foreign  law,  into or on any land or
water so that such solid waste or hazardous  waste or any  constituents  thereof
may enter the  environment  or be emitted  into the air or  discharged  into any
waters, including ground waters.

     "Domestic  Lending  Office"  means,  with respect to any Lender Party,  the
office of such Lender Party specified as its "Domestic  Lending Office" opposite
its name on Schedule I hereto or in the Assignment  and  Acceptance  pursuant to
which it became a Lender Party, as the case may be, or such other office of such
Lender  Party as such Lender Party may from time to time specify to the Borrower
and the Administrative Agent.

     "Domestic  Subsidiary" means any Subsidiary organized under the laws of the
United States of America or any State thereof.

     "EBITDA"  means,  for any period,  the sum,  determined  on a  Consolidated
basis, of (i) net income (or net loss), (ii) Interest Expense,  (iii) income tax
expense,  (iv) depreciation  expense,  (v) extraordinary and nonrecurring losses
and (vi) amortization  expense,  minus  extraordinary and nonrecurring gains (in
each case  determined  in  accordance  with GAAP)  plus the pro forma  effect on
EBITDA  for  such  period  of  any  Permitted   Acquisition  or  Permitted  Club
Acquisition  made by the  Borrower  (such  pro  forma  effect  to be  reasonably
acceptable to the Administrative Agent),  provided that, as required by the last
sentence of Section  1.3,  EBITDA  shall be adjusted for the effect of reporting
advertising expenses and New Member Acquisition Costs as expensed as incurred.

     "Eligible  Assignee"  means with  respect to any  Facility  (other than the
Letter of Credit Facility),  (a) a Lender; (b) an Affiliate of a Lender; and (c)
subject to the prior  approval  of the  Administrative  Agent and, so long as no
Event of Default  shall have  occurred and be  continuing,  the  Borrower,  such
approval by the Borrower not to be unreasonably withheld or delayed, (i) a


                                       11

<PAGE>


commercial  bank  organized  under the laws of the United  States,  or any State
thereof,  and having total assets in excess of $500,000,000;  (ii) a savings and
loan  association or savings bank organized under the laws of the United States,
or any State thereof, and having total assets in excess of $500,000,000; (iii) a
commercial  bank organized  under the laws of any other country that is a member
of the OECD or has concluded special lending arrangements with the International
Monetary  Fund  associated  with its  General  Arrangements  to Borrow or of the
Cayman Islands, or a political subdivision of any such country, and having total
assets  in  excess of  $500,000,000,  so long as such  bank is acting  through a
branch or agency  located in the United  States;  (iv) the  central  bank of any
country  that is a member of the  OECD;  and (v) a  finance  company,  insurance
company  or  other  financial   institution  or  fund  (whether  a  corporation,
partnership,  trust or other  entity) that is engaged in making,  purchasing  or
otherwise  investing in commercial  loans in the ordinary course of its business
and having  total  assets in excess of  $500,000,000;  and,  with respect to the
Letter of Credit Facility, a Person that is an Eligible Assignee under subclause
(i)  or  (iii)  of  clause  (c)  of  this  definition  and  is  approved  by the
Administrative  Agent and the Borrower,  such approval by the Borrower not to be
unreasonably  withheld  or  delayed;  provided,  however,  that no Loan Party or
Affiliate  of a Loan Party  shall  qualify as an  Eligible  Assignee  under this
definition.

     "Environmental  Action"  means any action,  suit,  demand,  demand  letter,
claim,  notice of non-compliance or violation,  notice of liability or potential
liability,  investigation,   proceeding,  consent  order  or  consent  agreement
relating  in any way to any  Environmental  Law,  any  Environmental  Permit  or
Hazardous Material or arising from alleged injury or threat to public health and
safety  or  the  environment,   including,   without  limitation,   (a)  by  any
governmental or regulatory  authority or third party for  enforcement,  cleanup,
Removal,  Response,  Remedial  or  other  actions  or  damages  and  (b)  by any
governmental or regulatory  authority or third party for damages,  contribution,
indemnification, cost recovery, compensation or injunctive relief.

     "Environmental  Law" means any international or transnational law, federal,
state, local or foreign statute, law, ordinance, rule, regulation,  code, order,
writ, judgment, injunction, decree or judicial or agency interpretation,  policy
or guidance  relating to pollution or protection of the  environment  or natural
resources,  including,  without limitation, those relating to the use, handling,
transportation,  treatment,  storage,  disposal,  threatened release, release or
discharge of Hazardous Materials.

     "Environmental Permit" means any permit,  approval,  identification number,
license or other authorization required under any Environmental Law.

     "Equipment"  has the  meaning  specified  in Section  1(a) of the  Security
Agreement.

     "Equity  Issuance" means any issuance or sale by the Borrower or any of its
Subsidiaries of its capital stock or other equity  securities or any obligations
convertible  into or exchangeable  for, or giving any Person a right,  option or
warrant to acquire such stock,  securities or such  convertible or  exchangeable
obligations;  provided,  however, that for purposes of Section 2.6(b)(iii),  the
term "Equity Issuance" shall not include any issuance or sale of (a) Equity


                                       12

<PAGE>


Interests of the Borrower to any Person as consideration paid in connection with
a Permitted  Acquisition;  (b) Equity  Interests  of the  Borrower  issued on or
before the Closing Date in connection with any Acquisition  which are consistent
with the  provisions of Section 6.18 and disclosed on Schedule 6.18 hereto;  (c)
common stock of the Borrower issued to any director of the Borrower  required by
applicable  law in  connection  with such Person  acting in such  capacity;  (d)
common stock of the Borrower to management and employees thereof,  respectively,
pursuant to any stock option plan permitted hereunder or the exercise of options
issued  pursuant  thereto;  (e) common stock of Borrower issued upon exercise of
any  outstanding  warrants,   rights  or  options  or  upon  conversion  of  any
outstanding  convertible  securities,  in each case only if  outstanding  on the
Closing Date or issued to the holder of the Senior  Subordinated Debt thereafter
in  accordance  with the  Letter  Agreement;  (f)  Equity  Interests  issued  in
compliance  with the  provisions  of Section  6.18(e),  except to the extent net
proceeds  thereof exceed the net proceeds  actually applied to replace or repay,
in whole or in part,  the Senior  Subordinated  Debt in accordance  with Section
6.18 (e);  (g) Equity  Interests  issued by the  Borrower  to the extent the net
proceeds  therefrom are applied to satisfy the Borrower's  obligations under the
Acquisition  Puts or the Future  Acquisition Puts (in each case if then required
to be paid) so long as (i) such  application  is made within one hundred  eighty
(180)  days  after the  issuance  of such  Equity  Interests,  (ii) any such net
proceeds  not so  applied  within  such  period  shall be  applied  to repay the
Advances in  accordance  with  Section  2.6,  and (iii) the  Borrower  otherwise
complies with Section 6.7(c) and Section  6.7(e) in satisfying  the  Acquisition
Puts and the Future Acquisition Puts; and (h) Equity Interests issued as full or
partial  consideration  for any Permitted Club  Acquisition or to the extent the
net  proceeds  therefrom  are  used  as full or  partial  consideration  for any
Permitted Club  Acquisition to repay any  indebtedness of the business  acquired
simultaneously with the closing of such acquisition or pay any fees and expenses
incurred by the Borrower or its Subsidiaries in connection  therewith so long as
(i) the  application of any net proceeds is made within one hundred eighty (180)
days after the issuance of such Equity Interests, and (ii) any such net proceeds
not so applied  within  such  period  shall be applied to repay the  Advances in
accordance with Section 2.6.

     "Equity  Interests"  means, in any Person,  any and all shares,  interests,
participations,  rights or other equivalents (however designated) of any capital
stock or other  ownership  of any  profit  interest,  and any and all  warrants,
rights,  options,  obligations  or other  securities  of or in such Person,  and
rights  to  acquire  any  of  the  foregoing,   including,  without  limitation,
partnership  interests  and joint venture  (whether  general or limited) and any
other interest or participation  that confers on a Person the right to receive a
share of the  profits  and  losses  of,  or  distributions  of assets  of,  such
partnership  or joint  venture,  but  excluding  debt  for  borrowed  money  and
excluding any debt security that is convertible into, or exchangeable for any of
the foregoing equity interests.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended from time to time, and the  regulations  promulgated  and rulings issued
thereunder.


                                       13

<PAGE>


     "ERISA  Affiliate"  means any Person that for purposes of Title IV of ERISA
is a member of the controlled  group of any Loan Party,  or under common control
with any Loan Party,  within the meaning of Section 414 of the Internal  Revenue
Code.

     "ERISA Event" means (a) (i) the  occurrence of a reportable  event,  within
the meaning of Section 4043 of ERISA, with respect to any Plan unless the 30-day
notice  requirement  with respect to such event has been waived by the PBGC,  or
(ii) the  requirements  of subsection  (1) of Section  4043(b) of ERISA (without
regard to subsection (2) of such Section) are met with respect to a contributing
sponsor,  as defined in Section  4001(a)(13)  of ERISA,  of a Plan, and an event
described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA
is  reasonably  expected to occur with respect to such Plan within the following
30 days;  (b) the  application  for a minimum  funding  waiver with respect to a
Plan; (c) the provision by the  administrator  of any Plan of a notice of intent
to  terminate  such Plan  under  ERISA  Section  4041(c),  pursuant  to  Section
4041(a)(2) of ERISA  (including any such notice with respect to a plan amendment
referred to in Section  4041(e) of ERISA);  (d) the cessation of operations at a
facility of any Loan Party or any ERISA Affiliate in the circumstances described
in Section  4062(e) of ERISA;  (e) the withdrawal by any Loan Party or any ERISA
Affiliate  from a Multiple  Employer  Plan during a plan year for which it was a
substantial  employer,  as  defined  in  Section  4001(a)(2)  of ERISA;  (f) the
conditions  for  imposition of a lien under  Section  302(f) of ERISA shall have
been met with  respect to any Plan;  (g) the  adoption of an amendment to a Plan
requiring  the  provision  of security  to such Plan  pursuant to Section 307 of
ERISA;  or (h) the  institution  by the PBGC of  proceedings to terminate a Plan
pursuant to Section 4042 of ERISA,  or the  occurrence of any event or condition
described in Section 4042 of ERISA that constitutes  grounds for the termination
of, or the appointment of a trustee to administer, such Plan.

     "Escrow Agreement" has the meaning specified in Section 6.11 hereof.

     "Eurocurrency Liabilities" has the meaning specified in Regulation D of the
Board of  Governors  of the Federal  Reserve  System,  as in effect from time to
time.

     "Eurodollar  Lending Office" means,  with respect to any Lender Party,  the
office  of such  Lender  Party  specified  as its  "Eurodollar  Lending  Office"
opposite  its name on  Schedule  I hereto or in the  Assignment  and  Acceptance
pursuant to which it became a Lender Party (or, if no such office is  specified,
its Domestic Lending Office),  or such other office of such Lender Party as such
Lender   Party  may  from  time  to  time   specify  to  the  Borrower  and  the
Administrative Agent.

     "Eurodollar  Rate" means,  for any Interest  Period for all Eurodollar Rate
Advances  comprising  part of the same  Borrowing,  an  interest  rate per annum
(rounded upward, if necessary, to the nearest 1/32 of one percent) as determined
on the basis of the offered rates for deposits in U.S. dollars,  for a period of
time  comparable to such Interest Period which appears on the Telerate Page 3750
as of 11:00 a.m.  (London  time) two Business  Days before the first day of such
Interest Period;  provided,  however,  that if the rate described above does not
appear on the Telerate System on any applicable interest determination date, the
Eurodollar Rate shall be the

                                       14

<PAGE>


rate (rounded  upward as described  above,  if  necessary)  for deposits in U.S.
dollars for a period  substantially  equal to the interest period on the Reuters
Page "LIBO" (or such other page as may replace the LIBO page on that service for
the  purpose of  displaying  such  rates),  as of 11:00 a.m.  (London  time) two
Business Days before the first day of such Interest Period.

     If both the Telerate and Reuters system are unavailable,  then the rate for
that date will be  determined  on the basis of the offered rates for deposits in
U.S.  dollars for a period of time  comparable to such Interest Period which are
offered by four  major  banks in the London  interbank  market at  approximately
11:00 a.m. (London time) two Business Days before the first day of such Interest
Period as selected by the  Administrative  Agent. The principal London office of
each of the four major  London banks will be requested to provide a quotation of
its U.S.  dollar  deposit  offered  rate.  If at least two such  quotations  are
provided,  the rate for that date will be the arithmetic mean of the quotations.
If fewer than two quotations  are provided as requested,  the rate for that date
will be determined on the basis of the rates quoted for loans in U.S. dollars to
leading  European banks for a period of time  comparable to such Interest Period
offered by major banks in New York City at  approximately  11:00 a.m.  (New York
time) two Business  Days before the first day of such  Interest  Period.  In the
event that the  Administrative  Agent is unable to obtain any such  quotation as
provided  above,  it will be deemed that the  Eurodollar  Rate for such Interest
Rate cannot be determined.

     In the event that the Board of  Governors  of the  Federal  Reserve  System
shall impose a Eurodollar  Rate Reserve  Percentage with respect to Eurocurrency
Liabilities,  the Eurodollar  Rate for an Interest  Period shall be equal to the
amount  determined  above for such Interest Period divided by a percentage equal
to 100% minus the Eurodollar Rate Reserve Percentage for such Interest Period.

     "Eurodollar  Rate Advance" means an Advance that bears interest as provided
in Section 2.7(a)(ii).

     "Eurodollar Rate Reserve Percentage" means, for any Interest Period for all
Eurodollar  Rate Advances  comprising  part of the same  Borrowing,  the reserve
percentage  applicable  two Business  Days before the first day of such Interest
Period under  regulations  issued from time to time by the Board of Governors of
the  Federal  Reserve  System (or any  successor)  for  determining  the maximum
reserve requirement (including, without limitation, any emergency,  supplemental
or other marginal reserve  requirement) for a member bank of the Federal Reserve
System in New York City with respect to liabilities  or assets  consisting of or
including  Eurocurrency  Liabilities  (or with respect to any other  category of
liabilities  that  includes  deposits by reference to which the interest rate on
Eurodollar  Rate  Advances is  determined)  having a term equal to such Interest
Period.

     "Events of Default" has the meaning specified in Article 9.

     "Excess  Cash  Flow"  means  for any  period  the sum of (a)  EBITDA of the
Borrower  and its  Subsidiaries  for such  period  (provided  that  EBITDA,  for
purposes of this definition of Excess


                                       15

<PAGE>


Cash Flow,  shall be computed  without  giving effect to the final clause of the
definition  of  "EBITDA"  relating to the  addition  of the pro forma  effect of
Permitted  Acquisitions)  plus (b) the aggregate  amount of all non-cash charges
deducted  from  Consolidated  net income for such period,  but not added back in
arriving at EBITDA plus (c) if there was a net increase in Consolidated  Current
Liabilities of the Borrower and its Subsidiaries  during such period, the amount
of such net  increase  other than  arising  out of Debt  permitted  pursuant  to
Section 6.2 plus (d) if there was a net decrease in Consolidated  Current Assets
(excluding  cash and Cash  Equivalents)  of the  Borrower  and its  Subsidiaries
during such period the amount of such net decrease less (e) the aggregate amount
of mandatory and optional  prepayments  (other than optional  prepayments of the
Swing Line Advances, Letter of Credit Advances or Revolving Credit Advances made
pursuant to clause (i) of the second  sentence of Section  2.6(a)) or repayments
of principal made by the Borrower and its Subsidiaries on any Funded Debt of the
Borrower and its Subsidiaries  during such period less (f) Capital  Expenditures
of the Borrower and its  Subsidiaries  during such period less (g) the aggregate
amount of all federal,  state,  local and foreign taxes paid by the Borrower and
its  Subsidiaries  during such period less (h) the aggregate  amount of interest
paid on any Debt of the  Borrower and its  Subsidiaries  during such period less
(i) the aggregate  amount of all non-cash  credits  included in arriving at such
EBITDA less (j) if there was a net decrease in Consolidated  Current Liabilities
of the Borrower and its Subsidiaries  during such period, the amount of such net
decrease  less (k) if there was a net increase in  Consolidated  Current  Assets
(excluding  cash and Cash  Equivalents)  of the  Borrower  and its  Subsidiaries
during such period the amount of such increase  less (l)  dividends  paid by the
Borrower  to the  holders of its common  stock  during such period to the extent
that the Borrower is permitted to pay such dividends under this Agreement.

     "Existing Debt" has the meaning specified in Section 4.19(a).

     "Extraordinary  Receipt"  means any cash  received by or paid to or for the
account of any Person not in the ordinary course of business, including, without
limitation,  tax refunds, pension plan reversions,  proceeds of insurance (other
than proceeds of business  interruption and associated  similar insurance to the
extent such proceeds  constitute  compensation for lost earnings),  condemnation
awards (and payments in lieu thereof) and indemnity payments; provided, however,
that an  Extraordinary  Receipt  shall not include cash  receipts  received from
proceeds of  insurance,  condemnation  awards (and  payments in lieu thereof) or
indemnity  payments to the extent that such proceeds,  awards or payments (a) in
respect of loss or damage to Equipment, fixed assets, real property or Inventory
are applied (or in respect of which  expenditures  were previously  incurred) to
replace or repair the  Equipment,  fixed  assets,  real property or Inventory in
respect of which such  proceeds,  awards or payments were received in accordance
with the terms of the Loan  Documents,  so long as (i) such  application is made
within  one  hundred  eighty  (180) days  after  such  Person's  receipt of such
proceeds,  awards or payments  and (ii) such  proceeds,  awards or payments  are
received by such Person within  fifteen (15) months after the occurrence of such
damage or loss;  or (b) are received by any Person in respect of any third party
claim  against such Person and applied to pay (or to  reimburse  such Person for
its prior  payment of) such claim and the costs and expenses of such Person with
respect thereto.


                                       16

<PAGE>


     "Facility"  means the Term Facility,  the Revolving  Credit  Facility,  the
Letter of Credit Facility or the Swing Line Facility.

     "Federal Funds Rate" means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight  Federal  funds  transactions  with members of the Federal  Reserve
System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next  preceding  Business Day) by the Federal
Reserve Bank of New York,  or, if such rate is not so published for any day that
is a  Business  Day,  the  average  of the  quotations  for  such  day for  such
transactions  received  by the  Administrative  Agent from three  Federal  funds
brokers of recognized standing selected by it.

     "Fiscal  Year" means a fiscal  year of the  Borrower  and its  Consolidated
Subsidiaries ending on December 31 in any calendar year.

     "Fixed  Charges" means the sum, for the Borrower and its  Subsidiaries on a
Consolidated  basis for any  period,  of (i) cash  Interest  Expense,  plus (ii)
scheduled  amortization  of Debt payable  during such period,  plus (iii) income
taxes and other  taxes  reasonably  estimated  by the  Borrower to be payable in
respect of such period, plus (iv) Capital Expenditures during such period to the
extent permitted by this Agreement.

     "Fixed  Charge  Coverage  Ratio"  means,  for the four  consecutive  fiscal
quarters of the Borrowers ending on the date of determination,  the ratio of (a)
EBITDA of the Borrower and its  Subsidiaries  for such four fiscal  quarters (or
other  period  specified  in Section  8.5),  to (b) Fixed  Charges for such four
fiscal quarters (or other period specified in Section 8.5).

     "Fleet"  means Fleet  National  Bank in its capacity as a Lender or Issuing
Bank or Swing Line Bank.

     "Foreign  Subsidiary" means any Subsidiary  organized under the laws of any
jurisdiction other than the United States of America or any State thereof.

     "Funded Debt" means, with respect to the Borrower,  the Advances,  and with
respect to the  Borrower and the other Loan  Parties and any other  Person,  all
other Debt of such Person that by its terms matures more than one year after the
date of determination or matures within one year from such date but is renewable
or extendible,  at the option of such Person, to a date more than one year after
such date or arises under a revolving credit or similar agreement that obligates
the  lender or lenders  to extend  credit  during a period of more than one year
after such date, including the current portion of all such Debt.

     "Future Acquisition Puts" has the meaning specified in Section 6.7.

     "GAAP" means  generally  accepted  accounting  principles  set forth in the
opinions and  pronouncements of the Accounting  Principles Board of the American
Institute of Certified Public

                                       17

<PAGE>


Accountants  and  statements  and  pronouncements  of the  Financial  Accounting
Standards  Board and  statements,  pronouncements,  rules and regulations of the
Securities and Exchange  Commission that are applicable to the  circumstances as
of the date of determination.

     "Guaranteed  Obligations"  has  the  meaning  specified  in the  Subsidiary
Guaranties.

     "Guarantors"  means (a) each  Domestic  Subsidiary  of the Borrower and (b)
each  Person  which shall have  executed  and  delivered  or become a party to a
Subsidiary Guaranty hereunder.

     "Hazardous   Materials"   means  (a)   petroleum  or  petroleum   products,
by-products or breakdown products,  radioactive  materials,  asbestos-containing
materials,  polychlorinated biphenyls and radon gas and (b) any other chemicals,
materials  or  substances  designated,  classified  or regulated as hazardous or
toxic or as a pollutant or contaminant under any Environmental Law.

     "Hedge  Agreements"  means  interest rate swap,  cap or collar  agreements,
interest rate future or option  contracts,  currency swap  agreements,  currency
future or option contracts and other similar agreements.

     "Hedge  Bank"  means any Lender in its  capacity as a party to a Bank Hedge
Agreement.

     "Indemnified Party" has the meaning specified in Section 11.4(b).

     "Information  Memorandum" means the information memorandum,  dated December
1998 delivered by the Administrative Agent to the Lenders.

     "Initial  Extension  of Credit"  means the  earlier to occur of the initial
Borrowing and the initial issuance of a Letter of Credit.

     "Initial Issuing Bank" has the meaning  specified in the recital of parties
to this Agreement.

     "Initial  Lenders"  has the meaning  specified in the recital of parties to
this Agreement.

     "Insufficiency" means, with respect to any Plan, the amount, if any, of its
unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA.

     "Intellectual  Property  Security  Agreement" has the meaning  specified in
Section 3.1(a).

     "Intercreditor  Agreement" means the Intercreditor Agreement dated the date
of this  Agreement  among,  inter  alia,  the  holder or  holders  of the Senior
Subordinated  Debt,  and the  Administrative  Agent,  and  comprising one of the
Senior Subordinated Debt Documents.

     "Interest  Expense"  means,  with  respect to any  Person  for any  period,
interest  expense  on all Debt of such  Person for such  period net of  interest
income for such period, whether paid or


                                       18

<PAGE>


accrued, determined on a Consolidated basis for such Person and its Subsidiaries
and in accordance with GAAP, and including,  without limitation, (a) in the case
of the Borrower,  interest  expense in respect of Debt  resulting from Advances,
(b) the interest  component of all obligations  under  Capitalized  Leases,  (c)
commissions,  discounts and other fees and charges  payable in  connection  with
letters of credit (including,  without limitation,  Letters of Credit),  and (d)
all fees paid by the Borrower pursuant to Section 2.8(a).

     "Interest  Period" means, for each Eurodollar Rate Advance  comprising part
of the same Borrowing, the period commencing on the date of such Eurodollar Rate
Advance  or the date of the  Conversion  of any  Prime  Rate  Advance  into such
Eurodollar  Rate Advance,  and ending on the last day of the period  selected by
the Borrower pursuant to the provisions below and,  thereafter,  each subsequent
period commencing on the last day of the immediately  preceding  Interest Period
and ending on the last day of the period  selected by the  Borrower  pursuant to
the provisions  below.  The duration of each such Interest  Period shall be one,
two,  three or six months,  as the  Borrower  may,  upon notice  received by the
Administrative  Agent not later  than  11:00  A.M.  (New York time) on the third
Business Day prior to the first day of such Interest Period,  select;  provided,
however, that:

     (a) The  Borrower  may not select any  Interest  Period with respect to any
Eurodollar Rate Advance under a Facility that ends after any principal repayment
installment  date  for  such  Facility  unless,  after  giving  effect  to  such
selection,  the  aggregate  principal  amount  of  Prime  Rate  Advances  and of
Eurodollar Rate Advances  having  Interest  Periods that end on or prior to such
principal  repayment  installment date for such Facility shall be at least equal
to the  aggregate  principal  amount of  Advances  under such  Facility  due and
payable on or prior to such date;

     (b) Whenever the last day of any Interest Period would otherwise occur on a
day other than a Business  Day,  the last day of such  Interest  Period shall be
extended to occur on the next succeeding Business Day, provided,  however, that,
if such extension  would cause the last day of such Interest  Period to occur in
the next following  calendar  month,  the last day of such Interest Period shall
occur on the next preceding Business Day;

     (c)  Whenever the first day of any  Interest  Period  occurs on a day of an
initial  calendar month for which there is no numerically  corresponding  day in
the calendar  month that succeeds  such initial  calendar  month,  such Interest
Period shall end on the last Business Day of such succeeding calendar month; and

     (d) Until the earlier of (i) 120 days after the Closing  Date,  or (ii) the
date  on  which  the  Administrative   Agent  notifies  the  Borrower  that  the
syndication of the Facilities has been completed,  only Interest  Periods with a
duration of seven days,  if available to all the Lenders,  shall be available to
the Borrower for Eurodollar Rate Advances,  or if such Interest  Periods are not
available  to all the  Lenders,  Interest  Periods  of such  duration  as may be
selected by the Administrative Agent and are acceptable to the other Lenders.


                                       19

<PAGE>


     "Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
from  time  to  time,  and  the  regulations   promulgated  and  rulings  issued
thereunder.

     "Inventory"  of any  person  means  all of  such  Person's  now  owned  and
hereafter acquired  inventory,  goods,  merchandise and other personal property,
wherever located, to be furnished under any contract of service or held for sale
or lease, all returned goods, raw materials, other materials and supplies of any
kind,  nature or  description  which are or might be consumed  in such  Person's
business or used in connection with the packing, shipping, advertising,  selling
or finishing of such goods,  merchandise and such other personal  property,  and
all documents of title or other documents representing them.

     "Investment"  in any Person means any loan or advance to such  Person,  any
purchase or other  acquisition of any capital stock or other ownership or profit
interest,  warrants,  rights,  options,  obligations or other securities of such
Person, any capital  contribution to such Person or any other investment in such
Person,  including,  without limitation,  any arrangement  pursuant to which the
investor  incurs  Debt of the  types  referred  to in  clause  (h) or (i) of the
definition of "Debt" in respect of such Person.

     "Issuing Bank" means the Initial Issuing Bank and each Eligible Assignee to
which  Letter of Credit  Commitment  hereunder  has been  assigned  pursuant  to
Section 11.7.

     "L/C Cash  Collateral  Account"  has the meaning  specified in the Security
Agreement.

     "L/C Related Documents" has the meaning specified in Section 2.4(f)(ii)(A).

     "Lender Party" means any Lender, the Issuing Bank or the Swing Line Bank.

     "Lenders"  means the Initial  Lenders  and each Person that shall  become a
Lender hereunder pursuant to Section 11.7.

     "Letter Agreement" has the meaning specified in Section 6.11 hereof.

     "Letter  of  Credit"  means  any  Letter  of Credit  issued  hereunder  (as
specified in Section 2.3(a)).

     "Letter of Credit Advance" means an advance made by the Issuing Bank or any
Revolving Credit Lender pursuant to Section 2.3(c).

     "Letter of Credit Agreement" has the meaning specified in Section 2.3(a).

     "Letter of Credit  Commitment" means, with respect to the Issuing Bank, the
amount set forth opposite the Issuing Bank's name on Schedule I hereto under the
caption  "Letter of Credit  Commitment" or, if the Issuing Bank has entered into
one or more Assignments and  Acceptances,  set forth for the Issuing Bank in the
Register maintained by the Administrative Agent pursuant


                                       20

<PAGE>


to Section 11.7(d) as the Issuing Bank's "Letter of Credit Commitment",  as such
amount may be reduced at or prior to such time pursuant to Section 2.5.

     "Letter of Credit  Facility"  means,  at any time,  an amount  equal to the
amount of the Issuing  Bank's Letter of Credit  Commitment at such time, as such
amount may be reduced pursuant to Section 2.5.

     "Lien" means any lien,  security interest or other charge or encumbrance of
any kind,  or any other type of  preferential  arrangement,  including,  without
limitation,  the lien or retained security title of a conditional vendor and any
easement, right of way or other encumbrance on title to real property.

     "Loan  Documents"  means  (a)  this  Agreement,  (b) the  Notes,  (c)  each
Subsidiary  Guaranty,  (d) the Collateral  Documents,  (e) each Letter of Credit
Agreement,   (f)  each  Additional  Collateral  Document,   and  (g)  all  other
agreements,  instruments and documents executed in connection therewith, in each
case as the same may at any time be amended, supplemented, restated or otherwise
modified and in effect.

     "Loan Parties" means the Borrower,  each  Guarantor,  and each other Person
who shall,  at any time,  have  executed  and  delivered a Loan  Document to the
Administrative Agent.

     "Management  Fees"  for  any  period,  all  fees,   emoluments  or  similar
compensation paid to or incurred with respect to any Person (other than any such
fees,  emoluments or similar compensation paid to or incurred and payable to any
Loan Party) in respect of services rendered in connection with the management or
supervision  of the  management  of any Loan  Party,  other  than (a)  salaries,
bonuses  and other  compensation  paid to any  full-time  executive  employee in
respect of such full-time  employment,  (b) fees and other  compensation paid in
the  ordinary  course of  business by any Loan Party to any Person who is not an
Affiliate   thereof  and  (c)  reimbursement  to  Affiliates  of  expenses  (not
management  fees) for services  provided to Borrower and/or its  Subsidiaries in
the ordinary course of business including,  without limitation,  for bookkeeping
services,  tax and legal  advice,  use of an aircraft and use of  accounting  or
other  personnel,  on terms which are no less  favorable to the Borrower and its
Subsidiaries than they would obtain in a comparable arms-length transaction with
a Person not an Affiliate so long as the  aggregate  amount  payable by all Loan
Parties  to  all  Affiliates  (excluding  payments  by the  Subsidiaries  of the
Borrower  directly to the  Borrower  or to other  Wholly-Owned  Subsidiaries  or
payments  by  Borrower  to its  Wholly-Owned  Subsidiaries)  does not exceed Two
Hundred  Thousand  ($200,000.00)  Dollars  in  any  single  fiscal  year  of the
Borrower.

     "Margin Stock" has the meaning specified in Regulation U.

     "Material  Adverse  Effect"  means  (a) a  material  adverse  effect on the
business,   condition   (financial  or   otherwise),   results  of   operations,
performance,  reasonably  foreseeable  business  prospects or  properties of the
Borrower and its Subsidiaries  (taken as a whole), (b) a material adverse affect
on the ability of any Loan Party to perform its obligations under the Loan


                                       21

<PAGE>


Documents  to which it is a party,  (c) an  adverse  affect  on the  rights  and
remedies of the  Administrative  Agent and the Lender  Parties  under any of the
Loan Documents or (d) a material adverse affect on any aspect of any Acquisition
or the Facilities.

     "Material Contract" means, with respect to any Person, each contract listed
on Schedule  4.23,  each contract which is a replacement or a substitute for any
contract listed on such Schedule and each other contract to which such Person is
a party which is  material to the  business,  financial  condition,  operations,
performance,  properties or reasonably  foreseeable  business  prospects of such
Person.

     "Metacom" has the meaning specified in the Preliminary Statements.

     "Mortgage"  means  each  mortgage,  deed of trust,  leasehold  mortgage  or
leasehold deed of trust or other similar document  executed and delivered by the
appropriate Loan Party, in form and substance  acceptable to the  Administrative
Agent and the  Lenders  in order  (a) to  provide  that  such Loan  Party is the
mortgagor or grantor, (b) to comply with and/or provide for specific laws of the
jurisdictions in which the real property or leasehold  property to be encumbered
is located,  and (c) to assure that the Administrative  Agent for the benefit of
the Secured Parties has a perfected Lien on such Property.

     "Mortgage  Policies"  has the  meaning  assigned  to that  term in  Section
3.1(a)(iv)(B).

     "Mortgaged  Property"  means  each  real  property  or  leasehold  property
specified on Schedule 4.21 or 4.22, respectively,  that is subject to a Mortgage
and shall include After-Acquired Mortgaged Property.

     "Multiemployer  Plan"  means a  multiemployer  plan,  as defined in Section
4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is making or
accruing an obligation to make contributions, or has within any of the preceding
five plan years made or accrued an obligation to make contributions.

     "Multiple  Employer  Plan"  means a single  employer  plan,  as  defined in
Section  4001(a)(15) of ERISA,  that (a) is maintained for employees of any Loan
Party or any ERISA Affiliate and at least one Person other than the Loan Parties
and the ERISA  Affiliates or (b) was so  maintained  and in respect of which any
Loan Party or any ERISA  Affiliate  could have  liability  under Section 4064 or
4069 of ERISA in the event such plan has been or were to be terminated.

     "Net Cash Proceeds"  means,  with respect to any sale,  lease,  transfer or
other  disposition  of any asset or any Debt Issuance or Equity  Issuance by any
Person, or any  Extraordinary  Receipt received by or paid to or for the account
of any Person,  the aggregate amount of cash received from time to time (whether
as  initial   consideration  or  through  payment  or  disposition  of  deferred
consideration)  by  or  on  behalf  of  such  Person  in  connection  with  such
transaction after deducting therefrom only (without  duplication) (a) reasonable
and customary brokerage commissions,


                                       22

<PAGE>


underwriting fees and discounts,  legal fees, finder's fees and other normal and
customary out-of-pocket costs incurred in connection with such transaction,  (b)
the  amount  of  taxes  payable  in  connection  with  or as a  result  of  such
transaction and (c) with respect to any asset, the amount of any Debt secured by
a Lien on such asset that, by the terms of such  transaction,  is required to be
repaid  upon  such  disposition,  in each  case to the  extent,  but only to the
extent,  that the amounts so deducted  are, at the time of or shortly  after the
receipt of such cash, actually paid to a Person that is not an Affiliate of such
Person or any Loan Party or any  Affiliate  of any Loan  Party and are  properly
attributable to such transaction or to the asset that is the subject thereof.

     "New Member  Acquisition Costs" means amounts expended by the Borrower or a
Subsidiary  of the  Borrower for any type of  advertising  in any medium for the
purpose of acquiring customers.

     "Note" means a Term Note, a Revolving Credit Note or a Swing Line Note.

     "Note Assignment Agreement" has the meaning specified in Section 3.

     "Notice of Borrowing" has the meaning specified in Section 2.2(a).

     "Notice of Issuance" has the meaning specified in Section 2.3(a).

     "Notice of Renewal" has the meaning specified in Section 2.1(f).

     "Notice of Swing  Line  Borrowing"  has the  meaning  specified  in Section
2.2(b).

     "Notice of Termination" has the meaning specified in Section 2.1(f).

     "NPL" means the National Priorities List under CERCLA.

     "Obligation" means, with respect to any Person, any payment, performance or
other obligation of such Person of any kind, including,  without limitation, any
liability of such Person on any claim,  whether or not the right of any creditor
to  payment  in  respect  of such  claim is  reduced  to  judgment,  liquidated,
unliquidated,   fixed,  contingent,   matured,  disputed,   undisputed,   legal,
equitable,  secured or unsecured,  and whether or not such claim is  discharged,
stayed or  otherwise  affected by any  proceeding  referred  to in Section  9.7.
Without  limiting the generality of the foregoing,  the  Obligations of the Loan
Parties under the Loan  Documents  include (a) the  obligation to pay principal,
interest, Letter of Credit commissions, charges, expenses, fees, attorneys' fees
and disbursements, indemnities and other amounts payable by any Loan Party under
any Loan Document,  (b) the obligation of any Loan Party to reimburse any amount
in  respect  of any of the  foregoing  that any  Lender  Party  may,  after  the
occurrence and during the  continuance  of an Event of Default,  elect to pay or
advance on behalf of such Loan Party, and (c) any other obligations  arising out
of or under, based upon or relating to the Loan Documents.

     "OECD" means the Organization for Economic Cooperation and Development.


                                       23

<PAGE>


     "Open Year" has the meaning specified in Section 4.16.

     "Other Taxes" has the meaning specified in Section 2.12(b).

     "Owned  Herrick  Shares" means any or all shares of capital stock issued by
the  Borrower  having  voting  rights,  that are  owned or  controlled  (whether
beneficially  and/or of  record)  by Norton  Herrick,  Michael  Herrick,  Howard
Herrick and their Affiliates in the aggregate.

     "PBGC" means the Pension Benefit Guaranty Corporation (or any successor).

     "Permitted  Acquisitions"  means any  acquisition  by any of the Borrower's
Subsidiaries of all or  substantially  all of the assets or the capital stock of
any Person (or  segment of such  Person's  business)  which  either (a) has been
consented to in writing by the Administrative Agent and the Required Lenders, or
(b)  complies  with each of the  following:  (i) such Person (or segment of such
Person's  business)  is engaged  in  substantially  the same or similar  line of
business  as the  Borrower  or any of its  Subsidiaries  as of the  date of this
Agreement,  (ii) the  aggregate  cash  consideration  payable  in respect of any
individual  acquisition  shall not exceed  $3,000,000,  (iii) the aggregate cash
consideration payable in respect of acquisitions contemplated by this definition
shall not exceed for all such  acquisitions  $4,000,000 in any twelve (12) month
period ending on the last day of the calendar  month  immediately  preceding the
closing  of the  proposed  acquisition,  (iv) such  Person  (or  segment of such
Person's  business) on a consolidated basis with its Subsidiaries being acquired
in the proposed acquisition had positive EBITDA for the twelve (12) month period
ending on the last day of the calendar month  immediately  preceding the closing
of  the  proposed   acquisition,   (v)  after  giving  effect  to  the  proposed
acquisition,  the Revolving  Credit  Commitments of all Lenders minus the sum of
Revolving  Advances plus Letter of Credit Advances plus Swing Line Advances plus
the aggregate  Available Amount of all Letters of Credit then outstanding  shall
equal at least $1,500,000, (vi) the Borrower shall give the Administrative Agent
and the Lenders not less than ten (10) Business Days prior written notice of its
intention to make a Permitted  Acquisition,  such notice to include the proposed
amounts, date and form of the proposed transaction,  a reasonable description of
the stock or assets to be acquired and the location of all assets, a description
and calculation in reasonable  detail of the pro forma  adjustments to EBITDA of
the target of such  acquisition,  and a calculation in reasonable  detail of the
pro  forma  effect of such  acquisition  on  matters  covered  by the  financial
covenants  contained herein,  (vii)  concurrently with the making of a Permitted
Acquisition,  the Borrower  shall,  as  additional  collateral  security for the
Obligations,  grant or cause to be granted to the  Administrative  Agent for the
ratable benefit of the Lenders,  prior liens on and security  interests (subject
to  Permitted  Liens  existing  with  respect to such  assets at the time of the
Permitted  Acquisition)  in any of the  acquired  assets  by the  execution  and
delivery  to the  Administrative  Agent  of  such  agreements,  instruments  and
documents  as shall be  reasonably  satisfactory  in form and  substance  to the
Administrative  Agent,  and (viii) the Borrower  shall not permit to be made any
acquisition  at any time  during  which an Event of Default  shall  exist and be
continuing  or would  exist  after  giving  effect to such  acquisition  and the
Borrower  shall  have  delivered  to  the  Administrative   Agent  a  Compliance
Certificate effective as of the date of consummation of such acquisition.


                                       24

<PAGE>


     "Permitted  Club  Acquisitions"   means  any  acquisition  by  any  of  the
Borrower's Subsidiaries of all or substantially all of the assets or the capital
stock of any Person (or segment of such Person's  business) which either (a) has
been  consented to in writing by the  Administrative  Agent or (b) complies with
each of the following: (i) such Person (or segment of such Person's business) is
engaged in the business of operating a  membership  club  business or a business
that licenses,  operates,  owns or otherwise  exploits a library of audio, video
and/or  entertainment  content or a business that is substantially the same kind
of business as determined in the  discretion of the Required  Lenders,  (ii) the
consideration payable in respect of such acquisition is comprised exclusively of
Equity  Interests  of the  Borrower  and/or  the net  proceeds  from the  Equity
Interests of the Borrower  raised within the one hundred eighty (180) day period
preceding  the closing of such  acquisition,  (iii) the Borrower  shall give the
Administrative  Agent and the Lenders not less than ten (10) Business Days prior
written  notice of its  intention  to make a Permitted  Club  Acquisition,  such
notice  to  include  the  proposed  amounts,  date  and  form  of  the  proposed
transaction,  a reasonable description of the stock or assets to be acquired and
the  location of all assets,  a  description  and  calculation  of the pro forma
adjustments  to EBITDA of the target of such  acquisition,  and a calculation in
reasonable detail of the pro forma effect of such acquisition on matters covered
by the financial  covenants  contained herein, (iv) concurrently with the making
of a Permitted Club Acquisition, the Borrower, as additional collateral security
for the  Obligations,  shall grant or cause to be granted to the  Administrative
Agent for the  ratable  benefit  of the  Lenders,  prior  liens on and  security
interests  (subject to Permitted  Liens  existing with respect to such assets at
the time of the Permitted Club Acquisition) in any of the acquired assets by the
execution  and  delivery  to  the  Administrative   Agent  of  such  agreements,
instruments  and  documents  as shall  be  reasonably  satisfactory  in form and
substance to the Administrative  Agent, and (v) the Borrower shall not permit to
be made any acquisition at any time during which an Event of Default shall exist
and be continuing or would exist after giving effect to such acquisition and the
Borrower  shall  have  delivered  to  the  Administrative   Agent  a  Compliance
Certificate effective as of the date of consummation of such acquisition.

     "Permitted  Liens"  means  any of  the  following:  (a)  Liens  for  taxes,
assessments  and  governmental  charges or levies (i) not yet due and payable or
(ii) that are due and payable and that are being  contested in good faith and by
appropriate proceedings diligently conducted, provided that in the case of Liens
under this clause (ii), reserves or other appropriate provisions shall have been
established  therefor in accordance with GAAP; (b) Liens imposed by law, such as
materialmen's,  mechanics', carriers', workmen's and repairmen's Liens and other
similar Liens arising in the ordinary  course of business  securing  obligations
that are not  overdue  for a period of more than  sixty  (60) days or which,  if
overdue,  are  being  contested  in good  faith and by  appropriate  proceedings
diligently  conducted,  provided that reserves or other  appropriate  provisions
shall have been  established  therefor in accordance  with GAAP;  (c) pledges or
deposits  to secure  obligations  under  workers'  compensation  laws or similar
legislation  or to secure public or statutory  obligations;  (d) Permitted  Real
Property Encumbrances; (e) in the case of any Permitted Acquisition or Permitted
Club  Acquisition,  any Lien in  respect  of  property  of the  acquired  Person
existing  at the  time of such  acquisition  if such  Lien  would  constitute  a
Permitted  Lien  under  any of the  preceding  clauses  of  this  definition  or
otherwise  permitted by Section  6.1(d) or (e)  provided  that in respect of all
Liens referred to in this clause (e) (i) such Lien was


                                       25

<PAGE>


not created in  contemplation  of such event, and (ii) no such Lien shall at any
time extend to or cover any asset of Borrower or any  Subsidiary  other than the
assets on which it was originally imposed and improvements  thereto and proceeds
thereof;  (f) judgment and other similar Liens arising in connection  with court
proceedings,  provided  the  execution  or other  enforcement  of such  Liens is
effectively  stayed or bonded and the claims secured thereby are being contested
in good faith and by appropriate  proceedings  and no Default  otherwise  exists
under  Section 9.7 hereof;  (g) Liens (other than Liens created or imposed under
ERISA)  incurred  or  deposits  made  in the  ordinary  course  of  business  in
connection with workers' compensation, unemployment insurance and other types of
social security, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids,  leases,  government  contracts,  performance and
return-of-money  bonds and other similar  obligations  (exclusive in any case of
obligations  incurred in connection with the borrowing of money or the obtaining
of  advances  or  credit);  and (h) Liens  arising  from the  sales of  accounts
receivable for collection in the ordinary  course of business to the extent such
sales are permitted in accordance with the terms of Section 6.5(g).

     "Permitted  Real  Property   Encumbrances"   means,  with  respect  to  any
particular real property,  easements, zoning restrictions or other restrictions,
rights-of-way,  minor encroachments,  covenants or encumbrances on real property
imposed by law or arising in the ordinary  course of business  that do not arise
out of the  incurrence  of any Debt and that do not and could not  reasonably be
expected  to  materially  detract  from the value of the  affected  property  or
interfere  materially  with the ordinary  conduct of business of the Borrower or
any of its Subsidiaries or materially  impair the use thereof to the Borrower or
any Subsidiary.

     "Person"  means  an  individual,  partnership,   corporation  (including  a
business  trust),  limited  liability  company,  joint  stock  company,   trust,
unincorporated  association,  joint venture or other entity,  or a government or
any political subdivision or agency thereof.

     "Plan" means a Single Employer Plan or a Multiple Employer Plan.

     "Pre-Commitment Information" has the meaning specified in Section 3.1(g).

     "Premier" has the meaning specified in the Preliminary Statements.

     "Prime  Rate" means a  fluctuating  interest  rate per annum in effect from
time to time, which rate per annum shall at all times be equal to the higher of:

     (a)  the  rate  of  interest   announced   publicly  by  Fleet  in  Boston,
Massachusetts,  from  time  to  time,  as  Fleet's  prime  rate,  which  is  not
necessarily the lowest rate made available by Fleet; or

     (b) 1/2 of one percent per annum above the Federal Funds Rate.

     "Prime Rate  Advance"  means an Advance that bears  interest as provided in
Section 2.7(a)(i).


                                       26

<PAGE>


     "Pro Rata Share" of any amount means,  with respect to any Revolving Credit
Lender at any time, the product of such amount times a fraction the numerator of
which is the amount of such Lender's  Revolving  Credit  Commitment at such time
and the denominator of which is the Revolving Credit Facility at such time.

     "Radio Spirits" has the meaning specified in the Preliminary Statements.

     "Radio  Spirits   Subordinated   Security  Agreement"  means  the  Security
Agreement  dated and  effective as of December  11, 1998  between the  Borrower,
Classic Radio Holding Corp.  and Classic  Radio  Acquisition  Corp.,  on the one
hand,  and Carl  Amari,  on the  other  hand,  as in  effect on the date of this
Agreement.

     "Receivables"  means all  Receivables  referred  to in Section  1(c) of the
Security Agreement.

     "Reduction Amount" has the meaning specified in Section 2.6(b)(v).

     "Register" has the meaning specified in Section 11.7(d).

     "Regulation T" means  Regulation T of the Board of Governors of the Federal
Reserve System, as in effect from time to time.

     "Regulation U" means  Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.

     "Regulation X" means  Regulation X of the Board of Governors of the Federal
Reserve System, as in effect from time to time.

     "Regulatory  Authority"  means any federal,  state,  local or other U.S. or
foreign governmental authority, bureau or agency.

     "Release" means any release, spill, emission,  leaking,  pumping,  pouring,
emitting,  emptying,  discharging,  injecting,  escaping,  leaching,  dumping or
disposing  into the  environment  (including  the  abandonment  or discarding of
barrels,  containers  and other  closed  receptacles  containing  any  Hazardous
Materials)  or into or from any property,  including,  without  limitation,  the
movement of any Hazardous  Materials  through the air,  soil,  surface waters or
ground water.

     "Remedial"  shall have the meaning as set forth in CERCLA at 42 U.S.C.  ss.
9601(24) and/or any other applicable Environmental Laws.

     "Removal"  shall have the  meaning as set forth in CERCLA at 42 U.S.C.  ss.
9601(23) and/or any other applicable Environmental Laws.

     "Required  Lenders" means at any time Lenders owed or holding  greater than
50% of the sum of (a) the aggregate principal amount of the Advances outstanding
at such time and (b) the


                                       27

<PAGE>


aggregate  Available  Amount of all Letters of Credit  outstanding at such time,
or, if no such principal amount and no Letters of Credit are outstanding at such
time,  Lenders holding greater than 50% of the aggregate of the Term Commitments
and the Revolving  Credit  Commitments;  provided,  however,  that if any Lender
shall be a  Defaulting  Lender at such time,  there shall be  excluded  from the
determination  of  Required  Lenders  at such time (i) the  aggregate  principal
amount of the  Advances  owing to such Lender (in its  capacity as a Lender) and
outstanding  at such  time,  and  (ii) the  aggregate  Term  Commitment  and the
Revolving  Credit  Commitment of such Lender at such time.  For purposes of this
definition,  the aggregate  principal amount of Swing Line Advances owing to the
Swing Line Bank,  Letter of Credit  Advances  owing to the Issuing  Bank and the
Available  Amount of each Letter of Credit shall be considered to be owed to the
Revolving Credit Lenders ratably in accordance with their  respective  Revolving
Credit Commitments.

     "Response"  shall have the meaning as set forth in CERCLA at 42 U.S.C.  ss.
9601(25) and/or any other applicable Environmental Laws.

     "Responsible  Officer"  means,  with  respect to any Loan Party,  the Chief
Executive  Officer,  the  President,  the  Chief  Financial  Officer,  any  Vice
President, the Controller or the Treasurer of such Loan Party.

     "Revolving Credit Advance" has the meaning specified in Section 2.1(c).

     "Revolving Credit  Borrowing" means a borrowing  consisting of simultaneous
Revolving Credit Advances of the same Type made by the Revolving Credit Lenders.

     "Revolving Credit  Commitment"  means, with respect to any Revolving Credit
Lender at any time, the amount set forth opposite such Lender's name on Schedule
I hereto under the caption  "Revolving Credit Commitment" or, if such Lender has
entered into one or more Assignments and Acceptances,  set forth for such Lender
in the  Register  maintained  by the  Administrative  Agent  pursuant to Section
11.7(d) as such Lender's  "Revolving  Credit  Commitment," as such amount may be
reduced at or prior to such time pursuant to Section 2.5.

     "Revolving Credit Facility" means, at any time, the aggregate amount of the
Revolving Credit Lenders' Revolving Credit Commitments at such time.

     "Revolving  Credit  Lender"  means any Lender that has a  Revolving  Credit
Commitment.

     "Revolving  Credit Note" means a promissory note of the Borrower payable to
the order of any Revolving Credit Lender, in substantially the form of Exhibit B
hereto,  evidencing  the aggregate  indebtedness  of the Borrower to such Lender
resulting from the Revolving Credit Advances made by such Lender.

     "Revolving  Credit  Termination  Date"  means the  earlier of (a) the fifth
anniversary of the Closing Date, and (b) the Termination Date.


                                       28

<PAGE>


     "Secured Obligations" has the meaning specified in the Security Agreement.

     "Secured Parties" means the Administrative  Agent, the Lender Parties,  and
the Hedge Banks and the other Persons the Obligations  owing to which are or are
purported  to be secured  by the  Collateral  under the terms of the  Collateral
Documents.

     "Security Agreement" has the meaning specified in Section 3.1(a).

     "Senior Debt" means, as at any date of determination thereof, the aggregate
outstanding  principal  balance  of (a)  all  Term  Advances,  Revolving  Credit
Advances (b) all Debt of the Borrower and its  Subsidiaries,  if any, secured by
purchase  money  security  interests,  conditional  sale  arrangements  or other
similar   security   interests,   (c)   obligations  of  the  Borrower  and  its
Subsidiaries,  if any, with respect to Capitalized  Leases and (d) other Debt of
the Borrower and its Subsidiaries,  if any, which is senior to other Debt in the
priority of payment.

     "Senior  Subordinated  Debt" means the 9% Convertible  Senior  Subordinated
Promissory  Notes due December 31, 2004 issued by the Borrower payable to Norton
Herrick,  dated  December 31, 1998 and any  guaranties  thereof  permitted to be
issued by  Subsidiaries  of the  Company  from time to time  pursuant to Section
6.2(c)(iv),  as the same may be amended,  modified or supplemented  from time to
time consistent with the terms of this Agreement.

     "Senior  Subordinated  Debt Documents" means all documents  entered into or
delivered in connection with the Senior  Subordinated Debt,  including,  without
limitation, the Letter Agreement and the Escrow Agreement.

     "Senior Subordinated Security Agreement" means the Security Agreement dated
on or about the date hereof  between the  Borrower,  Classic Radio Holding Corp.
and Classic  Radio  Acquisition  Corp.  on the one hand,  and Norton  Herrick as
holder of the Senior Subordinated Debt.

     "Single  Employer Plan" means a single employer plan, as defined in Section
4001(a)(15) of ERISA,  that (a) is maintained for employees of any Loan Party or
any ERISA  Affiliate  and no Person  other than the Loan  Parties  and the ERISA
Affiliates  or (b) was so  maintained  and in respect of which any Loan Party or
any ERISA  Affiliate  could have  liability  under  Section 4069 of ERISA in the
event such plan has been or were to be terminated.

     "Solvent" and "Solvency"  mean,  with respect to any Person on a particular
date,  that on such  date (a) the fair  value of the  assets  of such  Person is
greater than the total amount of  liabilities,  including,  without  limitation,
contingent  liabilities,  of such Person,  (b) the present fair salable value of
the assets of such  Person is not less than the amount  that will be required to
pay the probable  liability of such Person on its debts as they become  absolute
and  matured,  (c) such Person does not intend to, and does not believe  that it
will, incur debts or liabilities  beyond such Person's ability to pay such debts
and liabilities as they mature and (d) such Person is not engaged in business or
a transaction, and is not about to engage in business or a transaction, for


                                       29

<PAGE>


which such Person's property would constitute an unreasonably small capital. The
amount of  contingent  liabilities  at any time shall be  computed as the amount
that,  in the light of all the facts and  circumstances  existing  at such time,
represents  the amount  that can  reasonably  be expected to become an actual or
matured liability.

     "Standby  Letter of Credit"  means any Letter of Credit  other than a Trade
Letter of Credit.

     "Subordinated  Debt" means any Debt of the Borrower that is subordinated to
the  Obligations of the Borrower under the Loan Documents on, and that otherwise
contains,  terms and conditions  satisfactory  to the  Administrative  Agent and
Required Lenders and shall include, without limitation,  the Senior Subordinated
Debt.

     "Subsidiary"  of any  Person  means  any  corporation,  partnership,  joint
venture,  limited liability company, trust or estate of which (or in which) more
than 50% of (a) the issued and outstanding  capital stock having ordinary voting
power  to  elect a  majority  of the  Board  of  Directors  of such  corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation  shall or might have voting power upon the occurrence of any
contingency),  (b) the  interest in the capital or profits or  distributions  or
general or limited partnership  interests of such partnership,  joint venture or
limited  liability  company  or (c) the  beneficial  interest  in such  trust or
estate,  is at the time  directly  or  indirectly  owned or  controlled  by such
Person,  by such Person and one or more of its other  Subsidiaries  or by one or
more of such Person's other Subsidiaries. Unless otherwise specified herein, the
term Subsidiary shall mean a Subsidiary of the Borrower.

     "Subsidiary Guaranty" has the meaning specified Section 3.1(a)(viii).

     "Surviving Debt" shall have the meaning specified in Section 4.19(b).

     "Swing  Line  Advance"  means an  advance  made by (a) the Swing  Line Bank
pursuant  to Section  2.1(e) or (b) any  Revolving  Credit  Lender  pursuant  to
Section 2.2(b).

     "Swing  Line Bank" has the meaning  specified  in the recital of parties to
this Agreement.

     "Swing Line Borrowing" means a borrowing consisting of a Swing Line Advance
made by the Swing Line Bank.

     "Swing Line Facility" has the meaning specified in Section 2.1(e).

     "Swing Line Note" means a promissory  note of the  Borrower  payable to the
order of the Swing Line Bank, in substantially the form of Exhibit I, evidencing
the  indebtedness  of the  Borrower to such Swing Line Bank  resulting  from the
Swing Line Advances made by such Swing Line Bank.

     "Taxes" has the meaning specified in Section 2.12(a).


                                       30

<PAGE>


     "Term Advance" has the meaning specified in Section 2.1(a).

     "Term Borrowing" means a borrowing consisting of simultaneous Term Advances
of the same Type made by the Term Lenders.

     "Term  Commitment"  means, with respect to any Term Lender at any time, the
amount set forth  opposite  such  Lender's  name on Schedule I hereto  under the
caption  "Term  Commitment"  or, if such  Lender  has  entered  into one or more
Assignments  and  Acceptances,  set  forth  for  such  Lender  in  the  Register
maintained  by the  Administrative  Agent  pursuant  to Section  11.7(d) as such
Lender's  "Term  Commitment,"  as such amount may be reduced at or prior to such
time pursuant to Section 2.5.

     "Term  Facility"  means,  at any  time,  the  aggregate  amount of the Term
Lenders' Term Commitments at such time.

     "Term Lender" means any Lender that has a Term Commitment.

     "Term Note" means a promissory note of the Borrower payable to the order of
any Term Lender, in substantially  the form of Exhibit C hereto,  evidencing the
indebtedness of the Borrower to such Lender resulting from the Term Advance made
by such Lender.

     "Termination   Date"  means  the  date  of  termination  in  whole  of  the
Commitments pursuant to Section 2.5 or Article 9.

     "Trade  Letter of Credit" means any Letter of Credit that is issued for the
benefit of a supplier of Inventory to the Borrower or any of its Subsidiaries to
effect payment for such Inventory, the conditions to drawing under which include
the presentation to the Issuing Bank of negotiable bills of lading, invoices and
related documents  sufficient,  in the judgment of the Issuing Bank, to create a
valid and perfected  lien on or security  interest in such  Inventory,  bills of
lading, invoices and related documents in favor of the Issuing Bank.

     "Transaction"  means  the  transactions  contemplated  by  the  Acquisition
Documents and the Loan Documents.

     "Type" refers to the distinction  between  Advances bearing interest at the
Prime Rate and Advances bearing interest at the Eurodollar Rate.

     "Unused Revolving Credit  Commitment"  means, with respect to any Revolving
Credit Lender,  at any time, (a) such Lender's  Revolving  Credit  Commitment at
such  time  minus  (b) the  sum of (i) the  aggregate  principal  amount  of all
Revolving  Credit Advances and Letter of Credit Advances made by such Lender (in
its capacity as a Lender) and  outstanding at such time, plus (ii) such Lender's
Pro Rata Share of (A) the  aggregate  Available  Amount of all Letters of Credit
outstanding at such time and (B) the aggregate principal amount of all Letter of
Credit  Advances  made by the  Issuing  Bank  pursuant  to  Section  2.3(c)  and
outstanding at such time.


                                       31

<PAGE>


     "Voting Stock" means capital stock issued by a  corporation,  or equivalent
interests  in any other  Person,  the  holders of which are  ordinarily,  in the
absence of  contingencies,  entitled to vote for the election of  directors  (or
persons performing  similar  functions) of such Person,  even if the right so to
vote has been suspended by the happening of such a contingency.

     "Welfare  Plan" means a welfare  plan, as defined in Section 3(1) of ERISA,
that is  maintained  for  employees of any Loan Party or in respect of which any
Loan Party could have liability.

     "Wholly-Owned  Subsidiary"  of any Person means a Subsidiary of such Person
all of the outstanding  Equity  Interests of which shall at the time be owned by
such  Person or by one or more  Wholly-Owned  Subsidiaries  of that  Person or a
combination thereof.

     "Withdrawal  Liabilities" has the meaning specified in Part I of Subtitle E
of Title IV of ERISA.

     SECTION  1.2  Computation  of  Time  Periods.  In  this  Agreement  in  the
computation of periods of time from a specified date to a later  specified date,
the word "from" means "from and  including"  and the words "to" and "until" each
mean "to but excluding."

     SECTION  1.3  Accounting  Terms.  For  purposes  of  this  Agreement,   all
accounting terms not otherwise  defined herein shall have the meanings  assigned
to  such  terms  in  conformity  with  GAAP.   Financial  statements  and  other
information  furnished  to Lender  pursuant  to Article 7 shall be  prepared  in
accordance  with  GAAP  (as in  effect  at the  time of such  preparation)  on a
consistent  basis,  subject to the final  sentence of this  Section  1.3. In the
event any  "Accounting  Changes" (as defined below) shall occur and such changes
affect  financial  covenants,  standards or terms in this Agreement  (other than
changes which have an immaterial effect on such financial  covenants,  standards
or terms), then the Borrower and the Lenders agree to enter into negotiations in
order to amend such provisions of this Agreement so as to equitably reflect such
Accounting  Changes with the desired result that the criteria for evaluating the
financial  condition  of the  Borrower  shall be the same after such  Accounting
Changes as if such Accounting  Changes had not been made, and until such time as
such an amendment shall have been executed and delivered by the Borrower and the
Lenders,  (a) all financial  covenants,  standards  and terms in this  Agreement
shall be calculated and/or construed as if such Accounting  Changes had not been
made,  and  (b)  the  Borrower  shall  prepare   footnotes  to  each  Compliance
Certificate and the financial statements required to be delivered hereunder that
show the differences between the financial  statements  delivered (which reflect
such  Accounting  Changes)  and the basis  for  calculating  financial  covenant
compliance (without reflecting such Accounting Changes),  and, in any event, the
terms of the last sentence of this Section 1.3 shall supersede the provisions of
this sentence to the extent of any  inconsistency.  "Accounting  Changes" means:
(a)  changes  in  accounting  principles  required  by GAAP and  implemented  by
Borrower;  (b)  changes  in  accounting  principles  recommended  by  Borrower's
certified public accountants; (c) changes in carrying value of the Borrower's or
any of its Subsidiaries'  assets,  liabilities or equity accounts resulting from
adjustments that, in each case, were applicable to, but not included in, the


                                       32

<PAGE>


Pro Forma Financials; and (d) changes in accounting principles permitted by GAAP
(other than with respect to any changes to the  Borrower's  method of accounting
for New Member  Acquisition  Costs or  advertising  expenses as reflected in the
financial  statements  of the  Borrower  and its  Subsidiaries  provided  by the
Borrower  pursuant  to  Section  4.6)  which in the  reasonable  opinion  of the
Borrower's  management  provide for more  meaningful  disclosure in light of the
business  conducted by the Borrower and its  Subsidiaries  and which changes are
concurred  with by  Borrower's  certified  public  accountants  and which do not
effect a material change. Notwithstanding any other provision in this Agreement,
in any event, for all purposes of reporting and compliance under this Agreement,
New  Member  Acquisition  Costs and  advertising  expenses  shall be  treated as
expensed and not amortized  regardless of GAAP and notwithstanding  treatment by
Columbia  House in any  other  manner,  provided  that,  in  complying  with the
reporting  provisions  of this  Agreement,  including  applicable  provisions of
Section 7 hereof,  the  Borrower  shall be  permitted  to deliver its audited or
publicly filed financial statements,  in accordance with GAAP (which may require
amortization of advertising  expenses and New Member  Acquisition Costs) so long
as  together  therewith  the  Borrower  shall have  delivered  to the  Lenders a
schedule  reporting  EBITDA and net  income as if  advertising  and New  Members
Acquisition Costs were expensed as incurred .

     SECTION  1.4  Other  Definitional  Provisions.  References  to  "Sections",
"subsections",  "Exhibits" and  "Schedules"  shall be to Sections,  subsections,
Exhibits  and  Schedules,  respectively,  of  this  Agreement  unless  otherwise
specifically  provided.  Any of the terms defined in Section 1.1 may, unless the
context otherwise  requires,  be used in the singular or the plural depending on
the reference.  In this Agreement,  words importing any gender include the other
genders;  the words "including,"  "includes" and "include" shall be deemed to be
followed by the words "without  limitation";  references to agreements and other
contractual  instruments  shall be  deemed  to  include  subsequent  amendments,
assignments,  and  other  modifications  thereto,  but only to the  extent  such
amendments,  assignments and other modifications are not prohibited by the terms
of this  Agreement or any other Loan  Document;  references  to Persons  include
their  respective   permitted   successors  and  assigns  or,  in  the  case  of
governmental  Persons,  Persons  succeeding  to the  relevant  functions of such
Persons;  and all references to statutes and related  regulations  shall include
any amendments of same and any successor statutes and regulations.



                                       33

<PAGE>


                                    ARTICLE 2

                        AMOUNTS AND TERMS OF THE ADVANCES
                            AND THE LETTERS OF CREDIT

     SECTION 2.1 The Advances.

     (a) The Term Advances.  Each Term Lender severally agrees, on the terms and
conditions hereinafter set forth, to make a single advance (a "Term Advance") to
the Borrower on the Closing Date in an amount not to exceed such  Lender's  Term
Commitment at such time. The Term Borrowing  shall consist of Term Advances made
simultaneously  by the Term Lenders ratably according to their Term Commitments.
Amounts  borrowed  under this  Section  2.1(a) and repaid or prepaid  may not be
reborrowed.

     (b) [Intentionally left blank].

     (c) The Revolving Credit  Advances.  Each Revolving Credit Lender severally
agrees,  on the terms and  conditions  hereinafter  set forth,  to make advances
(each a "Revolving  Credit  Advance")  to the Borrower  from time to time on any
Business Day during the period from the date hereof until the  Revolving  Credit
Termination  Date in an amount for each such Advance not to exceed such Lender's
Unused  Revolving Credit  Commitment at such time;  provided,  however,  that no
Revolving  Credit Lender shall have any  obligation  to make a Revolving  Credit
Advance under this Section  2.1(c) to the extent such  Revolving  Credit Advance
would cause the aggregate amount of Revolving Credit Advances outstanding (after
giving effect to any immediate  application  of the proceeds  thereof) to exceed
the Revolving Credit Facility; and provided, further, that during the respective
periods  described below no Revolving  Advance,  Swing Line Advance or Letter of
Credit Advance shall be made or remain outstanding and no Letter of Credit shall
be issued if, after giving effect thereto,  the outstanding  principal amount of
all Revolving Credit Advances, SwingLine Advances, Letter of Credit Advances and
Available  Amounts  when  taken  together  with the then  outstanding  principal
balance  of all of the  Term  Advances,  would  exceed  the  respective  amounts
described below:


                                                        Maximum Aggregate
                Period                                     Outstanding
---------------------------------------     ------------------------------------
Day Following Closing Date through (and                $30,000,000
including) March 30, 1999


                                       34
<PAGE>

March 31, 1999 through (and including) the             $31,500,000
date of delivery of the June 30, 1999 
quarterly  Compliance  Certificate  

After delivery of the June 30, 1999                    Maximum Amount that would
quarterly Compliance Certificate                       not cause violation of 
                                                       any of the covenants set
                                                       forth in Article 8.

Each Revolving  Credit  Borrowing shall be in an aggregate amount of $500,000 or
an integral  multiple of $100,000  (other than,  in each case,  a Borrowing  the
proceeds of which  shall be used  solely to repay or prepay in full  outstanding
Swing Line Advances or outstanding  Letter of Credit Advances) and shall consist
of Revolving Credit Advances made simultaneously by the Revolving Credit Lenders
ratably  according to their Revolving Credit  Commitments.  Within the limits of
each Revolving Credit Lender's Unused Revolving Credit Commitment in effect from
time to time,  the Borrower  may borrow,  repay and  reborrow  Revolving  Credit
Advances.

     (d) [Intentionally left blank].

     (e) The Swing Line  Advances.  The Borrower may request the Swing Line Bank
to make,  and the Swing Line Bank may, if in its  discretion it elects to do so,
make, on the terms and conditions  hereinafter set forth, Swing Line Advances to
the  Borrower  from time to time on any  Business Day during the period from the
date hereof  until the  Revolving  Credit  Termination  Date (i) in an aggregate
amount  not to  exceed  at any time  outstanding  $1,000,000  (the  "Swing  Line
Facility")  and (ii) in an amount  for each such  Swing  Line  Borrowing  not to
exceed the aggregate of the Unused Revolving Credit Commitments of the Revolving
Credit Lenders at such time. No Swing Line Advance shall be used for the purpose
of funding the payment of principal of any other Swing Line Advance.  Each Swing
Line Borrowing  shall be made as a Prime Rate Advance.  Within the limits of the
Swing Line Facility and within the limits  referred to in clause (ii) above,  so
long as the Swing  Line  Bank,  in its  discretion,  elects to make  Swing  Line
Advances, the Borrower may borrow and reborrow under this Section 2.1(e) and may
repay or prepay the Swing Line  Advances at such times prior to the  Termination
Date, and in such integral multiples, as the Borrower may elect.

     (f) Letters of Credit. The Issuing Bank agrees, on the terms and conditions
hereinafter  set  forth,  to issue  letters  of credit  for the  account  of the
Borrower  from time to time on any  Business  Day  during  the  period  from the
Closing Date until sixty (60) days before the Revolving Credit  Termination Date
(i) in an aggregate  Available Amount for all Letters of Credit not to exceed at
any time the Issuing Bank's Letter of Credit Commitment at such time and (ii) in
an Available Amount for each such Letter of Credit not to exceed an amount equal
to the Unused  Revolving  Credit  Commitments of the Revolving Credit Lenders at
such time.  No Letter of Credit shall have an  expiration  date  (including  all
rights of the Borrower or the beneficiary to require renewal) later than (A) the
earlier of sixty (60) days before the Revolving Credit  Termination Date, (B) in
the case of a Standby Letter of Credit, 365 days after the date of


                                       35

<PAGE>


issuance thereof and (C) in the case of a Trade Letter of Credit, 180 days after
the date of issuance thereof. The foregoing notwithstanding,  any Standby Letter
of Credit may, by its terms,  be  renewable  annually  upon notice (a "Notice of
Renewal") given to the Issuing Bank and the Administrative  Agent on or prior to
any date for notice of renewal  set forth in such  Letter of Credit  (but in any
event at least five (5) Business Days prior to the date of the proposed  renewal
of such  Standby  Letter  of  Credit)  and upon  fulfillment  of the  applicable
conditions  set forth in Article 3 unless such Issuing Bank shall have  notified
the Borrower (with a copy to the  Administrative  Agent) on or prior to the date
for notice of  termination  set forth in such Letter of Credit (but in any event
at least thirty (30)  Business  Days prior to the date of automatic  renewal) of
its  election  not to  renew  such  Standby  Letter  of  Credit  (a  "Notice  of
Termination");  provided that the terms of each Standby Letter of Credit that is
automatically  renewable  annually shall not permit the  expiration  date (after
giving  effect to any renewal) of such Standby  Letter of Credit in any event to
be  extended to a date later than sixty (60) days  before the  Revolving  Credit
Termination  Date. If either a Notice of Renewal is not given by the Borrower or
a Notice of Termination is given by the Issuing Bank pursuant to the immediately
preceding  sentence,  such Standby  Letter of Credit shall expire on the date on
which it otherwise would have been  automatically  renewed;  provided,  however,
that even in the  absence of receipt of a Notice of Renewal,  the  Issuing  Bank
may, in its discretion unless  instructed to the contrary by the  Administrative
Agent or the Borrower,  deem that a Notice of Renewal had been timely  delivered
and, in such case, a Notice of Renewal shall be deemed to have been so delivered
for all purposes under this Agreement. Within the limits of the Letter of Credit
Facility,  and subject to the limits referred to above, the Borrower may request
the issuance of Letters of Credit under this Section 2.1(f), repay any Letter of
Credit  Advances  resulting  from drawings  under Letters of Credit  pursuant to
Section  2.3(c) and request the issuance of  additional  Letters of Credit under
this Section 2.1(f).

     SECTION  2.2  Making the  Advances.  (a) Except as  otherwise  provided  in
Section 2.3 or, with respect to Swing Line  Advances,  in Section  2.2(b),  each
Borrowing  shall be made on notice,  given not later  than 11:00 A.M.  (New York
time) on the third  Business Day prior to the date of the proposed  Borrowing in
the case of Eurodollar  Rate Advances and on the first Business Day prior to the
date of the  proposed  Borrowing  in the  case of  Prime  Rate  Advances  by the
Borrower  to the  Administrative  Agent,  which  shall give to each  appropriate
Lender  prompt  notice  thereof by telex or  telecopier.  Each such  notice of a
Borrowing (a "Notice of Borrowing") may be by telephone,  confirmed  immediately
in  writing,  or telex or  telecopier  in  substantially  the form of  Exhibit D
hereto,  specifying  therein  the  requested  (i) date of such  Borrowing,  (ii)
Facility  under  which such  Borrowing  is to be made,  (iii)  Type of  Advances
comprising  such Borrowing,  (iv) aggregate  amount of such Borrowing and (v) in
the case of a Borrowing consisting of Eurodollar Rate Advances, initial Interest
Period for each such Advance.  Each appropriate Lender shall,  before 11:00 A.M.
(New York time) on the date of such Borrowing, make available for the account of
its Applicable Lending Office to the Administrative  Agent at the Administrative
Agent's  Account,  in same day  funds,  such  Lender's  ratable  portion of such
Borrowing in accordance  with the  respective  Commitments  under the applicable
Facility  of  such  Lender  and  the  other  appropriate   Lenders.   After  the
Administrative  Agent's  receipt  of such  funds  and  upon  fulfillment  of the
applicable conditions set forth in Article 3, the Administrative Agent


                                       36

<PAGE>


will make such funds  available  to the  Borrower by  crediting  the  Borrower's
Account; provided,  however, that in the case of any Revolving Credit Borrowing,
the  Administrative  Agent shall first make a portion of such funds equal to the
aggregate  principal  amount of any Swing  Line  Advances  and  Letter of Credit
Advances  made by the  Swing  Line  Bank,  the  Issuing  Bank  and by any  other
Revolving  Credit Lender and  outstanding on the date of such  Revolving  Credit
Borrowing,  plus  interest  accrued  and unpaid  thereon to and as of such date,
available  to the Swing Line Bank,  the  Issuing  Bank and such other  Revolving
Credit  Lenders for  repayment of such Swing Line  Advances and Letter of Credit
Advances.

     (b) Each Swing Line Borrowing shall be made either (x) on notice, given not
later  than 11:00 A.M.  (New York time) on the date of the  proposed  Swing Line
Borrowing,  by the Borrower to the Swing Line Bank and the Administrative  Agent
or (y) pursuant to other arrangements,  including,  by way of example and not of
limitation,  arrangements  for daily  repayments and borrowings on each Business
Day,  which are  satisfactory  in form and substance to the Swing Line Bank, the
Administrative  Agent and the  Borrower.  Each notice of a Swing Line  Borrowing
pursuant to clause (x) in the immediately preceding sentence (a "Notice of Swing
Line Borrowing")  shall be by telephone,  confirmed  immediately in writing,  or
telex  or  telecopier,  specifying  therein  the  requested  (i)  date  of  such
Borrowing,  (ii) amount of such  Borrowing and (iii)  maturity of such Borrowing
(which  maturity shall be no later than the seventh day after the requested date
of such Borrowing).  If, in its discretion,  it elects to make a requested Swing
Line Advance,  the Swing Line Bank will make the amount thereof available to the
Administrative  Agent at the Administrative  Agent's Account, in same day funds.
After the  Administrative  Agent's receipt of such funds and upon fulfillment of
the applicable  conditions set forth in Article 3, the Administrative Agent will
make such funds  available to the Borrower by crediting the Borrower's  Account.
Upon  written  demand by the Swing Line Bank,  with a copy of such demand to the
Administrative Agent, each other Revolving Credit Lender shall purchase from the
Swing  Line  Bank,  and the Swing  Line Bank  shall sell and assign to each such
other  Revolving  Credit  Lender,  such  other  Lender's  Pro Rata  Share of all
outstanding Swing Line Advances as of the date of such demand, by deposit to the
Administrative  Agent's  Account,  in same day  funds,  an  amount  equal to the
portion  of the  outstanding  principal  amount  of Swing  Line  Advances  to be
purchased  by such  Lender.  The  Borrower  hereby  agrees to each such sale and
assignment.  Each Revolving  Credit Lender agrees to purchase its Pro Rata Share
of  outstanding  Swing Line  Advances on (i) the  Business  Day on which  demand
therefor is made by the Swing Line Bank;  provided that notice of such demand is
given not later than 3:00 P.M. (New York time) on such Business Day, or (ii) the
first Business Day next succeeding such demand if notice of such demand is given
after such time.  Upon any such  assignment  by the Swing Line Bank to any other
Revolving  Credit  Lender of a portion of a Swing Line  Advance,  the Swing Line
Bank  represents  and  warrants to such other Lender that the Swing Line Bank is
the legal and beneficial  owner of such interest being assigned by it, but makes
no other  representation or warranty and assumes no responsibility  with respect
to such Swing Line Advance,  the Loan Documents or any Loan Party. If and to the
extent that any  Revolving  Credit  Lender  shall not have so made the amount of
such Swing Line Advance  available to the  Administrative  Agent, such Revolving
Credit Lender agrees to pay to the Administrative  Agent, for the account of the
Swing Line Bank, forthwith on demand such amount together with interest thereon,
for each day


                                       37

<PAGE>



from the date of  demand by the Swing  Line Bank  until the date such  amount is
paid to the  Administrative  Agent,  at the Federal  Funds Rate.  If such Lender
shall pay to the  Administrative  Agent such amount for the account of the Swing
Line Bank on any Business Day, such amount so paid in respect of principal shall
constitute  a Swing Line  Advance  made by such Lender on such  Business Day for
purposes of this Agreement,  and the outstanding  principal  amount of the Swing
Line Advance made by the Swing Line Bank shall be reduced by such amount on such
Business Day.

     (c) Anything in subsection (a) above to the contrary  notwithstanding,  (i)
the Borrower may not select  Eurodollar  Rate Advances if the  obligation of the
appropriate  Lenders to make  Eurodollar  Rate Advances  shall then be suspended
pursuant to Section 2.9 or Section 2.10, and (ii) the  Eurodollar  Rate Advances
made on any date may not be  outstanding  as part of more than ten (10) separate
Borrowings.

     (d) Each Notice of Borrowing  and Notice of Swing Line  Borrowing  shall be
irrevocable  and binding on the Borrower.  In the case of any Borrowing that the
related  Notice of Borrowing  specifies is to be  comprised of  Eurodollar  Rate
Advances, the Borrower shall indemnify each appropriate Lender against any loss,
cost or expense incurred by such Lender as a result of any failure to fulfill on
or before the date  specified in such Notice of Borrowing for such Borrowing the
applicable conditions set forth in Article 3, including, without limitation, any
loss  (including  loss of anticipated  profits as reasonably  determined by such
Lender),  cost or expense  incurred by reason of the liquidation or redeployment
of  deposits  or other  funds  acquired by such Lender to fund the Advance to be
made by such Lender as part of such Borrowing when such Advance,  as a result of
such failure, is not made on such date.

     (e) Unless the  Administrative  Agent  shall have  received  notice from an
appropriate  Lender prior to the date of any  Borrowing  under a Facility  under
which such Lender has a Commitment  that such Lender will not make  available to
the  Administrative  Agent such Lender's ratable portion of such Borrowing,  the
Administrative Agent may assume that such Lender has made such portion available
to the  Administrative  Agent on the date of such  Borrowing in accordance  with
subsection (a) or (b) of this Section 2.2 and the  Administrative  Agent may, in
reliance  upon such  assumption,  make  available to the Borrower on such date a
corresponding  amount.  If and to the extent that such Lender  shall not have so
made such ratable portion available to the Administrative Agent, such Lender and
the  Borrower  severally  agree  to  repay  or pay to the  Administrative  Agent
forthwith on demand such corresponding  amount and to pay interest thereon,  for
each day from the date such amount is made  available to the Borrower  until the
date such amount is repaid or paid to the  Administrative  Agent,  at (i) in the
case of the Borrower,  the interest  rate  applicable at such time under Section
2.7 to Advances  comprising  such Borrowing and (ii) in the case of such Lender,
the  Federal  Funds  Rate.  If any Lender so fails to make its  ratable  portion
available to the Administrative  Agent, the  Administrative  Agent shall use its
best efforts to obtain such ratable  portion from such Lender and,  upon receipt
of such  amount,  shall  promptly  forward  it to  Borrower,  provided  that the
foregoing shall not be deemed to change the Administrative  Agent's  obligations
hereunder,  or to cause the several  obligations  of the Lenders to become joint
obligations. If such Lender shall pay to the Administrative Agent


                                       38

<PAGE>



such  corresponding  amount,  such amount so paid shall constitute such Lender's
Advance as part of such Borrowing for all purposes.

     (f) The  failure of any Lender to make the Advance to be made by it as part
of any Borrowing shall not relieve any other Lender of its  obligation,  if any,
hereunder to make its Advance on the date of such Borrowing, but no Lender shall
be  responsible  for the  failure of any other  Lender to make the Advance to be
made by such other Lender on the date of any Borrowing.

     SECTION 2.3  Issuance of and Drawings and  Reimbursement  Under  Letters of
Credit.

     (a)  Request  for  Issuance.  Each  Letter of Credit  shall be issued  upon
notice,  given not later than 11:00 A.M.  (New York time) on the fifth  Business
Day prior to the date of the proposed  issuance of such Letter of Credit, by the
Borrower to the Issuing Bank, which shall give to the  Administrative  Agent and
each Revolving Credit Lender prompt notice thereof by telex or telecopier.  Each
such notice of issuance of a Letter of Credit (a "Notice of Issuance")  shall be
by  telephone,  confirmed  immediately  in  writing,  or  telex  or  telecopier,
specifying  therein the requested  (i) date of such  issuance  (which shall be a
Business Day), (ii) Available Amount of such Letter of Credit,  (iii) expiration
date of such Letter of Credit,  (iv) name and address of the beneficiary of such
Letter of Credit and (v) form of such Letter of Credit, and shall be accompanied
by such  application  and agreement for letter of credit as the Issuing Bank may
specify to the  Borrower for use in  connection  with such  requested  Letter of
Credit (a "Letter of Credit Agreement"). If the requested form of such Letter of
Credit is reasonably acceptable to the Issuing Bank, the Issuing Bank will, upon
fulfillment  of the  applicable  conditions  set forth in  Article  3, make such
Letter of Credit  available to the Borrower at its office referred to in Section
11.2 or as otherwise  agreed with the Borrower in connection with such issuance.
In the event and to the extent that the  provisions of any such Letter of Credit
Agreement shall conflict with this  Agreement,  the provisions of this Agreement
shall govern.

     (b) Letter of Credit  Reports.  The Issuing  Bank shall  furnish (i) to the
Administrative  Agent on the first  Business  Day of each week a written  report
summarizing issuance and expiration dates of Letters of Credit issued during the
previous week and drawings during such week under all Letters of Credit, (ii) to
the  Administrative  Agent, the Borrower and each Revolving Credit Lender on the
first  Business  Day of each month a written  report  summarizing  issuance  and
expiration  dates of Letters of Credit  issued  during the  preceding  month and
drawings  during  such  month  under  all  Letters  of  Credit  and (iii) to the
Administrative Agent, the Borrower and each Revolving Credit Lender on the first
Business Day of each calendar quarter a written report setting forth the average
daily aggregate  Available  Amount during the preceding  calendar quarter of all
Letters of Credit.

     (c) Drawing and  Reimbursement.  The payment by the Issuing Bank of a draft
drawn  under any Letter of Credit  shall  constitute  for all  purposes  of this
Agreement  the making by the Issuing  Bank of a Letter of Credit  Advance  which
shall be a Prime Rate Advance in the amount of such draft. Each of the Borrower,
the Administrative Agent and each Revolving Credit Lender


                                       39

<PAGE>



hereby  acknowledges  and agrees that Letter of Credit  Advances may be made, or
deemed  made,  by the  Issuing  Bank in  respect  of any Letter of Credit and to
participate in all Letter of Credit Advances made hereunder as provided  herein.
Upon  written  demand by the  Issuing  Bank,  with a copy of such  demand to the
Administrative  Agent,  each  Revolving  Credit  Lender shall  purchase from the
Issuing Bank,  and the Issuing Bank shall sell and assign to each such Revolving
Credit Lender, such Lender's Pro Rata Share of such outstanding Letter of Credit
Advance as of the date of such purchase, by making available (for the account of
its Applicable Lending Office) to the  Administrative  Agent (for the account of
the Issuing Bank), by deposit to the Administrative Agent's Account, in same day
funds,  an amount equal to the portion of the  outstanding  principal  amount of
such Letter of Credit  Advance to be purchased by such  Lender.  Promptly  after
receipt  thereof,  the  Administrative  Agent shall  transfer  such funds to the
Issuing Bank. The Borrower hereby agrees to each such sale and assignment.  Each
Revolving  Credit Lender agrees to purchase its Pro Rata Share of an outstanding
Letter of Credit  Advance on (i) the Business  Day on which  demand  therefor is
made by the Issuing Bank; provided that notice of such demand is given not later
than 11:00 A.M. (New York time) on such Business Day or (ii) the first  Business
Day next  succeeding  such  demand if notice of such  demand is given after such
time. Upon any such assignment by the Issuing Bank to any other Revolving Credit
Lender of a portion of a Letter of Credit  Advance,  the Issuing Bank represents
and  warrants  to such  other  Lender  that the  Issuing  Bank is the  legal and
beneficial  owner of such interest  being  assigned by it, free and clear of any
liens,   but  makes  no  other   representation   or  warranty  and  assumes  no
responsibility with respect to such Letter of Credit Advance, the Loan Documents
or any Loan Party.  If and to the extent that any Revolving  Credit Lender shall
not have so made the amount of such Letter of Credit  Advance  available  to the
Administrative  Agent,  such  Revolving  Credit  Lender  agrees  to  pay  to the
Administrative  Agent  forthwith on demand such amount  together  with  interest
thereon, for each day from the date of demand by the Issuing Bank until the date
such amount is paid to the  Administrative  Agent, at the Federal Funds Rate for
its account or the account of the Issuing  Bank, as  applicable.  If such Lender
shall pay to the Administrative Agent such amount for the account of the Issuing
Bank on any  Business  Day,  such amount so paid in respect of  principal  shall
constitute a Letter of Credit  Advance made by such Lender on such  Business Day
for purposes of this  Agreement,  and the  outstanding  principal  amount of the
Letter of Credit  Advance  made by the  Issuing  Bank  shall be  reduced by such
amount on such Business Day.

     (d) Failure to Make Letter of Credit Advances. The failure of any Lender to
make any  Letter of Credit  Advance  to be made by it on the date  specified  in
Section 2.3(c) shall not relieve any other Lender of its obligation hereunder to
make  its  Letter  of  Credit  Advance  on such  date,  but no  Lender  shall be
responsible  for the  failure  of any other  Lender to make the Letter of Credit
Advance to be made by such other Lender on such date.

     SECTION 2.4 Repayment of Advances.

     (a) Term Advances. The Borrower shall repay to the Administrative Agent for
the ratable  account of the Term  Lenders the  aggregate  outstanding  principal
amount of the Term  Advances on the  following  dates in the  amounts  indicated
(which amounts shall be reduced as


                                       40

<PAGE>



a result of the  application  of  prepayments  in  accordance  with the order of
priority set forth in Section 2.6):

             Date                                            Amount
--------------------------------------------------------------------------------
Each of March 31, 1999, June 30, 1999,                      $250,000
September 30, 1999 and December 31, 1999

Each of March 31, 2000, June 30, 2000,                       750,000
September 30, 2000 and December 31, 2000

Each of March 31, 2001, June 30, 2001,                     1,250,000
September 30, 2001 and December 31, 2001

Each of March 31, 2002, June 30, 2002,                     1,750,000
September 30, 2002 and December 31, 2002

Each of March 31, 2003, June 30, 2003,                     2,250,000
September 30, 2003 and December 31, 2003
--------------------------------------------------------------------------------

provided,  however,  that the final principal  installment shall be in an amount
equal to the aggregate principal amount of the Term Advances outstanding on such
date.

     (b) [Intentionally left blank.]

     (c)  Revolving   Credit   Advances.   The  Borrower   shall  repay  to  the
Administrative  Agent for the ratable account of the Revolving Credit Lenders on
the Revolving  Credit  Termination  Date the aggregate  principal  amount of the
Revolving Credit Advances then outstanding.

     (d) [Intentionally left blank.]

     (e) Swing Line  Advances.  The Borrower  shall repay to the  Administrative
Agent for the  account of the Swing Line Bank and each  other  Revolving  Credit
Lender that has made a Swing Line Advance the  outstanding  principal  amount of
each Swing Line Advance made by each of them on the earlier of the maturity date
for such  Swing Line  Advance  (which  maturity  date shall be no later than the
seventh day after the date of such Swing Line Advance) and the Revolving  Credit
Termination Date.

     (f)  Letter  of  Credit  Advances.  (i) The  Borrower  shall  repay  to the
Administrative  Agent  for the  account  of the  Issuing  Bank  and  each  other
Revolving  Credit Lender that has made a Letter of Credit Advance on the earlier
of demand made by the  Administrative  Agent to the Borrower  and the  Revolving
Credit  Termination  Date the  outstanding  principal  amount of each  Letter of
Credit Advance made by each of them.


                                       41

<PAGE>


     (ii) The  Obligations of the Borrower under this  Agreement,  any Letter of
Credit Agreement and any other agreement or instrument relating to any Letter of
Credit shall be  unconditional  and  irrevocable,  and shall be paid strictly in
accordance with the terms of this Agreement, such Letter of Credit Agreement and
such other agreement or instrument under all circumstances,  including,  without
limitation, the following circumstances:

     (A) any lack of validity or enforceability of any Loan Document, any Letter
of Credit  Agreement,  any Letter of Credit or any other agreement or instrument
relating to any of the foregoing (all of the foregoing being, collectively,  the
"L/C Related Documents");

     (B) any change in the time,  manner or place of payment of, or in any other
term of, all or any of the  Obligations  of the  Borrower  in respect of any L/C
Related Document or any other amendment or waiver of or any consent to departure
from all or any of the L/C Related Documents;

     (C) the  existence of any claim,  set-off,  defense or other right that the
Borrower may have at any time against any  beneficiary  or any  transferee  of a
Letter of  Credit  (or any  Persons  for whom any such  beneficiary  or any such
transferee  may be acting),  the Issuing Bank,  or any other Person,  whether in
connection with the  transactions  contemplated by the L/C Related  Documents or
any unrelated transaction;

     (D) any statement or any other document  presented under a Letter of Credit
proving to be forged, fraudulent,  invalid or insufficient in any respect or any
statement  therein being untrue or  inaccurate in any respect,  except where the
Issuing Bank acts with gross  negligence  or willful  misconduct in accepting an
insufficient such statement or document; or

     (E) any  exchange,  release or  non-perfection  of any  Collateral or other
collateral,  or any release or  amendment  or waiver of or consent to  departure
from any  Subsidiary  Guaranty  or any  other  guarantee,  for all or any of the
Obligations of the Borrower in respect of the L/C Related Documents.

     SECTION 2.5 Termination or Reduction of the Commitments.

     (a) Optional.  The Borrower may, upon at least three  Business Days' notice
to the  Administrative  Agent,  terminate  in whole or reduce in part the unused
portions of the Unused Revolving Credit  Commitments;  provided,  however,  that
each partial  reduction  of a Facility  (i) shall be in an  aggregate  amount of
$250,000 or an integral  multiple of $100,000 in excess thereof,  and (ii) shall
be  made  ratably  among  the  appropriate  Lenders  in  accordance  with  their
Commitments with respect to such Facility.

     (b) Mandatory.  (i) On the date of the Term Borrowing,  after giving effect
to such Term Borrowing,  and from time to time thereafter upon each repayment or
prepayment of the


                                       42

<PAGE>


Term  Advances,  the  aggregate  Term  Commitments  of the Term Lenders shall be
automatically and permanently  reduced,  on a pro rata basis, by an amount equal
to the amount by which the aggregate Term Commitments  immediately prior to such
reduction exceed the aggregate unpaid principal amount of the Term Advances then
outstanding;  provided,  however, that the Term Commitments shall terminate, and
all Advances made thereunder shall be repaid in full, no later than December 31,
2003.

     (ii) [Intentionally left blank].

     (iii) [Intentionally left blank].

     (iv) [Intentionally left blank].

     (v) [Intentionally left blank].

     (vi) In the event the Closing Date shall not have  occurred by December 31,
1998, then all of the  Commitments  shall be  automatically  terminated and this
Agreement shall be of no further force or effect.

     SECTION 2.6 Prepayments.

     (a) Optional.  The Borrower may, without premium or penalty,  upon at least
one (1) Business  Day's notice in the case of Prime Rate  Advances and three (3)
Business Days' notice in the case of Eurodollar  Rate Advances,  in each case to
the  Administrative  Agent  stating the proposed  date and  aggregate  principal
amount of the  prepayment,  and if such  notice is given,  the  Borrower  shall,
prepay the outstanding  aggregate principal amount of the Advances,  in whole or
ratably in part,  together with accrued  interest to the date of such prepayment
on the aggregate  principal  amount prepaid;  provided,  however,  that (i) each
partial  prepayment shall be in an aggregate  principal amount of $500,000 or an
integral multiple of $100,000 in excess thereof and (ii) no such prepayment of a
Eurodollar  Rate Advance shall be made other than on the last day of an Interest
Period therefor  without payment by the Borrower of the amounts  provided for in
Section 11.4(c).  Each prepayment made pursuant to this Section 2.6(a) shall, at
the  Borrower's  option,  be applied to either (i) repay the  Facilities  in the
following  manner:  first, to prepay Letter of Credit Advances then  outstanding
until such Advances are paid in full; second, to prepay Swing Line Advances then
outstanding until such Advances are paid in full; and third, to prepay Revolving
Credit Advances then  outstanding  until such Revolving Credit Advances are paid
in full; or (ii) be applied to repay the  Facilities  in the  following  manner:
first,  ratably to the Term Facility,  and ratably to each unpaid installment of
principal of the Term Facility until such installments are paid in full; second,
to prepay  Letter of Credit  Advances then  outstanding  until such Advances are
paid in full;  third, to prepay Swing Line Advances then outstanding  until such
Advances are paid in full;  fourth,  to prepay  Revolving  Credit  Advances then
outstanding  until such Revolving  Credit  Advances are paid in full; and fifth,
deposited in the L/C Cash Collateral  Account to cash  collateralize 100% of the
Available Amount of the Letters of Credit then outstanding.  Upon the drawing of
any Letter of Credit for which funds are on deposit in the L/C


                                       43

<PAGE>


Cash  Collateral  Account,  such funds shall be applied to reimburse the Issuing
Bank or the Revolving Credit Lenders, as applicable.

     (b) Mandatory. (i) Within ninety (90) days following the end of each Fiscal
Year in which the ratio of Consolidated Debt to EBITDA at the end of such Fiscal
Year  exceeds   4.25:1,   the  Borrower   shall   execute  and  deliver  to  the
Administrative  Agent a certificate of the Borrower's Chief Executive Officer or
Chief Financial  Officer  demonstrating  its calculation of Excess Cash Flow for
such Fiscal Year along with a prepayment of the then outstanding  Advances equal
to seventy-five percent (75%) of the annual Excess Cash Flow; provided, however,
that (A) if the ratio of Consolidated Debt to EBITDA, measured at the end of and
for such Fiscal Year of the Borrower,  for such Fiscal Year of the Borrower,  is
less  than or equal  to  4.25:1  but  greater  than  3.25:1,  then the  required
prepayment  of the then  outstanding  Advances  shall be in the  amount of fifty
percent  (50%) of the annual  Excess  Cash Flow for such Fiscal Year rather than
seventy-five  percent  (75%) of such annual  Excess  Cash Flow;  and (B) without
limiting the preceding  terms of this clause (i) in any event the Borrower shall
deliver a prepayment of the then outstanding  Advances equal to no less than 50%
of the annual  Excess  Cash Flow  payable in 2000 (in respect of the Fiscal Year
ended in 1999) and also  payable in 2001 (in respect of the Fiscal Year ended in
2000) even if the ratio of Consolidated  Debt to EBITDA for the Fiscal Year then
ended is less than 3.25:1.

     (ii) Upon receipt by any Loan Party or any of its  Subsidiaries of Net Cash
Proceeds  from  any  Asset  Disposition,  the  Borrower  shall  prepay  the then
outstanding  Advances in an amount equal to  one-hundred  percent (100%) of such
Net  Cash  Proceeds  payable   concurrently  with  consummation  of  such  Asset
Disposition;  provided that no such  prepayment  need be made (1) unless the Net
Proceeds  from  any  single  Asset   Disposition  or  series  of  related  Asset
Dispositions  exceed  $100,000 (in which case a prepayment  shall be made in the
amount of the entire Asset Disposition) or (2) until the cumulative Net Proceeds
from all Asset Dispositions by the Borrower in any particular fiscal year exceed
$500,000  (in which  case a  prepayment  shall be made in the  amount of the Net
Proceeds from the specific Asset  Disposition (or portion  thereof)  causing the
limit to be  exceeded),  except  that the  terms of this  Section  shall  not be
applicable  with respect to Asset  Dispositions,  not exceeding  $500,000 in any
single  fiscal  year by the  Borrower  or any  Subsidiary  if the  Net  Proceeds
therefrom  are  reinvested  in fixed  assets (for use in its  business  or, with
respect to the Borrower,  the business of the  Subsidiaries)  within 180 days of
such Asset  Disposition,  provided  that any such Net Proceeds not so reinvested
shall be used to prepay the Advances on the 181st day.

     (iii) Within  fifteen  (15) days after  receipt by any Loan Party or any of
its Subsidiaries of Net Cash Proceeds from any Debt Issuance or Equity Issuance,
the Borrower  shall prepay the then  outstanding  Advances in an amount equal to
(A) one hundred  percent (100%) of such Net Cash  Proceeds,  with respect to any
Debt Issuance and (B) seventy-five (75%) of such Net Cash Proceeds, with respect
to any Equity Issuance.

     (iv) Within  fifteen  (15) days after  receipt of Net Cash  Proceeds by any
Loan Party or any of its Subsidiaries from any Extraordinary Receipt received by
or paid to or for the


                                       44

<PAGE>


account of any Loan Party or any of its Subsidiaries and not otherwise  included
in  clause  (i),  (ii) or  (iii)  above,  the  Borrower  shall  prepay  the then
outstanding  Advances in an amount equal to one hundred  percent  (100%) of such
Net Cash Proceeds in excess of $500,000 in the aggregate.

     (v) Each prepayment made pursuant to clause (i), (ii),  (iii) or (iv) shall
be subject to the  provisions of Section  11.4(c) and shall be applied to prepay
the Facilities in the following manner: first, ratably to the Term Facility, and
ratably to each unpaid  installment of principal of the Term Facility until such
installments are paid in full;  second, to prepay Letter of Credit Advances then
outstanding  until such Advances are paid in full;  third,  to prepay Swing Line
Advances  then  outstanding  until such  Advances are paid in full;  fourth,  to
prepay Revolving  Credit Advances then  outstanding  until such Revolving Credit
Advances  are paid in full;  and  fifth,  deposited  in the L/C Cash  Collateral
Account to cash  collateralize  100% of the  Available  Amount of the Letters of
Credit  then  outstanding.  Upon the  drawing  of any Letter of Credit for which
funds are on deposit in the L/C Cash  Collateral  Account,  such funds  shall be
applied to  reimburse  the Issuing  Bank or the  Revolving  Credit  Lenders,  as
applicable.  The amount remaining (if any) after the required  prepayment of the
Advances then outstanding and the 100% cash  collateralization  of the aggregate
Available  Amount  of  Letters  of  Credit  then  outstanding  (the  sum of such
prepayment amounts,  cash  collateralization  amounts and remaining amount being
referred to herein as the  "Reduction  Amount") may be retained by the Borrower.
Upon the  drawing of any Letter of Credit for which  funds are on deposit in the
L/C Cash  Collateral  Account,  such funds  shall be applied  to  reimburse  the
Issuing  Bank  or  the  Revolving  Credit  Lenders,  as  applicable.   Upon  the
termination of all of the  Commitments and the  indefeasible  payment in full of
all Obligations, including, without limitation, termination or expiration of all
Letters of Credit and the  indefeasible  payment in full of all  Obligations  in
respect of all Letters of Credit,  then all amounts  remaining on deposit in the
L/C Cash Collateral Account shall be returned to the Borrower.

     (vi) The Borrower shall, within fifteen (15) days following the end of each
month in each Fiscal Year,  pay to the  Administrative  Agent for deposit in the
L/C Cash Collateral  Account an amount  sufficient to cause the aggregate amount
on deposit in such Account to equal the amount by which the aggregate  Available
Amount of all  Letters of Credit then  outstanding  exceeds the Letter of Credit
Facility on such Business Day.

     (vii) At any time that the aggregate  amount of Revolving  Credit  Advances
outstanding   exceeds  the  Revolving  Credit   Facility,   the  Borrower  shall
immediately  repay Revolving  Credit Advances to the extent  necessary to reduce
the principal  balance of Revolving  Credit  Borrowings to an amount equal to or
less than the Revolving Credit Facility.

     (viii) The foregoing notwithstanding, the provisions of this Section 2.6(b)
shall not be construed  to permit any Equity  Issuance,  Debt  Issuance or Asset
Disposition otherwise prohibited under the terms of this Agreement.


                                       45

<PAGE>


     (c)  Application of  Prepayments to the Term Facility.  Upon receipt of any
amounts to be applied to the prepayment in respect of the Term Facility pursuant
to this Section 2.6,  the  Administrative  Agent shall apply such amounts to the
prepayment of the Term Advances ratably.

     SECTION 2.7 Interest.

     (a) Scheduled Interest. The Borrower shall pay to the Administrative Agent,
for the benefit of the Lenders,  interest on the unpaid principal amount of each
Advance owing to each Lender from the date of such Advance until such  principal
amount shall be paid in full, at the following rates per annum:

     (i) Prime Rate  Advances.  During such  periods as such  Advance is a Prime
Rate  Advance,  a rate per annum  equal at all times to the sum of (x) the Prime
Rate in effect from time to time plus (y) the Applicable Margin for such Advance
in effect  from time to time,  payable in arrears  quarterly  on the last day of
each March, June, September and December, commencing March 31, 1999, during such
periods and on the date such Prime Rate  Advance  shall be  Converted or paid in
full.

     (ii)  Eurodollar  Rate  Advances.  During such periods as such Advance is a
Eurodollar  Rate  Advance,  a rate per  annum  equal at all  times  during  each
Interest  Period for such Advance to the sum of (x) the Eurodollar Rate for such
Interest Period for such Advance plus (y) the Applicable Margin for such Advance
in effect on the first day of such  Interest  Period,  payable in arrears on the
last day of such Interest  Period and, if such Interest Period has a duration of
more than three  months,  on each day that occurs  during such  Interest  Period
every three  months from the first day of such  Interest  Period and on the date
such Eurodollar Rate Advance shall be Converted or paid in full.

     (b) Default  Interest.  Upon the occurrence and during the continuance of a
Default,  the Borrower shall pay interest on (i) the unpaid  principal amount of
each Advance owing to each Lender,  payable in arrears on the dates  referred to
in clause  (a)(i) or (a)(ii)  above and on demand,  at a rate per annum equal at
all times to 2% per annum  above the rate per annum  required to be paid on such
Advance  pursuant  to clause  (a)(i) or  (a)(ii)  above and (ii) to the  fullest
extent permitted by law, the amount of any interest, fee or other amount payable
hereunder  that is not  paid  when  due  (whether  at the  stated  maturity,  by
acceleration  or  otherwise),  from the date such amount shall be due until such
amount  shall be paid in full,  payable in arrears on the date such amount shall
be paid in full and on demand,  at a rate per annum equal at all times to 2% per
annum above the rate per annum required to be paid, in the case of interest,  on
the Type of Advance on which such interest has accrued pursuant to clause (a)(i)
or (a)(ii) above,  and, in all other cases,  on Prime Rate Advances  pursuant to
clause (a)(i) above.

     (c)  Notice  of  Interest  Rate.  Promptly  after  receipt  of a Notice  of
Borrowing pursuant to Section 2.2(a), the Administrative Agent shall give notice
to the Borrower and each  appropriate  Lender of the  applicable  interest  rate
determined by the Administrative Agent.



                                       46

<PAGE>


     (d) Limitations on Interest. All agreements between and among the Borrower,
any Guarantors,  any other Loan Party and the Lenders and/or the  Administrative
Agent  are  hereby  expressly  limited  so  that  in  no  contingency  or  event
whatsoever,  whether by reason of acceleration  of maturity of the  Indebtedness
evidenced hereby or otherwise, shall the amount paid or agreed to be paid to any
Lender for the use or the  forbearance of the  Indebtedness  incurred  hereunder
exceed the maximum  permissible  under  applicable  law. As used herein the term
"applicable  law" shall mean the law in effect as of the date hereof;  provided,
however,  that in the  event  there is a change in the law  which  results  in a
higher  permissible  rate of interest,  then this Agreement and the Notes issued
hereunder  shall be governed by such new law as of its  effective  date. In this
regard it is expressly agreed that it is the intent of the Borrower, the Lenders
and the  Administrative  Agent in  execution,  delivery and  acceptance  of this
Agreement  to  contract in strict  compliance  with the laws of the State of New
York  from  time to time in  effect.  If  under  any  circumstances  whatsoever,
fulfillment of any provision  hereof or of any of the Loan Documents at the time
performance of such provision shall be due shall involve transcending the limits
of such  validity  prescribed  by  applicable  law,  then the  obligation  to be
fulfilled shall automatically be reduced to the limits of such validity,  and if
under or from any circumstance whatsoever the Administrative Agent or any Lender
should ever receive as interest any amount which would exceed the highest lawful
rate,  such amount  which would be  excessive  interest  shall be applied to the
reduction of the principal  balance  evidenced by the Notes issued hereunder and
not to the  payment of  interest.  This  provision  shall  control  every  other
provision of all agreements between and among the Borrower, any Guarantors,  any
other Loan Party, the Administrative Agent and the Lenders.

     SECTION 2.8 Fees.

     (a) Commitment  Fees. The Borrower shall pay to the  Administrative  Agent,
for the account of the Lenders,  commitment  fees,  from the Closing Date in the
case of each  Initial  Lender  and  from the  effective  date  specified  in the
Assignment  and  Acceptance  pursuant to which it became a Lender in the case of
each other  Lender,  until the  Revolving  Credit  Termination  Date  payable in
arrears  quarterly on the last Business Day of each March,  June,  September and
December,  commencing  March 31, 1999, and on the Revolving  Credit  Termination
Date at a rate per annum  equal to 0.50% per annum on the average  daily  Unused
Revolving  Credit  Commitment  of such Lender.  For purposes of this clause (a),
Swing Line Advances  shall not constitute  utilization  of the Revolving  Credit
Commitments of the Revolving Credit Lenders.

     (b) [Intentionally left blank.]

     (c) Letter of Credit Fees. (i) The Borrower shall pay to the Administrative
Agent for the account of each Revolving  Credit Lender a commission,  payable in
arrears  quarterly on the last Business Day of each March,  June,  September and
December,  commencing  March 31,  1999 and on the  earliest to occur of the full
drawing,  expiration,  termination or  cancellation of any such Letter of Credit
and on the Revolving Credit Termination Date, on such Lender's Pro Rata Share of
the average daily aggregate  Available Amount during such quarter of all Letters
of


                                       47

<PAGE>


Credit  outstanding  from  time to time  at the  rate  per  annum  equal  to the
Applicable  Margin then in effect for  Eurodollar  Advances  under the Revolving
Credit Facility.

     (ii) In addition to the foregoing fees described in (i) above, the Borrower
shall pay to the Issuing Bank, for its own account,  (x) on the Available Amount
of each Letter of Credit  outstanding,  a fronting  fee, for the period from the
date of  issuance  of such  Letter of Credit to and  including  the  termination
thereof,  computed at the rate of one  quarter of one percent  (1/4%) per annum,
payable in arrears  quarterly  on the last  Business  Day of each  March,  June,
September and December of each year and on the date of  termination  thereof and
(y) transfer fees and other  customary  fees and charges in connection  with the
issuance  or  administration  of each Letter of Credit as the  Borrower  and the
Issuing Bank shall agree.

     (d)   Administrative   Agent's  Fees.   The  Borrower   shall  pay  to  the
Administrative  Agent for its own account  such fees as may from time to time be
agreed between the Borrower and the Administrative Agent.

     SECTION 2.9 Conversion of Advances.

     (a)  Optional.  The Borrower may on any Business  Day, upon notice given to
the Administrative  Agent not later than 11:00 A.M. (New York time) on the third
Business  Day prior to the date of the  proposed  Conversion  and subject to the
provisions of Sections 2.7 and 2.10,  Convert all or any portion of the Advances
of one Type  comprising  the same  Borrowing  into  Advances  of the other Type;
provided,  however,  that any Conversion of Eurodollar  Rate Advances into Prime
Rate Advances shall be made only on the last day of an Interest  Period for such
Eurodollar Rate Advances unless the Borrower pays the amounts,  if any, provided
for in Section  11.4(c),  any Conversion of Prime Rate Advances into  Eurodollar
Rate Advances shall be in an amount not less than the minimum  amount  specified
in Section  2.1(c),  no Conversion of any Advances shall result in more separate
Borrowings  than permitted  under Section 2.2(c) and each Conversion of Advances
comprising  part of the same Borrowing  under any Facility shall be made ratably
among the appropriate  Lenders in accordance with their  Commitments  under such
Facility.  Each  such  notice  of  Conversion  shall,  within  the  restrictions
specified above,  specify (i) the date of such Conversion,  (ii) the Advances to
be Converted and (iii) if such Conversion is into Eurodollar Rate Advances,  the
duration  of the  initial  Interest  Period for such  Advances.  Each  notice of
Conversion shall be irrevocable and binding on the Borrower.

     (b)  Mandatory.  (i) On the date on which the  aggregate  unpaid  principal
amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by
payment or prepayment or otherwise,  to less than $500,000,  such Advances shall
automatically Convert into Prime Rate Advances.

     (ii) If the  Borrower  shall fail to select the  duration  of any  Interest
Period for any  Eurodollar  Rate  Advances  in  accordance  with the  provisions
contained  in  the   definition  of  "Interest   Period"  in  Section  1.1,  the
Administrative Agent will forthwith so notify the Borrower


                                       48

<PAGE>



and the  appropriate  Lenders,  whereupon each such Eurodollar Rate Advance will
automatically,  on the last day of the then existing  Interest Period  therefor,
Convert into a Prime Rate Advance.

     (iii)  Upon the  occurrence  and  during  the  continuance  of any Event of
Default and the  acceleration of the Notes,  interest  thereon and other amounts
payable by the  Borrower  under  this  Agreement  and the other  Loan  Documents
pursuant to Article 9, (x) each Eurodollar Rate Advance will  automatically,  on
the last day of the then existing Interest Period therefor, Convert into a Prime
Rate  Advance  and (y) the  obligation  of the  Lenders  to make,  or to Convert
Advances into, Eurodollar Rate Advances shall be suspended.

     SECTION 2.10 Increased Costs, Etc.

     (a) If, after the date hereof, due to (i) the introduction or effectiveness
of, any change in, or any change in the interpretation of, reserve  requirements
included in the Eurodollar Rate Reserve Percentage, or any law or regulation, or
(ii) the compliance with any guideline or request from any central bank or other
governmental  authority (whether or not having the force of law), there shall be
any  increase in the cost to any Lender  Party of agreeing to make or of making,
funding or maintaining  Eurodollar Rate or Prime Rate Advances or of agreeing to
issue or of issuing or  maintaining  Letters of Credit or of agreeing to make or
of making or maintaining  Letter of Credit  Advances  (excluding for purposes of
this Section 2.10 any such  increased  costs  resulting  from (x) Taxes or Other
Taxes (as to which  Section  2.12 shall  govern) and (y) changes in the basis of
taxation of overall net income or overall  gross income by the United  States or
by the foreign  jurisdiction  or state under the laws of which such Lender Party
is organized or has its Applicable  Lending Office or any political  subdivision
thereof),  then the Borrower shall either (i) from time to time,  upon demand by
such Lender Party (with a copy of such demand to the Administrative  Agent), pay
to the  Administrative  Agent for the  account of such Lender  Party  additional
amounts  sufficient to compensate  such Lender Party for such  increased cost or
(ii) repay in full the outstanding  principal balance of such affected Advances,
together with all interest accrued and unpaid thereon; provided, however, that a
Lender Party claiming  additional  amounts under this Section  2.10(a) agrees to
use best efforts  (consistent  with its internal policy and legal and regulatory
restrictions) to designate a different  Applicable  Lending Office if the making
of such a  designation  would  avoid the need for, or reduce the amount of, such
increased  cost that may  thereafter  accrue  and would not,  in the  reasonable
judgment of such  Lender  Party,  be  otherwise  disadvantageous  to such Lender
Party. A certificate as to the amount of such increased  cost,  submitted to the
Borrower by such Lender Party, shall be conclusive and binding for all purposes,
absent manifest error.

     (b) If, after the date hereof, due to (i) the introduction or effectiveness
of, any change in, or any change in the interpretation of, any law or regulation
or (ii) the  compliance  with any  guideline or request from any central bank or
other  governmental  authority  (whether or not having the force of law),  there
shall be any increase in the amount of capital  required or reasonably  expected
to be maintained by any Lender Party or any corporation  controlling such Lender
Party  as a  result  of or  based  upon the  existence  of such  Lender  Party's
commitment to lend or to issue Letters of Credit hereunder and other commitments
of such type or the issuance


                                       49

<PAGE>



or  maintenance  of the Letters of Credit (or similar  contingent  obligations),
then,  upon  demand  by such  Lender  Party  (with a copy of such  demand to the
Administrative  Agent), the Borrower shall pay to the  Administrative  Agent for
the account of such Lender Party,  from time to time as reasonably  specified by
such Lender Party, additional amounts sufficient to compensate such Lender Party
in the  light of such  circumstances,  to the  extent  that  such  Lender  Party
reasonably  determines such increase in capital to be allocable to the existence
of such  Lender  Party's  commitment  to  lend or to  issue  Letters  of  Credit
hereunder  or to the  issuance  or  maintenance  of any  Letters  of  Credit.  A
certificate  as to such  amounts  submitted to the Borrower by such Lender Party
shall be conclusive and binding for all purposes, absent manifest error.

     (c) If, with respect to any  Eurodollar  Rate Advances  under any Facility,
Lenders owed  greater than 50% of the then  aggregate  unpaid  principal  amount
thereof  notify  the  Administrative  Agent  that  the  Eurodollar  Rate for any
Interest  Period for such Advances will not adequately  reflect the cost to such
Lenders of making,  funding or maintaining  their  Eurodollar  Rate Advances for
such Interest  Period,  the  Administrative  Agent shall forthwith so notify the
Borrower and the  appropriate  Lenders,  whereupon (i) each such Eurodollar Rate
Advance  under  any  Facility  will  automatically,  on the last day of the then
existing  Interest Period  therefor,  Convert into a Prime Rate Advance and (ii)
the obligation of the appropriate  Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended until the Administrative Agent shall
notify the Borrower  that such Lenders have  determined  that the  circumstances
causing  such  suspension  no longer  exist,  which it shall do promptly in such
event.

     (d)  Notwithstanding  any  other  provision  of  this  Agreement,   if  the
introduction  or  effectiveness  of,  any  change  in,  or  any  change  in  the
interpretation of, any law or regulation shall make it unlawful,  or any central
bank or other governmental  authority shall assert that it is unlawful,  for any
Lender or its Eurodollar Lending Office to perform its obligations  hereunder to
make Eurodollar Rate Advances or to continue to fund or maintain Eurodollar Rate
Advances  hereunder,  then, on notice thereof and demand therefor by such Lender
to the Borrower  through the  Administrative  Agent (and if such demand is being
made by the  Lender to all  similarly  situated  customers  of such  Lender as a
result of such  events),  (i) each  Eurodollar  Rate Advance under each Facility
under which such Lender has a Commitment will  automatically,  upon such demand,
Convert into a Prime Rate  Advance and (ii) the  obligation  of the  appropriate
Lenders to make, or to Convert Advances into,  Eurodollar Rate Advances shall be
suspended  until the  Administrative  Agent shall notify the Borrower  that such
Lender has determined that the  circumstances  causing such suspension no longer
exist, which it shall do promptly in such event; provided,  however, that before
making any such demand,  such Lender agrees to use its best efforts  (consistent
with its internal policy and legal and regulatory  restrictions)  to designate a
different  Eurodollar  Lending Office if the making of such a designation  would
allow such Lender or its  Eurodollar  Lending  Office to continue to perform its
obligations to make  Eurodollar Rate Advances or to continue to find or maintain
Eurodollar  Rate  Advances  and would not, in the  judgment of such  Lender,  be
otherwise disadvantageous to such Lender.



                                       50

<PAGE>



     SECTION 2.11 Payments and Computations.

     (a) The  Borrower  shall make each payment  hereunder  and under the Notes,
irrespective  of any right of  counterclaim  or  set-off  (except  as  otherwise
provided in Section 2.15),  not later than 11:00 A.M. (New York time) on the day
when due in U.S.  dollars  to the  Administrative  Agent  at the  Administrative
Agent's  Account  in same day funds.  The  Administrative  Agent  will  promptly
thereafter  cause  like  funds  to be  distributed  (i) if such  payment  by the
Borrower  is in respect of  principal,  interest,  commitment  fees or any other
Obligation  then payable  hereunder  and under the Notes to more than one Lender
Party,  to such Lender  Parties for the account of their  respective  Applicable
Lending  Offices  ratably in  accordance  with the  amounts  of such  respective
Obligations  then payable to such Lender Parties and (ii) if such payment by the
Borrower is in respect of any  Obligation  then payable  hereunder to one Lender
Party, to such Lender Party for the account of its Applicable Lending Office, in
each case to be applied in accordance with the terms of this Agreement. Upon its
acceptance  of an Assignment  and  Acceptance  and recording of the  information
contained  therein in the Register  pursuant to Section 11.7(d),  from and after
the effective date of such Assignment and Acceptance,  the Administrative  Agent
shall make all payments hereunder and under the Notes in respect of the interest
assigned  thereby to the Lender Party  assignee  thereunder,  and the parties to
such Assignment and Acceptance  shall make all  appropriate  adjustments in such
payments for periods prior to such effective date directly between themselves.

     (b) If the  Administrative  Agent  receives  funds for  application  to the
Obligations  under the Loan  Documents  under  circumstances  for which the Loan
Documents do not specify the Advances or the Facility to which, or the manner in
which, such funds are to be applied, the Administrative Agent may, but shall not
be obligated to, elect to distribute  such funds to each Lender Party ratably in
accordance with such Lender Party's  proportionate share of the principal amount
of all  outstanding  Advances and the Available  Amount of all Letters of Credit
then outstanding in repayment or prepayment of such of the outstanding  Advances
or other  Obligations  owed to such Lender Party,  and for  application  to such
principal installments, as the Administrative Agent shall direct.

     (c) The Borrower hereby  authorizes each Lender Party, if and to the extent
payment owed to such Lender Party is not made when due hereunder or, in the case
of a Lender,  under the Note held by such  Lender,  to charge  from time to time
against any or all of the Borrower's  accounts with such Lender Party any amount
so due.

     (d) All  computations  of interest,  fees and Letter of Credit  commissions
shall be made by the Administrative Agent on the basis of a year of 360 days, in
each case for the actual number of days  (including  the first day but excluding
the  last  day)  occurring  in the  period  for  which  such  interest,  fees or
commissions are payable;  provided,  however,  that interest on Prime Rate Loans
shall be computed on the basis of a year of 365 days. Each  determination by the
Administrative  Agent of an interest rate, fee or commission  hereunder shall be
conclusive and binding for all purposes, absent manifest error.



                                       51

<PAGE>



     (e) Whenever any payment hereunder or under the Notes shall be stated to be
due on a day other than a Business  Day,  such payment shall be made on the next
succeeding  Business  Day,  and such  extension  of time  shall in such  case be
included in the  computation  of payment of interest or  commitment  fee, as the
case may be; provided,  however,  that, if such extension would cause payment of
interest on or  principal  of  Eurodollar  Rate  Advances to be made in the next
following  calendar  month,  such  payment  shall be made on the next  preceding
Business Day.

     (f) Unless the  Administrative  Agent shall have  received  notice from the
Borrower  prior to the date on which  any  payment  is due to any  Lender  Party
hereunder   that  the  Borrower  will  not  make  such  payment  in  full,   the
Administrative  Agent may assume that the Borrower has made such payment in full
to the Administrative  Agent on such date and the  Administrative  Agent may, in
reliance upon such assumption, cause to be distributed to each such Lender Party
on such due date an amount  equal to the amount then due such Lender  Party.  If
and to the extent the  Borrower  shall not have so made such  payment in full to
the   Administrative   Agent,   each  such  Lender  Party  shall  repay  to  the
Administrative  Agent forthwith on demand such amount distributed to such Lender
Party together with interest thereon,  for each day from the date such amount is
distributed  to such Lender  Party until the date such Lender  Party repays such
amount to the Administrative Agent, at the Federal Funds Rate.

     SECTION 2.12 Taxes.

     (a) Any and all payments by the Borrower hereunder or under the Notes shall
be  made,  in  accordance  with  Section  2.11,  free and  clear of and  without
deduction for any and all present or future taxes, levies, imposts,  deductions,
charges or withholdings, and all liabilities with respect thereto, excluding, in
the case of each Lender  Party and the  Administrative  Agent,  net income taxes
that are imposed by the United States and net income taxes (or  franchise  taxes
imposed  in  lieu  thereof)  that  are  imposed  on  such  Lender  Party  or the
Administrative  Agent by the  state or  foreign  jurisdiction  under the laws of
which  such  Lender  Party or the  Administrative  Agent (as the case may be) is
organized or any political  subdivision  thereof and, in the case of each Lender
Party,  net income taxes (or  franchise  taxes imposed in lieu thereof) that are
imposed on such Lender Party by the state or foreign jurisdiction of such Lender
Party's Applicable Lending Office or any political subdivision thereof (all such
non-excluded  taxes,  levies,  imposts,  deductions,  charges,  withholdings and
liabilities  in  respect  of  payments   hereunder  or  under  the  Notes  being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum  payable  hereunder  or under any
Note to any Lender Party or the Administrative  Agent, (i) the sum payable shall
be increased  as may be  necessary so that after making all required  deductions
(including  deductions  applicable to additional sums payable under this Section
2.12)  such  Lender  Party  or the  Administrative  Agent  (as the  case may be)
receives  an  amount  equal  to the  sum it  would  have  received  had no  such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant  taxation  authority
or other authority in accordance with applicable law.



                                       52

<PAGE>



     (b) In  addition,  the  Borrower  shall pay any  present  or future  stamp,
documentary,  excise,  property or similar  taxes,  charges or levies that arise
from any  payment  made  hereunder  or under  the  Notes or from the  execution,
delivery or  registration  of,  performing  under, or otherwise with respect to,
this Agreement or the Notes (hereinafter referred to as "Other Taxes").

     (c) The Borrower shall  indemnify each Lender Party and the  Administrative
Agent for the full amount of Taxes and Other  Taxes,  and for the full amount of
taxes imposed by any  jurisdiction  on amounts  payable under this Section 2.12,
imposed on or paid by such Lender Party or the Administrative Agent (as the case
may be) and any liability (including  penalties,  additions to tax, interest and
expenses) arising therefrom or with respect thereto,  except with respect to any
Lender  Party  or the  Administrative  Agent,  as the  case  may be,  for such a
liability arising from such Lender Party's or the Administrative Agent's, as the
case may be, willful misconduct or gross negligence.  This indemnification shall
be made within  thirty (30) days from the date on which such Lender Party or the
Administrative  Agent,  as the case may be, makes written  demand  specifying in
reasonable detail the basis therefor.

     (d) Within  thirty  (30) days after the date of any  payment of Taxes,  the
Borrower shall furnish to the  Administrative  Agent, at its address referred to
in Section 11.2, the original  receipt of payment thereof or a certified copy of
such receipt.  In the case of any payment  hereunder or under the Notes by or on
behalf of the Borrower through an account or branch outside the United States or
by or on behalf of the Borrower by a payor that is not a United  States  person,
if the Borrower  determines  that no Taxes are payable in respect  thereof,  the
Borrower  shall  furnish,   or  shall  cause  such  payor  to  furnish,  to  the
Administrative  Agent, at such address,  an opinion of counsel acceptable to the
Administrative  Agent  stating  that such  payment  is exempt  from  Taxes.  For
purposes of this  subsection (d) and subsection  (e), the terms "United  States"
and "United States person" shall have the meanings  specified in Section 7701 of
the Internal Revenue Code.

     (e) Each Lender Party  organized  under the laws of a jurisdiction  outside
the United States  shall,  on or prior to the date of its execution and delivery
of this Agreement in the case of each Initial Lender or Initial Issuing Bank, as
the case may be, and on the date of the Assignment  and  Acceptance  pursuant to
which it became a Lender Party in the case of each other Lender Party,  and from
time  to  time  thereafter  as  requested  in  writing  by the  Borrower  or the
Administrative  Agent (but only so long  thereafter as such Lender Party remains
lawfully  able  to do so),  provide  each of the  Administrative  Agent  and the
Borrower with two (2) original  Internal  Revenue Service forms 1001 or 4224, as
appropriate,  or any successor or other form prescribed by the Internal  Revenue
Service,  certifying  that such  Lender is exempt  from or entitled to a reduced
rate of United States  withholding tax on payments pursuant to this Agreement or
the Notes. If the forms provided by a Lender Party at the time such Lender Party
first becomes a party to this Agreement  indicates or such Lender Party is later
subject  to a United  States  interest  withholding  tax rate in excess of zero,
withholding tax at such rate shall be considered  excluded from Taxes unless and
until such Lender Party provides the  appropriate  form certifying that a lesser
rate  applies,  whereupon  withholding  tax at such  lesser  rate only  shall be
considered  excluded  from Taxes for periods  governed  by such form;  provided,
however, that, if at the date of the Assignment and Acceptance pursuant to which
a Lender Party becomes a party to this


                                       53

<PAGE>



Agreement,  the Lender Party assignor was entitled to payments under  subsection
(a) in respect of United States withholding tax with respect to interest paid at
such date,  then,  to such extent,  the term Taxes shall include (in addition to
withholding  taxes that may be imposed in the future or other amounts  otherwise
includable in Taxes)  United States  withholding  tax, if any,  applicable  with
respect to the Lender  Party  assignee  on such  date.  If any form or  document
referred to in this subsection (e) requires the disclosure of information, other
than information  necessary to compute the tax payable and information  required
on the date  hereof by  Internal  Revenue  Service  form 1001 or 4224,  that the
Lender Party  reasonably  considers to be  confidential,  the Lender Party shall
give notice  thereof to the  Borrower  and shall not be  obligated to include in
such form or document such confidential information.

     (f) For any  period  with  respect  to which a Lender  Party has  failed to
provide the Borrower  with the  appropriate  form  described in  subsection  (e)
(other than if such failure is due to a change in law  occurring  after the date
on which a form originally was required to be provided or if such form otherwise
is not required under  subsection  (e)), such Lender Party shall not be entitled
to indemnification  under subsection (a) or (c) with respect to Taxes imposed by
the United States by reason of such failure;  provided,  however,  that should a
Lender  Party become  subject to Taxes  because of its failure to deliver a form
required  hereunder,  the  Borrower  shall take such steps as such Lender  Party
shall reasonably request to assist such Lender Party to recover such Taxes.

     (g) Any Lender Party claiming any additional  amounts  payable  pursuant to
this Section 2.12 agrees to use reasonable efforts (consistent with its internal
policy and legal and regulatory  restrictions) to change the jurisdiction of its
Eurodollar  Lending  Office if the making of such a change  would avoid the need
for, or reduce the amount of, any such  additional  amounts that may  thereafter
accrue and would not,  in the  reasonable  judgment  of such  Lender  Party,  be
otherwise disadvantageous to such Lender Party.

     SECTION 2.13 Sharing of Payments,  Etc. If any Lender Party shall obtain at
any time any payment (whether  voluntary,  involuntary,  through the exercise of
any right of  set-off,  or  otherwise)  (i) on  account of  Obligations  due and
payable to such Lender Party hereunder or under the Notes at such time in excess
of its ratable  share  (according  to the  proportion  of (x) the amount of such
Obligations  due  and  payable  to such  Lender  Party  at such  time to (y) the
aggregate  amount of the  Obligations  due and  payable  to all  Lender  Parties
hereunder  and under the  Notes at such  time) of  payments  on  account  of the
Obligations  due and payable to all Lender Parties  hereunder or under the Notes
at such time obtained by all the Lender  Parties at such time or (ii) on account
of  Obligations  owing (but not due and payable) to such Lender Party  hereunder
and under the Notes at such time in excess of its ratable  share  (according  to
the proportion of (x) the amount of such Obligations  owing to such Lender Party
at such time to (y) the aggregate  amount of the Obligations  owing (but not due
and payable) to all Lender  Parties  hereunder and under the Notes at such time)
of payments on account of the Obligations owing (but not due and payable) to all
Lender Parties hereunder and under the Notes at such time obtained by all of the
Lender Parties at such time, such Lender Party shall forthwith purchase from the
other Lender Parties such  participations  in the Obligations due and payable or
owing to them, as the case may


                                       54

<PAGE>



be, as shall be  necessary  to cause such  purchasing  Lender Party to share the
excess payment ratably with each of them; provided,  however, that if all or any
portion of such excess  payment is  thereafter  recovered  from such  purchasing
Lender Party,  such purchase from each other Lender Party shall be rescinded and
each such other  Lender  Party shall repay to the  purchasing  Lender  Party the
purchase price to the extent of such Lender Party's ratable share  (according to
the  proportion  of (x) the purchase  price paid to such Lender Party to (y) the
aggregate  purchase price paid to all Lender Parties) of such recovery  together
with an amount equal to such Lender  Party's  ratable  share  (according  to the
proportion of (x) the amount of such other Lender Party's required  repayment to
(y) the total amount of such required repayments to the purchasing Lender Party)
of any interest or other amount paid or payable by the  purchasing  Lender Party
in respect of the total amount so recovered.

The Borrower  agrees that any Lender Party so  purchasing a  participation  from
another  Lender Party  pursuant to this Section 2.13 may, to the fullest  extent
permitted  by law,  exercise all its rights of payment  (including  the right of
set-off)  with  respect to such  participation  as fully as if such Lender Party
were the direct creditor of the Borrower in the amount of such participation.

     SECTION 2.14 Use of Proceeds. The proceeds of the Advances and issuances of
Letters of Credit shall be available,  and the Borrower  shall use such proceeds
and Letters of Credit solely (a) to finance in part the Acquisitions, (b) to pay
fees and expenses  incurred in connection  with the  Acquisitions,  (c) to repay
existing  indebtedness  of the Borrower;  and (d) to finance working capital and
capital expenditures of the Borrower.

     SECTION 2.15  Defaulting  Lenders.  (a) In the event that, at any one time,
(i) any Lender Party shall be a Defaulting  Lender,  (ii) such Defaulting Lender
shall owe a Defaulted  Advance to the Borrower  and (iii) the Borrower  shall be
required to make any payment  hereunder  or under any other Loan  Document to or
for the account of such Defaulting Lender,  then the Borrower may, so long as no
Default  shall occur or be  continuing  at such time and to the  fullest  extent
permitted by applicable  law, set off and otherwise  apply the obligation of the
Borrower to make such  payment to or for the account of such  Defaulting  Lender
against the obligation of such Defaulting Lender to make such Defaulted Advance.
In the event that,  on any date,  the  Borrower  shall so set off and  otherwise
apply its  obligation  to make any such payment  against the  obligation of such
Defaulting  Lender to make any such Defaulted  Advance on or prior to such date,
the amount so set off and otherwise applied by the Borrower shall constitute for
all purposes of this  Agreement and the other Loan  Documents an Advance by such
Defaulting  Lender  made on the date under the  Facility  pursuant to which such
Defaulted Advance was originally  required to have been made pursuant to Section
2.1. Such Advance shall be a Prime Rate Advance and shall be considered, for all
purposes of this Agreement, to comprise part of the Borrowing in connection with
which such Defaulted Advance was originally  required to have been made pursuant
to Section 2.1, even if the other Advances  comprising  such Borrowing  shall be
Eurodollar  Rate Advances on the date such Advance is deemed to be made pursuant
to this  subsection (a). The Borrower shall notify the  Administrative  Agent at
any time the Borrower exercises its right of set-off pursuant to this subsection
(a) and shall set forth in such notice (i) the name of the Defaulting Lender and
the Defaulted Advance required to be made by such


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<PAGE>



Defaulting  Lender and (ii) the amount set off and otherwise  applied in respect
of such Defaulted  Advance  pursuant to this subsection (a). Any portion of such
payment  otherwise  required to be made by the Borrower to or for the account of
such Defaulting Lender which is paid by the Borrower, after giving effect to the
amount set off and otherwise applied by the Borrower pursuant to this subsection
(a), shall be applied by the Administrative Agent as specified in subsection (b)
or (c) of this Section 2.15.

     (b) In the event  that,  at any one time,  (i) any Lender  Party shall be a
Defaulting  Lender,  (ii) such Defaulting Lender shall owe a Defaulted Amount to
the  Administrative  Agent or any of the  other  Lender  Parties  and  (iii) the
Borrower  shall make any payment  hereunder or under any other Loan  Document to
the  Administrative  Agent for the account of such Defaulting  Lender,  then the
Administrative  Agent  may,  on its  behalf or on behalf  of such  other  Lender
Parties and to the fullest  extent  permitted by applicable  law,  apply at such
time the amount so paid by the Borrower to or for the account of such Defaulting
Lender to the payment of each such  Defaulted  Amount to the extent  required to
pay such Defaulted Amount. In the event that the  Administrative  Agent shall so
apply any such amount to the payment of any such  Defaulted  Amount on any date,
the amount so applied  by the  Administrative  Agent  shall  constitute  for all
purposes  of this  Agreement  and the other  Loan  Documents,  payment,  to such
extent, of such Defaulted Amount on such date. Any such amount so applied by the
Administrative   Agent  shall  be  retained  by  the  Administrative   Agent  or
distributed by the Administrative Agent to such other Lender Parties, ratably in
accordance  with the respective  portions of such Defaulted  Amounts  payable at
such time to the Administrative  Agent and such other Lender Parties and, if the
amount of such payment made by the Borrower  shall at such time be  insufficient
to pay all Defaulted Amounts owing at such time to the Administrative  Agent and
the other Lender Parties, in the following order of priority:

     (i) first, to the Administrative  Agent for any Defaulted Amount then owing
to the Administrative Agent; and

     (ii) second,  to the Lender Parties for any Defaulted Amounts then owing to
such  Lender  Parties,  ratably in  accordance  with such  respective  Defaulted
Amounts then owing to such Lender Parties.

Any  portion  of such  amount  paid by the  Borrower  for  the  account  of such
Defaulting  Lender  remaining,  after giving effect to the amount applied by the
Administrative  Agent pursuant to this  subsection  (b), shall be applied by the
Administrative Agent as specified in subsection (c) of this Section 2.15.

     (c) In the event  that,  at any one time,  (i) any Lender  Party shall be a
Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted Advance
or a Defaulted Amount and (iii) the Borrower,  the  Administrative  Agent or any
other Lender Party shall be required to pay or distribute  any amount  hereunder
or under  any other  Loan  Document  to or for the  account  of such  Defaulting
Lender,  then the  Borrower or such other  Lender Party shall pay such amount to
the Administrative Agent to be held by the Administrative  Agent, to the fullest
extent


                                       56

<PAGE>



permitted by applicable law, in escrow or the Administrative Agent shall, to the
fullest extent permitted by applicable law, hold in escrow such amount otherwise
held by it.  Any funds  held by the  Administrative  Agent in escrow  under this
subsection (c) shall be deposited by the Administrative Agent in an account with
Fleet,  in the name and under  the  control  of the  Administrative  Agent,  but
subject to the provisions of this subsection  (c). The terms  applicable to such
account,  including  the rate of  interest  payable  with  respect to the credit
balance  of such  account  from time to time,  shall be Fleet's  standard  terms
applicable to escrow accounts  maintained with it. Any interest credited to such
account  from time to time shall be held by the  Administrative  Agent in escrow
under, and applied by the  Administrative  Agent from time to time in accordance
with the provisions of, this subsection (c). The Administrative  Agent shall, to
the fullest  extent  permitted  by  applicable  law,  apply all funds so held in
escrow from time to time to the extent  necessary to make any Advances  required
to be made by such  Defaulting  Lender  and to pay any  amount  payable  by such
Defaulting   Lender  hereunder  and  under  the  other  Loan  Documents  to  the
Administrative  Agent or any other Lender  Party,  as and when such  Advances or
amounts  are  required  to be made or paid and,  if the amount so held in escrow
shall at any time be  insufficient to make and pay all such Advances and amounts
required to be made or paid at such time, in the following order of priority:

     (i) first, to the Administrative  Agent for any amount then due and payable
by such Defaulting Lender to the Administrative Agent hereunder;

     (ii) second,  to the Lender  Parties for any amount then due and payable by
such Defaulting Lender to such Lender Parties  hereunder,  ratably in accordance
with such respective amounts then due and payable to such Lender Parties; and

     (iii) third,  to the  Borrower for any Advance then  required to be made by
such Defaulting Lender pursuant to a Commitment of such Defaulting Lender.

In the event that any Lender Party that is a  Defaulting  Lender  shall,  at any
time,  cease to be a  Defaulting  Lender,  any funds held by the  Administrative
Agent in  escrow  at such  time  with  respect  to such  Lender  Party  shall be
distributed by the Administrative Agent to such Lender Party and applied by such
Lender  Party to the  Obligations  owing to such Lender Party at such time under
this Agreement and the other Loan Documents in such manner as the Administrative
Agent shall reasonably direct.

     (d) The rights and remedies against a Defaulting  Lender under this Section
2.15 are in addition to other  rights and  remedies  that the  Borrower may have
against such  Defaulting  Lender with respect to any Defaulted  Advance and that
the  Administrative  Agent or any Lender Party may have against such  Defaulting
Lender with respect to any Defaulted Amount.



                                       57

<PAGE>


                                    ARTICLE 3

                              CONDITIONS OF LENDING


     SECTION  3.1  Conditions  Precedent  to Initial  Extension  of Credit.  The
obligation  of each Lender to make an Advance or of the Issuing  Bank to issue a
Letter of Credit on the occasion of the Initial Extension of Credit hereunder is
subject to the satisfaction of each of the following conditions precedent before
or concurrently with the Initial Extension of Credit:

     (a) The  Administrative  Agent shall have  received on or before the day of
the  Initial  Extension  of Credit the  following,  each dated such day  (unless
otherwise specified),  in form and substance  satisfactory to the Administrative
Agent and the Lenders, and in sufficient copies (except for the Notes), for each
Lender Party:

     (i) The Notes  payable to the order of the  Lenders  duly  executed  by the
Borrower.

     (ii) A security  agreement in substantially  the form of Exhibit E granting
to the Administrative  Agent, for the ratable benefit of the Lenders, a security
interest in all of the Collateral of the Borrower and each  Guarantor  (together
with each other security  agreement deliv ered pursuant to Section 5.13, in each
case  as  amended,  supplemented  or  otherwise  modified  from  time to time in
accordance with its terms,  each a "Security  Agreement"),  duly executed by the
Borrower and each Guarantor, together with:

     (A) proper, duly executed financing statements under the Uniform Commercial
Code of all jurisdictions  that the  Administrative  Agent may deem necessary or
desirable in order to perfect and protect the first  priority Liens and security
interests  created  under  the  Security  Agreement,   covering  the  Collateral
described in the Security Agreement which are able to be perfected by filing;

     (B) completed requests for information,  dated on or before the date of the
Initial Extension of Credit,  listing all effective  financing  statements filed
that name the Borrower or any other Loan Party as debtor,  together  with copies
of such financing statements;

     (C) evidence of the  completion of all other  recordings  and filings of or
with respect to the Security  Agreement that the  Administrative  Agent may deem
necessary  or  desirable  in order to  perfect  and  protect  the Liens  created
thereby;

     (D)  evidence  of the  insurance  required  by the  terms  of the  Security
Agreement;



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<PAGE>



     (E) copies of the Assigned Agreements,  if any, referred to in the Security
Agreement, together with a consent (to the extent required by the Administrative
Agent) to such  assignments,  if any, in substantially  the form of Exhibit C to
the Security Agreement,  duly executed by each party to such Assigned Agreements
other than the Borrower;

     (F)  certificates  representing  the  Pledged  Shares  referred  to in  the
Security  Agreement,  accompanied by undated stock powers  executed in blank and
irrevocable proxies;

     (G) a duly  executed  note  assignment  agreement  in  form  and  substance
satisfactory to the Administrative Agent (as amended,  modified and supplemented
from time to time, the "Note Assignment Agreement") covering (and together with)
all  intercompany  notes  made by the  Borrower's  Subsidiaries  payable  to the
Borrower and duly endorsed to the Administrative Agent;

     (H)  in the  case  of  the  Borrower's  Foreign  Subsidiaries,  all  action
necessary to allow the  Administrative  Agent to obtain a valid and enforceable,
first priority,  perfected security interest in 65% of the stock of each Foreign
Subsidiary and a memorandum to the Administrative Agent from appropriate foreign
counsel  confirming  that the  Administrative  Agent,  on behalf of the  Secured
Parties,  has obtained a valid and enforceable first priority perfected security
interest in the  relevant  Pledged  Stock or  outlining  the steps  necessary to
obtain a perfected security interest in the relevant Pledged Stock; and

     (I) evidence that all other action that the  Administrative  Agent may deem
necessary or desirable in order to perfect the first priority liens and security
interests created under the Security Agreement has been taken.

     (iii) If required by the  Administrative  Agent a collateral  assignment of
lease  assigning to the  Administrative  Agent,  for the ratable  benefit of the
Lenders, the Borrower's interest in the lease of certain of its facilities, duly
executed by the Borrower, together with a recognition agreement duly executed by
the property  owner  pursuant to which the  property  owner shall (A) consent to
such collateral  assignment,  (B) acknowledge the interest of the Administrative
Agent,  for the  ratable  benefit  of the  Secured  Parties  and (C)  permit the
Administrative  Agent or its assignee to become the successor in interest to the
Borrower under the lease.

     (iv)  If  required  by  the   Administrative   Agent:  (A)  fully  executed
counterparts of Mortgages duly executed by the applicable  Loan Party,  together
with evidence that  counterparts of the Mortgages have been delivered to a title
insurance  company  (reasonably  acceptable to the Lenders) insuring the Lien of
the Mortgages for recording in all places to the extent  necessary or desirable,
in the  reasonable  judgment of the Lenders,  to create a valid and  enforceable
first priority lien on each Mortgaged  Property listed on Schedule 4.21 (subject
only


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<PAGE>



to Permitted Real Property  Encumbrances) in favor of Administrative Agent (or a
trustee acting on behalf of Administrative Agent required or desired under local
law) for the benefit of the Secured Parties;

     (B) Mortgagee  title  insurance  policies (or binding  commitments to issue
such title insurance policies) which shall (1) be issued to Administrative Agent
for the benefit of the Secured Parties by title insurance  companies  reasonably
satisfactory to the  Administrative  Agent (the "Mortgage  Policies") in amounts
reasonably  satisfactory to the Administrative Agent insuring that the Mortgages
are  valid and  enforceable  first  priority  mortgage  liens on the  respective
Mortgaged  Properties,  free and clear of all  defects,  encumbrances  and other
Liens except Permitted Real Property Encumbrances,  (2) be in form and substance
satisfactory to the Administrative Agent in its sole discretion, (3) include, as
appropriate,  an endorsement for future advances under this Agreement, the Notes
and the Mortgages and such other endorsements that the  Administrative  Agent in
its  discretion  may  reasonably  request,  (4) not  include  an  exception  for
mechanics' liens, and (5) provide for affirmative insurance and such reinsurance
(including  direct  access  agreements)  as  the  Administrative  Agent  in  its
discretion may reasonably request; and

     (C)  Surveys,  in form and  substance  satisfactory  to the  Administrative
Agent, of each Mortgaged  Property listed on Schedule 4.21,  dated a recent date
reasonably  acceptable  to the  Administrative  Agent,  certified  by a licensed
professional  surveyor in a manner satisfactory to the Administrative  Agent for
the benefit of the Lenders.

     (v) An intellectual  property security  agreement in substantially the form
of Exhibit G hereto granting to the Administrative Agent for the ratable benefit
of the Lenders  security  interest in all of the Borrower's and each Guarantor's
intellectual  property (together with each other intellectual  property security
agreement  delivered  pursuant  to  Section  5.13,  in  each  case  as  amended,
supplemented  or otherwise  modified  from time to time in  accordance  with its
terms, each an "Intellectual Property Security Agreement"), duly executed by the
Borrower and each  Guarantor,  together  with  evidence that all action that the
Administrative  Agent may deem  necessary  or  desirable in order to perfect and
protect  the first  priority  Liens and  security  interests  created  under the
Intellectual Property Security Agreement has been taken.

     (vi) All accrued fees and expenses of the  Administrative  Agent (including
the reasonable fees and expenses of counsel for the Agent).

     (vii) [Intentionally left blank.]

     (viii) A  guaranty  in  substantially  the  form of  Exhibit  H hereto  (as
hereafter  amended,  supplemented  or  otherwise  modified  from time to time in
accordance with its terms, whether one or more, the "Subsidiary Guaranty"), duly
executed by each Domestic Subsidiary of the Borrower.



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<PAGE>



     (ix) Certified copies of resolutions of the Board of Directors of each Loan
Party approving the Acquisitions, this Agreement, the Notes, and each other Loan
Document and Acquisition Document to which it is or is to be a party, and of all
documents evidencing other necessary corporate action and governmental and other
third party  approvals and consents,  if any, with respect to the  Acquisitions,
this  Agreement,  the  Notes,  and each  other  Loan  Document  and  Acquisition
Document.

     (x) A copy of the  charter of each Loan Party and each  amendment  thereto,
certified  (as of a date  reasonably  near the date of the Initial  Extension of
Credit) by the Secretary of State of the  jurisdiction of its  incorporation  as
being a true and correct copy thereof.

     (xi) A copy of a certificate of the Secretary of State of the  jurisdiction
of its  incorporation,  dated within five (5)  Business  Days of the date of the
Initial  Extension  of Credit,  listing  the charter of each Loan Party and each
amendment  thereto on file in its office and certifying that (A) such amendments
are the only amendments to such Loan Party's charter on file in its office,  (B)
to the extent  obtainable,  that such Loan Party has paid all franchise taxes to
the date of such certificate and (C) such Loan Party is duly incorporated and in
good  standing or  existing,  as the case may be, under the laws of the State of
the jurisdiction of its incorporation.

     (xii) A copy of a  certificate  of the  Secretary  of State  of each  State
listed on Schedule 4.2, dated reasonably near the date of the Initial  Extension
of Credit,  stating that each Loan Party is duly  qualified and in good standing
as a foreign corporation in such State and has filed all annual reports required
to be filed to the date of such certificate.

     (xiii) A certificate of each Loan Party signed on behalf of such Loan Party
by a  Responsible  Officer and the  Secretary or an Assistant  Secretary of such
Loan Party,  dated the date of the Initial  Extension of Credit (the  statements
made in such  certificate  shall  be true on and as of the  date of the  Initial
Extension of Credit),  certifying as to (A) the absence of any amendments to the
charter  of  such  Loan  Party  since  the  date  of the  Secretary  of  State's
certificate  referred to in Section  3.1(a)(xi),  (B) a true and correct copy of
the bylaws of such Loan Party as in effect on the date of the Initial  Extension
of Credit,  (C) the due  incorporation and good standing of such Loan Party as a
corporation  organized under the laws of the jurisdiction of its  incorporation,
and the absence of any  proceeding  for the  dissolution  or liquidation of such
Loan Party, (D) the truth of the representations and warranties contained in the
Information Memorandum, any Pre-Commitment  Information,  the Loan Documents and
the  Acquisition  Documents  as though made on and as of the date of the Initial
Extension  of  Credit  except  for  such  representations  and  warranties  that
expressly  relate to an  earlier  date and except  for  changes in the  ordinary
course  of  business  none  of  which  individually  or in the  aggregate  could
reasonably be expected to have a Material  Adverse Effect and (E) the absence of
any event occurring and continuing,  or resulting from the Initial  Extension of
Credit, that constitutes a Default or an Event of Default.

     (xiv) A certificate of the Secretary or an Assistant Secretary of each Loan
Party  certifying  the names and true  signatures  of the  officers of such Loan
Party authorized to sign this


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<PAGE>



Agreement,  the Notes,  each other Loan  Document to which they are or are to be
parties and the other documents to be delivered hereunder and thereunder.

     (xv) Such  financial,  business and other  information  regarding each Loan
Party, each Acquisition Target and each such Person's Subsidiaries as any of the
Lenders shall have reasonably requested, including, without limitation,

     (A)  information  as  to  possible  contingent  liabilities,  tax  matters,
Environmental   Actions,   Environmental   Permits,   obligations  under  Plans,
Multiemployer  Plans and Welfare  Plans,  collective  bargaining  agreements and
other arrangements with employees; and

     (B) annual  financial  statements  dated December 31, 1997, with respect to
each of (1) the Borrower,  (2) Columbia House and (3) Radio  Spirits,  and dated
January 31,  1998,  with  respect to Premier  which are  audited  (except to the
extent otherwise  described in Section 4.6), interim financial  statements dated
the end of the most recent fiscal  quarter for which  financial  statements  are
available  (or, in the event the Initial  Lenders' due diligence  review reveals
material  changes  since such  financial  statements,  as of a later date within
thirty  (30) days of the day of the  Initial  Extension  of  Credit),  pro forma
financial  statements as to each of the Loan Parties and each Acquisition Target
and forecasts prepared by management of the Borrower,  all in form and substance
reasonably satisfactory to the Lenders, which pro forma financial statements and
forecasts  have  heretofore  been  delivered  to  the  Administrative  Agent  by
Borrower.

     (xvi) A Notice of Borrowing with respect to each Facility pursuant to which
the Borrower shall request an Initial Extension of Credit in an aggregate amount
of not more than $27,000,000.

     (b) The Initial  Lenders  shall be satisfied  with the  corporate and legal
structure  and  capitalization  of each Loan Party and each of its  Subsidiaries
after the Acquisitions,  including, without limitation, the terms and conditions
of the charter,  by-laws and each class of capital  stock of each Loan Party and
each such  Subsidiary  and of each  agreement  or  instrument  relating  to such
structure or capitalization.

     (c) The Initial  Lenders shall be satisfied that all Existing  Debt,  other
than the Surviving  Debt, has been (or, upon  consummation  of the  Acquisitions
will be)  prepaid,  redeemed  or  defeased in full or  otherwise  satisfied  and
extinguished  and that all  Surviving  Debt  shall  be on terms  and  conditions
satisfactory to the Initial Lenders.

     (d)  There  shall  have  occurred  no  change  in the  business,  condition
(financial or otherwise),  results of  operations,  performance or properties of
the Borrower and its  Subsidiaries,  taken as a whole,  since September 30, 1998
that could  reasonably be expected to result in a Material  Adverse Effect,  and
there shall have  occurred no change in the  business,  condition  (financial or
otherwise), results of operations, performance on properties of any Acquisition


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<PAGE>



Target and its  Subsidiaries,  taken as a whole,  since September 30, 1998, that
could reasonably be expected to result in a Material Adverse Effect.

     (e) Other than the Disclosed Litigation, there shall exist no action, suit,
investigation,  litigation or  proceeding  pending or threatened in any court or
before any  arbitrator or  governmental  or regulatory  agency or authority that
could reasonably be expected to have a Material Adverse Effect,  and there shall
have been no Material  Adverse Effect in the status,  or financial effect on the
Borrower or its  Subsidiaries as a whole, of the Disclosed  Litigation from that
described on Schedule 4.9.

     (f) All  governmental  and third party consents and approvals  necessary in
connection with each aspect of the  Acquisitions  and the Facilities  shall have
been obtained  (without the imposition of any conditions that are not acceptable
to the Initial  Lenders)  and shall  remain in effect;  all  applicable  waiting
periods  shall have  expired  without  any  adverse  action  being  taken by any
competent  authority;  and no law  or  regulation  shall  be  applicable  in the
judgment of the Initial Lenders that restrains,  prevents or imposes  materially
adverse conditions upon any aspect of the Acquisitions or the Facilities.

     (g) The Initial Lenders shall have completed a due diligence  investigation
(including, without limitation, a review of all customer and supplier contracts)
of the Borrower,  the other Loan parties and their  respective  Subsidiaries  in
scope, and with results,  satisfactory to the Initial Lenders;  the Borrower and
each of the Guarantors shall have given the Administrative  Agent such access to
their  respective  books  and  records  as the  Administrative  Agent  may  have
requested  (including access so as to permit the Administrative Agent to conduct
a field audit, the results of which shall be satisfactory to the  Administrative
Agent) in order to carry out its  investigations,  appraisals and analyses,  and
the Administrative Agent shall have received all additional financial,  business
and other information regarding the Borrower and its Subsidiaries and properties
as they shall have requested (including the report of J.H. Cohn LLP).

All of the  information,  taken  as a whole,  provided  by or on  behalf  of the
Borrower or any of its Subsidiaries to the Administrative  Agent and the Initial
Lenders  prior  to  their   commitment  in  respect  of  the   Facilities   (the
"Pre-Commitment  Information")  shall  be  true  and  correct  in  all  material
respects,  and no development  or change shall have occurred,  and no additional
information shall have come to the attention of the Administrative  Agent or the
Initial  Lenders,  that (i) has resulted in or could  reasonably  be expected to
result in a material change in, or material  deviation from, the  Pre-Commitment
Information,  taken as a whole, or (ii) has had or could  reasonably be expected
to have a Material Adverse Effect. The Administrative  Agent shall be reasonably
satisfied with the results,  taken as a whole, of interviews conducted and other
investigations  made  with  respect  to the  Borrower's  relationships  with its
customers.

     (h) The Borrower and each Guarantor shall have delivered a certificate,  in
form  and  substance  reasonably   satisfactory  to  the  Administrative  Agent,
attesting  to  the  Solvency  of  the  Borrower  or  Guarantor,  as  applicable,
immediately before and immediately after giving effect to the Transaction,  from
its respective Chief Financial Officer.


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<PAGE>



     (i) The Borrower  shall have  demonstrated  to the  Administrative  Agent's
reasonable  satisfaction  that:  (i)  the  operations  of the  Borrower  and its
Subsidiaries comply in all material respects with applicable  Environmental Laws
and health and safety statutes and regulations,  including,  without limitation,
regulations  promulgated  under the Federal  Resource  Conservation and Recovery
Act;  (ii) such  operations  are not the subject of any federal,  state or local
investigation  evaluating the need for remedial action  involving an expenditure
to respond to such Environmental Actions; and (iii) neither the Borrower nor any
Guarantor has or could  reasonably  be expected to have any material  contingent
liability in connection with any Environmental Action.

     (j) The  Administrative  Agent shall be reasonably  satisfied  that (i) the
Borrower  and its  Subsidiaries  will be able to meet in all  material  respects
their respective  obligations under all employee and retiree welfare plans, (ii)
the employee  benefit  plans of the Borrower  and its  Subsidiaries  are, in all
material respects, funded in accordance with the minimum statutory requirements,
(iii) no material  "reportable event" (as defined in ERISA, but excluding events
for which  reporting  has been  waived)  has  occurred  as to any such  employee
benefit plan and (iv) no termination  of, or withdrawal  from, any such employee
benefit plan has occurred or is contemplated  that could  reasonably be expected
to result in a material  liability.  The  Borrower  shall have  delivered to the
Administrative  Agent certified  copies of each  employment  agreement and other
compensation arrangement with each executive officer of each Loan Party.

     (k) The Administrative Agent shall be reasonably satisfied with the amount,
types and terms and  conditions of all insurance  maintained by or, after giving
effect  to  the  Acquisitions,   to  be  maintained  by  the  Borrower  and  its
Subsidiaries,  and the  Administrative  Agent shall have  received  endorsements
naming the Administrative  Agent, on behalf of the Lenders,  as loss payee or an
additional insured, as applicable, under all insurance policies to be maintained
with respect to the properties of the Borrower and its Subsidiaries  forming any
part of the Lenders'  Collateral under the Security Agreement and the other Loan
Documents and Collateral Documents.

     (l) The Administrative Agent shall have received  satisfactory  opinions of
counsel for the Borrower and the Guarantors and local and special counsel to the
extent reasonably requested by the Administrative Agent, as to the Transaction.

     (m) There shall exist no Default or Event of Default  under any of the Loan
Documents,  and all legal  matters  incident to the Initial  Extension of Credit
shall be reasonably satisfactory to counsel for the Administrative Agent.

     (n) All accrued  reasonable fees and expenses of the  Administrative  Agent
and the  Initial  Lenders  (including  the fees and  expenses of counsel for the
Administrative Agent and local counsel for the Administrative  Agent) shall have
been paid.

     (o) Each of the  Acquisitions  shall  have  been  consummated  (prior to or
concurrently  with the  Initial  Extension  of  Credit)  (and the  rights of the
Borrower  to  consummate  the CH  Acquisition  shall  have been  assigned  to CH
Subsidiary) pursuant to the terms and conditions of


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<PAGE>



the Acquisition Agreement therefor (and none of the material terms or conditions
of any Acquisition  Agreement shall have been waived or modified except with the
consent of the Administrative  Agent and the Required Lenders) and in compliance
with all  applicable  laws and with all necessary  consents and  approvals.  The
final  terms and  conditions  of the  Acquisition  Documents  and the  resulting
corporate  structure  of  the  Borrower  and  its  Subsidiaries   following  the
Acquisitions   shall  be  reasonably   satisfactory   in  all  respects  to  the
Administrative  Agent and the Lenders,  and the Administrative  Agent shall have
received  certified copies of each of the Acquisition  Documents,  each of which
shall be  satisfactory  to the Lenders  and in full force and effect;  and shall
have had such  discussions  with such members of management  of the  Acquisition
Targets as the Administrative Agent shall have requested.

     (p) The  Administrative  Agent shall be  satisfied  that there are no state
takeover  laws  and  no  supermajority  charter  provisions  applicable  to  any
Acquisition,  or that any  conditions  to avoiding such  restrictions  have been
satisfied.

     (q) The  Administrative  Agent shall have received all Senior  Subordinated
Debt Documents (including without limitation the Letter Agreement and the Escrow
Agreement),  certified  as true and  correct  by a  Responsible  Officer  of the
Borrower,  all of which Senior Subordinated Debt Documents shall be satisfactory
to the  Administrative  Agent,  together  with a  certification  that  at  least
$15,000,000  in cash shall have been  received by the Borrower from the issuance
of the Senior  Subordinated  Debt on or before the Closing Date and that 100% of
said proceeds were utilized for the purpose of affecting the Acquisitions.

     (r) All Advances made under this Agreement shall be in full compliance with
all applicable  requirements  of law,  including,  without  limitation,  Federal
Reserve Regulations T, U, and X.

     (s) The  Administrative  Agent  shall  have  received a duly  executed  and
delivered  counterparts  of landlord  waivers from all  landlords  and leasehold
mortgage  holders and bailee  letters  from all  warehousemen  and bailees  with
respect  to any  Inventory  located  at a  location  that  is not  owned  by the
Borrower,  as deemed necessary or desirable in the  Administrative  Agent's sole
discretion,  to preserve or otherwise in respect of the  Administrative  Agent's
rights in  Collateral.  The  Administrative  Agent shall also have received such
bank consent agreements, third party consents, intercreditor agreements or other
agreements,  as deemed necessary or desirable in the Administrative Agent's sole
discretion,  to preserve or otherwise in respect of the  Administrative  Agent's
rights in the Collateral.

     (t) The  Administrative  Agent shall have  received  such other  approvals,
opinions  or  documents  as any  Lender  through  the  Administrative  Agent may
reasonably  request,  and all legal matters  incident to such Borrowing shall be
satisfactory to counsel for the Administrative Agent.

     SECTION 3.2  Conditions  Precedent  to Each  Borrowing  and  Issuance.  The
obligation of each appropriate Lender to make an Advance (other than a Letter of
Credit Advance made by the Issuing Bank or a Revolving Credit Lender pursuant to
Section 2.3(c) and a Swing Line


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<PAGE>



Advance made by a Revolving Credit Lender pursuant to Section  2.2(b)),  and the
obligation  of the  Issuing  Bank to issue a Letter  of  Credit  (including  the
initial  issuance  thereof)  or renew a Letter  of  Credit  and the right of the
Borrower to request the issuance or renewal of a Letter of Credit, shall each be
subject  to the  further  conditions  precedent  that on the  date of each  such
Borrowing or issuance or renewal:

     (a) Each of the conditions  precedent listed in Section 3.1 shall have been
satisfied or waived in accordance with this Agreement.

     (b) The following  statements  shall be true and the  Administrative  Agent
shall  have  received  a  certificate  signed by a duly  authorized  Responsible
Officer  of the  Borrower,  dated  the date of such  Borrowing  or  issuance  or
renewal,  stating  that (and  each of the  giving  of the  applicable  Notice of
Borrowing,  Notice of Swing Line  Borrowing,  or Notice of Issuance or Notice of
Renewal and the  acceptance by the Borrower of the proceeds of a Borrowing or of
a Letter of Credit or the  renewal  of a Letter  of Credit  shall  constitute  a
representation and warranty by the Borrower that both on the date of such notice
and on the date of such  Borrowing  or issuance or renewal such  statements  are
true):

     (i) the representations and warranties  contained in each Loan Document are
correct on and as of such date, before and after giving effect to such Borrowing
or issuance or renewal and to the  application  of the  proceeds  therefrom,  as
though  made  on and as of  such  date  (except  for  such  representations  and
warranties  that  expressly  relate to an earlier date and except for changes in
the ordinary  course of business which are not prohibited  hereunder and none of
which  individually or in the aggregate  would  reasonably be expected to have a
Material Adverse Effect); and

     (ii) no event has  occurred  and is  continuing,  or would result from such
Borrowing  or  issuance  or  renewal  or from the  application  of the  proceeds
therefrom, that consti tutes a Default or an Event of Default.

     (c) The  Administrative  Agent shall have  received  such other  approvals,
opinions or documents as any appropriate Lender through the Administrative Agent
may  reasonably  request,  and all legal matters  incident to such  Borrowing or
issuance  of such  Letter of Credit  shall be  satisfactory  to counsel  for the
Administrative Agent.

     SECTION 3.3  Determinations  Under Section 3.1. For purposes of determining
compliance  with the  conditions  specified in Section 3.1, each Initial  Lender
shall be deemed to have  consented  to,  approved or accepted or to be satisfied
with each  document or other matter  required  thereunder  to be consented to or
approved by or  acceptable  or  satisfactory  to the Initial  Lenders  unless an
officer  of  the   Administrative   Agent   responsible  for  the   transactions
contemplated by the Loan Documents shall have received  written notice from such
Initial Lender prior to the Initial Extension of Credit specifying its objection
thereto and, if the Initial  Extension of Credit  consists of a Borrowing,  such
Initial  Lender shall not have made available to the  Administrative  Agent such
Initial Lender's ratable portion of such Borrowing.


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<PAGE>



                                    ARTICLE 4

                 REPRESENTATIONS AND WARRANTIES OF THE BORROWER


     The Borrower represents and warrants as follows:

     SECTION  4.1  Organization.  Each  Loan  Party  (a) is a  corporation  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction of its incorporation, (b) is duly qualified and in good standing as
a foreign  corporation  in each  other  jurisdiction  in which it owns or leases
property or in which the conduct of its business requires it to so qualify or be
licensed  except  where the  failure  to so  qualify  or be  licensed  could not
reasonably  be  expected  to  have a  Material  Adverse  Effect  and (c) has all
requisite  corporate power and authority  (including,  without  limitation,  all
governmental licenses,  permits and other approvals) to own or lease and operate
its  properties and to carry on its business as now conducted and as proposed to
be conducted.

     SECTION 4.2  Subsidiaries.  Set forth on Schedule  4.2 hereto is a complete
and  accurate  list of the  Borrower  and all  Subsidiaries  of each Loan Party,
showing  as of the date  hereof  (and  updated on a  quarterly  basis to reflect
changes   permitted   under  this   Agreement)  (i)  the   jurisdiction  of  its
incorporation or formation,  (ii) the  jurisdictions in which such Loan Party is
duly qualified and in good standing as a foreign  corporation  or Person,  (iii)
the number of shares of each class of capital  stock or other  equity  interests
authorized,  and the number outstanding,  and as to each of them that is a legal
entity  other  than a  corporation  (but not a natural  person),  and the record
owners  (other  than  shares  of  the  Borrower  publicly  held  other  than  by
Affiliates)  of such equity  interests,  in each case after giving effect to the
Acquisitions   and  any  Permitted   Acquisitions  and  the  percentage  of  the
outstanding  shares or other  interests  of each such class owned  (directly  or
indirectly)  by such  Loan  Party and the  number  of shares or other  interests
covered by all outstanding options,  warrants,  rights of conversion or purchase
and similar  rights after giving  effect to the  Acquisitions  and any Permitted
Acquisition.  All of the outstanding  capital stock or other interests of all of
the Borrower and each of such  Subsidiaries  has been validly  issued,  is fully
paid and non-assessable and is owned by such Loan Party (except for the publicly
owned stock of the Borrower) or one or more of its  Subsidiaries  free and clear
of all Liens, except those created under the Collateral Documents.

     SECTION 4.3 Corporate  Power,  Authorization.  The execution,  delivery and
performance  by each Loan Party of this  Agreement,  the Notes,  each other Loan
Document and each  Acquisition  Document to which it is or is to be a party, and
the  consummation  of the  Transaction,  are within such Loan Party's  corporate
powers,  have been duly authorized by all necessary corporate action, and do not
(a)  contravene  such Loan  Party's  charter  or  bylaws,  (b)  violate  any law
(including,  without  limitation,  the Securities  Act of 1933, as amended,  the
Securities  Exchange Act of 1934, as amended,  and the Racketeer  Influenced and
Corrupt Organizations Chapter of the Organized Crime Control Act of 1970), rule,
regulation (including, without limitation,  Regulation T, U or X of the Board of
Governors of the Federal Reserve System),


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order, writ, judgment,  injunction, decree, determination or award, (c) conflict
with or result in the breach of, or  constitute  a default  under,  any material
contract,  loan agreement,  indenture,  mortgage,  deed of trust, lease or other
material  instrument or agreement binding on or affecting any Loan Party, any of
its  Subsidiaries  or any of their  respective  properties  where the  conflict,
breach  or  default  relates  to an  instrument,  agreement  or  other  document
involving assets,  revenues or liabilities in excess of $250,000 individually or
$500,000 in the  aggregate or otherwise  could  reasonably be expected to have a
Material  Adverse  Effect,  or (d)  except  for  the  Liens  created  under  the
Collateral  Documents,  result in or require the creation or  imposition  of any
Lien upon or with respect to any of the  properties  of any Loan Party or any of
its  Subsidiaries.  No Loan Party or any of its  Subsidiaries is in violation of
any such law, rule,  regulation,  order,  writ,  judgment,  injunction,  decree,
determination  or  award or in  breach  of any such  contract,  loan  agreement,
indenture,  mortgage, deed of trust, lease or other instrument or agreement, the
violation  or breach of which  could  reasonably  be expected to have a Material
Adverse Effect.

     SECTION 4.4  Governmental  Authorizations,  Approvals.  No authorization or
approval or other action by, and no notice to or filing with,  any  governmental
authority or regulatory body or any other third party is or was required for (a)
the due  execution,  delivery,  recordation,  filing or  performance by any Loan
Party of this Agreement,  the Notes,  any other Loan Document or any Acquisition
Document  to  which it is or is to be a party,  or for the  consummation  of the
Transaction, (b) the grant by any Loan Party of the Liens granted by it pursuant
to the  Collateral  Documents,  (c) the  perfection or  maintenance of the Liens
created  by the  Collateral  Documents  (including  the  first  priority  nature
thereof)  which  Liens are able to be  perfected  by  filings  or the  taking of
possession  with  respect  to the  Collateral  or such  other  actions as may be
required by the Administrative  Agent and agreed upon by the Borrower or (d) the
exercise by the Administrative Agent or any Lender Party of its rights under the
Loan  Documents  or the  remedies in respect of the  Collateral  pursuant to the
Collateral Documents, except for the authorizations, approvals, actions, notices
and filings listed on Schedule 4.4, all of which have been duly obtained, taken,
given  or made  and are in full  force  and  effect,  except  for  such  actions
regarding the perfection of certain items of Collateral not required to be taken
by the  Administrative  Agent  or  except  where  the  failure  to  receive  any
authorizations,  approvals,  actions,  notices  or  filings  under  instruments,
agreements  or other  documents  relates to an  instrument,  agreement  or other
document  involving  assets,  revenues  or  liabilities  in excess  of  $250,000
individually,  or $500,000 in the aggregate or otherwise would not be reasonably
likely to have a Material  Adverse  Effect.  All applicable  waiting  periods in
connection  with the  Transaction  have expired  without any action  having been
taken by any competent authority restraining,  preventing or imposing materially
adverse  conditions  upon the  Transaction  or the rights of the Loan Parties or
their Subsidiaries  freely to transfer or otherwise dispose of, or to create any
Lien on, any properties now owned or hereafter acquired by any of them.

     SECTION 4.5 Due  Execution,  Validity,  Enforceability.  This Agreement and
each  Acquisition  Document has been,  and each of the Notes and each other Loan
Document has been or when delivered  hereunder will have been, duly executed and
delivered  by each Loan  Party  thereto.  This  Agreement  and each  Acquisition
Document is, and each of the Notes and each other Loan Document has been or when
delivered hereunder will be, the legal, valid and binding


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obligation of each Loan Party  thereto,  enforceable  against such Loan Party in
accordance with its terms,  except (a) as such  enforceability may be limited by
applicable bankruptcy,  insolvency,  reorganization,  moratorium or similar laws
affecting the enforcement of creditors' rights generally,  except that such laws
shall not materially interfere with the practical realization of the benefits of
the Security Documents or the security interests or Liens created thereby except
for (i) possible delay,  (ii) situations which may arise under Chapter 11 of the
Bankruptcy Code, and (iii) equitable orders of the Bankruptcy  Court, and (b) to
the extent that such  enforceability is subject to general  principles of equity
(regardless of whether such  enforcement is considered in a proceeding in equity
or at law).

     SECTION 4.6 Financial Statements.  The Borrower has delivered or at Closing
will deliver to the Administrative  Agent (i) the balance sheets of the Borrower
as at December 31, 1997, and the related statements of income and cash flows for
the fiscal year then ended,  accompanied  by an opinion of KPMG Peat Marwick LLP
with respect to such  financial  statements,  (ii) the balance sheet of Columbia
House as at December 31,  1997,  and the related  statements  of income and cash
flows for the  fiscal  year  then  ended,  accompanied  by an  opinion  of Price
Waterhouse  Coopers LLP, (iii) the balance sheet of Radio Spirits as at December
31,  1997,  and the related  statements  of income and cash flows for the fiscal
year then ended,  accompanied  by an opinion of BD&A, and (iv) the balance sheet
of Premier as at January 31, 1998, and the related statements of income and cash
flows for the fiscal year then ended, accompanied by a report of Edward A. Mach,
CPA as to the review of such  financial  statements.  The  Borrower  has further
delivered  or at  Closing  will  deliver  to the  Administrative  Agent,  (i) an
unaudited  pro  forma  balance  sheet of AIC as at July 31,  1998 and  unaudited
statements  of income of AIC for the year ended  December 31, 1997 and the seven
months ended July 31, 1998, (ii) the consolidated  balance sheet of the Borrower
and its  Subsidiaries  as at  September  30, 1998 and the  related  consolidated
statements  of income and cash flows for the nine months  then ended,  (iii) the
balance  sheet  of  Columbia  House as at  September  30,  1998 and the  related
statements  of income and cash flows for the nine months  then  ended,  (iv) the
balance  sheet  of Radio  Spirits  as at  September  30,  1998  and the  related
statements  of income and cash flows for the nine  months  then  ended,  (v) the
balance  sheet of  Premier as at July 31,  1998 and the  related  statements  of
income and cash flows for the six months then ended. The financial statements of
the Borrower and its Subsidiaries  (excluding the Acquisition  Targets) referred
to above  have  been  duly  certified  by the  Chief  Financial  Officer  of the
Borrower,  copies of which have been  furnished  to each Lender  Party,  present
fairly,  subject,  in the case of the interim  balance sheet as at September 30,
1998 and said  statements  of income  and cash  flows for the nine  months  then
ended, to normal year-end audit adjustments, the Consolidated (and, with respect
to  the  balance  sheets  dated  December  31,  1997,  consolidating)  financial
condition  of the  Borrower  and  its  Subsidiaries  as at  such  date  and  the
Consolidated  (and,  with respect to the statements of income dated December 31,
1997,  consolidating)  results  of  the  operations  of  the  Borrower  and  its
Subsidiaries  for the period  ended on such date,  all in  accordance  with GAAP
applied on a consistent  basis, and, since September 30, 1998, there has been no
change that could  reasonably be expected to have a Material  Adverse  Effect on
the Borrower and its Subsidiaries or, to its knowledge,  material adverse effect
on the  business,  financial  condition,  results  of  operations,  performance,
reasonably  foreseeable  business  prospects or  properties  of the  Acquisition
Targets taken as a whole; provided that after the date


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<PAGE>



of this Agreement the  immediately  preceding  reference to the Borrower and its
Subsidiaries  shall be deemed to  include  reference  to the  businesses  of the
Acquisition  Targets acquired pursuant to the Acquisitions.  Nothing has come to
the  attention  of the Borrower  which  causes it to believe that the  financial
statements  of any of the  Acquisition  Targets  contain an untrue  statement of
material fact or omit to state a material  fact  necessary to make the financial
statements not misleading which fact or omission could reasonably be expected to
have  a  material  adverse  effect  on the  business,  condition  (financial  or
otherwise), results of operations,  performance, reasonably foreseeable business
prospects or properties of any Acquisition Target.

     SECTION 4.7 Pro Forma Financial Statements.  (a) The Consolidated pro forma
balance  sheet of the Borrower  and its  Subsidiaries,  and for Columbia  House,
Radio Spirits, Premier and AIC and their respective Subsidiaries in each case as
at June 30, 1998, and the related Consolidated pro forma statement of income and
cash flows of the  Borrower  and its  Subsidiaries  and  Columbia  House,  Radio
Spirits,  Premier and AIC and their respective  Subsidiaries for the period then
ended,  have  been  furnished  to  the  Administrative  Agent  and  present  the
Consolidated pro forma financial  condition of the Borrower and its Subsidiaries
and  Columbia  House,  Radio  Spirits,  Premier  and  AIC and  their  respective
Subsidiaries  as at  such  date  and  the  Consolidated  pro  forma  results  of
operations  of the  Borrower and its  Subsidiaries  and  Columbia  House,  Radio
Spirits,  Premier and AIC and their respective Subsidiaries for the period ended
on such date, in each case after giving effect to the Transaction.  The Borrower
believes that the pro forma financial  statements  described above were prepared
on a reasonable  basis based upon the  information  available to the Borrower at
the time of preparation thereof.


     (b) The  projections  delivered  on the Closing Date (and after the date of
this  Agreement,  the budgets  delivered to the Lenders  pursuant to Section 7.5
hereof) have been prepared on the basis of the assumptions accompanying them and
reflect as of the date  thereof the  Borrower's  good faith  projections,  after
reasonable analysis, of the matters set forth therein, based on such assumptions
(it being understood that projected financial information is not to be viewed as
facts and that the actual results during the period or periods  covered  thereby
may differ from the projected results and that the differences may be material).

     SECTION 4.8 Accurate Information.  None of the Information Memorandum,  any
Pre-Commitment  Information or any  information,  exhibit or report furnished by
any Loan Party to the  Administrative  Agent or any Lender  Party in  connection
with the Loan Documents or pursuant to the terms of the Loan Documents contained
any  untrue  statement  of a  material  historical  fact or  omitted  to state a
material  historical  fact  necessary  to make the  statements  made therein not
misleading,   provided  that  with  regard  to  any  forward-looking  statements
contained  in  such  documents  or  information,   exhibits  or  reports,   such
forward-looking  statements are based on assumptions  that were reasonable as of
the time at which they were made.

     SECTION 4.9 Litigation. Other than the litigation disclosed on Schedule 4.9
(the  "Disclosed  Litigation"),   there  is  no  action,  suit,   investigation,
litigation or proceeding affecting the Borrower,  any other Loan Party or any of
their respective Subsidiaries, including, without


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limitation,  any Environmental Action, pending or, to its knowledge,  threatened
before any court,  governmental  agency or arbitrator  that could  reasonably be
expected to have a Material Adverse Effect,  and there has been no change in the
status, or financial effect on any Loan Party or any of its Subsidiaries, of the
Disclosed  Litigation from that described on Schedule 4.9 that could  reasonably
be expected to have a Material Adverse Effect.

     SECTION  4.10  Regulation  U. Neither the Borrower nor any other Loan Party
nor any of their respective Subsidiaries is engaged in the business of extending
credit for the purpose of purchasing or carrying Margin Stock.

     SECTION 4.11 ERISA.

     (a) Except as set forth on Schedule  4.11 hereto,  neither the Borrower nor
any  of  its  ERISA  Affiliates   maintains  or  has  maintained  any  Plans  or
Multiemployer  Plans. Set forth on Schedule 4.11 is a complete and accurate list
of all Welfare Plans and all defined  contribution plans in respect of which any
Loan Party could have liability.

     (b) Except as set forth in the financial  statements referred to in Section
4.6 and in Article 7,  neither the  Borrower,  any of the other Loan Parties nor
any of their respective  Subsidiaries has any material liability with respect to
"expected post retirement benefit  obligations"  within the meaning of Statement
of Financial Accounting Standards No. 106.

     SECTION 4.12 Casualty.  Neither the business nor the properties of any Loan
Party or any of its Subsidiaries are affected by any fire, explosion,  accident,
strike,  lockout or other  labor  dispute,  drought,  storm,  hail,  earthquake,
embargo,  act of God or of the public  enemy or other  casualty  (whether or not
covered by  insurance)  that could  reasonably  be  expected  to have a Material
Adverse Effect.

     SECTION 4.13 Environmental Matters.

     (a) The  operations  and  properties  of each  Loan  Party  and each of its
Subsidiaries   comply  in  all  known  material  respects  with  all  applicable
Environmental Laws and Environmental Permits, all known past non-compliance with
such  Environmental  Laws and  Environmental  Permits has been resolved  without
ongoing  obligations or costs, and no circumstances  exist that could reasonably
be expected to (i) form the basis of an  Environmental  Action  against any Loan
Party  or  any of  its  Subsidiaries  or any  of  their  properties  that  could
reasonably be expected to have a Material  Adverse Effect or (ii) cause any such
property to be subject to any material restrictions on ownership, occupancy, use
or transferability under any Environmental Law.

     (b) Except as disclosed in the environmental  assessment  reports listed on
Schedule 4.13 hereto, (i) none of the properties  currently or formerly owned or
operated by any Loan Party or any of its  Subsidiaries is listed or proposed for
listing on the NPL or on the CERCLIS or any  analogous  foreign,  state or local
list or is adjacent to any such property;  (ii) there are no and, to the best of
its knowledge, never have been any underground or aboveground


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storage tanks or any surface impoundments,  septic tanks, pits, sumps or lagoons
in which  Hazardous  Materials are being or, to the best of its knowledge,  have
been treated,  stored or disposed on any property currently owned or operated by
any Loan Party or any of its  Subsidiaries or on any property  formerly owned or
operated  by any  Loan  Party  or any of its  Subsidiaries;  (iii)  there  is no
asbestos or  asbestos-containing  material on any  property  currently  owned or
operated  by any Loan  Party  or any of its  Subsidiaries;  and  (iv)  Hazardous
Materials  have not been  released,  discharged  or disposed of on any  property
currently owned or operated by any Loan Party or any of its Subsidiaries, or any
property   formerly  owned  or  operated  by  any  Loan  Party  or  any  of  its
Subsidiaries.

     (c) Except as disclosed in the environmental  assessment  reports listed on
Schedule 4.13, no Loan Party nor any of its  Subsidiaries  is undertaking or has
not  completed,   either   individually  or  together  with  other   potentially
responsible  parties,  any investigation or assessment or Remedial,  Response or
Removal  action  relating  to any actual or  threatened  release,  discharge  or
disposal of  Hazardous  Materials  at any site,  location or  operation,  either
voluntarily or pursuant to the order of any governmental or regulatory authority
or the  requirements  of any  Environmental  Law;  and all  Hazardous  Materials
generated,  used, treated,  handled or stored at, or transported to or from, any
property  currently  owned  or  operated  by  any  Loan  Party  or  any  of  its
Subsidiaries or any property formerly owned or operated by any Loan Party or any
of its Subsidiaries have been disposed of in a manner not reasonably expected to
result in material liability to any Loan Party or any of its Subsidiaries.

     SECTION 4.14 Restrictive Agreements.  Except as set forth on Schedule 4.14,
no Loan Party nor any of its  Subsidiaries is a party to any indenture,  loan or
credit agreement or any lease or other agreement or instrument or subject to any
charter or corporate  restriction  that could  reasonably  be expected to have a
Material Adverse Effect.

     SECTION 4.15 Priority of Liens. The Collateral Documents, together with all
filings and  delivery to the  Administrative  Agent or its agent of  instruments
requiring possession for perfection create in favor of the Administrative Agent,
for the ratable  benefit of the Lenders,  a valid and perfected  first  priority
security  interest  in the  Collateral  which  security  interest  is able to be
perfected by filings or the taking of possession with respect to the Collateral,
to the extent the Administrative Agent actually takes such possession,  securing
the payment of the Obligations,  and all filings and other actions  necessary or
reasonably  desirable to perfect and protect such security interest as requested
by the Administrative Agent have been duly taken. The Loan Parties are the legal
and beneficial  owners of the Collateral free and clear of any Lien,  except for
the liens and security  interests created or expressly  permitted under the Loan
Documents, and except for the CH Deferred Purchase Price Rights.

     SECTION 4.16 Taxes.

     (a) Each Loan Party and each of its  Subsidiaries  has filed, has caused to
be filed or has been  included in all tax  returns  (Federal,  state,  local and
foreign)  required to be filed and has paid all taxes  shown  thereon to be due,
together with applicable interest and penalties.


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<PAGE>



     (b) Set forth on  Schedule  4.16 is a complete  and  accurate  list of each
taxable year of each Loan Party and each of its  Subsidiaries  for which Federal
income  tax  returns  have  been  filed  and for  which  the  expiration  of the
applicable  statute of limitations for assessment or collection has not occurred
by reason of extension or otherwise (an "Open Year").

     (c) There is no unpaid  amount of  adjustments  to the  Federal  income tax
liability  of each  Loan  Party  and each of its  Subsidiaries  proposed  by the
Internal Revenue Service to the Borrower or any of its Subsidiaries with respect
to Open Years. No issues have been raised by the Internal Revenue Service to the
Borrower  or any of its  Subsidiaries  in  respect of Open  Years  that,  in the
aggregate, could reasonably be expected to have a Material Adverse Effect.

     (d)  There is no unpaid  amount  of  adjustments  to the  state,  local and
foreign tax liability of each Loan Party and each of its  Subsidiaries  proposed
by any state,  local or foreign taxing authorities to the Borrower or any of its
Subsidiaries  (other than amounts arising from adjustments to Federal income tax
returns).  No issues have been raised by such taxing authorities to the Borrower
or  any of its  Subsidiaries  that,  individually  or in  the  aggregate,  could
reasonably be expected to have a Material Adverse Effect.

     (e) No  "ownership  change" as defined  in Section  382(g) of the  Internal
Revenue Code, and no event that would result in the application of the "separate
return limitation year" or "consolidated return change of ownership" limitations
under the Federal income tax consolidated return regulations,  has occurred with
respect to any Loan Party.

     SECTION 4.17 Compliance with Securities Laws. No Loan Party and none of any
Loan Party's Subsidiaries is an "investment  company," or an "affiliated person"
of, or "promoter" or "principal  underwriter"  for, an "investment  company," as
such terms are  defined  in the  Investment  Company  Act of 1940,  as  amended.
Neither the making of any  Advances,  nor the issuance of any Letters of Credit,
nor the  application of the proceeds or repayment  thereof by the Borrower,  nor
the consummation of the  Transaction,  will violate any provision of such Act or
any  rule,  regulation  or  order  of the  Securities  and  Exchange  Commission
thereunder  or any  takeover,  disclosure  or other  federal,  state or  foreign
securities  law or  Regulations  T, U or X of the  Federal  Reserve  Board.  The
Borrower  is not  subject  to  regulation  under any  federal,  state or foreign
statute or regulation which limits its ability to incur Debt.

     SECTION 4.18 Solvency.  The Borrower is, individually and together with its
Subsidiaries, Solvent.

     SECTION 4.19 Debt.

     (a) Set forth on Schedule  4.19(a) is a complete and  accurate  list of all
Debt of the Borrower and its Subsidiaries the principal amount of each such Debt
which is greater than $250,000  (the  "Existing  Debt"),  showing as of the date
hereof immediately before giving effect to the Transactions the principal amount
outstanding thereunder and the maturity date thereof.



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     (b) Set forth on Schedule  4.19(b) is a complete and  accurate  list of all
Debt of the Borrower and its Subsidiaries the principal amount of each such Debt
which is greater than $100,000, which Debt shall remain outstanding after giving
effect to the Transactions (the "Surviving Debt"), showing as of the date hereof
the principal amount outstanding  thereunder,  the maturity date thereof and the
amortization schedule therefor.

     SECTION 4.20 No Defaults, Compliance with Laws.

     (a)  Except as set  forth on  Schedule  4.20  hereto,  no Loan  Party is in
default  under  any  agreement,  ordinance,   resolution,  decree,  bond,  note,
indenture,  order or judgment to which it is a party or by which it is bound, or
any other agreement or other instrument by which any of the properties or assets
owned by it or used in the conduct of its  business is affected,  which  default
would be  reasonably  likely to have a Material  Adverse  Effect,  except to the
extent  that any such  default  in  respect  of an  order or  judgment  is being
contested in good faith and by proper proceedings and adequate reserves and does
not otherwise constitute an Event of Default under this Agreement.

     (b) Each Loan Party has complied and is in  compliance in all respects with
all applicable laws, rules, ordinances, regulations, resolutions, orders, writs,
decrees  and  other  similar   documents  and  instruments  of  all  courts  and
governmental authorities, bureaus and agencies, domestic and foreign, including,
without limitation,  any Regulatory  Authority and all applicable  provisions of
the  Americans  with  Disabilities  Act  (42  U.S.C.  ss.  12101-12213)  and the
regulations   issued   thereunder   and  all  applicable   Environmental   Laws,
non-compliance  with  which  could  reasonably  be  expected  to have a Material
Adverse Effect.

     SECTION 4.21 Owned Real Property.  Set forth on Schedule 4.21 is a complete
and  accurate  list of all real  property  owned by any Loan Party or any of its
Subsidiaries  or in which any Loan Party has an interest  as a contract  vendee,
showing  as of the date  hereof  the street  address,  county or other  relevant
jurisdiction,  state,  record owner and book and estimated  fair value  thereof.
Such Loan Party or such Subsidiary has good, marketable and insurable fee simple
title to such real property,  free and clear of all Liens,  other than Permitted
Real  Property  Encumbrances.   Each  Mortgage  creates,  as  security  for  the
obligations  purported to be secured thereby, a valid and enforceable  perfected
security interest in and Lien on all of the Mortgaged  Property (and will create
a valid and enforceable  perfected security interest in and Lien on all fixtures
and improvements related to such Mortgaged Property and affixed or added thereto
on or after  the  Closing  Date) in favor of the  Administrative  Agent (or such
other  trustees  that may be  named  therein)  for the  benefit  of the  Secured
Parties,  superior to and prior to the rights of all third Persons  (except that
the security  interest  created in the Mortgaged  Property may be subject to the
Permitted Real Property  Encumbrances  related  thereto) and subject to no other
Liens (other than Permitted Real Property Encumbrances).

     SECTION 4.22 Leased Real Property. Set forth on Schedule 4.22 is a complete
and accurate list of all leases of real  property  under which any Loan Party or
any of its Subsidiaries is the lessee,  showing as of the date hereof the street
address,  county  or  other  relevant  jurisdic-

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tion, state, lessor, lessee,  expiration date and annual rental cost thereof. To
the best knowledge of each Loan Party,  each such lease is the legal,  valid and
binding  obligation of the lessor  thereof,  enforceable in accordance  with its
terms,   except  (a)  as  such  enforceability  may  be  limited  by  applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement  of  creditors'  rights  generally,  and (b) to the extent that such
enforceability is subject to general principles of equity (regardless of whether
such enforcement is considered in a proceeding in equity or at law).

     SECTION 4.23 Material  Contracts.  Set forth on Schedule 4.23 is a complete
and  accurate  list  of all  Material  Contracts  of  each  Loan  Party  and its
Subsidiaries, showing as of the date hereof the parties, subject matter and term
thereof.  Except as could not reasonably be expected to have a Material  Adverse
Effect,  each such  Material  Contract  has been duly  authorized,  executed and
delivered by each Loan Party and its  Subsidiaries,  as the case may be, and any
other parties thereto,  has not been amended or otherwise  modified,  is in full
force and effect and is binding upon and enforceable against each Loan Party and
its  Subsidiaries,  as the  case  may  be,  and any  other  parties  thereto  in
accordance with its terms,  except (a) as such  enforceability may be limited by
applicable bankruptcy,  insolvency,  reorganization,  moratorium or similar laws
affecting the enforcement of creditors' rights generally,  and (b) to the extent
that such  enforceability is subject to general principles of equity (regardless
of whether such  enforcement is considered in a proceeding in equity or at law).
There exists no material default under any Material  Contract by the Borrower or
any of its  Subsidiaries  party thereto and, to the best  knowledge of each Loan
Party,  there exists no default  under any Material  Contract by any other party
thereto.

     SECTION  4.24  Investments.  Set forth on Schedule  4.24 is a complete  and
accurate list of all Investments in excess of $250,000 held by any Loan Party or
any of its  Subsidiaries,  showing as of the date hereof the amount,  obligor or
issuer and maturity, if any, thereof.

     SECTION  4.25  Intellectual  Property.  Set  forth  on  Schedule  4.25 is a
complete and  accurate  list of all patents,  trademarks,  trade names,  service
marks and copyrights,  and all applications  therefor and licenses  thereof,  of
each Loan Party or any of its  Subsidiaries,  showing as of the date  hereof the
jurisdiction  in  which  registered,   the  registration  number,  the  date  of
registration  and the  expiration  date.  Each  Loan  Party  and  each of  their
respective Subsidiaries owns or has rights to use all patents, trademarks, trade
names,  service marks,  copyrights and other intellectual  property necessary to
conduct its  business  as now or  heretofore  conducted  by it or proposed to be
conducted  by it.  Each  Loan  Party and each of their  respective  Subsidiaries
conducts its business and affairs without  infringement of or interference  with
any patent, trademark, trade name, service mark, copyright or other intellectual
property of any other Person  except for  infringements  or  interferences  that
would have an immaterial effect on the Borrower and its Subsidiaries  taken as a
whole or on the rights and remedies of the Lender Parties and the Administrative
Agent. The Intellectual  Property Security Agreement,  together with all filings
and other actions  required to be taken in  connection  therewith,  creates,  as
security  for the  obligations  purported  to be  secured  thereby,  a valid and
enforceable  perfected  security  interest in and Lien on all of the  Collateral
purported to be covered thereby in favor of the Administrative Agent for


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the benefit of the Secured  Parties,  superior to and prior to the rights of all
third Persons except for Permitted Liens.

     SECTION 4.26 Acquisition Documents.  (a) Each Acquisition Document to which
any Loan Party or any of its  respective  Subsidiaries  is a party has been duly
executed and  delivered by such Loan Party or such  Subsidiary,  as the case may
be, and, to the best knowledge of the Borrower,  each  Acquisition  Document has
been duly executed and delivered by the parties  thereto other than the Borrower
and its Subsidiaries,  and is in full force and effect. The  representations and
warranties of any Loan Party and each of its respective  Subsidiaries  contained
in each Acquisition Document to which such Loan Party or such Subsidiary, as the
case may be, is a party are true and  correct in all  material  respects  on the
date hereof and will be true and correct in all material respects on the Closing
Date  and the  Acquisition  Date,  as if made  on  each of such  dates,  and the
Administrative  Agent and each Lender  Party shall be entitled to rely upon such
representations  and  warranties  with the same force and effect as if they were
incorporated  in this  Agreement and made to the  Administrative  Agent and each
Lender  Party  directly  as of the  date  hereof,  the  Closing  Date,  and  the
Acquisition Date.

     (b) True and correct copies of each of the Acquisition  Documents have been
delivered  to  the  Administrative  Agent,  and  as of  the  Closing  Date,  the
Acquisitions shall have been consummated in accordance  therewith,  and no party
thereto shall have waived any material term or condition contained therein.

     SECTION  4.27 Fees.  No  broker's or finder's  fees or  commissions  or any
similar  fees or  commissions  will be  payable  by any Loan Party or any of its
Subsidiaries  with respect to the incurrence and maintenance of the Obligations,
any  other  transaction  contemplated  by the  Loan  Documents  or any  services
rendered  in  connection  with any such  transactions,  except for such fees and
commissions  payable by any Loan Party or any of its  Subsidiaries  which in the
aggregate do not exceed  $200,000.  The Borrower hereby  covenants and agrees to
indemnify  the  Administrative  Agent and each Lender Party against and hold the
Administrative  Agent and each Lender Party  harmless from any claim,  demand or
liability for broker's or finder's fees or similar fees or commissions.

     SECTION 4.28 Government Consents for Conduct of Business.

     (a) Except as set forth on  Schedule  4.4,  each Loan Party has,  and is in
good  standing  with respect to, all  approvals,  permits,  licenses,  consents,
authorizations,  franchises,  certificates,  and  inspections  of all Regulatory
Agencies  and are  otherwise  necessary  for a Loan Party to continue to conduct
business  and own,  use,  operate,  and  maintain  its  property  and  assets as
heretofore  conducted,  owned,  used,  operated,  and maintained  which,  if not
obtained  (whether  directly  or by  lawful  and  effective  assignment)  or not
maintained  in good  standing,  could  reasonably be expected to have a Material
Adverse  Effect.  No such approval,  permit,  license,  consent,  authorization,
franchise,  or  certificate  is  conditioned  or limited  any more so than as is
generally the case with respect to Persons  engaged in the same or similar lines
of  business.  Each such  approval,  permit,  license,  consent,  authorization,
franchise, or certificate was duly and


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validly  granted or issued,  is in full force and effect,  and neither has been,
nor, to the knowledge of any Loan Party,  has been  threatened  to be,  amended,
modified, suspended, rescinded, revoked, forfeited, or assigned. Further, to its
knowledge,  no condition(s)  exist(s) or event(s) has (have) occurred that, with
the giving of notice or lapse of time or both,  could  result in the  amendment,
modification,  suspension, rescission, revocation, forfeiture, or non-renewal of
any such  approval,  permit,  license,  consent,  authorization,  franchise,  or
certificate.


                                    ARTICLE 5

                              AFFIRMATIVE COVENANTS


     While any of the  Commitments is outstanding  and, in the event any Advance
remains  outstanding,  so long as the  Borrower  or any  other  Loan  Party  are
indebted to any of the Lender Parties or the  Administrative  Agent under any of
the Loan  Documents,  any Letter of Credit is  outstanding  and until payment in
full  of the  Notes  and  full  and  complete  performance  of all of its  other
obligations arising hereunder, the Borrower shall:

     SECTION 5.1 Compliance with Law. Comply, and cause each of its Subsidiaries
to  comply,  in  all  material  respects,   with  all  applicable  laws,  rules,
regulations  and  orders,  such  compliance  to  include,   without  limitation,
compliance with ERISA; provided, however, that the Borrower and its Subsidiaries
shall not be required to comply with any such laws, rules, regulation and orders
to the extent that its obligation to do so is being  contested in good faith and
by proper  proceedings and adequate  reserves are being maintained in connection
with such circumstances.

     SECTION 5.2 Payment of Taxes, Etc. Timely pay and discharge, and cause each
of its Subsidiaries to timely pay and discharge,  (a) all taxes, assessments and
governmental  charges or levies imposed upon it or upon its property and (b) all
lawful  claims that,  if unpaid,  might by law become a Lien upon its  property;
provided,  however, that the Borrower and its Subsidiaries shall not be required
to pay or  discharge  any such tax,  assessment,  charge or claim  that is being
contested in good faith and by proper  proceedings  and as to which  appropriate
reserves are being  maintained,  unless and until any Lien  resulting  therefrom
attaches to its property and becomes  enforceable against the Borrower or any of
its Subsidiaries.

     SECTION 5.3 Compliance with  Environmental  Laws. Comply, and cause each of
its  Subsidiaries  and all lessees and other Persons  operating or occupying its
properties  to  comply,   in  all  material   respects,   with  all   applicable
Environmental Laws and Environmental Permits; obtain and renew and cause each of
its  Subsidiaries  to  obtain  and renew all  Environmental  Permits  reasonably
necessary for its operations and properties;  and conduct, and cause each of its
Subsidiaries to conduct,  any investigation,  study,  sampling and testing,  and
undertake any Removal, Remedial or other Response action necessary to remove and
clean up all Hazardous Materials from any of its properties,  in accordance with
the requirements of all Environmental


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Laws;  provided,  however,  that the Borrower and its Subsidiaries  shall not be
required to comply with any such  Environmental  Law or Environmental  Permit or
undertake any such cleanup, Removal,  Remedial,  Response or other action to the
extent  that its  obligation  to do so is being  contested  in good faith and by
proper  proceedings  and  adequate  reserves  as  reasonably  determined  by the
Administrative Agent are being maintained with respect to such circumstances.

     SECTION 5.4 Preparation of Environmental  Reports. The Borrower agrees that
the  Administrative  Agent may, upon reasonable prior notice,  from time to time
(but in any  event  no  more  frequently  than  once  every  two  years)  in its
reasonable  discretion,  retain,  at  the  Borrower's  expense,  an  independent
professional consultant to prepare environmental site assessment reports for the
Borrower  or any of its  Subsidiaries  and/or to review any report  relating  to
Hazardous  Materials  prepared by or for the  Borrower  and,  upon a  reasonable
belief that the Borrower or any of its Subsidiaries has breached any covenant or
representation  with respect to  environmental  matters or that there has been a
material  violation  of  Environmental  Laws  by  the  Borrower  or  one  of its
Subsidiaries, the Administrative Agent may conduct its own investigation of such
matter at any facility or property currently owned, leased,  operated or used by
the  Borrower  or one of its  Subsidiaries  and the  Borrower  agrees to use its
commercially  reasonable  efforts to obtain  permission  for the  Administrative
Agent's  professional  consultant to conduct its own  investigation  of any such
matter at any facility or property previously owned, leased, operated or used by
the  Borrower or one of its  Subsidiaries.  The  Borrower  and its  Subsidiaries
hereby  grant  to the  Administrative  Agent,  its  employees,  consultants  and
contractors,  the  right to  enter  into or onto the  facilities  or  properties
currently  owned,  leased,  operated or used by the Borrower or its Subsidiaries
upon  reasonable  notice to the  Borrower to perform  such  assessments  on such
property  as  are   reasonably   necessary  to  conduct  such  a  review  and/or
investigation.  Any such investigation of any such facility or property shall be
conducted,  unless  otherwise  agreed to by the Borrower and the  Administrative
Agent,  during normal business hours and, to the extent reasonably  practicable,
shall be  conducted so as not to interfere  with the ongoing  operations  at any
facility or property or to cause any damage or loss to any facility or property.
The Borrower and the Administrative  Agent hereby acknowledge and agree that any
report of any investigation conducted at the request of the Administrative Agent
will be  obtained  and  shall be used by the  Administrative  Agent  and  Lender
Parties for the purpose of internal  credit  decisions to monitor and police the
Advances and/or protect the Administrative  Agent's and Lender Parties' security
interests in the Collateral.  The Administrative  Agent agrees to deliver a copy
of any such report to the  Borrower  with the  understanding  that the  Borrower
acknowledges  and agrees that (i) the Borrower will  indemnify and hold harmless
the  Administrative  Agent  and each  Lender  Party  from any  costs,  losses or
liabilities  relating  to the  Borrower's  use of or reliance on such report and
(ii)  neither  the   Administrative   Agent  nor  any  Lender  Party  makes  any
representation or warranty with respect to such report.

     SECTION 5.5 Maintenance of Insurance. (a) Maintain, and cause each of their
Subsidiaries to maintain,  insurance with  responsible  and reputable  insurance
companies or  associations in such amounts and covering such risks as is usually
carried by companies engaged in similar businesses and owning similar properties
in the same general  areas in which such  Borrower or such  Subsidiary  operates
including, without limitation, the policies described on


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Schedule  5.5  (or  other  policies  comparable  thereto);  (b)  file  with  the
Administrative  Agent upon its request a detailed list of the insurance  then in
effect,  stating the names of the insurance companies,  the amounts and rates of
the insurance,  the dates of the expiration thereof and the properties and risks
covered  thereby;  and (c)  deliver  to the  Administrative  Agent,  in form and
substance reasonably  satisfactory to the Administrative Agent,  endorsements to
(A) all  "all-risk"  and casualty and (if any) business  interruption  insurance
naming the  Administrative  Agent, on behalf of itself and the Lenders,  as loss
payee if permitted thereunder (or assignee, in the case of business interruption
insurance,  if any) insuring in the case of "all-risk" against loss or damage by
fire, lightening, windstorm, explosion, hail, tornado, and if to the extent in a
flood hazard area, a flood insurance  policy,  and (B) all general liability and
other liability  policies naming the  Administrative  Agent, on behalf of itself
and the Lenders, as additional insured if permitted  thereunder,  and providing,
in any event, that such insurance  policies shall not be canceled without thirty
(30)  days'  prior  written  notice  thereof  by the  respective  insurer to the
Administrative  Agent  and shall  contain  standard  non-contributory  mortgagee
clause endorsement in favor of the  Administrative  Agent with respect to hazard
insurance coverage.

     SECTION 5.6 Preservation of Corporate  Existence,  Etc. Except as otherwise
expressly permitted in the Loan Documents preserve and maintain,  and cause each
of its  Subsidiaries to preserve and maintain,  its existence,  legal structure,
legal name, and to the extent  necessary for it to conduct its business,  rights
(charter and statutory) permits, licenses, approvals, privileges and franchises.

     SECTION 5.7 Visitation Rights.

     (a) At any  reasonable  time and from time to time during  normal  business
hours, upon reasonable notice,  permit the  Administrative  Agent, or, after the
occurrence of a Default,  the Lender Parties,  or any agents or  representatives
thereof,  to examine and make copies of and abstracts from the records and books
of account of and visit the properties of the Borrower and its Subsidiaries, and
to discuss the  affairs,  finances  and  accounts of the  Borrower  and any such
Subsidiaries with any of their officers or directors.

     (b) Permit the Administrative  Agent and the Lender Parties to conduct such
commercial finance examinations and/or Collateral audits of the Borrower and its
Subsidiaries  during  each  calendar  year  as  the  Administrative   Agent  may
reasonably  request during normal business hours and so as not to interfere with
the ongoing operations of the Borrower and its Subsidiaries.

     SECTION 5.8 Keeping of Books.  Keep, and cause each of its  Subsidiaries to
keep,  proper  books of record and  account,  in which full and correct  entries
shall be made of all financial  transactions  and the assets and business of the
Borrower and each Subsidiary in accordance with GAAP.

     SECTION 5.9  Maintenance of  Properties,  Etc.  Maintain and preserve,  and
cause each of its  Subsidiaries to maintain and preserve,  all of its properties
that are reasonably necessary in the


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conduct of its business in good working order and  condition,  ordinary wear and
tear excepted and except for insured casualty losses on such properties.

     SECTION 5.10  Compliance  with Terms of  Leaseholds.  Make all payments and
otherwise  perform all  obligations in respect of all leases of real property to
which the Borrower or any of its  Subsidiaries  is a party,  keep such leases in
full force and effect and not allow such leases to lapse or be terminated or any
rights  to  renew  such  leases  to  be  forfeited   or  canceled,   notify  the
Administrative Agent of any default by any party with respect to such leases and
cooperate  with  the  Administrative  Agent  in all  respects  to cure  any such
default,  and cause each of its Subsidiaries to do so except, in any case, where
the  failure  to do so,  either  individually  or in the  aggregate,  could  not
reasonably be expected to have a Material Adverse Effect.

     SECTION 5.11 Performance of Material  Contracts.  Perform and observe,  and
cause each of its Subsidiaries to perform and observe, all of the material terms
and  provisions  of each  Material  Contract to be  performed or observed by it,
maintain,  and cause each of its  Subsidiaries  to maintain,  each such Material
Contract  in  full  force  and  effect,  and  enforce,  and  cause  each  of its
Subsidiaries  to enforce,  each such Material  Contract in  accordance  with its
terms,  except where the failure to do so would not be reasonably likely to have
a  Material  Adverse  Effect  and  except  where its  failure  to do so is being
contested in good faith and by proper proceedings.

     SECTION 5.12 Transactions with Affiliates. Notwithstanding anything in this
Agreement to the contrary, except as set forth in Schedule 5.12 hereto, conduct,
and cause  each of its  Subsidiaries  to  conduct,  all  transactions  otherwise
permitted  under the Loan Documents  with any of their  Affiliates on terms that
are fair and reasonable and no less favorable to the Borrower or such Subsidiary
than it would obtain in a comparable  arms-length  transaction with a Person not
an Affiliate;  provided,  however, that this Section 5.12 shall not be deemed to
prohibit  any  intercompany  transactions  solely  between the  Borrower and its
Wholly-Owned  Subsidiaries  carried  out in the  ordinary  course  of  business,
subject,  however,  to any applicable  provisions of Article 6, and shall not be
deemed to prohibit the transactions contemplated by the Senior Subordinated Debt
Documents  as in effect on the date hereof,  including  the Warrants (as defined
therein).

     SECTION 5.13 Agreement to Grant Additional Security.

     (a)  Promptly,  and  in  any  event  within  thirty  (30)  days  after  the
acquisition of assets of the type that would have constituted  Collateral at the
date hereof and investments of the type that would have  constituted  Collateral
on the date hereof  (other  than  assets  with a fair market  value of less than
$50,000),  including the capital  stock of any direct or indirect  Subsidiary of
the Borrower,  notify the Administrative Agent of the acquisition of such assets
or  investments  and,  to  the  extent  not  already  Collateral  in  which  the
Administrative   Agent  has  a  perfected  security  interest  pursuant  to  the
Collateral  Documents,  such  assets  and  investments  will  become  additional
Collateral  hereunder to the extent the Administrative Agent deems the pledge of
such assets  practicable (the "Additional  Collateral"),  and the Borrower will,
and will  cause  each of its  direct  and  indirect  Subsidiaries  to,  take all
necessary action, including the filing of appropriate financing


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statements  under the  provisions of the UCC,  applicable  foreign,  domestic or
local laws,  rules or  regulations  in each of the offices  where such filing is
necessary or appropriate to grant  Administrative Agent a perfected Lien in such
Collateral  (or  comparable  interest  under  foreign law in the case of foreign
Collateral)  pursuant  to and to the  full  extent  required  by the  Collateral
Documents and this Agreement.

     (b)  Promptly,  and in any event no later  than  thirty  (30) days  after a
request with respect thereto,  cause each of the Borrower's  direct and indirect
Subsidiaries  (except such as the  Administrative  Agent shall exempt) to become
party to, or to execute and deliver, a Subsidiary  Guaranty,  guarantying to the
Administrative Agent and the Lenders the prompt payment, when and as due, of all
Obligations  of the  Loan  Parties  under  the  Loan  Documents,  including  all
obligations under any hedging agreements.

     (c)  Promptly,  and in any event no later  than  thirty  (30) days  after a
request with respect thereto,  cause each Guarantor created or established after
the date hereof to grant to the Administrative Agent, for the ratable benefit of
the Lenders,  a first priority Lien on all property (tangible and intangible) of
such Guarantor,  including,  without limitation, all of the capital stock of any
of  its  Domestic  Subsidiaries  and  65%  of the  stock  of any of its  Foreign
Subsidiaries,  upon terms similar to those set forth in the Collateral Documents
and otherwise  satisfactory in form and substance to the  Administrative  Agent.
The Borrower shall cause each Guarantor,  at its own expense,  to become a party
to a Security Agreement, an Intellectual Property Security Agreement, a Mortgage
and any other Collateral  Document and to execute,  acknowledge and deliver,  or
cause the execution,  acknowledgment  and delivery of, and thereafter  register,
file  or  record  in  any  appropriate  governmental  office,  any  document  or
instrument  reasonably  deemed  by  Administrative  Agent  to  be  necessary  or
desirable  for the creation and  perfection of the  foregoing  Liens  (including
legal opinion, title insurance, consents, corporate documents and any additional
or substitute  security agreements or mortgages or deeds of trust). The Borrower
will cause each such Guarantor to take all actions  requested by  Administrative
Agent (including,  without limitation, the filing of UCC-1's) in connection with
the granting of such security interests.

     (d)  Promptly,  and in any event not later  than  thirty  (30) days after a
request  with  respect  thereto,  (i)  deliver to the  Administrative  Agent the
original  of all  instruments,  documents  and  chattel  paper,  and  all  other
Collateral of which the Administrative  Agent determines it should have physical
possession  in order to perfect its security  interest  therein,  duly  pledged,
endorsed or assigned  to the  Administrative  Agent  without  restriction;  (ii)
obtain landlord waivers,  in form and substance  reasonably  satisfactory to the
Administrative Agent, with respect to any Inventory or other tangible Collateral
located at a location that is not owned by the Borrower or a  Subsidiary;  (iii)
deliver to the  Administrative  Agent warehouse receipts covering any portion of
the Inventory or other Collateral  located in warehouses and for which warehouse
receipts are issued; (iv) when an Event of Default exists, transfer Inventory to
locations  designated by the  Administrative  Agent; (v) if any Collateral is at
any  time in the  possession  or  control  of any  warehousemen,  bailee  or the
Borrower's  agents or processors,  notify the  Administrative  Agent thereof and
notify  such  person of the  Administrative  Agent's  security  interest in such
Collateral  and  obtain  a  bailee  letter,  in form  and  substance  reasonably
satisfactory to the Administrative


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Agent, from such person and instruct such person to hold all such Collateral for
the  Administrative  Agent's  account  subject  to  the  Administrative  Agent's
instructions;  (vi) if at any time any Inventory or other  Collateral is located
on any real  property  of the  Borrower  which is subject to a mortgage or other
Lien, obtain a mortgagee waiver, in form and substance  reasonably  satisfactory
to the  Administrative  Agent, from the holder of each mortgage or other Lien on
such real  property;  and (vii) take all such other  actions and obtain all such
other  agreements as the  Administrative  Agent may reasonably deem necessary or
desirable in respect of any Collateral.

     (e) The security  interests required to be granted pursuant to this Section
shall be granted pursuant to the Collateral  Documents or, in the Administrative
Agent's  discretion,   such  other  security   documentation   (which  shall  be
substantially similar to the Collateral Documents already executed and delivered
by the Borrower and the  Guarantors) as is reasonably  satisfactory  in form and
substance to Administrative  Agent (the "Additional  Collateral  Documents") and
shall constitute valid and enforceable perfected security interests prior to the
rights of all third Persons and subject to no other Liens except Liens permitted
under Section 6.1. The  Additional  Collateral  Documents and other  instruments
related  thereto  shall be duly  recorded  or filed in such  manner  and in such
places and at such times as are required by law to establish,  perfect, preserve
and protect the Liens, in favor of Administrative  Agent, for the benefit of the
Lender Parties, granted pursuant to the Additional Collateral Documents and, all
taxes,  fees and other charges payable in connection  therewith shall be paid in
full by the  Borrower.  At the time of the  execution and delivery of Additional
Collateral Documents, the Borrower shall cause to be delivered to Administrative
Agent such agreements,  opinions of counsel,  and other related documents as may
be reasonably  requested by the Administrative  Agent or the Required Lenders to
assure themselves that this Section has been complied with.

     SECTION 5.14 Performance of Acquisition Documents.  Perform and observe, or
cause the relevant Subsidiary to perform and observe,  all of the material terms
and provisions of each Acquisition Document to be performed or observed by it or
such  Subsidiary,  maintain  each such  Acquisition  Document  in full force and
effect,  enforce each such  Acquisition  Document in accordance  with its terms,
take all such  action to such end as may be from time to time  requested  by the
Administrative  Agent required in order to enforce its material rights under the
Acquisition  Documents and, upon request of the  Administrative  Agent,  make to
each other party to each such Acquisition Document such demands and requests for
action or for  information  and  reports as the  Borrower or any  Subsidiary  is
entitled to make under such  Acquisition  Document  required in order to enforce
its material rights under the Acquisition Documents.

     SECTION 5.15 Year 2000  Compatibility.  Take all action necessary to assure
that its computer based systems, hardware and software used in each Loan Party's
business and operations are able to operate and effectively  receive,  transmit,
process, store, retrieve or retransmit data including dates on and after January
1, 2000, and, at the request of the Administrative Agent, the Loan Parties shall
provide evidence to the reasonable  satisfaction of the Administrative  Agent of
such year 2000 compatibility.



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                                    ARTICLE 6

                               NEGATIVE COVENANTS


     While any of the  Commitments is outstanding  and, in the event any Advance
remains outstanding, so long as the Borrower or any other Loan Party is indebted
to any of the Lender Parties or the  Administrative  Agent under any of the Loan
Documents,  any Letter of Credit is outstanding and until payment in full of the
Notes and full and complete  performance of all of its other obligations arising
hereunder,  the Borrower  covenants  that it will not, at any time, and will not
permit  any Loan  Party  to do,  agree to do or  permit  to be done,  any of the
following without the prior written consent of the Required Lenders:

     SECTION 6.1 Liens, Etc. Create, incur, assume or suffer to exist, or permit
any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien on
or with respect to any of its  properties of any character  (including,  without
limitation,  accounts  receivable,  Inventory and other Collateral)  whether now
owned or hereafter  acquired,  or sign or file or suffer to exist, or permit any
of its  Subsidiaries  to sign or file or  suffer to  exist,  under  the  Uniform
Commercial Code or any other statute of any jurisdiction,  a financing statement
that names the Borrower or any of its Subsidiaries as debtor,  or sign or suffer
to exist,  or permit  any of its  Subsidiaries  to sign or suffer to exist,  any
security  agreement  authorizing  any secured party  thereunder to file any such
financing statement, or assign, or permit any of its Subsidiaries to assign, any
accounts  or  other  right  to  receive  income,  excluding,  however,  from the
operation of the foregoing restrictions the following:

     (a) Liens created under the Loan Documents;

     (b) Permitted Liens;

     (c) Liens existing on the date hereof and described on Schedule 6.1(c);

     (d) Purchase money Liens securing Debt  permitted  under Section  6.2(c)(i)
upon real  property or Equipment  acquired or held by the Borrower or any of its
Subsidiaries  in the ordinary course of business to secure the purchase price of
such real  property  or  Equipment  or to secure  Debt  incurred  solely for the
purpose of financing the  acquisition,  construction  or improvement of any such
real property or Equipment to be subject to such Liens, or Liens existing on any
such real property or Equipment at the time of acquisition  (other than any such
Liens  created  in  contemplation  of such  acquisition  that do not  secure the
purchase price), or extensions, renewals or replacements of any of the foregoing
for the same or a lesser  amount;  provided,  however,  that no such Lien  shall
extend to or cover any property other than the real property or Equipment  being
acquired, constructed or improved, and no such extension, renewal or replacement
shall extend to or cover any property not theretofore  subject to the Lien being
extended, renewed or replaced;



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     (e) Liens arising in connection  with  Capitalized  Leases  permitted under
Section  6.2(c)(i) or true operating leases;  provided,  that no such Lien shall
extend to or cover any Collateral or any assets other than the assets subject to
such Capitalized Leases or operating leases, as the case may be;

     (f) (i)  Liens  created  under  the  Radio  Spirits  Subordinated  Security
Agreement; and

     (ii) Liens on the same assets as described  under clause (f)(i)  granted to
secure  the  Senior   Subordinated   Debt  but  only  on  terms  and  conditions
satisfactory to the  Administrative  Agent as acknowledged in writing;  provided
that said Liens shall in any event be co-terminous with the Liens referred to in
clause (f)(i) above and the holder of such Liens shall have no rights to vote as
a secured creditor in any proceeding of the type described in Section 9.6.

     (g) The replacement,  extension or renewal of any Lien permitted by clauses
(a) through (f) above upon or in the same property  theretofore  subject thereto
in connection with the replacement,  extension or renewal  (without  increase in
the  amount or any  change  in any  direct or  contingent  obligor)  of the Debt
secured thereby.

     SECTION 6.2 Debt. Create,  incur,  assume or suffer to exist, or permit any
of its Subsidiaries to create,  incur, assume or suffer to exist, any Debt other
than:

     (a) In the  case  of the  Borrower,  Debt  incurred  pursuant  to the  Loan
Documents;

     (b) In the case of the Borrower,  debt owed to any Wholly-Owned  Subsidiary
of the  Borrower,  and in the case of any of the  Subsidiaries  of the Borrower,
Debt owed to the  Borrower  or to a  Wholly-Owned  Subsidiary  of the  Borrower;
provided,  that all such Debt owed by any  Subsidiary  to the Borrower  shall be
evidenced by a promissory  note,  such  promissory  note shall be pledged to the
Administrative  Agent  pursuant to the terms of the  Security  Agreement or such
other document (including,  without limitation,  the Note Assignment  Agreement)
and, in the case of Debt owed by any Subsidiary,  there shall be no restrictions
whatsoever on the ability of such Subsidiary to repay such Debt; and

     (c) In the case of the Borrower and any of its Subsidiaries:

     (i)  Debt  (A)  secured  by  Liens  permitted  by  Section  6.1(d)  and (B)
Capitalized Leases,  collectively not to exceed in the aggregate $500,000 at any
time outstanding;

     (ii)  endorsement  of negotiable  instruments  for deposit or collection or
similar transactions in the ordinary course of business;

     (iii) the Surviving Debt;



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     (iv) Senior  Subordinated  Debt,  provided  that (A) principal and interest
shall be payable or paid by the Borrower only in  accordance  with the terms and
conditions of the  applicable  Subordinated  Debt Documents and (B) the Borrower
may, as required by the Senior  Subordinated Debt Documents,  cause its existing
Subsidiaries  and  any  Subsidiaries  of the  Company  hereafter  formed  and/or
acquired by the Company (or any  Subsidiary of the Company) to issue  guaranties
of  the  Borrower's  Obligations  under  the  Senior  Subordinated  Debt,  which
guaranties  shall be  substantially  similar to the Subsidiary  Guaranty  issued
pursuant to this Agreement,  except that such guaranties will be subordinated to
the Obligations of such Subsidiaries under the Subsidiary Guaranty or Guaranties
issued or to be issued under this Agreement  consistent  with the  subordination
provisions set forth in the Convertible Senior Subordinated Note included in the
Senior  Subordinated  Debt,  will guaranty the Obligations of the Borrower under
such Note and otherwise be in form and substance reasonably  satisfactory to the
Administrative Agent and the holder of such Note;

     (v) Subordinated Debt,  provided that principal shall be payable or paid by
the  Borrower  subsequent  to the  maturity  date of the  Obligations  under the
Facilities  with  interest  payments,  if  approved by the  Required  Lenders in
connection with approval of the terms of such Subordinated  Debt,  payable prior
to maturity on terms agreed to by the Required Lenders;

     (vi) Debt  (other  than as  borrowed  hereunder)  incurred  or  assumed  in
connection  with Permitted  Acquisitions or Permitted Club  Acquisitions  not to
exceed in the aggregate $500,000 at any time outstanding.

     (vii)  Unsecured  Debt  incurred in connection  with the  conversion of the
obligations  under any Future  Acquisition Puts into Debt of the Borrower or its
Subsidiaries  pursuant  to the terms of the  agreements  governing  such  Future
Acquisition  Puts,  provided that all of the Debt described in this clause (vii)
constitutes Subordinated Debt; and

     (viii) any Debt extending the maturity of, or refunding or refinancing,  in
whole or in part, the Debt referred to in this Section 6.2(c), provided that (A)
the  principal  amount of such Debt shall not be increased  above the  principal
amount thereof outstanding immediately prior to the refinancing (but, in respect
of the Senior  Subordinated  Debt,  may be  increased  to Eighteen  Million Five
Hundred Thousand  ($18,500,000)  Dollars in respect of the first  refinancing of
the Senior  Subordinated  Debt that exists on the Closing Date),  and the direct
and contingent  obligors  shall not be changed,  as a result of or in connection
with such extension, refunding or refinancing, except that any Subsidiary of the
Company in existence at, or formed or acquired by the Company (or any Subsidiary
of the Company) subsequent to, the date of any of such extension of the maturity
of, or refunding or refinancing, in whole or in part, of the Senior Subordinated
Debt,  shall be  permitted to  guarantee  such Debt as so extended,  refunded or
refinanced,  to the same extent as such  Subsidiaries are permitted to guarantee
such Debt pursuant to Section  6.2(c)(iv)  hereof,  and no prepayment premium or
penalty of any kind shall be incurred  in  connection  therewith,  and the terms
thereof  are no less  favorable  to the  Borrower  or the Lender  Parties or the
Administrative Agent (except as and to the extent set forth in respect of Senior
Subordinated  Debt under clause  (viii)(B) below) than the terms of the refunded
or refinanced


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Debt and the fees, expenses and other costs associated  therewith are reasonably
acceptable  to the  Administrative  Agent  in  the  exercise  of its  reasonable
discretion;  (B) no  amendment,  modification  or supplement to the terms of any
Debt or any  refinanced  or  refunded  Debt  shall be made  except if and to the
extent  permitted  under Section 6.13, but amendments and  modifications  to any
replacement for the Senior Subordinated Debt which are not inconsistent with the
terms of Section  6.13(b)  shall be deemed  acceptable  to the  Lenders  and the
Administrative  Agent;  and (C) with  respect  to the first  refinancing  of the
Senior  Subordinated  Debt that exists on the Closing Date, the principal amount
of the replacement Debt shall at least equal the sum of (i) the principal amount
then outstanding of such Senior  Subordinated  Debt which is refinanced and (ii)
the fees,  expenses and other costs payable by the Borrower or its  Subsidiaries
in connection  with such  refinancing  (subject to the limit of  $18,500,000  of
clause (viii)(A) above).

     SECTION 6.3 Accounts Payable. No accounts payable of the Borrower or any of
its Subsidiaries  arising from the purchase of property or services,  including,
without  limitation,  Inventory  acquired  for resale shall be  outstanding  for
longer than 150 days from the date of  incurrence,  except (a) accounts  payable
which by their  terms  become  payable  after  150 days from  incurrence  or (b)
accounts payable that are subject to good faith dispute by the Borrower.

     SECTION 6.4 Fundamental Changes.

     (a) Merge into or consolidate with any Person or permit any Person to merge
into it, or permit any of its  Subsidiaries  to do so, except that so long as no
Default or Event of Default shall have occurred and be continuing and so long as
no  Default  or  Event of  Default  would  result  therefrom,  (A)  Wholly-Owned
Subsidiaries of the Borrower may make Permitted  Acquisitions and Permitted Club
Acquisitions;  (B) any Subsidiary of the Borrower may consolidate  with or merge
into the Borrower or any Wholly-Owned Subsidiary of the Borrower if the Borrower
or such  Wholly-Owned  Subsidiary  will be the  surviving  corporation;  (C) any
Subsidiary may sell,  lease,  transfer,  contribute or otherwise  dispose of its
assets, in whole or in part, to Borrower or any other Wholly-Owned Subsidiary of
the Borrower,  and may,  following any such disposition in whole,  liquidate and
dissolve and the Borrower may transfer,  contribute or otherwise  dispose of its
assets in whole or in part to any Wholly-Owned  Subsidiary of the Borrower;  (D)
the  Borrower  may on a  single  occasion  transfer  any or all of its  accounts
receivable  to its  Wholly-Owned  Subsidiary,  ABC  Investment  Corp.,  and such
Subsidiary  may transfer any or all of its accounts  receivable  to the Borrower
(in each case subject to the continuing existence of the Administrative  Agent's
perfected  security  interest therein) and (E) a merger of the Borrower with and
into a  newly-formed  Delaware  Wholly-Owned  Subsidiary of the Borrower for the
sole  purpose of  effecting  a  reincorporation  of the  Borrower  in  Delaware,
provided that the Borrower  shall have given the  Administrative  Agent not less
than ten (10)  Business Days prior  written  notice and prior to effecting  such
Merger  Borrower  shall take all  actions,  if any,  reasonably  required by the
Administrative Agent to preserve the Administrative Agent's security interest in
the  Collateral  and all  other  rights  and  remedies  of the  Lenders  and the
Administrative Agent under the Loan Documents or otherwise then existing by law;



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     (b) Except as otherwise expressly permitted herein,  liquidate,  wind-up or
dissolve  itself (or suffer  any  liquidation  or  dissolution),  convey,  sell,
assign,  lease,  transfer  or  otherwise  dispose  of (or agree to do any of the
foregoing at any future time) all or substantially all of its property, business
or assets, or permit any of its Subsidiaries to do any of the foregoing;

     (c) Except as otherwise expressly  permitted herein,  acquire or permit any
Subsidiary  to acquire  all or  substantially  all of the assets or any  capital
stock of any other  Person,  except that (A) the  Borrower  may  consummate  the
Acquisitions  in accordance  with the terms and  conditions  of the  Acquisition
Documents,  (B)  Wholly-Owned   Subsidiaries  of  the  Borrower  may  consummate
Permitted  Acquisitions and Permitted Club  Acquisitions and (C) the Borrower or
any  Wholly-Owned  Subsidiary of the Borrower may acquire any asset permitted to
be sold, leased,  transferred,  contributed or otherwise disposed of by Borrower
or any of its Subsidiaries pursuant to Section 6.4(a)(C).

     SECTION 6.5 Sales, Etc. of Assets.  Except as otherwise expressly set forth
in Section  6.4 with  respect to  transfers  or other  dispositions  between the
Borrower  and any of its  Subsidiaries  or between  or among such  Subsidiaries,
sell, lease, transfer or otherwise dispose of, or permit any of its Subsidiaries
to sell, lease, transfer or otherwise dispose of, any assets or grant any option
or other right to purchase, lease or otherwise acquire any assets, except:

     (a) Sales of Inventory in the ordinary course of business;

     (b) Sales of obsolete or surplus  Equipment or Equipment which is no longer
useful in the ordinary course of business;

     (c) Sales of assets (other than an asset included in Section  6.5(a),  (b),
(d),  (e), (f) or (g) the aggregate  purchase  price of which in any Fiscal Year
does not exceed  $1,000,000  and provided that no such sale shall be made if (A)
such sale would impair the value or  composition  of the  Collateral  beyond the
dollar value of the asset sale in any material respect,  or (B) Default or Event
of Default then exists or would exist after giving effect thereto;

     (d) The sale of any fixed asset by the Borrower or any of its  Subsidiaries
(other than an asset included in Section 6.5(a), (b), (c) or (f)) so long as (i)
the purchase price paid to the Borrower or such  Subsidiary for such asset shall
be no less than the fair  market  value of such  asset at the time of such sale,
(ii) the  purchase  price for such asset  shall be paid to the  Borrower or such
Subsidiary  solely in cash and (iii) the  aggregate  purchase  price paid to the
Borrower and all of its Subsidiaries for such asset and all other assets sold by
the  Borrower  and its  Subsidiaries  (other  than an asset  included in Section
6.5(a),  (b),  (c) or (f)) in any Fiscal Year  pursuant to this clause (d) shall
not exceed $1,000,000;  and provided that no such sale shall be made if (A) such
sale would impair the value or composition  of the Collateral  beyond the dollar
value of the asset  sale in any  material  respect,  or (B)  Default or Event of
Default then exists or would exist after giving effect thereto;



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provided that in the case of sales of assets  pursuant to Section 6.5 (c) or (d)
the Borrower  shall, on the date of receipt  thereof,  apply the entire Net Cash
Proceeds from such sale in accordance with Section 2.6(b)(ii);

     (e) Sell or liquidate Cash Equivalents in the ordinary course of business;

     (f) Sale of  Premier's  assets  which are  unrelated  to  classic  video or
old-time radio;

     (g) Sales of accounts  receivable not exceeding  $250,000 during any fiscal
year of the Borrower for collection in the ordinary course of business,  but not
from and after the occurrence of a Default or Event of Default; and

     (h)  Transactions  in the ordinary  course of business  including,  without
limitation,  relating  to  rental,  lease or  licensing  of  customer  lists and
programs and similar rights to third party users in which revenues are shared by
the Borrower (or one of its  Subsidiaries),  provided that in respect of each of
the  foregoing,  no  rights  in  any  assets  of  the  Borrower  or  any  of its
Subsidiaries  shall be  granted to any person  that would  limit the  Borrower's
rights  in such  assets  in any  materially  adverse  way or the  Administrative
Agent's rights with respect thereto in any materially  adverse way or that would
diminish  the value of the assets to the  Borrower  or its  Subsidiaries  or its
value as collateral to the Administrative Agent in any materially adverse way.

     SECTION 6.6  Investments in Other  Persons.  Make or hold, or permit any of
its  Subsidiaries  to make or hold,  any  Investment  utilizing  cash (or if not
utilizing cash, then subject to the terms of Section 6.6(m)) in any Person other
than:

     (a) Investments by the Borrower and its Subsidiaries in their  Subsidiaries
outstanding on the date hereof and described on Schedule 6.6(a),  and additional
investments in  Wholly-Owned  Subsidiaries of the Borrower (but excluding in any
event OTR Joint Venture  except as permitted  under Section  6.6(g));  provided,
however,  that no more  than an  aggregate  amount  equal to  $500,000  shall be
invested from and after the date hereof in Foreign Subsidiaries;  and, provided,
further,  that with  respect to  Investments  in any newly  acquired  or created
Wholly-Owned  Subsidiary,  any such Subsidiary shall become a Guarantor pursuant
to the terms of the Subsidiary  Guaranty and an additional  grantor  pursuant to
the terms of the Security Agreement and Intellectual Property Security Agreement
and shall comply with the provisions of Section 5.13;

     (b) Loans and  advances to officers  and other  employees  in the  ordinary
course of the  business of the  Borrower  and its  Subsidiaries  in an aggregate
principal amount not to exceed $250,000 at any time outstanding;

     (c) Investments by the Borrower and its Subsidiaries in Cash Equivalents;

     (d)  Investments  consisting of  intercompany  Debt permitted under Section
6.2(b);



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     (e)  Investments  existing  on the date  hereof and  described  on Schedule
6.6(e) hereto;

     (f) Investments by the Borrower and its  Subsidiaries  in deposit  accounts
opened in the ordinary course of business;

     (g)  Investments by the Borrower and its  Subsidiaries in joint ventures in
an  aggregate  amount  not to  exceed  $1,000,000  and in  respect  of which the
Borrower's  and its  Subsidiaries'  liabilities  contingent or otherwise  cannot
exceed such $1,000,000 in the aggregate ;

     (h) Investments consisting of accounts receivable in the ordinary course of
business;

     (i)  Investments in the form of Permitted  Acquisitions  and Permitted Club
Acquisition;

     (j) The Investments comprising the Acquisitions;

     (k)  Investments  in  interest  rate  swaps,  currency  rate swaps or other
similar derivative instruments entered into for a valid business purpose and not
for speculation;

     (l)  Investments  received in the ordinary course of business in connection
with the settlement of debts, including receivables, owed to the Borrower or its
Subsidiaries; and

     (m) Investments  utilizing  Equity Interests issued by the Borrower and not
utilizing  cash or other  assets of any Loan  Party,  but only on the  following
terms and conditions:

     (i) no such  Investment  would,  before  or after  giving  effect  thereto,
conflict  with or be  inconsistent  with  any of the  other  provisions  of this
Agreement  (including,  without  limitation,  provisions  relating to  Permitted
Acquisitions  or  Permitted  Club  Acquisitions)  or cause a Default or Event of
Default; and

     (ii) no such Investment  would result in any liability or obligation  being
incurred  at any time by the  Borrower  or any of its  Subsidiaries,  except  as
otherwise expressly permitted by this Agreement.

     SECTION 6.7  Dividends,  Etc.  Subject to Section 6.18,  declare or pay any
dividends, pur chase, redeem, retire, defease or otherwise acquire for value any
of its capital stock or any warrants,  rights or options to acquire such capital
stock, now or hereafter  outstanding,  return any capital to its stockholders as
such, make any distribution of assets, capital stock, warrants, rights, options,
obligations  or  securities  to its  stockholders  as such, or permit any of its
Subsidiaries  to do any of the  foregoing or permit any of its  Subsidiaries  to
purchase,  redeem,  retire,  defease or otherwise  acquire for value any capital
stock of the Borrower or any warrants, rights or options to acquire such capital
stock or to issue or sell any such  capital  stock or any  warrants,  rights  or
options to acquire such capital stock, except:



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     (a) The  Borrower  may declare  and pay  dividends  and make  distributions
payable  solely in Equity  Interests of the  Borrower,  including  common stock,
warrants, options and rights to purchase common stock, but only on the condition
that no such  instrument  or security by its terms shall  mandate or require the
Borrower to, and no holder  thereof shall have the right to require the Borrower
to,  declare  or pay any  dividends  or  distributions  in  respect  thereof  or
purchase,  redeem,  retire,  defease or  otherwise  acquire for value any of its
capital stock, warrants, options or rights to acquire such capital stock;

     (b) A  Subsidiary  of the  Borrower  may  declare  and  pay  dividends  and
distributions  to the Borrower or to another  Subsidiary  that is a Wholly-Owned
Subsidiary of the Borrower;

     (c)  The  Borrower  may  consummate  the   Acquisitions   and  satisfy  the
Acquisition  Puts,  provided that  satisfaction of the Acquisition Puts shall be
subject to the  conditions  that no Default or Event of Default  then  exists or
would exist after  giving  effect to the  satisfaction  of any such  Acquisition
Puts, and the Administrative Agent shall have received a Compliance  Certificate
duly executed by the Borrower  evidencing  the  Borrower's  compliance  with the
covenants  set  forth in  Article  8  before  and  after  giving  effect  to the
satisfaction of any Acquisition Put;

     (d) For  issuances  of  stock  expressly  permitted  by  Section  6.18  and
issuances  of warrants to any Lender  Party and for  repurchases,  required  for
regulatory compliance, of warrants held by financial institutions; or

     (e) The Borrower or any Subsidiary may enter into obligations to repurchase
the  Borrower's   Equity   Interests   issuable  in  connection  with  Permitted
Acquisitions (the "Future Acquisition Puts"); provided that the total contingent
liability under all Future  Acquisition Puts shall not exceed  $2,500,000 at any
time  outstanding   through  December  31,  1999  and  $4,000,000  at  any  time
outstanding  thereafter (excluding for this calculation the contingent liability
of each Future Acquisition Put or portion thereof which cannot be exercised even
if a default  exists in respect  thereof or  documents  relating  thereto by the
holder  thereof prior to the  Termination  Date) and that no Default or Event of
Default then exists or would exist after giving  effect to the  satisfaction  of
any such  Future  Acquisition  Puts (and all  documents  evidencing  such Future
Acquisition Puts shall reflect the existence of such condition to the Borrower's
honoring  the   exercise  of  any  such  Future   Acquisition   Put),   and  the
Administrative Agent shall have received a Compliance  Certificate duly executed
by the Borrower  evidencing  the  Borrower's  compliance  with the covenants set
forth in Article 8 before and after  giving  effect to the  satisfaction  of any
Future Acquisition Put.

     SECTION  6.8  Change in  Nature of  Business.  Make,  or permit  any of its
Subsidiaries  to make,  any  material  change in the nature of its  business  as
carried on at the date hereof except as expressly permitted hereby.

     SECTION 6.9 Charter Amendments. Amend, or permit any of its Subsidiaries to
amend,  its certificate or articles of incorporation or bylaws if such amendment
could impair the interests or rights of the  Administrative  Agent or any Lender
Party.


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     SECTION  6.10  Accounting  Changes.  Make or  permit,  or permit any of its
Subsidiaries to make or permit,  any change in accounting  policies or reporting
practices except as described in clauses (a), (b), (c) and (d) of the definition
of Accounting Changes in Section 1.3.

     SECTION  6.11  Prepayments,  Etc. of Debt.  (a) Prepay,  redeem,  purchase,
defease or otherwise  satisfy  prior to the  scheduled  maturity  thereof in any
manner,  or make any payment in  violation  of any  subordination  terms of, any
Debt,  other than (i) prepayment of the Advances in accordance with the terms of
this Agreement and (ii) (A)  notwithstanding the provisions of Sections 5.12 and
6.20 hereof and any other  Section  limiting the terms of or  prepayment  of the
Senior  Subordinated  Debt, but subject to the proviso at the conclusion of this
clause  (ii),  repayment  to the  holder  of the  Senior  Subordinated  Debt  of
$1,000,000 of the Senior  Subordinated Debt pursuant to the terms and conditions
of that certain Escrow Agreement, dated on or about the date hereof (the "Escrow
Agreement")  among the Borrower,  Norton Herrick and Fleet National Bank and (B)
notwithstanding  any other provisions of the Loan Documents,  including Sections
5.12 and 6.20 hereof,  payment of such amounts, if any, which are payable by the
Borrower  pursuant to the terms and conditions of that certain letter agreement,
dated on or about the date hereof (the "Letter  Agreement") between the Borrower
and  Norton  Herrick  executed  and  delivered  in  connection  with the  Senior
Subordinated  Debt;  (b)  amend,  modify  or change  in any  manner  any term or
condition of any Existing Debt or Surviving Debt, except to the extent that such
benefit  inures to the benefit of the  Borrower  and could not be adverse to the
interests or rights of the Lender Parties or the  Administrative  Agent,  or (c)
permit any of its  Subsidiaries  to do any of the foregoing  other than to repay
any Debt payable to the Borrower.

     SECTION 6.12 Amendment, Etc. of Acquisition Documents.  Cancel or terminate
any Acquisition Document or consent to or accept any cancellation or termination
thereof, amend, modify or change in any manner any term or condition (other than
any  immaterial  term or  condition)  of any  Acquisition  Document  or give any
consent, waiver or approval thereunder, waive any default under or any breach of
any term or  condition  (other than any  immaterial  term or  condition)  of any
Acquisition Document or take any other action in connection with any Acquisition
Document  that would,  in any such case,  impair the value of the  interests  or
rights of the Borrower thereunder (except in an immaterial way), or would impair
the interests or rights of the Administrative  Agent or any Lender Party (except
in an  immaterial  way but only after not less than ten (10) days' prior written
notice of any of the foregoing such proposed actions shall have been received by
the  Lenders  and  Administrative  Agent but in no event  shall any such  action
whether or not  immaterial  relate to any  Acquisition  Puts or the CH  Deferred
Purchase  Price  Rights),  or permit  any of its  Subsidiaries  to do any of the
foregoing.

     SECTION 6.13  Amendment,  Etc. of Material  Contracts,  Including Debt. (a)
Cancel  or  terminate  any  Material  Contract  or  consent  to  or  accept  any
cancellation  or  termination  thereof,  amend or otherwise  modify any Material
Contract or give any consent,  waiver or approval thereunder,  waive any default
under or breach of any Material  Contract or take any other action in connection
with any  Material  Contract  that  would  materially  impair  the  value of the
interests  or  rights  of the  Borrower  thereunder  or that  could  impair  the
interests or rights of the  Administrative  Agent or any Lender Party (except in
an immaterial way and not in any event


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<PAGE>



from and after the occurrence of any Default or Event of Default hereunder) , or
permit any of their  Subsidiaries to do any of the foregoing;  provided however,
that the Borrower or its  Subsidiaries may take any such actions if individually
or in the  aggregate  such actions  could not  reasonably  be expected to have a
Material Adverse Effect; or

     (b) Modify, amend or supplement:

     (i) any documentation entered into in connection with any Subordinated Debt
(excluding  for  purposes  of this  clause  (i)  the  Senior  Subordinated  Debt
Documents),  except  as  approved  by  the  Administrative  Agent  in  its  sole
discretion; or

     (ii)  the  Senior  Subordinated  Debt  Documents  if  the  effect  of  such
amendment,  supplement or  modification is to: (A) increase the interest rate on
the Senior  Subordinated Debt in excess of thirteen (13%) per annum, except that
in respect of any portion of the Senior Subordinated Debt held by Norton Herrick
or any of his Affiliates no increase in the interest rate on such portion of the
Senior  Subordinated Debt shall be permitted or may be effected prior to January
1, 2000 and  thereafter may not exceed 11% (other than an increase not to exceed
11% for the periods from  October 1, 1999  through  December 31, 1999 so long as
such increase is solely in the form of  non-current  pay interest  which accrues
and is not payable in cash until final maturity of the Senior Subordinated Debt)
(provided that nothing contained herein shall preclude imposition of any default
rate  of  interest  in the  amount  provided  in the  Senior  Subordinated  Debt
Documents), (B) accelerate or shorten the dates upon which payments of principal
or interest are due on the Senior  Subordinated  Debt; (C) change the redemption
or prepayment  provisions of the Senior  Subordinated  Debt (other than any such
change which would reduce the amount of any  scheduled  redemption or prepayment
or of any  premium or interest  payable in  connection  therewith  or that would
defer the date on which any such redemption or prepayment is otherwise scheduled
to be made);  (D) make more  restrictive  any of the covenants  contained in the
Senior Subordinated Debt Documents,  or add any events of default, or modify any
events of default so as to be triggered  sooner in each case in comparison  with
any such  covenants or events of default  contained  in the Senior  Subordinated
Debt Documents as in effect prior to such proposed amendment, except for changes
that  individually  and  in the  aggregate  are  immaterial  and  provided  that
modifications to the terms of replacement  Senior  Subordinated Debt refinancing
the Senior  Subordinated  Debt existing on the Closing Date in regard to certain
types of covenants  that are customary for  subordinated  debt  transactions  of
similar  type  and  amount  (such  as  financial  covenants  identical  to those
contained  herein but looser to such reasonable  extent as the Required  Lenders
may  agree)  that do not  adversely  affect  the  rights of the  Lenders  or the
Administrative  Agent in any way  other  than  immaterial  ways  shall be deemed
acceptable to the Lenders and the Administrative  Agent so long as copies of all
documents relating to such replacement Senior  Subordinated Debt shall have been
received by the  Administrative  Agent in sufficient  time for review to confirm
compliance with the foregoing,  with the delivery of such confirmation not to be
unreasonably  withheld and the  determination of approval or objection not to be
unreasonably  delayed;  (E) change any  provisions  of Article 3 (or  comparable
provisions)  of the  Senior  Subordinated  Debt  Documents  or modify any of the
defined terms used in such Article 3 (or comparable provisions), (F) provide for
any additional security in respect of the


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obligations under the Senior Subordinated Debt Documents,  in each case, without
the prior written consent of the Required  Lenders;  or (G) change any provision
of the Letter  Agreement or the Escrow  Agreement in any respect;  provided that
the  Borrower  shall  be  permitted  to  effect  any  amendment,  supplement  or
modification required pursuant to the terms of the Letter Agreement; or

     (c) Modify, amend,  supplement or terminate any agreements,  instruments or
documents  relating to the  incurrence  (if  consented to by the  Administrative
Agent except to the extent such consent is not required under Section 6.2(c)(vi)
of this Agreement) of any Debt or other obligations, contingent or otherwise, of
the Borrowers or any Subsidiary  permitted under Section  6.2(c)(vi) owing under
any Permitted  Acquisition  documents or Permitted Club Acquisition documents or
arising  in  connection  with  any  Permitted   Acquisition  or  Permitted  Club
Acquisition other than  modifications,  amendments and/or  supplements which are
immaterial  and other than  refinancing,  in accordance  with the  provisions of
Section  6.2(c)(viii),  of up to $500,000 in  principal  amount of  indebtedness
permitted to be incurred in connection with Permitted Acquisitions in accordance
with the terms of Section 6.2(c)(vi).

     SECTION 6.14 Negative Pledge.  Enter into or suffer to exist, or permit any
of the  Subsidiaries  of the  Borrower  to enter  into or suffer  to exist,  any
agreement  prohibiting  or  conditioning  the creation or assumption of any Lien
upon  any of its  properties  or  assets,  other  than as  provided  in the Loan
Documents.

     SECTION 6.15 Partnerships, New Subsidiaries.

     (a) Become a general partner in any general or limited partnership or joint
venture  (other than as  expressly  permitted  pursuant to Section  6.6(g)),  or
permit any of its Subsidiaries to do so, or

     (b) Create any new Subsidiary,  unless such newly created  Subsidiary shall
become a  Guarantor  pursuant  to the terms of the  Subsidiary  Guaranty  and an
additional  grantor  pursuant  to  the  terms  of  the  Security  Agreement  and
Intellectual  Property Security Agreement and all shares of the capital stock of
such Subsidiary are pledged to the Administrative Agent pursuant to the Security
Agreement.

     SECTION  6.16   Speculative   Transactions.   Except  for   non-speculative
transactions  expressly permitted under Section 6.6(k), engage, or permit any of
its Subsidiaries to engage,  in any transaction  involving  commodity options or
futures contracts or derivatives or any similar speculative transactions.

     SECTION 6.17 Capital Expenditures.  Make, or permit any of its Subsidiaries
to make,  any Capital  Expenditures  that would cause the  aggregate of all such
Capital  Expenditures  made by the  Borrower  and  its  Subsidiaries  to  exceed
$1,000,000 in any Fiscal Year of the Borrower.



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     SECTION 6.18  Issuance of Stock.  Except as otherwise  expressly  permitted
under  Sections 6.4,  6.6, 6.7 and 6.15 hereof,  the Borrower will not, and will
not permit any of its  Subsidiaries  to,  directly or indirectly,  issue,  sell,
assign,  pledge or otherwise  encumber or dispose of any shares of capital stock
or other Equity  Interests of the Borrower or any  Subsidiary  of the  Borrower,
except (a) to the Borrower or a Subsidiary of Borrower, (b) to qualify directors
if required by applicable  law, (c) as set forth in Schedule  6.18; (d) pursuant
to the Acquisitions in accordance with the express  provisions of the respective
Acquisition Documents as in effect on the date hereof (or as they may be amended
as and  to  the  extent  permitted  under  this  Agreement)  including,  without
limitation,  in respect of  Acquisition  Puts in accordance  with the summary of
terms of the Acquisition Puts set forth on Schedule 6.18,  provided that no term
of the  Acquisition  Documents or  Acquisition  Puts is  inconsistent  with such
summary of terms on Schedule  6.18;  (e)  issuances  of Equity  Interests of the
Borrower in  replacement  for or repayment of the Senior  Subordinated  Debt, in
whole  or in  part,  in  existence  on the  date of this  Agreement  (but not in
replacement  for or repayment of any  replacement  or refinancing of such Senior
Subordinated  Debt in existence on the date of this Agreement),  so long as such
Equity  Interests  (i)shall  be in an  amount  at least  equal to the sum of the
principal  amount then  outstanding  of such Senior  Subordinated  Debt which is
replaced  or repaid  plus the fees,  expenses  and other  costs  payable  by the
Borrower or its  Subsidiaries in connection  with such  replacement or repayment
and (ii) do not mandate or require the Borrower to, and no holder  thereof shall
have the right to require the Borrower to,  declare or pay any cash dividends or
cash distributions in respect thereof or purchase,  redeem,  retire,  defease or
otherwise  acquire for cash any such Equity  Interests,  except for  payments of
cash  dividends in respect of such Equity  Interests on  substantially  the same
economic terms and having substantially the same economic effect as the payments
of interest on the Senior  Subordinated  Debt in effect on the Closing  Date and
having a cash  dividend  not in excess of 8.5% per  annum and  payable  on dates
comparable  to (or less  frequently  than)  the  payment  dates set forth in the
Senior  Subordinated  Debt in effect on the Closing Date and subject to blockage
of such payments upon  substantially the same terms as apply to such payments of
interest,  and (iii) do not contain any rights,  whether or not on conversion or
otherwise,  that,  if  exercisable  or exercised  on the date of issuance  could
result  in a Change of  Control,  or if  exercisable  or  exercised  at any time
thereafter  could  reasonably be expected to result in a Change of Control,  and
provided  that the amount  and terms of any fees and  expenses  and other  costs
associated therewith are reasonably  acceptable to the Administrative Agent; (f)
issuances  of Future  Acquisition  Puts,  if any;  and (g)  issuances  of Equity
Interests of the Borrower not otherwise covered by clauses (a) through (f) above
but only on the condition that no such instrument or security by its terms shall
mandate or require the Borrower to, and no holder  thereof  shall have the right
to require  the  Borrower  to, (i)  declare  or pay any cash  dividends  or cash
distributions in respect thereof or (ii) purchase,  redeem,  retire,  defease or
otherwise acquire for cash any of its capital stock, warrants, options or rights
to acquire such capital stock or (iii) issue securities in respect thereof which
payments of or in respect of which are not subordinate to the Obligations  under
the Loan Documents,  and, provided,  further that no such Equity Interests shall
contain  any  rights,  whether  or not  on  conversion  or  otherwise  that,  if
exercisable  or  exercised  on the date of issuance  could result in a Change of
Control,  or if exercisable or exercised at any time thereafter could reasonably
be expected to result in a Change of Control,


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and any references in this Agreement to permitted  issuances of Equity Interests
shall be subject to the terms of this subsection 6.18(g).

     SECTION  6.19  Operations  in  Subsidiaries.  (i) Fail  after  nine  months
following the Closing Date to transfer the membership database from the Borrower
to one or more of its Wholly-Owned  Subsidiaries (other than Acquisition Corp or
Holding  Corp.) or (ii) fail from and after such  nine-month  period to commence
all new agreements and licenses in one or more of its Wholly-Owned  Subsidiaries
(provided  that the Borrower may be a party to any such  agreement or license so
long  as  substantially  all of the  economic  benefits  thereof  accrue  to the
Subsidiary), or (iii) from and after the date which is nine months following the
Closing Date intentionally  expand or increase the business,  assets or revenues
of the  Borrower  (itself on an  unconsolidated  basis) in any way other than an
immaterial way, or accept business opportunities or acquire assets in other than
the  Wholly-Owned  Subsidiaries  of the  Borrower as distinct  from the Borrower
itself, it being understood that Subsidiaries of the Borrower are not restricted
in any way by the  provisions  of this Section  6.19,  and provided that (a) the
foregoing shall not be deemed to limit  acceptance of business  opportunities by
non-Wholly-Owned  Subsidiaries  or joint  ventures  of the  Borrower  and/or its
Subsidiaries to the extent not otherwise  limited under this Agreement;  and (b)
in the event of an inconsistency  between the terms of this Section 6.19 and any
other provisions of this Agreement, the terms of this Section 6.19 shall govern.

     SECTION 6.20 Management Fees. Notwithstanding any other provision contained
in this  Agreement  or any of the other  Loan  Documents,  pay,  or be or become
obligated  to pay,  any  Management  Fees to any Person or any  interest  on any
deferred obligation therefor, including, without limitation, to any shareholder,
director, officer or employee of any Borrower, or any Loan Party.

     SECTION 6.21 Shelf Registration. Fail to cause a shelf registration on Form
S-3 for an offering to be made on a continuous  basis pursuant to Rule 415 under
the Securities Act of 1933,  which shelf  registration  statement  registers for
resale the shares of the Borrower's  Common Stock issued in connection  with (or
issuable  upon exercise of any warrants  issued in  connection  with) any of the
Acquisitions or otherwise issued or issuable on the Closing Date, to be declared
effective  on or prior to the 180th day  following  the Closing Date (or fail to
list the shares  registered  under such shelf  registration  for  trading on the
AMEX, subject to notice of official issuance, by such 180th day) or fail to have
filed within sixty days after the Closing Date such shelf registration;  and the
Borrower  shall keep the shelf  registration  statement  effective  (except  for
periods  of not more  than 20  consecutive  days  required  in  order to  amend,
supplement or otherwise correct any disclosures in such registration  statement)
until the earlier of (a) the second  anniversary  of the date hereof and (b) the
date that is one week after all shares issued in connection with any Acquisition
(or  issuable  under  such  warrants)  and  included  in the shelf  registration
statement have been sold.




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                                    ARTICLE 7

                             REPORTING REQUIREMENTS

     While any of the  Commitments is outstanding  and, in the event any Advance
remains outstanding, so long as the Borrower or any other Loan Party is indebted
to any of the Lender Parties or the  Administrative  Agent under any of the Loan
Documents,  any Letter of Credit is outstanding and until payment in full of the
Notes and full and complete  performance of all of its other obligations arising
hereunder,  the Borrower  shall furnish to the  Administrative  Agent and Lender
Parties:

     SECTION 7.1 Default  Notice.  As soon as possible  and in any event  within
five (5)  Business  Days after a  Responsible  Officer of the  Borrower  obtains
knowledge  of  the  occurrence  of any  Default  or any  event,  development  or
occurrence  reasonably  likely to have a Material Adverse Effect, a statement of
the Chief  Financial  Officer  of the  Borrower  setting  forth  details of such
Default or event, development or occurrence and the action that the Borrower has
taken and proposes to take with respect thereto.

     SECTION  7.2  Monthly  Financials.  As soon as  available  and in any event
within  thirty  (30)  days  after  the end of each  month  which is not a fiscal
quarter end, a Consolidated  balance  sheet,  statement of income and cash flows
for  each  month  commencing  April  1999,  as of the end of such  month  of the
Borrower and its Subsidiaries, and consolidating balance sheet and statements of
income of the Borrower and its  Subsidiaries,  for the period  commencing at the
end of the previous month and ending with the end of such month and Consolidated
statement of income and a  Consolidated  statement of cash flows of the Borrower
and its Subsidiaries, and consolidating statements of income of the Borrower and
its  Subsidiaries,  for the period  commencing at the end of the previous Fiscal
Year  and  ending  with  the end of  such  month,  setting  forth  in each  case
commencing  April 2000 in  comparative  form the  corresponding  figures for the
corresponding period of the prior Fiscal Year, all in reasonable detail and duly
certified by the chief financial officer of the Borrower.

     SECTION 7.3  Quarterly  Financials.  As soon as available  and in any event
within fifty (50) days after the end of each of the first three fiscal  quarters
of each Fiscal Year:

     (a) a Consolidated balance sheet of the Borrower and its Subsidiaries,  and
consolidating balance sheets of the Borrower and its Subsidiaries, as of the end
of such  quarter  and a  Consolidated  statement  of income  and a  Consolidated
statement of cash flows of the Borrower and its Subsidiaries,  and consolidating
statements of income and consolidating  statements of cash flows of the Borrower
and its  Subsidiaries,  for the  period  commencing  at the end of the  previous
fiscal quarter and ending with the end of such fiscal quarter; and

     (b) a Consolidated statement of income and a Consolidated statement of cash
flows of the Borrower  and its  Subsidiaries  and  consolidating  statements  of
income  and  consolidating  statements  of cash  flows of the  Borrower  and its
Subsidiaries for the period commencing at the


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end of the previous  Fiscal Year and ending with the end of such fiscal quarter,
setting forth in each case in comparative form the corresponding figures for the
corresponding period of the preceding Fiscal Year and the corresponding  figures
from the budgets for such  period and for the Fiscal  Year which  includes  such
period,  all of the  foregoing in  reasonable  detail and duly  certified by the
chief  financial  officer of the Borrower as having been  prepared in accordance
with GAAP (subject to normal  year-end audit  adjustments),  together with (i) a
Compliance  Certificate  (provided  that  the  Compliance  Certificate  must  be
delivered in no event later than  forty-five  (45) days after the end of each of
the first three fiscal  quarters of each Fiscal  Year) of said officer  stating,
inter alia,  that no Default has occurred and is continuing or, if a Default has
occurred and is continuing,  a statement as to the nature thereof and the action
that the Borrower has taken and proposes to take with respect thereto and (ii) a
schedule in form  reasonably  satisfactory  to the  Administrative  Agent of the
computations  used by the Borrower in determining  compliance with the financial
covenants  contained in Article 8, provided,  that in the event of any change in
GAAP used in the  preparation of such financial  statements,  the Borrower shall
also provide, if necessary for the determination of compliance with Article 8, a
statement  of  reconciliation  conforming  such  financial  statements  to GAAP;
provided,  further, that to the extent that comparable  information is set forth
in the  Borrower's  quarterly  report on Form 10-Q filed with the Securities and
Exchange Commission for each such quarter,  delivery to the Administrative Agent
and the Lender Parties of such 10-Q within the time period specified above shall
be acceptable for purposes of this Section 7.3.

     SECTION 7.4 Annual Financials. As soon as available and in any event within
one hundred  five (105) days after the end of each  Fiscal Year with  respect to
all deliveries pursuant to this Section 7.4 except for the certificate  referred
to in clause (c) below which,  in any event,  shall be delivered  within  ninety
(90) days after the end of each Fiscal  Year,  a copy of the annual audit report
for  such  year for the  Borrower  and its  Subsidiaries,  including  therein  a
Consolidated   balance  sheet  of  the  Borrower  and  its   Subsidiaries,   and
consolidating balance sheets of Borrower and its Subsidiaries,  as of the end of
such  Fiscal  Year and a  Consolidated  statement  of income and a  Consolidated
statement of cash flows of the Borrower and its Subsidiaries,  and consolidating
statements of income and consolidating  statements of cash flows of the Borrower
and its  Subsidiaries,  for such  Fiscal  Year,  in each case  setting  forth in
comparative  form the  corresponding  figures for the prior  Fiscal Year and the
corresponding  figures  from the  budget for such  Fiscal  Year and in each case
accompanied  (in the  case  of such  Consolidated  financial  statements)  by an
opinion with respect to such Consolidated financial statements acceptable to the
Administrative Agent of Deloitte & Touche or other independent  certified public
accountants  of  recognized  national  standing  reasonably  acceptable  to  the
Administrative  Agent together with (a) a letter of such  accounting firm to the
Administrative  Agent  and  Lender  Parties  stating  that in the  course of the
regular audit of the business of the Borrower and its Subsidiaries,  which audit
was conducted by such  accounting  firm in accordance  with  generally  accepted
auditing  standards,  such  accounting  firm has  obtained no  knowledge  that a
Default has occurred and is continuing, or if, in the opinion of such accounting
firm,  a Default has occurred  and is  continuing,  a statement as to the nature
thereof,  (b) a schedule in form reasonably  satisfactory to the  Administrative
Agent of the computations used by such accountants in determining, as of the end
of such Fiscal  Year,  compliance  with the  covenants  contained  in Article 8,
provided, that in the


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event  of  any  change  in  GAAP  used  in the  preparation  of  such  financial
statements,  the Borrower shall also provide, if necessary for the determination
of  compliance  with Article 8, a statement of  reconciliation  conforming  such
financial  statements  to GAAP  and (c) a  certificate  of the  Chief  Financial
Officer of the Borrower  stating that no Default has occurred and is  continuing
or, if a Default has  occurred and is  continuing,  a statement as to the nature
thereof and the action  that the  Borrower  has taken and  proposes to take with
respect thereto.

     SECTION  7.5 Annual  Forecasts.  As soon as  available  and in any event no
later  than  sixty  (60)  days  after  the end of each  Fiscal  Year,  an annual
operating  budget  prepared by management of the Borrower,  including  projected
consolidated and consolidating  balance sheets,  income statements and cash flow
statements on a quarterly  basis and a description  of the  assumptions  used in
preparing such budget and such other relevant notes to such budget.

     SECTION 7.6 ERISA Events and ERISA  Reports.  (i) Promptly and in any event
within thirty (30) days after any Loan Party or any ERISA Affiliate knows or has
reason to know  that any ERISA  Event has  occurred,  a  statement  of the Chief
Financial Officer of the Borrower describing such ERISA Event and the action, if
any, that such Loan Party or such ERISA Affiliate has taken and proposes to take
with  respect  thereto  and  (ii) on the date any  records,  documents  or other
information  must be furnished to the PBGC with respect to any Plan  pursuant to
Section 4010 of ERISA, a copy of such records, documents and information.

     SECTION 7.7 Plan  Terminations.  Promptly  and in any event within ten (10)
Business  Days after receipt  thereof by any Loan Party or any ERISA  Affiliate,
copies of each notice from the PBGC stating its  intention to terminate any Plan
or to have a trustee appointed to administer any Plan or correspondence from the
PBGC indicating it is considering termination of any Plan.

     SECTION 7.8 Actuarial  Reports.  Promptly upon receipt  thereof by any Loan
Party or any ERISA Affiliate,  a copy of the annual  actuarial  valuation report
for each Plan the funded  current  liability  percentage  (as defined in Section
302(d)(8)(B)  of  ERISA)  of which  is less  than  90% or the  unfunded  current
liability  (as  defined  in  Section  302(d)(8)(A)  of ERISA)  of which  exceeds
$500,000.  The present value of benefit  liabilities as of the latest  actuarial
valuation  date for such  Plan  (but not  prior to 12  months  prior to the date
hereof),  determined  on the basis of a shut down of the  company in  accordance
with  actuarial   assumptions   used  by  the  PBGC  in   single-employer   plan
terminations,  shall not  exceed  the market  value of assets  exclusive  of any
contributions due to the Plan by more than $500,000.

     SECTION 7.9 Plan Annual  Reports.  Upon the request,  from time to time, of
the  Administrative  Agent,  promptly and in any event  within  thirty (30) days
after the filing  thereof  with the  Internal  Revenue  Service,  copies of each
Schedule B (Actuarial  Information) to the annual report (Form 5500 Series) with
respect to each Plan.

     SECTION 7.10 Annual Plan  Summaries.  As soon as available and in any event
within one  hundred  twenty  (120) days after the end of each  Fiscal  Year,  an
annual summary of actuarial


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valuation and other information with respect to each Plan in form, substance and
detail satisfactory to the Administrative Agent.

     SECTION 7.11 Multiemployer  Plan Notices.  Promptly and in any event within
five (5)  Business  Days  after  receipt  thereof by any Loan Party or any ERISA
Affiliate  from the  sponsor  of a  Multiemployer  Plan,  copies of each  notice
concerning,  or other  correspondence  with  respect to, (i) the  imposition  of
Withdrawal  Liability by any such Multiemployer Plan, (ii) the reorganization or
termination,  within the meaning of Title IV of ERISA, of any such Multiemployer
Plan or (iii) the amount of liability incurred, or that may be incurred, by such
Loan Party or any ERISA  Affiliate  in  connection  with any event  described in
clause (i) or (ii).

     SECTION 7.12 Litigation. Promptly after the commencement thereof, notice of
all material actions, suits,  investigations,  litigation and proceedings before
any court or  governmental  department,  commission,  board,  bureau,  agency or
instrumentality,  Federal, state, local or foreign,  affecting any Loan Party or
any of its Subsidiaries  and, promptly after the occurrence  thereof,  notice of
any change in the status or the financial effect on any Loan Party or any of its
Subsidiaries  of the Disclosed  Litigation  from that  described on Schedule 4.9
that in each case  could  reasonably  be  expected  to have a  Material  Adverse
Effect.

     SECTION  7.13  Securities  Reports.  Promptly  after the  sending or filing
thereof,  copies of all proxy statements,  financial statements and reports that
any Loan Party or any of its Subsidiaries sends to its stockholders,  and copies
of all  regular,  periodic  and  special  reports,  and all  final  registration
statements,  that  any  Loan  Party or any of its  Subsidiaries  files  with the
Securities and Exchange  Commission or any other governmental  authority or with
any national securities exchange.

     SECTION 7.14  Creditor  Reports.  Promptly  after the  furnishing  thereof,
copies  of any  statement  or  report  furnished  to  any  other  holder  of the
securities of any Loan Party or of any of its Subsidiaries pursuant to the terms
of any indenture,  loan or credit  agreement or similar  agreement or instrument
and not otherwise required to be furnished to the Lender Parties pursuant to any
other clause of this Article 7.

     SECTION 7.15 Agreement  Notices.  Promptly upon receipt thereof,  copies of
all notices,  requests and other documents  received by any Loan Party or any of
its Subsidiaries  under or pursuant to any Material Contract or indenture,  loan
or credit agreement or similar  agreement or instrument  regarding or related to
any breach or default  by any party  thereto or any event that could  materially
impair the value of the  interests or the rights of any Loan Party or any of its
Subsidiaries  (other than  immaterial  interests or rights) or otherwise  have a
Material  Adverse Effect and copies of any amendment,  modification or waiver of
any provisions of any Material  Contract or indenture,  loan or credit agreement
or similar  agreement  or indenture  and,  from time to time upon request by the
Administrative  Agent,  such information and reports  regarding the foregoing as
the Administrative Agent may reasonably request.



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     SECTION 7.16 Revenue  Agent  Reports.  Within ten (10) days after  receipt,
copies of all Revenue  Agent  Reports  (Internal  Revenue  Service Form 886), or
other written proposals of the Internal Revenue Service, that propose, determine
or otherwise set forth any  adjustments  to the Federal  income tax liability of
the affiliated  group (within the meaning of Section  1504(a)(1) of the Internal
Revenue Code) of which the Borrower is a member aggregating $250,000 or more.

     SECTION 7.17  Environmental  Conditions.  Promptly  after the  assertion or
occurrence  thereof,  notice  of  any  Environmental  Action  against  or of any
noncompliance  by  any  Loan  Party  or  any  of  its   Subsidiaries   with  any
Environmental  Law or Environmental  Permit that could reasonably be expected to
have a Material Adverse Effect.

     SECTION 7.18 Real  Property.  Upon the request,  from time to time,  of the
Administrative  Agent,  promptly and in any event within  thirty (30) days after
any  such  request,  a report  supplementing  Schedules  4.21  and 4.22  hereto,
including an  identification  of all real and leased property disposed of by the
Borrower  or any  of its  Subsidiaries  during  such  Fiscal  Year,  a list  and
description   (including   the  street   address,   county  or  other   relevant
jurisdiction,  state,  record  owner  and,  in the case of leases  of  property,
lessor,  lessee,  expiration  date and annual  rental cost  thereof) of all real
property  acquired or leased during such Fiscal Year and a  description  of such
other changes in the information  included in such Schedules as may be necessary
for such Schedules to remain accurate and complete in all respects.

     SECTION  7.19  Insurance.  Upon the  request,  from  time to  time,  of the
Administrative  Agent,  promptly and in any event within  thirty (30) days after
any such request, a report summarizing the insurance coverage  (specifying type,
amount  and  carrier)  in effect for each Loan  Party and its  Subsidiaries  and
containing  such  additional   information  as  the  Administrative   Agent  may
reasonably request.

     SECTION 7.20 [Intentionally left blank.]

     SECTION 7.21  Management  Letters.  As soon as  available  and in any event
within  ten  (10)  Business  Days  after  the  receipt  thereof,  copies  of any
"management  letter" or similar letter  received by the Borrower or its Board of
Directors (or any Committee thereof) from its indepen dent public accountants.

     SECTION 7.22 Permitted Acquisition  Documents.  Within twenty (20) Business
Days following the consummation of each Permitted Acquisition and each Permitted
Club Acquisition,  complete copies of the related material documents  evidencing
such Permitted Acquisition or such Permitted Club Acquisition, certified as true
and correct by an appropriate officer of the Borrower.

     SECTION  7.23 Other  Information.  Such other  information  respecting  the
business,   condition   (financial  or  otherwise),   operations,   performance,
properties  or  prospects  of any Loan Party or any of its  Subsidiaries  or the
Collateral  as  the  Administrative  Agent  or any  Lender  Party  (through  the
Administrative Agent) may from time to time reasonably request.


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                                    ARTICLE 8

                               FINANCIAL COVENANTS


     While any of the  Commitments is outstanding  and, in the event any Advance
remains outstanding, so long as the Borrower or any other Loan Party is indebted
to any of the Lender Parties or the  Administrative  Agent under any of the Loan
Documents,  any Letter of Credit is outstanding and until payment in full of the
Notes and full and complete  performance of all of its other obligations arising
hereunder, the Borrower shall:

     SECTION 8.1 Minimum EBITDA.  Maintain on a Consolidated  basis with respect
to the Borrower and its  Subsidiaries as of the end of each fiscal period of the
Borrower  set forth  below  EBITDA at not less than the  respective  amounts set
forth below:

          Period                                Minimum EBITDA
          ------                                --------------

     (a)  fiscal quarter ending on
          March 31, 1999                        $0.00 (i.e., no negative amount)

     (b)  two fiscal quarters ending on
          June 30, 1999                         $2,500,000


     (c)  three fiscal quarters ending on
          September 30, 1999                    $6,000,000

     (d)  four fiscal quarters ending on 
          the dates specified below:

          December 31, 1999                     $10,000,000

          March 31, 2000                        $11,000,000

          June 30, 2000                         $12,000,000

          September 30, 2000                    $12,000,000

          December 31, 2000                     $13,000,000

          December 31, 2001                     $15,000,000

          December 31, 2002                     $16,000,000



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         December 31, 2003                      $16,000,000

     SECTION  8.2  Consolidated  Senior  Debt  to  EBITDA  Ratio  Maintain  on a
Consolidated  basis with respect to the Borrower and its  Subsidiaries as of the
end of  each  fiscal  period  of the  Borrower  set  forth  below,  a  ratio  of
Consolidated  Senior Debt to EBITDA of not more than the ratio set forth  below;
provided,  however,  that with respect to the fiscal quarters ending on June 30,
1999 and September  30, 1999,  EBITDA shall be calculated as provided at the end
of this Article 8.

              Period                                          Maximum Ratio
              ------                                          -------------

         (a)  two fiscal quarters ending on
              June 30, 1999                                   5.25 to 1.00

         (b)  three fiscal quarters ending on
              September 30, 1999                              4.00 to 1.00

         (c)  most recently completed
              four fiscal quarters ending on the
              dates specified below:

              December 31, 1999                               3.00 to 1.00

              March 31, 2000                                  3.00 to 1.00

              June 30, 2000                                   2.75 to 1.00

              September 30, 2000                              2.75 to 1.00

              December 31, 2000                               2.50 to 1.00

              December 31, 2001 and on
              each December 31 thereafter                     2.00 to 1.00

     SECTION 8.3 Consolidated  Debt to EBITDA Ratio.  Maintain on a Consolidated
basis with respect to the Borrower  and its  Subsidiaries  as of the end of each
period set forth below a Consolidated  Debt to EBITDA Ratio of not more than the
ratio set forth  below;  provided,  however,  that with  respect  to the  fiscal
quarters ending on September 30, 1999, EBITDA shall be calculated as provided at
the end of this Article 8:



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              Period                                          Maximum Ratio
              ------                                          -------------

         (a)  three fiscal quarters ending on
              September 30, 1999                              6.00 to 1.00

         (b)  most recently completed  
              four fiscal quarters ending on the
              dates specified below:

              December 31, 1999                               4.50 to 1.00

              March 31, 2000                                  4.50 to 1.00

              June 30, 2000                                   4.25 to 1.00

              September 30, 2000                              4.00 to 1.00

              December 31, 2000                               3.75 to 1.00

              December 31, 2001
              and each December 31 thereafter                 3.50 to 1.00

     SECTION 8.4 Interest Coverage Ratio.  Maintain as of the end of each period
set forth  below,  a ratio of (i) EBITDA for the most  recently  completed  four
fiscal  quarters of the Borrower to (ii)  Consolidated  Interest  Expense to the
extent  paid in cash  during  such  period for such  period of not less than the
ratio set forth below for such period.


              Period                                          Minimum Ratio
              ------                                          -------------

         (a)  most recently completed  
              four fiscal quarters ending on the
              dates specified below:

              December 31, 1999                               1.75 to 1.00

              March 31, 2000                                  2.00 to 1.00

              June 30, 2000                                   2.25 to 1.00

              September 30, 2000                              2.25 to 1.00

              December 31, 2000                               2.50 to 1.00



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              December 31, 2001
              and each December 31 thereafter                 2.50 to 1.00

     SECTION 8.5 Fixed  Charge  Coverage  Ratio.  Maintain as of the end of each
period  set forth  below a Fixed  Charge  Coverage  Ratio for the most  recently
completed  four fiscal  quarters of the  Borrower of not less than the ratio set
forth below for such period.

              Period                                          Minimum Ratio
              ------                                          -------------

         (a)  four fiscal quarters ending on the
              dates specified below:

              December 31, 1999                               1.20 to 1.00

              March 31, 2000                                  1.20 to 1.00

              June 30, 2000                                   1.20 to 1.00

              September 30, 2000                              1.20 to 1.00

              December 31, 2000                               1.20 to 1.00

              December 31, 2001
              and each December 31 thereafter                 1.20 to 1.00


With  respect to Section 8.2 as to the first three full fiscal  quarters  ending
after the Closing Date,  EBITDA shall be calculated on an annualized basis, such
that (a) with respect to the two full fiscal  quarters  ending on June 30, 1999,
EBITDA shall be calculated by multiplying  EBITDA for the period from January 1,
1999 to June 30,  1999 by 2, and (b)  with  respect  to the  three  full  fiscal
quarters ending on September 30, 1999, EBITDA shall be calculated by multiplying
EBITDA for the period from January 1, 1999 to September 30, 1999 by 4/3.

With  respect to Section 8.3 as to the first three full fiscal  quarters  ending
after the Closing Date,  EBITDA shall be calculated on an annualized basis, such
that with  respect to the three full fiscal  quarters  ending on  September  30,
1999,  EBITDA  shall be  calculated  by  multiplying  EBITDA for the period from
January 1, 1999 to September 30, 1999 by 4/3.


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                                    ARTICLE 9

                                EVENTS OF DEFAULT

     If  any  of  the  following  ("Events  of  Default")  shall  occur  and  be
continuing:

     SECTION 9.1 Payment.  (a) The Borrower  shall fail to pay any  principal of
any Advance when the same shall become due and payable or (b) the Borrower shall
fail to pay any  interest on any  Advance,  or any Loan Party shall fail to make
any other  payment under any Loan  Document,  in each case under this clause (b)
within three (3) Business Days after the same becomes due and payable; or

     SECTION 9.2 Representations and Warranties.  Any representation or warranty
made by any Loan Party (or any of its officers)  under or in connection with any
Loan Document  shall prove to have been  incorrect in any material  respect when
made or confirmed; or

     SECTION  9.3  Certain  Covenants.  The  Borrower  shall  fail to perform or
observe any term,  covenant or agreement  contained in Section  2.14,  5.5, 5.6,
5.7, 5.13, or 5.14,  Article 6 or Article 8 and such failure shall, if caused by
a violation of the provisions of Section  6.1(b),  (d) or (e), 6.6, 6.14,  6.16,
6.17 and if able to be remedied,  remain  unremedied for fifteen (15) days after
the date of such failure; or

     SECTION 9.4 Other Covenants. Any Loan Party shall fail to perform any other
term,  covenant or agreement  contained in any Loan Document or other  documents
executed or delivered to any of the Lenders in connection with this Agreement on
its part to be performed or observed if such failure shall remain unremedied for
thirty  (30) days  after  the  earlier  of the date on which  (a) a  Responsible
Officer of any Loan Party  becomes  aware of such failure or (b) written  notice
thereof shall have been given to the Borrower by the Administrative Agent or any
Lender Party; or

     SECTION 9.5 Other Defaults. Any Loan Party or any of its Subsidiaries shall
fail to pay any principal of, premium or interest on or any other amount payable
in respect of any Debt that is outstanding in a principal or notional  amount of
at least $500,000  either  individually  or in the aggregate (but excluding Debt
outstanding  hereunder) of such Loan Party or such  Subsidiary  (as the case may
be),  when the same becomes due and payable  after any  applicable  grace period
(whether by scheduled maturity,  required  prepayment,  acceleration,  demand or
otherwise);  or any other event shall occur or  condition  shall exist under any
agreement or instrument relating to any such Debt, in each case if the effect of
such event or condition is to accelerate,  or to permit the acceleration of, the
maturity of such Debt or otherwise to cause,  or to permit the holder thereof to
cause,  such Debt to mature;  or any such Debt shall be  declared  to be due and
payable or  required  to be  prepaid  or  redeemed  (other  than by a  regularly
scheduled required prepayment or redemption), purchased or defeased, or an offer
to prepay,  redeem,  purchase or defease such Debt shall be required to be made,
in each case prior to the stated maturity thereof; or


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<PAGE>


     SECTION 9.6  Bankruptcy,  Etc..  Any Loan Party or any of its  Subsidiaries
shall  generally  not pay its debts as such debts  become due, or shall admit in
writing  its  inability  to pay its  debts  generally,  or shall  make a general
assignment for the benefit of creditors;  or any proceeding  shall be instituted
by or against any Loan Party or any of its Subsidiaries seeking to adjudicate it
a bankrupt or insolvent,  or seeking  liquidation,  winding up,  reorganization,
arrangement,  adjustment,  protection, relief, or composition of it or its debts
under any law relating to bankruptcy,  insolvency or reorganization or relief of
debtors,  or seeking  the entry of an order for relief or the  appointment  of a
receiver,  trustee or other similar  official for it or for any substantial part
of its property and, in the case of any such  proceeding  instituted  against it
(but not  instituted  by it) that is being  diligently  contested  by it in good
faith, any such proceeding shall remain  undismissed or unstayed for a period of
sixty  (60) days or any of the  actions  sought in such  proceeding  (including,
without limitation, the entry of an order for relief against, or the appointment
of a receiver,  trustee,  custodian  or other  similar  official  for, it or any
substantial  part of its property)  shall occur, or any Loan Party or any of its
Subsidiaries shall take any corporate action to authorize any of the actions set
forth above in this Section 9.6; or

     SECTION 9.7 Judgments.

     (a) Any  judgment  or order  for the  payment  of money in  excess  of Five
Hundred Thousand ($500,000) Dollars individually or in the aggregate (other than
such a  judgment  or order  which is fully  covered by  insurance  for which the
appropriate  insurer  has  acknowledged  responsibility  in  writing)  shall  be
rendered  against any Loan Party or any of its  Subsidiaries and (i) enforcement
proceedings  shall have been  commenced  by any creditor  upon such  judgment or
order and (ii) there shall be a period of fifteen (15)  consecutive  days during
which a stay of  enforcement  of such judgment or order,  by reason of a pending
appeal or otherwise, shall not be in effect; or

     (b) Any  non-monetary  judgment or order shall be rendered against any Loan
Party or any of its  Subsidiaries  that is reasonably  likely to have a Material
Adverse Effect; or

     SECTION 9.8 Loan  Documents.  Any material  provision of any Loan  Document
after delivery  thereof shall for any reason cease to be valid and binding on or
enforceable  against any Loan Party which is party to it, or any such Loan Party
shall so state in writing; or

     SECTION 9.9 Liens. Any Collateral Document after delivery thereof, together
with all filings  and other  required  perfection  actions  taken in  connection
therewith,  shall for any reason  cease to or  otherwise  not create a valid and
perfected  first  priority  lien  on and  security  interest  in the  Collateral
purported to be covered thereby (other than  non-perfection of Liens on specific
collateral as  identified  expressly in the Security  Agreement or  Intellectual
Property Security Agreement);  or any Event of Default shall have occurred under
the Radio Spirits  Subordinated  Security  Agreement or the Senior  Subordinated
Security  Agreement or the secured  party under either  thereof shall have taken
any action in  violation  of the terms  thereof;  or the bailee under any bailee
letter  relating to inventory of any Loan Party shall take any action in respect
of such


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<PAGE>


inventory  having a value of  $500,000 or more that could  adversely  affect the
Administrative  Agent's rights in collateral  covered thereby in a material way;
or

     SECTION 9.10 Change of Control. Any Change of Control shall occur; or

     SECTION 9.11 ERISA Events.

     (a) Any ERISA Event shall have  occurred with respect to a Plan and the sum
(determined  as of the date of  occurrence  of the last such ERISA Event) of the
Insufficiency of such Plan and the Insufficiency of any and all other Plans with
respect  to which an ERISA  Event  shall  have  occurred  and then exist (or the
liability  of the Loan  Parties and the ERISA  Affiliates  related to such ERISA
Events) exceeds $500,000; or

     (b) Any Loan Party or any ERISA  Affiliate  shall have been notified by the
sponsor of a  Multiemployer  Plan that it has incurred  Withdrawal  Liability to
such  Multiemployer  Plan in an  amount  that,  when  aggregated  with all other
amounts required to be paid to  Multiemployer  Plans by the Loan Parties and the
ERISA  Affiliates as  Withdrawal  Liability  (determined  as of the date of such
notification),  exceeds  $500,000 or  requires  payments  exceeding  300,000 per
annum; or

     (c) Any Loan Party or any ERISA  Affiliate  shall have been notified by the
sponsor  of  a   Multiemployer   Plan  that  such   Multiemployer   Plan  is  in
reorganization or is being terminated,  within the meaning of Title IV of ERISA,
and as a result of such  reorganization  or  termination  the  aggregate  annual
contributions of the Loan Parties and the ERISA Affiliates to all  Multiemployer
Plans that are then in  reorganization  or being terminated have been or will be
increased over the amounts  contributed to such Multiemployer Plans for the plan
years of such Multiemployer  Plans immediately  preceding the plan year in which
such reorganization or termination occurs by an amount exceeding $300,000; or

     SECTION  9.12  Subordination   Provisions.   The  subordination  provisions
contained in any instrument  pursuant to which the  Subordinated  Debt permitted
under  Section  6.2(c)(iv)  is  created  or in any  instrument  evidencing  such
Subordinated Debt shall cease, for any reason, to be in full force and effect or
enforceable in accordance  with their terms (other than as the result of payment
or prepayment in accordance with the terms hereof); or

     SECTION  9.13  Management.  Norton  Herrick  shall  cease  for  any  reason
whatsoever,   including,  without  limitation,  death  or  disability  (as  such
disability  shall  be  determined  in the  sole  and  absolute  judgment  of the
Administrative  Agent) to be and continuously  perform the duties of Chairman of
the Borrower or, if such cessation  shall occur as a result of the death or such
disability,  neither (i) Michael Herrick nor (ii) another  successor  reasonably
satisfactory  to the  Administrative  Agent,  shall  have  become and shall have
commenced to perform the duties of Chairman of the Borrower  within  thirty (30)
days after such cessation; provided, however, that if Michael Herrick or another
such reasonably satisfactory successor shall have been so elected and shall have
commenced performance of such duties within such period, the name of Michael


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<PAGE>


Herrick or such  other  successor,  as the case may be,  shall be deemed to have
been inserted in place of Norton Herrick, in this Section 9.13; or

     SECTION 9.14 No Pledge of Certain Stock.  Norton  Herrick,  Michael Herrick
and/or Howard  Herrick or any of their  Affiliates  shall create or suffer to be
imposed a Lien on any of the shares of capital stock of the Borrower at any time
owned by any of them of record and/or beneficially either (a) at any time when a
Default or Event of Default  then exists  hereunder  or would exist after giving
effect  thereto or (b) under any of the  circumstances  described  below in this
Section 9.14,  (i) if Norton  Herrick,  Michael  Herrick,  Howard Herrick and/or
their  Affiliates  allow a Lien to be imposed on that  quantity of Owned Herrick
Shares which would cause the shares of the Borrower owned (whether  beneficially
and/or of record) by Norton Herrick,  Michael Herrick,  Howard Herrick and their
Affiliates  in the  aggregate  which are not subject to any Lien to be less than
the number of shares required to be owned in clauses (a)(i), (ii), (iii) or (iv)
of the  definition of Change of Control as of the date of the imposition of such
Lien (whether or not any Lien thereon shall have been foreclosed on or otherwise
made use of directly or indirectly in any respect by the creditor(s)  holding or
having any benefit of such Lien),  the intent of the parties hereto being that a
Default  shall  exist  under  this  Agreement  if a Lien is granted on shares of
capital  stock of the  Borrower  if a  potential  Change of Control  could arise
therefrom (as determined under this clause (i) as of the date of the granting of
any such Lien),  whether or not a Change of Control would  actually exist on the
date of grant or  existence  of such Lien;  or (ii) if a Lien is imposed on more
than  forty-nine  (49%) percent of Owned  Herrick  Shares as of the Closing Date
(or, if such  shareholdings  increase after the Closing Date, then not more than
49% of such shares owned after the Closing Date);  or (iii) if a Lien is imposed
on more than 350,000 of Owned Herrick Shares in favor of any single Person or in
favor of any Person taken  together with its Affiliates or in favor of any group
of Persons (whether or not Affiliates) acting together or forming a partnership,
limited  partnership,  syndicate or group of any kind or similar combination (as
such amount may be  appropriately  adjusted as a result of stock  splits,  stock
dividends,   reverse  stock  splits,   reclassifications  or  similar  corporate
transactions);

then, and in any such event, the Administrative  Agent (i) shall at the request,
or may with the consent,  of the Required  Lenders,  by notice to the  Borrower,
declare the Commitments of each appropriate Lender (other than the Commitment in
respect of Letter of Credit  Advances by the Issuing Bank or a Revolving  Credit
Lender pursuant to Section 2.3(c) and Swing Line Advances by a Revolving  Credit
Lender  pursuant to Section  2.2(b)) and of the Issuing Bank to issue Letters of
Credit to be terminated,  whereupon the same shall forthwith terminate, and (ii)
shall at the request, or may with the consent,  of the Required Lenders,  (A) by
notice to the Borrower,  declare the Notes,  all interest  thereon and all other
amounts  payable  under  this  Agreement  and the  other  Loan  Documents  to be
forthwith due and payable,  whereupon the Notes,  all such interest and all such
other  amounts   shall  become  and  be  forthwith  due  and  payable,   without
presentment,  demand,  protest or further  notice of any kind,  all of which are
hereby expressly waived by the Borrower and (B) by notice to each party required
under the terms of any agreement in support of which a Standby  Letter of Credit
is issued,  request that all Obligations  under such agreement be declared to be
due and  payable;  provided,  however,  that in the event of an actual or deemed
entry  of an order  for  relief  with  respect  to any Loan  Party or any of its
Subsidiaries under the


                                       108

<PAGE>


Federal  Bankruptcy  Code,  (x) the  obligation  of each Lender to make Advances
(other than Letter of Credit Advances by the Issuing Bank or a Revolving  Credit
Lender pursuant to Section 2.3(c) and Swing Line Advances by a Revolving  Credit
Lender  pursuant to Section  2.2(b)) and of the Issuing Bank to issue Letters of
Credit shall  automatically  be terminated and (y) the Notes,  all such interest
and all such amounts shall automatically become and be due and payable,  without
presentment,  demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.

If  any  Event  of  Default   shall  have  occurred  and  be   continuing,   the
Administrative  Agent  may,  or shall at the  request of the  Required  Lenders,
irrespective  of whether it is taking any of the actions  described in Article 9
or otherwise,  make demand upon the Borrower to, and forthwith  upon such demand
the  Borrower  will,  pay to the  Administrative  Agent on behalf of the  Lender
Parties in same day funds at the  Administrative  Agent's  office  designated in
such demand, for deposit in the L/C Cash Collateral  Account, an amount equal to
the aggregate Available Amount of all Letters of Credit then outstanding.  If at
any time the Administrative Agent determines that any funds held in the L/C Cash
Collateral  Account are  subject to any right or claim of any Person  other than
the Administrative Agent and the Lender Parties or that the total amount of such
funds is less than the aggregate  Available Amount of all Letters of Credit, the
Borrower will,  forthwith upon demand by the  Administrative  Agent,  pay to the
Administrative  Agent,  as additional  funds to be deposited and held in the L/C
Cash  Collateral  Account,  an amount equal to the excess of (a) such  aggregate
Available  Amount over (b) the total amount of funds,  if any,  then held in the
L/C Cash Collateral Account that the Administrative  Agent determines to be free
and clear of any such right and claim.

                                   ARTICLE 10

                            THE ADMINISTRATIVE AGENT

     SECTION  10.1  Authorization  and  Action.  (a) Each  Lender  Party (in its
capacities  as a Lender,  the Issuing  Bank  and/or the Swing Line Bank)  hereby
appoints and authorizes the Administrative Agent to take such action as agent on
its behalf and to exercise such powers and  discretion  under this Agreement and
the other Loan  Documents as are  delegated to the  Administrative  Agent by the
terms  hereof and  thereof,  together  with such  powers and  discretion  as are
reasonably  incidental thereto. The Administrative Agent shall have no duties or
responsibilities  except those  expressly  set forth in this  Agreement  and the
other  Loan  Documents  and shall not be a trustee or  fiduciary  for any Lender
Party.

     (b) As to any  matters not  expressly  provided  for by the Loan  Documents
(including,  without  limitation,  enforcement or collection of the Notes),  the
Administrative  Agent shall not be required to exercise any  discretion  or take
any action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required  Lenders,  and such  instructions  shall be binding upon all Lender
Parties and all holders of Notes and any action taken or failure to act pursuant
thereto shall be binding on all the Lender Parties; provided,  however, that the
Administrative Agent shall not be


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<PAGE>


required to take any action that  exposes the  Administrative  Agent to personal
liability  or that is contrary  to this  Agreement,  any other Loan  Document or
applicable law and except for action  expressly  required by the  Administrative
Agent hereunder or under the Loan Documents,  the Administrative  Agent shall in
all  cases be fully  justified  in  failing  or  refusing  to act  hereunder  or
thereunder  unless it shall be  indemnified  to its  satisfaction  by the Lender
Parties  against any and all liability and expense that may be incurred by it by
reason of taking or continuing to take any such action.

     SECTION 10.2 Agent's Reliance,  Etc. Neither the  Administrative  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
the Loan  Documents,  except  for its or their own gross  negligence  or willful
misconduct.   Without  limitation  of  the  generality  of  the  foregoing,  the
Administrative  Agent: (a) may treat the payee of any Note as the holder thereof
until the Administrative Agent receives and accepts an Assignment and Acceptance
entered into by the Lender that is the payee of such Note,  as assignor,  and an
Eligible  Assignee,  as assignee,  as provided in Section 11.7;  (b) may consult
with legal counsel  (including  counsel for any Loan Party),  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;  (c) makes no  warranty  or
representation  to any Lender Party and shall not be  responsible  to any Lender
Party for  recitals,  any  statements,  warranties or  representations  (whether
written or oral) made in or in connection with the Loan Documents; (d) 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 any Loan Document on the part of
any Loan Party or to inspect the property  (including  the books and records) of
any Loan Party;  (e) shall not be  responsible  to any Lender  Party for the due
execution, legality, validity, enforceability, genuineness, sufficiency or value
of, or the  perfection or priority of any lien or security  interest  created or
purported to be created  under or in connection  with,  any Loan Document or any
other  instrument or document  furnished  pursuant  thereto;  (f) shall incur no
liability  under or in respect of any Loan  Document  by acting upon any notice,
consent,  certificate or other  instrument or writing (which may be by telegram,
telecopy  or telex)  believed  by it to be  genuine  and signed or sent by or on
behalf  of  the  proper  party  or  parties;  and  (g)  may  employ  agents  and
attorneys-in-fact  and shall not be answerable  for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it with reasonable care.

     SECTION 10.3 Fleet and  Affiliates.  With respect to its  Commitments,  the
Advances made by it and the Notes issued to it, Fleet shall have the same rights
and powers  under the Loan  Documents as any other Lender Party and may exercise
the same as though it were not the  Administrative  Agent;  and the term "Lender
Party" or "Lender Parties" shall, unless otherwise expressly indicated,  include
Fleet in its individual  capacity.  Fleet and its affiliates may accept deposits
from,  lend money to, act as trustee  under  indentures  of,  accept  investment
banking  engagements from and generally engage in any kind of business with, any
Loan Party,  any of its  Subsidiaries and any Person who may do business with or
own securities of any Loan Party or any such  Subsidiary and may accept fees and
other  consideration  from the  Borrower  or its  Affiliates,  for  services  in
connection with this Agreement, the other Loan Documents or


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otherwise,  all as if Fleet were not the  Administrative  Agent and  without any
duty to account therefor to the Lender Parties.

     SECTION 10.4 Lender Party Credit Decision.  Each Lender Party  acknowledges
that it has, independently and without reliance upon the Administrative Agent or
any other  Lender  Party and based on the  financial  statements  referred to in
Section  4.6  and  such  other  documents  and  information  as  it  has  deemed
appropriate,  made its own  credit  analysis  and  decision  to enter  into this
Agreement.  Each Lender Party also acknowledges that it will,  independently and
without  reliance  upon the  Administrative  Agent or any other Lender Party and
based on such  documents and  information  as it shall deem  appropriate  at the
time,  continue to make its own credit  decisions in taking or not taking action
under this Agreement.

     SECTION 10.5 Indemnification.

     (a) Each Lender  Party  severally  agrees to indemnify  the  Administrative
Agent (to the extent not promptly  reimbursed by the Borrower)  from and against
such Lender Party's ratable share  (determined as provided below) of any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses or disbursements  of any kind or nature  whatsoever that may be
imposed on, incurred by, or asserted against the Administrative Agent in any way
relating  to or  arising  out of any of the Loan  Documents  or any  transaction
contemplated  hereby  and  thereby  or  any  action  taken  or  omitted  by  the
Administrative Agent under any of the Loan Documents; provided, however, that no
Lender Party shall be liable for any portion of such  liabilities,  obligations,
losses,  damages,  penalties,  actions,  judgments,  suits,  costs,  expenses or
disbursements  to the extent  resulting  from the  Administrative  Agent's gross
negligence or willful  misconduct.  Without  limitation of the  foregoing,  each
Lender Party agrees to reimburse the  Administrative  Agent promptly upon demand
for its ratable share of any costs and expenses (including,  without limitation,
fees and expenses of counsel) payable by the Borrower under Section 11.4, to the
extent that the Administrative  Agent is not promptly  reimbursed for such costs
and expenses by the Borrower.

     (b) Each Lender Party  severally  agrees to indemnify  the Issuing Bank (to
the extent not promptly reimbursed by the Borrower) from and against such Lender
Party's ratable share (determined as provided below) of any and all liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses or disbursements  of any kind or nature  whatsoever that may be imposed
on, incurred by, or asserted  against the Issuing Bank in any way relating to or
arising out of any of the Loan  Documents  or any action taken or omitted by the
Issuing Bank under any of the Loan Documents;  provided, however, that no Lender
Party shall be liable for any portion of such liabilities,  obligations, losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
resulting  from the  Issuing  Bank's  gross  negligence  or willful  misconduct.
Without  limitation of the foregoing,  each Lender Party agrees to reimburse the
Issuing  Bank  promptly  upon  demand  for its  ratable  share of any  costs and
expenses (including,  without limitation,  fees and expenses of counsel) payable
by the Borrower  under  Section 11.4, to the extent that the Issuing Bank is not
promptly reimbursed for such costs and expenses by the Borrower.


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     (c) For  purposes of  Sections  10.5(a) and  10.5(b),  the Lender  Parties'
respective  ratable  shares  of any  amount  shall be  determined,  at any time,
according  to the sum of (i) the  aggregate  principal  amount  of the  Advances
outstanding at such time and owing to the respective Lender Parties,  (ii) their
respective Pro Rata Shares of the aggregate  Available  Amount of all Letters of
Credit  outstanding at such time,  (iii) the aggregate  unused portions of their
respective  Term  Commitments  at such time,  and (iv) their  respective  Unused
Revolving  Credit  Commitments  at  such  time;  provided,  that  the  aggregate
principal  amount of Swing Line Advances owing to the Swing Line Bank and Letter
of Credit  Advances  owing to the Issuing Bank shall be considered to be owed to
the  Revolving  Credit  Lenders  ratably in  accordance  with  their  respective
Revolving Credit  Commitments.  In the event that any Defaulted Advance shall be
owing by any Defaulting Lender at any time, such Lender Party's  Commitment with
respect to the Facility under which such Defaulted  Advance was required to have
been made shall be  considered to be unused for purposes of this Section 10.5 to
the extent of the amount of such  Defaulted  Advance.  The failure of any Lender
Party to reimburse the Administrative Agent or the Issuing Bank, as the case may
be, promptly upon demand for its ratable share of any amount required to be paid
by the Lender  Parties to the  Administrative  Agent or the Issuing Bank, as the
case may be, as provided  herein shall not relieve any other Lender Party of its
obligation  hereunder to reimburse the Administrative Agent or the Issuing Bank,
as the case may be, for its ratable  share of such  amount,  but no Lender Party
shall be responsible  for the failure of any other Lender Party to reimburse the
Administrative  Agent or the  Issuing  Bank,  as the case may be, for such other
Lender Party's ratable share of such amount.  Without  prejudice to the survival
of any other  agreements  of any  Lender  Party  hereunder,  the  agreement  and
obligations  of each Lender Party  contained in this Section 10.5 shall  survive
the  payment  in full of  principal,  interest  and all  other  amounts  payable
hereunder and under the other Loan Documents.

     SECTION 10.6 Successor  Administrative Agents. The Administrative Agent may
resign as to any or all of the  Facilities at any time by giving  written notice
thereof to the Lender  Parties and the  Borrower and may be removed as to all of
the Facilities at any time with or without cause by the Required  Lenders.  Upon
any such  resignation or removal,  the Required  Lenders shall have the right to
appoint a  successor  Administrative  Agent as to such of the  Facilities  as to
which the  Administrative  Agent has resigned or been  removed.  If no successor
Administrative  Agent shall have been so appointed by the Required Lenders,  and
shall have accepted such appointment, within thirty (30) days after the retiring
Administrative  Agent's giving of notice of resignation or the Required Lenders'
removal of the retiring  Administrative Agent, then the retiring  Administrative
Agent may, on behalf of the Lender Parties,  appoint a successor  Administrative
Agent,  which shall be a Lender which is a commercial  bank organized  under the
laws of the United States or of any State thereof and having a combined  capital
and surplus of at least $250,000,000.  Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor  Administrative Agent as to all of
the  Facilities and upon the execution and filing or recording of such financing
statements, or amendments thereto, and such other instruments or notices, as may
be necessary or desirable,  or as the Required Lenders may request,  in order to
continue the  perfection  of the Liens granted or purported to be granted by the
Collateral Documents,  such successor  Administrative Agent shall succeed to and
become vested with all the rights, powers, discretion,  privileges and duties of
the retiring Administrative Agent,


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and the retiring Administrative Agent shall be discharged from all of its duties
and  obligations  under this  Agreement and the other Loan  Documents.  Upon the
acceptance of any appointment as  Administrative  Agent hereunder by a successor
Administrative  Agent  as to  less  than  all of the  Facilities  and  upon  the
execution and filing or recording of such  financing  statements,  or amendments
thereto,  and  such  other  instruments  or  notices,  as  may be  necessary  or
desirable,  or as the  Required  Lenders may  request,  in order to continue the
perfection  of the Liens  granted or purported  to be granted by the  Collateral
Documents,  such  successor  Administrative  Agent  shall  succeed to and become
vested with all the rights,  powers,  discretion,  privileges  and duties of the
retiring Administrative Agent as to such Facilities,  other than with respect to
funds  transfers and other similar aspects of the  administration  of Borrowings
under such  Facilities,  issuances  of Letters  of Credit  (notwithstanding  any
resignation  as  Administrative  Agent  with  respect  to the  Letter  of Credit
Facility)  and payments by the Borrower in respect of such  Facilities,  and the
retiring   Administrative   Agent  shall  be  discharged  from  its  duties  and
obligations under this Agreement as to such Facilities, other than as aforesaid.
After any retiring  Administrative  Agent's  resignation or removal hereunder as
Administrative Agent as to all of the Facilities, the provisions of this Article
10 shall inure to its benefit as to any actions  taken or omitted to be taken by
it while it was Administrative Agent as to any Facilities under this Agreement.

     SECTION  10.7  Events of  Default.  The  Administrative  Agent shall not be
deemed  to have  knowledge  of the  occurrence  of a  Default  (other  than  the
non-payment  of  principal  of or interest on Loans)  unless the  Administrative
Agent has received notice from a Lender or the Borrower  specifying such Default
and  stating  that such notice is a "Notice of  Default".  In the event that the
Administrative  Agent receives such a notice of the occurrence of a Default, the
Administrative  Agent shall give notice  thereof to the Lenders  (and shall give
each Lender notice of each such  non-payment).  The  Administrative  Agent shall
(subject  to Section  10.1(b)  hereof)  take such  action  with  respect to such
Default as shall be directed by the Required Lenders.

                                   ARTICLE 11

                                  MISCELLANEOUS

     SECTION 11.1  Amendments,  Etc. No amendment or waiver of any  provision of
this  Agreement  or the Notes or any other  Loan  Document,  nor  consent to any
departure by the Borrower therefrom,  shall in any event be effective unless the
same  shall  be in  writing  and  signed  (or,  in the  case  of the  Collateral
Documents,  consented to) by the Required  Lenders and Revolving  Credit Lenders
holding greater than 50% of the aggregate Revolving Credit Commitments, and then
such waiver or consent shall be effective only in the specific  instance and for
the specific purpose for which given; provided,  however, that (a) no amendment,
waiver or  consent  shall,  unless in writing  and signed by all of the  Lenders
(other than any Lender Party that is, at such time, a Defaulting Lender), do any
of the following at any time: (i) change the percentage of (A) the  Commitments,
(B) the aggregate  unpaid  principal amount of the Advances or (C) the aggregate
Available  Amount of outstanding  Letters of Credit that, in each case, shall be
required  for the  Lenders  or any of them to take any  action  hereunder;  (ii)
release all or


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substantially  all of the  Collateral  in any  transaction  or series of related
transactions or permit the creation, incurrence,  assumption or existence of any
Lien on any material  portion of the Collateral in any  transaction or series of
related  transactions  to secure  any  liabilities  or  obligations  other  than
Obligations owing to the Secured Parties under the Loan Documents; (iii) release
any of the Guarantors from their  Subsidiary  Guaranty;  (iv) amend this Section
11.1 or the  definition of Required  Lenders;  or (v) limit the liability of any
Loan  Party  under any of the Loan  Documents  and (b) no  amendment,  waiver or
consent  shall,  unless in writing and signed by the  Required  Lenders and each
Lender  that has a  Commitment  under  the Term  Facility  or  Revolving  Credit
Facility if affected by such  amendment,  waiver or consent,  (i)  increase  the
Commitments of such Lender or subject such Lender to any additional obligations,
(ii) reduce the  principal  of, or interest on, the Notes held by such Lender or
any fees or other  amounts  payable  hereunder to such Lender,  (iii) change any
date fixed for any payment of  principal  of, or interest  on, the Notes held by
such Lender or any fees or other  amounts  payable  hereunder  to such Lender or
(iv) change the order of  application of any prepayment set forth in Section 2.6
in any manner that materially affects such Lender;  provided,  further,  that no
amendment,  waiver or consent  shall,  unless in writing and signed by the Swing
Line Bank or the  Issuing  Bank,  as the case may be, in addition to the Lenders
required  above to take such  action,  affect the rights or  obligations  of the
Swing Line Bank or the Issuing Bank, as the case may be, under this Agreement or
any other Loan Document;  and provided,  further,  that no amendment,  waiver or
consent  shall,  unless in  writing  and signed by the  Administrative  Agent in
addition to the Lenders required above to take such action, affect the rights or
duties of the  Administrative  Agent  under  this  Agreement  or any other  Loan
Document.

     SECTION 11.2 Notices Etc. All notices and other communications provided for
hereunder  shall  be  in  writing  (including  telegraphic,  telecopy  or  telex
communication) and mailed,  telegraphed,  telecopied,  telexed or delivered,  by
overnight courier services or personally served,

                  (a)      if to the Borrower:

                           Audio Book Club, Inc.
                           20 Community Place
                           Post Office Box 2346
                           Morristown, New Jersey 07962-2346
                           Attention: Mr. Norton Herrick
                                      Chairman, Co-Chief Executive Officer
                           Telephone No.: (973) 539-9528
                           Facsimile No.: (973) 539-1273

                                       and

                           Audio Book Club, Inc.
                           2295 Corporate Blvd., NW
                           Suite 222
                           P.O. Box 5010


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<PAGE>


                           Boca Raton, FL  33431
                           Attention:  Mr. Norton Herrick
                                           Chairman, Co-Chief Executive Officer
                           Telephone No.: (561) 241-9880
                           Facsimile No.:  (561) 241-9887

                           with a copy to:

                                    Werbel & Carnelutti, P.C.
                                    711 Fifth Avenue
                                    New York, New York 10022
                                    Attention:  Stephen M. Davis, Esq.
                                    Telephone No.: (212)832-8300
                                    Facsimile No.:  (212) 832-3353

                  (b)      if to the Administrative Agent:

                                    Fleet National Bank
                                    One Federal Street
                                    Boston, Massachusetts 02110
                                    Attention: Thomas Flanagan
                                    Telephone No.: (617) 346-4911
                                    Facsimile No.:  (617) 346-5093

                           with a copy to:

                                    Winston & Strawn
                                    200 Park Avenue
                                    New York, New York 10166
                                    Attention: Susan Berkwitt-Malefakis, Esq.
                                    Telephone No.: (212) 294-6703
                                    Facsimile No.: (212) 294-4700

     (c) if to any Initial  Lender or the Initial  Issuing Bank, at its Domestic
Lending Office specified opposite its name on Schedule I attached hereto.

     (d) if to any other Lender Party, at its Domestic  Lending Office specified
in the Assignment and Acceptance pursuant to which it became a Lender Party;

or, as to the Borrower or the  Administrative  Agent,  at such other  address as
shall be designated by such party in a written  notice to the other parties and,
as to each other party,  at such other  address as shall be  designated  by such
party in a written notice to the Borrower and the Administrative Agent. All such
notices and  communications  shall,  (i) when mailed by certified  mail,  return
receipt  requested,  be  effective  three  (3) days  after  mailing,  (ii)  when
telegraphed,


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telecopied or telexed be effective upon delivery to the telegraph company,  upon
transmission by telecopier or upon confirmation by telex answerback,  (iii) when
delivered in person,  be effective  when  delivered,  and (iv) when delivered by
overnight  courier,  be effective  two (2) Business  Days after  delivery to the
courier  properly  addressed,  except  that  notices and  communications  to the
Administrative Agent pursuant to Article 2, 3 or 10 shall not be effective until
received by the  Administrative  Agent.  Delivery by  telecopier  of an executed
counterpart  of this  Agreement,  the Notes or any other Loan Document or of any
Exhibit hereto or thereto or of any amendment or waiver of any provision thereof
shall be as effective as delivery of a manually executed counterpart thereof.

     SECTION 11.3 No Waiver; Remedies;  Counterclaims. No failure on the part of
any  Lender  Party  or the  Administrative  Agent to  exercise,  and no delay in
exercising,  any right  hereunder  or under  any Note or under  any  other  Loan
Document  shall  operate  as a waiver  thereof,  nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive  of any  remedies  provided  by law or in equity.  The due payment and
performance  of the  Obligations  shall be without  regard to any  counterclaim,
right of offset or any other claim  whatsoever  that the  Borrower or other Loan
Party may have against any Lender Party or the Administrative  Agent and without
regard to any other obligation of any nature whatsoever that any Lender Party or
the  Administrative  Agent may have to the  Borrower or Loan Party,  and no such
counterclaim  or  offset  shall  be  asserted  by  the  Borrower   (unless  such
counterclaim  or  offset  would,   under  applicable  law,  be  permanently  and
irrevocably  lost  if not  brought  in  such  action)  in any  action,  suit  or
proceeding  instituted  by any  Lender  Party or the  Administrative  Agent  for
payment or performance of the Obligations.

     SECTION 11.4 Costs and Expenses.

     (a) The  Borrower  agrees to pay on  demand  (i) all  reasonable  costs and
expenses  of the  Administrative  Agent  in  connection  with  the  preparation,
execution,  delivery,  administration,  modification  and  amendment of the Loan
Documents  (including,  without  limitation,  (A) all  reasonable due diligence,
collateral  review,  syndication  (including  printing,  distribution  and  bank
meetings),  transportation,  computer, duplication, appraisal, audit, insurance,
consultant,  search,  filing and recording  fees and expenses,  (B) the fees and
expenses of counsel for the Administrative Agent with respect thereto, including
advising the Administrative Agent as to its rights and responsibilities,  or the
perfection,  protection or  preservation  of rights or interests  under the Loan
Documents,  negotiating  with any Loan Party or with other creditors of any Loan
Party or any of its  Subsidiaries  arising  out of any  Default or any events or
circumstances  that may give  rise to a  Default,  and  presenting  claims in or
otherwise  participating  in or monitoring any  bankruptcy,  insolvency or other
similar  proceeding  involving  creditors'  rights  generally and any proceeding
ancillary thereto),  (C) and the fees and expenses of J.H. Cohn LLP with respect
to the  verification  of any cost savings and (ii) all costs and expenses of the
Administrative  Agent and the Lender Parties in connection  with the enforcement
of the  Loan  Documents,  whether  in any  action,  suit  or  litigation  or any
bankruptcy, insolvency or other similar proceeding affecting


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creditors' rights generally or otherwise  (including,  without  limitation,  the
fees and expenses of counsel for the Administrative  Agent and each Lender Party
with respect thereto).

     (b) The Borrower  agrees to indemnify and hold harmless the  Administrative
Agent,  each  Lender  Party and each of their  respective  Affiliates  and their
respective  officers,  directors,  employees,  agents  and  advisors  (each,  an
"Indemnified  Party")  from and  against any and all  claims,  damages,  losses,
liabilities and expenses  (including,  without  limitation,  reasonable fees and
expenses of counsel) that may be incurred by or asserted or awarded  against any
Indemnified  Party,  in each case  arising  out of or in  connection  with or by
reason of, or in connection with the preparation for a defense of, any commenced
or threatened investigation, litigation or proceeding arising out of, related to
or in connection with (and whether under any federal securities law or any other
statute of any  jurisdiction  or any  regulation  or at common) law or otherwise
against any Indemnified  Party, (i) the Transaction or any other  transaction of
Borrower or any of its  Subsidiaries  or other  Affiliates  and any of the other
transactions  contemplated by the Loan Documents, (ii) any Permitted Acquisition
and  any  other   acquisition  or  proposed   acquisition  or  similar  business
combination  or  proposed  business  combination  by the  Borrower or any of its
Subsidiaries or other  Affiliates of all or any portion of the shares of capital
stock or substantially all of the property and assets of any other Person or any
acts,  practices or omissions of the Borrower,  any of its  Subsidiaries  or its
agents related thereto,  or any withdrawals,  termination or cancellation of any
such proposed  transaction for any reason,  (iii) the Facilities,  the actual or
proposed  use of the  proceeds  of the  Advances or the Letters of Credit by the
Borrower or any of its  Subsidiaries  or other  Affiliates  and any of the other
transactions  contemplated by the Loan Documents,  or (iv) the actual or alleged
presence of Hazardous  Materials on any property of any Loan Party or any of its
Subsidiaries or any  Environmental  Action relating in any way to any Loan Party
or any of its  Subsidiaries,  in each case  whether  or not such  investigation,
litigation or proceeding is brought by any Loan Party, its directors,  officers,
employees,  stockholders or creditors or an Indemnified Party or any Indemnified
Party is  otherwise a party  thereto and whether or not the  Transaction  or any
other transaction contemplated hereby is consummated,  except to the extent such
claim, damage,  loss,  liability or expense is found in a final,  non-appealable
judgment  by a court  of  competent  jurisdiction  to have  resulted  from  such
Indemnified  Party's gross negligence or willful  misconduct.  The Borrower also
agrees not to assert any claim  against  the  Administrative  Agent,  any Lender
Party  or any of  their  respective  Affiliates,  or  any  of  their  respective
officers,  directors,   employees,  attorneys  and  agents,  on  any  theory  of
liability, for special, indirect,  consequential or punitive damages arising out
of or otherwise  relating to the  Acquisitions,  the  Facilities,  the actual or
proposed use of the proceeds of the Advances or the Letters of Credit,  the Loan
Documents or any of the Transaction or other transactions  contemplated thereby,
other than claims for direct, as opposed to consequential, damages.

     (c) If any payment of principal of, or Conversion of, any  Eurodollar  Rate
Advance is made by the  Borrower to or for the  account of a Lender  Party other
than on the last day of the Interest  Period for such Advance,  as a result of a
payment or Conversion  pursuant to Section 2.9(b)(i) or a prepayment pursuant to
Section 2.6(a) or (b) or  acceleration  of the maturity of the Notes pursuant to
Article 9, the Borrower shall, upon demand by such Lender Party (with


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a copy of such demand to the  Administrative  Agent),  pay to the Administrative
Agent for the account of such Lender  Party any amounts  required to  compensate
such Lender  Party for any  additional  losses,  costs or  expenses  that it may
reasonably incur as a result of such payment, including, without limitation, any
loss (including loss of anticipated profits), cost or expense incurred by reason
of the liquidation or  re-employment  of deposits or other funds required by any
Lender Party to fund or maintain such Advance.

     (d) If any Loan Party  fails to pay when due any costs,  expenses  or other
amounts payable by it under any Loan Document,  including,  without  limitation,
fees and expenses of counsel and indemnities,  such amount may be paid on behalf
of such Loan Party by the Administrative Agent, in its sole discretion.

     (e) Without  prejudice to the  survival of any other  agreement of any Loan
Party hereunder or under any other Loan Document, the agreements and obligations
of the Borrower  contained in Sections 2.10 and 2.12 and this Section 11.4 shall
survive the payment in full of principal, interest and all other amounts payable
hereunder and under any of the other Loan Documents.

     SECTION  11.5  Right of  Set-off.  Upon (a) the  occurrence  and during the
continuance  of any Event of Default  and (b) the  making of the  request or the
granting of the consent  specified by Article 9 to authorize the  Administrative
Agent to declare the Notes due and payable pursuant to the provisions of Article
9, each Lender Party and each of its respective  Affiliates is hereby authorized
at any time and from time to time,  to the fullest  extent  permitted by law, to
set off and otherwise  apply any and all deposits  (general or special,  time or
demand,  provisional  or final) at any time held and other  indebtedness  at any
time owing by such Lender  Party or such  Affiliate  to or for the credit or the
account of the  Borrower or any of its  Subsidiaries  against any and all of the
Obligations  of the Borrower now or hereafter  existing under this Agreement and
the Note or Notes (if any) held by such Lender  Party,  irrespective  of whether
such Lender Party shall have made any demand  under this  Agreement or such Note
or Notes and  although  such  obligations  may be  unmatured.  Each Lender Party
agrees  promptly to notify the Borrower and the  Administrative  Agent after any
such set-off and application;  provided,  however, that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of each Lender  Party and its  respective  Affiliates  under this Section are in
addition to other  rights and remedies  (including,  without  limitation,  other
rights of set-off) that such Lender Party and its respective Affiliates may have
at law, in equity or otherwise.

     SECTION 11.6 Binding Effect This Agreement  shall become  effective when it
shall have been executed by the Borrower and the  Administrative  Agent and when
the Administrative Agent shall have been notified by each Initial Lender and the
Initial  Issuing Bank that each such Initial Lender and the Initial Issuing Bank
has executed it and thereafter shall be binding upon and inure to the benefit of
the  Borrower,  the  Administrative  Agent  and  each  Lender  Party  and  their
respective  successors and assigns,  except that the Borrower shall not have the
right to assign any of its rights  hereunder or any interest  herein without the
prior written consent of the Lender Parties.


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<PAGE>



     SECTION 11.7 Assignments and Participations.

     (a) Each  Lender  may  assign to one or more  Eligible  Assignees  all or a
portion of its rights and obligations under this Agreement  (including,  without
limitation,  all or a portion of its  Commitment  or  Commitments,  the Advances
owing to it and the  Note or  Notes  held by it);  provided,  however,  that (i)
without the prior  written  consent of the  Administrative  Agent  (which may be
withheld for any reason) each such assignment  shall be of a uniform,  and not a
varying,  percentage of all rights and obligations  under and in respect of each
of the  Facilities  on a pro rata basis with  respect to each  Facility,  and no
Facility may be assigned in full or in part without a contemporaneous assignment
to the same assignee of each of the other Facilities, (ii) except in the case of
an  assignment to a Person that,  immediately  prior to such  assignment,  was a
Lender or an assignment of all of a Lender's rights and  obligations  under this
Agreement,  the amount of the Commitment of the assigning  Lender being assigned
pursuant to each such  assignment  (determined  as of the date of the Assignment
and Acceptance with respect to such  assignment)  shall in no event be less than
$5,000,000,  (iii) no such  assignments  shall be  permitted  without  the prior
consent of the Administrative Agent (which may be withheld for any reason) until
the Administrative Agent shall have notified the Lender Parties that syndication
of the Commitments hereunder has been completed, but in any event not later than
90 days following the Closing Date, (iv) no such  assignment  shall be permitted
if,  immediately after giving effect thereto,  the Borrower would be required to
make payments to or on behalf of the assignee  Lender Party  pursuant to Section
2.10(a)  or (b) and the  assignor  Lender  Party  was  not,  at the time of such
assignment,  entitled to receive any payment pursuant to Section 2.10(a) or (b),
and (v) the  parties to each such  assignment  shall  execute and deliver to the
Administrative  Agent,  for its  acceptance  and recording in the  Register,  an
Assignment  and  Acceptance,  together  with any Note or Notes  subject  to such
assignment and a processing and recordation fee of $3,500.

     (b) Upon such execution, delivery, acceptance and recording, from and after
the effective date specified in such Assignment and Acceptance, (x) the assignee
thereunder  shall  be a  party  hereto  and,  to  the  extent  that  rights  and
obligations  hereunder have been assigned to it pursuant to such  Assignment and
Acceptance,  have the rights and obligations of a Lender or Issuing Bank, as the
case may be,  hereunder and (y) the Lender or Issuing Bank assignor  thereun der
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such  Assignment  and  Acceptance,  relinquish  its rights and be
released  from its  obligations  under this  Agreement  (and,  in the case of an
Assignment and Acceptance  covering all or the remaining portion of an assigning
Lender's or Issuing Bank's rights and  obligations  under this  Agreement,  such
Lender or Issuing Bank shall cease to be a party hereto).

     (c) By executing and  delivering an Assignment and  Acceptance,  the Lender
Party assignor  thereunder and the assignee thereunder confirm to and agree with
each other and the other parties  hereto as follows:  (i) other than as provided
in such  Assignment  and  Acceptance,  such  assigning  Lender  Party  makes  no
representation  or warranty  and assumes no  responsibility  with respect to any
statements,  warranties or  representations  made in or in connection  with this
Agreement  or any other Loan  Document  or the  execution,  legality,  validity,
enforceability,  genuineness,  sufficiency  or value  of, or the  perfection  or
priority of any lien or security interest


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<PAGE>



created or purported to be created under or in connection  with,  this Agreement
or any  other  Loan  Document  or any other  instrument  or  document  furnished
pursuant  hereto  or  thereto;   (ii)  such  assigning  Lender  Party  makes  no
representation  or warranty  and assumes no  responsibility  with respect to the
financial  condition of the Borrower or any other Loan Party or the  performance
or  observance  by any  Loan  Party  of any of its  obligations  under  any Loan
Document or any other instrument or document furnished  pursuant thereto;  (iii)
such assignee  confirms that it has received a copy of this Agreement,  together
with  copies of the  financial  statements  referred  to in Section 4.6 and such
other  documents and  information  as it has deemed  appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance;  (iv)
such assignee will,  independently and without reliance upon the  Administrative
Agent,  such assigning  Lender Party or any other Lender Party and based on such
documents and information as it shall deem appropriate at the time,  continue to
make its own  credit  decisions  in  taking  or not  taking  action  under  this
Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi) such
assignee appoints and authorizes the Administrative Agent to take such action as
agent on its behalf  and to  exercise  such  powers  and  discretion  under this
Agreement and the other Loan  Documents as are  delegated to the  Administrative
Agent by the terms hereof and thereof,  together with such powers and discretion
as are reasonably  incidental  thereto;  and (vii) such assignee  agrees that it
will perform in accordance with their terms all of the obligations  which by the
terms of this  Agreement  are  required  to be  performed  by it as a Lender  or
Issuing Bank, as the case may be.

     (d) The  Administrative  Agent shall maintain at its address referred to in
Section 11.2 a copy of each Assignment and Acceptance  delivered to and accepted
by it and a  register  for the  recordation  of the names and  addresses  of the
Lender Parties and the Commitment  under each Facility of, and principal  amount
of the  Advances  owing under each  Facility  to, each Lender Party from time to
time (the  "Register").  The entries in the  Register  shall be  conclusive  and
binding  for  all  purposes,  absent  manifest  error,  and  the  Borrower,  the
Administrative  Agent and the Lender Parties may treat each Person whose name is
recorded in the  Register as a Lender Party  hereunder  for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender Party at any reasonable time and from time to time upon reasonable  prior
notice.

     (e) Upon  its  receipt  of an  Assignment  and  Acceptance  executed  by an
assigning Lender Party and an assignee,  together with any Note or Notes subject
to such assignment and the appropriate  processing and  reconciliation  fee, the
Administrative Agent shall, if such Assignment and Acceptance has been completed
and is in substantially the form of Exhibit A hereto, (i) accept such Assignment
and Acceptance,  (ii) record the information  contained  therein in the Register
and  (iii)  give  prompt  notice  thereof  to the  Borrower.  In the case of any
assignment by a Lender,  within five (5) Business Days after its receipt of such
notice,  the  Borrower,  at its own  expense,  shall  execute and deliver to the
Administrative Agent in exchange for the surrendered Note or Notes a new Note to
the order of such Eligible Assignee in an amount equal to the Commitment assumed
by it under a Facility  pursuant to such  Assignment and Acceptance  and, if the
assigning Lender has retained a Commitment  hereunder under such Facility, a new
Note to the order of the assigning Lender in an amount equal to the Commitment


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<PAGE>



retained  by it  hereunder.  Such  new Note or  Notes  shall be in an  aggregate
principal  amount equal to the aggregate  principal  amount of such  surrendered
Note or  Notes,  shall  be  dated  the  effective  date of such  Assignment  and
Acceptance and shall otherwise be in substantially the form of Exhibit B, C or I
hereto, as the case may be .

     (f) The Issuing  Bank may assign to an Eligible  Assignee all of its rights
and obligations  under the undrawn portion of its Letter of Credit Commitment at
any  time;  provided,  however,  that (i) each  such  assignment  shall be to an
Eligible Assignee and (ii) the parties to each such assignment shall execute and
deliver to the  Administrative  Agent,  for its  acceptance and recording in the
Register,  an  Assignment  and  Acceptance,   together  with  a  processing  and
recordation fee of $3,500.

     (g) Each Lender Party may sell participations to one or more Persons (other
than any Loan Party or any of its  Affiliates)  in or to all or a portion of its
rights and obligations under this Agreement (including,  without limitation, all
or a portion of its Commitments, the Advances owing to it and the Note or Notes,
if any, held by it) at any time and from time to time and without the consent of
or notice to the Borrower or any  Guarantor;  provided,  however,  that (i) such
Lender Party's obligations under this Agreement (including,  without limitation,
its  Commitments)  shall remain  unchanged,  (ii) such Lender Party shall remain
solely  responsible  to the other  parties  hereto for the  performance  of such
obligations,  (iii) such Lender  Party shall  remain the holder of any such Note
for all purposes of this Agreement,  (iv) the Borrower, the Administrative Agent
and the other Lender  Parties  shall  continue to deal solely and directly  with
such Lender Party in connection  with such Lender Party's rights and obligations
under this Agreement and (v) no participant under any such  participation  shall
have any right to approve any  amendment,  waiver or other  modification  of any
provision of this  Agreement or any other Loan  Document,  or any consent to any
departure by any Loan Party therefrom, except to the extent that such amendment,
waiver,  modification  or consent would reduce the principal of, or interest on,
the Notes or any fees or other amounts  payable  hereunder,  in each case to the
extent subject to such participation, postpone any date fixed for any payment of
principal  of, or interest  on, the Notes or any fees or other  amounts  payable
hereunder, in each case to the extent subject to such participation,  or release
all or substantially all of the Collateral.

     (h)  Any  Lender  Party  may,  in   connection   with  any   assignment  or
participation or proposed  assignment or participation  pursuant to this Section
11.7,   disclose  to  the  assignee  or  participant  or  proposed  assignee  or
participant,  any information  relating to the Borrower furnished to such Lender
Party by or on behalf of the Borrower;  provided,  however,  that,  prior to any
such disclosure, the assignee or participant or proposed assignee or participant
shall agree to preserve  the  confidentiality  of any  Confidential  Information
received by it from such Lender Party.

     (i)  Notwithstanding  any other provision set forth in this Agreement,  any
Lender Party may at any time create a security interest in all or any portion of
its rights under this Agreement  (including,  without  limitation,  the Advances
owing to it and the Note or Notes  held by it) in favor of any  Federal  Reserve
Bank in  accordance  with  Regulation A of the Board of Governors of the Federal
Reserve System.


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<PAGE>



     (j)  Fleet  may  syndicate  the  Facilities  to  other  lenders.  Any  such
syndication will be managed by Fleet. The Borrower shall assist Fleet in forming
such syndication and shall provide Fleet and any potential  lender,  assignee or
participant,  promptly  upon request,  with all  information  deemed  reasonably
necessary by them to complete successfully such syndication,  including, without
limitation,  all information  and projections  prepared by the Borrower or their
officers  or advisers  relating to the  transactions  contemplated  herein.  The
Borrower shall make appropriate officers and representatives of the Borrower and
their  Subsidiaries   available  to  participate  in  information  meetings  for
potential  syndicate  members and participants at such times and places as Fleet
may reasonably request.  In connection with such syndication,  Fleet may, in its
sole discretion, allocate to other Lenders portions of any fees payable to Fleet
in connection with the Facilities.

     SECTION 11.8 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  shall be deemed to be an original
and all of which taken  together shall  constitute  one and the same  agreement.
Delivery of an executed  counterpart  of a signature  page to this  Agreement by
telecopier shall be as effective as delivery of a manually executed  counterpart
of this Agreement.

     SECTION  11.9 No Liability of the Issuing  Bank.  The Borrower  assumes all
risks of the acts or omissions of any beneficiary or transferee of any Letter of
Credit  with  respect to its use of such  Letter of Credit.  Neither the Issuing
Bank nor any of its officers, directors,  employees or agents shall be liable or
responsible  for:  (a) the use that may be made of any  Letter  of Credit or any
acts or omissions of any beneficiary or transferee in connection therewith;  (b)
the validity,  sufficiency or genuineness  of documents,  or of any  endorsement
thereon,  even if  such  documents  should  prove  to be in any or all  respects
invalid,  insufficient,  fraudulent  or forged;  (c) payment by the Issuing Bank
against  presentation of documents that do not comply with the terms of a Letter
of Credit,  including failure of any documents to bear any reference or adequate
reference to the Letter of Credit; or (d) any other circumstances  whatsoever in
making or failing to make  payment  under any Letter of Credit,  except that the
Borrower shall have a claim against the Issuing Bank, and the Issuing Bank shall
be liable to the Borrower,  to the extent of any direct,  but not consequential,
damages suffered by the Borrower that the Borrower proves were caused by (i) the
Issuing Bank's  willful  misconduct or gross  negligence in determining  whether
documents  presented  under any  Letter of Credit  comply  with the terms of the
Letter of Credit or (ii) the  Issuing  Bank's  willful  failure  to make  lawful
payment  under a Letter of Credit  after the  presentation  to it of a draft and
certificates  strictly  complying with the terms and conditions of the Letter of
Credit. In furtherance and not in limitation of the foregoing,  the Issuing Bank
may  accept  documents  that  appear  on  their  face  to be in  order,  without
responsibility   for  further   investigation,   regardless  of  any  notice  or
information to the contrary.

     SECTION 11.10  Confidentiality.  Neither the  Administrative  Agent nor any
Lender Party shall disclose any  Confidential  Information to any Person without
the consent of the Borrower,  other than (a) to the  Administrative  Agent or to
the Administrative Agent's or such Lender Party's Affiliates and their officers,
directors, employees, agents and advisors and to actual or


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<PAGE>



prospective Eligible Assignees and participants, and then only on a confidential
basis,  (b) as required by any law, rule or  regulation or judicial  process and
(c) as  requested  or required  by any state,  federal or foreign  authority  or
examiner  regulating banks or banking.  In the event of any required  disclosure
under clauses (a),  (b), or (c) above,  the  Administrative  Agent and the other
Lender  Parties  agree to use  reasonable  efforts  to inform  the  Borrower  as
promptly  as  practicable  prior  to the  disclosure  of any  such  Confidential
Information.

     SECTION 11.11 Survival of Agreements and Representations; Construction.

     All  agreements,  representations  and warranties made herein shall survive
the  delivery  of  this  Agreement  and the  Notes.  The  headings  used in this
Agreement  and the table of contents are for  convenience  only and shall not be
deemed to constitute a part hereof

     SECTION 11.12 Assurances.

     (a)  At  any  time  and  from  time  to  time,  upon  the  request  of  the
Administrative  Agent,  the  Borrower  and each other Loan Party shall  execute,
deliver and  acknowledge  or cause to be executed,  delivered and  acknowledged,
such further  documents and instruments and do such other acts and things as the
Administrative  Agent  may  reasonably  request  in order to  fully  effect  the
purposes of this Agreement,  the other Loan Documents and any other  agreements,
instruments  and documents  delivered  pursuant hereto or in connection with the
Loans,  including,  without  limitation,  the  execution  and  delivery  to  the
Administrative  Agent of mortgages  in form and  substance  satisfactory  to the
Administrative Agent covering all real property or interests therein acquired by
the Borrower or other Loan Party,  and all leases of real property  entered into
by the Borrower or other Loan Party as tenant or lessee,  after the date of this
Agreement,  promptly  after such  acquisition  or the entering  into of any such
lease.

     (b) Upon receipt of an affidavit of an officer of the Administrative  Agent
or any Lender as to the loss,  theft,  destruction  or mutilation of any Note or
Collateral  Document which is not of public record, and, in the case of any such
mutilation,  upon the  surrender  and  cancellation  of such Note or  Collateral
Document,  the Borrower will issue, in lieu thereof, a replacement Note or other
Collateral  Document in the same  principal  amount  thereof (in the case of any
Note) and otherwise of like tenor.

     SECTION 11.13 Severability.

     The  provisions  of this  Agreement  are  severable,  and if any  clause or
provision  hereof shall be held invalid or  unenforceable in whole or in part in
any  jurisdiction,  then such invalidity or  unenforceability  shall affect only
such clause or provision, or part thereof, in such jurisdiction and shall not in
any manner  affect such clause or  provision in any other  jurisdiction,  or any
other  clause or provision in this  Agreement in any  jurisdiction.  Each of the
covenants,  agreements and conditions contained in this Agreement is independent
and compliance by the Borrower with any of them shall not excuse  non-compliance
by the  Borrower  with  any  other.  All  covenants  hereunder  shall  be  given
independent effect so that if a particular action or condition is not


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<PAGE>



permitted  by any of such  covenants,  the fact that it would be permitted by an
exception to, or be otherwise  within the limitations of, another covenant shall
not avoid the  occurrence  of a Default or an Event of Default if such action is
taken or condition exists.

     SECTION 11.14 JURISDICTION, ETC.

     (a) EACH OF THE  PARTIES  HERETO  HEREBY  IRREVOCABLY  AND  UNCONDITIONALLY
SUBMITS,  FOR ITSELF AND ITS PROPERTY,  TO THE NONEXCLUSIVE  JURISDICTION OF ANY
NEW YORK STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN
NEW YORK CITY, NEW YORK AND ANY APPELLATE COURT FROM ANY THEREOF,  IN ANY ACTION
OR PROCEEDING  ARISING OUT OF OR RELATING TO THIS  AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS TO WHICH IT IS A PARTY,  OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT,  AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING  MAY BE HEARD
AND  DETERMINED IN ANY SUCH NEW YORK STATE COURT OR, TO THE EXTENT  PERMITTED BY
LAW,  IN SUCH  FEDERAL  COURT.  EACH OF THE PARTIES  HERETO  AGREES THAT A FINAL
JUDGMENT  IN ANY  SUCH  ACTION  OR  PROCEEDING  SHALL BE  CONCLUSIVE  AND MAY BE
ENFORCED IN OTHER  JURISDICTIONS  BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED  BY LAW.  NOTHING  IN THIS  AGREEMENT  SHALL  AFFECT ANY RIGHT THAT ANY
LENDER PARTY MAY OTHERWISE  HAVE TO BRING ANY ACTION OR  PROCEEDING  RELATING TO
THIS  AGREEMENT  OR  ANY OF THE  OTHER  LOAN  DOCUMENTS  IN  THE  COURTS  OF ANY
JURISDICTION.

     (b) EACH OF THE PARTIES HERETO  IRREVOCABLY AND UNCONDITIONAL LY WAIVES, TO
THE FULLEST  EXTENT IT MAY LEGALLY AND  EFFECTIVELY DO SO, ANY OBJECTION THAT IT
MAY NOW OR  HEREAFTER  HAVE TO THE  LAYING  OF  VENUE  OF ANY  SUIT,  ACTION  OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS TO WHICH IT IS A PARTY IN ANY NEW YORK STATE OR FEDERAL COURT. EACH OF
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, THE DEFENSE OF AN  INCONVENIENT  FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.

     SECTION 11.15 GOVERNING LAW. THIS  AGREEMENT,  THE NOTES AND THE OTHER LOAN
DOCUMENTS  (OTHER THAN THE  MORTGAGES  WHICH SHALL BE GOVERNED BY THE LAW OF THE
JURISDICTION  WHERE THE PROPERTY  COVERED  THEREBY IS LOCATED) SHALL BE GOVERNED
BY, AND CONSTRUED AND  INTERPRETED IN ACCORDANCE  WITH, THE LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO ITS RULES  PERTAINING TO CONFLICTS OF LAWS OTHER THAN
GENERAL OBLIGATIONS LAW SECTION 5-1401.



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<PAGE>



     SECTION 11.16 WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE LOAN PARTIES,
THE ADMINISTRATIVE AGENT AND THE LENDER PARTIES  VOLUNTARILY,  INTENTIONALLY AND
IRREVOCABLY  WAIVES  ALL  RIGHT TO TRIAL BY JURY IN ANY  ACTION,  PROCEEDING  OR
COUNTERCLAIM  (WHETHER BASED ON CONTRACT,  TORT OR OTHERWISE)  ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN  DOCUMENTS,  THE ADVANCES OR
THE ACTIONS OF THE ADMINISTRATIVE  AGENT OR ANY LENDER PARTY IN THE NEGOTIATION,
ADMINISTRATION,  PERFORMANCE OR ENFORCEMENT  THEREOF.  THIS WAIVER CONSTITUTES A
MATERIAL INDUCEMENT FOR THE LENDER PARTIES AND THE ADMINISTRATIVE AGENT TO ENTER
INTO THIS AGREEMENT AND TO MAKE ADVANCES HEREUNDER.

     SECTION 11.17 FINAL AGREEMENT.  THIS WRITTEN  AGREEMENT,  THE NOTES AND THE
OTHER LOAN DOCUMENTS  REPRESENT THE FINAL AGREEMENT  BETWEEN THE PARTIES AND MAY
NOT BE  CONTRADICTED BY EVIDENCE OF PRIOR,  CONTEMPORANEOUS,  OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL  AGREEMENTS  BETWEEN THE
PARTIES.  THE PARTIES  HERETO  ACKNOWLEDGE  AND AFFIRM THE STATEMENT MADE IN THE
PRECEDING SENTENCE.


                            [SIGNATURE PAGES FOLLOW]


                                       125

<PAGE>



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



                                AUDIO BOOK CLUB, INC.


                                By: /s/ Norton Herrick
                                   ------------------------------------
                                Title:  Chief Executive Officer



                                FLEET NATIONAL BANK, as Administrative
                                Agent, as Initial Issuing Bank and as Swing Line
                                Bank


                                By:  /s/ Alex Sade
                                   ------------------------------------
                                Title:  Director


                                       S-1

                              [TO CREDIT AGREEMENT]

<PAGE>

                                INITIAL LENDERS:


                                FLEET NATIONAL BANK


                                By: /s/ Alex Sade
                                   ------------------------------------
                                Title:  Director



                                ING (U.S.) CAPITAL CORPORATION


                                By:
                                   ------------------------------------
                                Title:  Vice President


                                       S-2

                              [TO CREDIT AGREEMENT]

<PAGE>



                                EXHIBIT A TO THE
                                CREDIT AGREEMENT

                        FORM OF ASSIGNMENT AND ACCEPTANCE

     Reference is made to the Credit Agreement,  dated as of December ___, 1998,
(as amended, supplemented, restated or otherwise modified from time to time, the
"Credit  Agreement";  the terms  defined  therein  being used  herein as therein
defined) among Audio Book Club, Inc., a Florida  corporation  (the  "Borrower"),
the Lender  Parties party thereto and Fleet  National  Bank, as Initial  Issuing
Bank, as Swing Line Bank and as Administrative Agent for the Lender Parties (the
"Administrative Agent").

     The "Assignor" and the "Assignee" referred to on Schedule I hereto agree as
follows:

     1. The Assignor hereby sells and assigns to the Assignee,  and the Assignee
hereby  purchases  and  assumes  from the  Assignor,  an  interest in and to the
Assignor's  rights and  obligations  under the Credit  Agreement  as of the date
hereof equal to the  percentage  interest  specified on Schedule I hereto of all
outstanding  rights and  obligations  under the  Credit  Agreement  Facility  or
Facilities  as specified on Schedule I hereto.  After giving effect to such sale
and assignment, the Assignee's Term Commitments and Revolving Credit Commitments
and the amount of the Term Advances and Revolving  Credit  Advances owing to the
Assignee will be as set forth on Schedule I hereto.

     2. The  Assignor  (i)  represents  and  warrants  that it is the  legal and
beneficial  owner of the interest  being  assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty  and  assumes  no  responsibility   with  respect  to  any  statements,
warranties or  representations  made in or in connection with the Loan Documents
or the execution, legality, validity, enforceability,  genuineness,  sufficiency
or value of, or the  perfection  or priority  of any lien or  security  interest
created  or  purported  to be  created  under or in  connection  with,  the Loan
Documents  or any other  instrument,  agreement or document  furnished  pursuant
thereto; (iii) makes no representation or warranty and assumes no responsibility
with respect to the financial  condition of any Loan Party or the performance or
observance by any Loan Party of any of its  obligations  under any Loan Document
or any other instrument,  agreement or document furnished pursuant thereto;  and
(iv) attaches the Term Note or Notes and the Revolving Credit Note or Notes held
by the Assignor and requests that the Administrative Agent exchange such Note or
Notes  for a new Term  Note or Notes and a new  Revolving  Credit  Note or Notes
payable to the order of the Assignee in an amount equal to the Term  Commitments
and Revolving Credit Commitments  assumed by the Assignee pursuant hereto or new
Term Note or Notes and  Revolving  Credit Note or Notes  payable to the order of
the Assignee in an amount equal to the Term Commitments and the Revolving Credit


<PAGE>


Commitments  assumed  by the  Assignee  pursuant  hereto and to the order of the
Assignor  in an  amount  equal  to the Term  Commitments  and  Revolving  Credit
Commitments  retained by the Assignor under the Credit Agreement,  respectively,
as specified on Schedule I hereto.

     3. The  Assignee  (i)  confirms  that it has  received a copy of the Credit
Agreement, together with copies of the financial statements referred to therein,
including, without limitation, those referred to in Section 4.6 thereof and such
other  documents and  information  as it has deemed  appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance;  (ii)
agrees that it will,  independently and without reliance upon the Administrative
Agent,  the Assignor or any other Lender Party and based on such  documents  and
information as it shall deem  appropriate at the time,  continue to make its own
credit  decisions  in taking or not taking  action  under the Credit  Agreement;
(iii) confirms that it is an Eligible Assignee; (iv) appoints and authorizes the
Administrative  Agent to take such action as agent on its behalf and to exercise
such powers and  discretion  under the Loan  Documents  as are  delegated to the
Administrative  Agent by the  terms  thereof,  together  with  such  powers  and
discretion as are reasonably incidental thereto; (v) agrees that it will perform
in accordance with their terms all of the  obligations  that by the terms of the
Credit Agreement and the other Loan Documents are required to be performed by it
as a Lender Party; and (vi) attaches any U.S.  Internal Revenue Service forms or
other forms required under Section 2.12 of the Credit Agreement.

     4. Following the execution of this  Assignment and  Acceptance,  it will be
delivered  to  the  Administrative  Agent,  together  with  the  processing  and
recordation fee specified in the Credit Agreement,  for acceptance and recording
by the  Administrative  Agent.  The  effective  date  for  this  Assignment  and
Acceptance (the  "Effective  Date") shall be the later of the date of acceptance
hereof by the Administrative Agent or the date specified on Schedule I hereto.

     5. Upon such  acceptance and recording by the  Administrative  Agent, as of
the Effective  Date, (i) the Assignee  shall be a party to the Credit  Agreement
and, to the extent provided in this  Assignment and Acceptance,  have the rights
and obligations of a Lender Party thereunder and (ii) the Assignor shall, to the
extent provided in this Assignment and Acceptance,  relinquish its rights and be
released from its obligations under the Credit Agreement.

     6. Upon such acceptance and recording by the Administrative Agent, from and
after the Effective Date, the Administrative Agent shall make all payments under
the Credit Agreement and the Term Note or Notes and the Revolving Credit Note or
Notes in respect of the interest assigned hereby (including, without limitation,
all payments of principal, interest and commitment fees with respect thereto) to
the Assignee.  The Assignor and Assignee shall make all appropriate  adjustments
in  payments  under  the  Credit  Agreement  and the Term  Note or Notes and


<PAGE>


the  Revolving  Credit Note or Notes for  periods  prior to the  Effective  Date
directly between themselves.

     7. This  Assignment and  Acceptance  shall be governed by, and construed in
accordance with, the laws of the State of New York (without giving effect to its
conflicts of law principles).

     8.  This  Assignment  and  Acceptance  may be  executed  in any  number  of
counterparts and by different parties hereto in separate  counterparts,  each of
which when so executed  shall be deemed to be an original and all of which taken
together shall  constitute one and the same  agreement.  Delivery of an executed
counterpart of Schedule I to this Assignment and Acceptance by telecopier  shall
be  as  effective  as  delivery  of a  manually  executed  counterpart  of  this
Assignment and Acceptance.

                            [Signature page follows]



<PAGE>


     IN  WITNESS  WHEREOF,  the  Assignor  and the  Assignee  have  caused  this
Assignment and Acceptance to be duly executed by their authorized officers as of
the Effective Date.

                                               [NAME OF ASSIGNOR], as Assignor

                                               By:______________________________
                                               Title:___________________________
                                               Dated:_______________, ______

                                               [NAME OF ASSIGNEE], as Assignee

                                               By:______________________________
                                               Title:___________________________
                                               Dated:_____________ ___, ________

                                               Domestic Lending Office:
                                               _________________________________
                                               _________________________________
                                               _________________________________

                                               Eurodollar Lending Office:
                                               _________________________________
                                               _________________________________
                                               _________________________________

Accepted this ____ day of
_____________,_______

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

FLEET NATIONAL BANK, as Administrative Agent

By:_____________________________________
Title:__________________________________

[Consented to this ____ day of _________, ___

AUDIO BOOK CLUB, INC.
By:___________________________________
Title:__________________________________]1/

1/ The  Borrower's  signature  shall be required  only if no Event of Default is
then existing and continuing.


<PAGE>


                                   SCHEDULE I
                                       to
                          ASSIGNMENT AND ACCEPTANCE OF
                      ____________________ ("ASSIGNOR") AND
                        ___________________ ("ASSIGNEE")

As to the  Revolving  Credit  Facility  in respect of which an interest is being
assigned:

Percentage interest assigned:                                        __________%


Assignee's Revolving Credit Commitment:                              $__________

Aggregate outstanding principal amount
of  Revolving Credit Advances assigned:                              $__________

Principal amount of  Revolving Credit
Note payable to Assignee:                                            $__________

Principal amount of Revolving Credit
Note payable to Assignor:                                            $__________

Effective Date (if other than date of
acceptance by Administrative Agent):                          __________, ______



<PAGE>


                                EXHIBIT B TO THE
                                CREDIT AGREEMENT

                    FORM OF REVOLVING CREDIT PROMISSORY NOTE


$____________                                          Dated: December ___, 1998


     FOR VALUE  RECEIVED,  the  undersigned,  Audio Book Club,  Inc.,  a Florida
corporation (the "Borrower"), HEREBY PROMISES TO PAY on December __, 2003 to the
order of (the  "Lender") for the account of its  Applicable  Lending  Office (as
defined   in  the   Credit   Agreement   referred   to  below)   the  lesser  of
____________________  ($_________)  or the  aggregate  principal  amount  of the
Revolving Credit Advances (as defined in the Credit Agreement referred to below)
owing to the Lender by the Borrower pursuant to the Credit  Agreement,  dated as
of December ___, 1998 (as amended, supplemented, restated or otherwise modified,
the  "Credit  Agreement";  terms  defined  therein  being used herein as therein
defined),  among the Borrower, the Lender and certain other Lender Parties party
thereto and Fleet  National  Bank, as Initial  Issuing Bank, as Swing Line Bank,
and as Administrative Agent for the Lender and the other Lender Parties.

     This Promissory Note evidences all Revolving Credit Advances made by Lender
to Borrower under the Credit  Agreement.  The unpaid  principal  balance of this
Promissory Note shall be paid or prepaid at the times, in the amounts and in the
manner provided by the Credit  Agreement.  The Borrower promises to pay interest
on the unpaid principal amount of each Revolving Credit Advance from the date of
such Revolving  Credit  Advance until such principal  amount is paid in full, at
such interest  rates,  and payable at such times, as are specified in the Credit
Agreement.

     Both  principal  and  interest  are  payable in lawful  money of the United
States of America to Fleet National Bank, as Administrative Agent for the Lender
Parties, at One Federal Street, Boston, MA 02110, Account No. , Attention:  Loan
Administration,  in same day funds.  Each Revolving  Credit Advance owing to the
Lender by the  Borrower  and the  maturity  thereof,  and all  payments  made on
account of  principal  thereof,  shall be recorded by the Lender in its internal
records and, prior to any transfer hereof,  endorsed on the grid attached hereto
or any continuation  thereof,  which is part of this Promissory Note;  provided,
however,  that the failure of such Lender to so record any such  information  or
any error in so recording  any such  information  shall not,  however,  limit or
otherwise  affect the  obligations of the Borrower  hereunder or under any other
Loan Document.


<PAGE>


     This Promissory  Note is one of the Revolving  Credit Notes referred to in,
and is entitled to the benefits of, the Credit Agreement.  The Credit Agreement,
among other things,  (i) provides for the making of Revolving Credit Advances by
the  Lender to the  Borrower  from time to time in an  aggregate  amount  not to
exceed at any time outstanding the U.S. dollar amount first above mentioned, the
indebtedness of the Borrower  resulting from each such Revolving  Credit Advance
being  evidenced by this  Promissory  Note,  and (ii)  contains  provisions  for
acceleration  of the maturity hereof upon the happening of certain stated events
and also for  prepayments  on account of principal  hereof prior to the maturity
hereof upon the terms and conditions therein  specified.  The obligations of the
Borrower  under this  Promissory  Note,  and the  obligations  of the other Loan
Parties under the Loan  Documents,  are secured by the Collateral as provided in
the Collateral Documents.

     This  Promissory Note shall be governed by and construed in accordance with
the laws of the State of New York  without  regard to its  rules  pertaining  to
conflicts of laws, other than General  Obligations Law Section 5-1401, and shall
be deemed to be under seal.



                                               AUDIO BOOK CLUB, INC.



                                               By:______________________________

                                               Name: ___________________________

                                               Title: __________________________





<PAGE>



               REVOLVING CREDIT ADVANCES AND PAYMENTS OF PRINCIPAL



<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                       Amount of               Amount of           Unpaid Principal          Notation Made
Date               Revolving Credit        Principal Paid or            Balance                    by
                        Advance                 Prepaid
-----------------------------------------------------------------------------------------------------------
<S>                 <C>                     <C>                     <C>                      <C>

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

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</TABLE>



<PAGE>

                                EXHIBIT C TO THE
                                CREDIT AGREEMENT



                              TERM PROMISSORY NOTE


$__________                                            Dated: December ___, 1998


     FOR VALUE  RECEIVED,  the  undersigned,  Audio Book Club,  Inc.,  a Florida
corporation  (the  "Borrower"),  HEREBY  PROMISES  TO PAY to the  order  of (the
"Lender") for the account of its  Applicable  Lending  Office (as defined in the
Credit Agreement referred to below) the principal amount of the Term Advance (as
defined in the Credit  Agreement  referred to below)  owing to the Lender by the
Borrower  pursuant to the Credit  Agreement,  dated as of December ___, 1998 (as
amended,  supplemented,  restated or otherwise modified, the "Credit Agreement";
terms defined therein being used herein as therein defined), among the Borrower,
the Lender and certain other Lender  Parties party  thereto,  and Fleet National
Bank, as Initial Issuing Bank, as Swing Line Bank, and as  Administrative  Agent
for the Lender and the other Lender Parties.

     This  Promissory  Note  evidences  the Term  Advance  made by the Lender to
Borrower  under the  Credit  Agreement.  The  unpaid  principal  balance of this
Promissory Note shall be paid or prepaid at the times, in the amounts and in the
manner provided by the Credit  Agreement.  The Borrower promises to pay interest
on the unpaid  principal  amount of the Term  Advance from the date of such Term
Advance until such principal amount is paid in full, at such interest rates, and
payable at such times, as are specified in the Credit Agreement.

     Both  principal  and  interest  are  payable in lawful  money of the United
States of  America  to Fleet  National  Bank,  as  Administrative  Agent for the
Lender, at One Federal Street,  Boston, MA 02110, Account No. , Attention:  Loan
Administration, in same day funds.

     This  Promissory  Note is one of the  Term  Notes  referred  to in,  and is
entitled to the benefits of, the Credit Agreement.  The Credit Agreement,  among
other things, (i) provides for the making of a Term Advance by the Lender to the
Borrower  in an  amount  not to  exceed  the  U.S.  dollar  amount  first  above
mentioned,  the  indebtedness  of the Borrower  resulting from such Term Advance
being  evidenced by this  Promissory  Note,  and (ii)  contains  provisions  for
acceleration  of the maturity hereof upon the happening of certain stated events
and also for  prepayments  on account of principal  hereof prior to the maturity
hereof upon the terms and conditions therein  specified.  The


<PAGE>

obligations of the Borrower under this  Promissory  Note, and the obligations of
the other Loan Parties under the Loan  Documents,  are secured by the Collateral
as provided in the Collateral Documents.

     This  Promissory Note shall be governed by and construed in accordance with
the laws of the State of New York  without  regard to its  rules  pertaining  to
conflicts of laws, other than General  Obligations Law Section 5-1401, and shall
be deemed to be under seal.


                                               AUDIO BOOK CLUB, INC.



                                               By:______________________________

                                               Name:____________________________

                                               Title:___________________________



<PAGE>


                                EXHIBIT D TO THE
                                CREDIT AGREEMENT


                           FORM OF NOTICE OF BORROWING


                                             [Date]


Fleet National Bank, as Administrative
  Agent under the Credit Agreement
  referred to below
One Federal Street
Boston, Massachusetts 02110

Attention: Loan Administration


Ladies and Gentlemen:

     The  undersigned,  on behalf of Audio Book  Club,  Inc.  (the  "Borrower"),
refers to the Credit  Agreement,  dated as of  January  ___,  1999 (as  amended,
supplemented,  restated or otherwise modified, the "Credit Agreement"; the terms
defined  therein  being used  herein as therein  defined),  among the  Borrower,
certain Lender Parties party  thereto,  Fleet National Bank, as Initial  Issuing
Bank, as Swing Line Bank and as  Administrative  Agent for said Lender  Parties,
and hereby  gives the  Administrative  Agent  notice,  irrevocably,  pursuant to
Section  2.2 of the Credit  Agreement  that the  undersigned  hereby  requests a
Borrowing  under the Credit  Agreement,  and in that connection sets forth below
the  information  relating  to such  Borrowing  (the  "Proposed  Borrowing")  as
required by Section 2.2 of the Credit Agreement:

     (1)  The Business Day of the Proposed Borrowing is _____________, _____.

     (2)  The Facility  under which the Proposed  Borrowing is to be made is the
          _______________ Facility.

     (3)  The Type of Advances  comprising the Proposed Borrowing is [Prime Rate
          Advance][Eurodollar Rate Advance].

<PAGE>



     (4)  The aggregate amount of the Proposed Borrowing is $_________.

     [(5) The initial  Interest  Period for each Eurodollar Rate Advance made as
          part of the Proposed Borrowing is _______ month[s].]

     The  undersigned  hereby  certifies  on  behalf  of the  Borrower  that the
following  statements are true and correct on the date hereof,  and will be true
on the borrowing date:

     (a)  the representations and warranties contained in each Loan Document are
          correct on and as of the date of the Proposed  Borrowing,  both before
          and  after  giving  effect  to  the  Proposed  Borrowing  and  to  the
          application  of the  proceeds  therefrom,  as though made on and as of
          such  date,  except  for  such  representations  and  warranties  that
          expressly  relate to an earlier  date and  except  for  changes in the
          ordinary course of business not prohibited by the Credit Agreement and
          which have not and would not  individually  or in the aggregate have a
          Material Adverse Effect;

     (b)  no event has  occurred  and is  continuing,  or would  result from the
          Proposed Borrowing or from the application of the proceeds  therefrom,
          that constitutes a Default;


                                               Very truly yours,

                                               AUDIO BOOK CLUB, INC.



                                               By:______________________________

                                               Name:____________________________

                                               Title:___________________________



                                       -2-

<PAGE>


                       EXHIBIT E TO THE SECURITY AGREEMENT


                          Dated as of December 31, 1998

                                      From

                             AUDIO BOOK CLUB, INC.,

                          ABC INTERNET SERVICES, INC.,

                          CLASSIC RADIO HOLDING CORP.,

                        CLASSIC RADIO ACQUISITION CORP.,

                              ABC INVESTMENT CORP.

                                       and

                              CH ACQUISITIONS CORP.

                                   as Grantors

                                       to

                              FLEET NATIONAL BANK,

                             as Administrative Agent




<PAGE>


                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                     <C>
SECURITY AGREEMENT....................................................................................  1

PRELIMINARY STATEMENTS................................................................................  1
         Section 1.  Grant of Security................................................................  2
         Section 2.  Security for Obligations.........................................................  6
         Section 3.  Grantors Remain Liable...........................................................  6
         Section 4.  Delivery of Security Collateral and Account Collateral...........................  6
         Section 5.  Maintaining the L/C Cash Collateral Account......................................  6
         Section 6.  Investing of Amounts in the L/C Cash Collateral Account..........................  7
         Section 7.  Release of Amounts...............................................................  7
         Section 8.  Representations and Warranties...................................................  7
         Section 9.  Further Assurances...............................................................  9
         Section 10. As to Equipment and Inventory...................................................  10
         Section 11. Insurance.......................................................................  10
         Section 12. Place of Perfection; Record; Collection of Receivables..........................  11
         Section 13. Voting Rights; Dividends; Etc...................................................  12
         Section 14. As to the Assigned Agreements...................................................  14
         Section 15. Payments Under the Assigned Agreements..........................................  14
         Section 16. Transfers and Other Liens; Additional Shares....................................  15
         Section 17. Administrative Agent Appointed Attorney-in-Fact.................................  15
         Section 18. Administrative Agent May Perform................................................  16
         Section 19. Administrative Agent's Duties...................................................  16
         Section 20. Remedies........................................................................  16
         Section 21. Registration Rights; Private Sale...............................................  17
         Section 22. Indemnity and Expenses..........................................................  18
         Section 23. Security Interest Absolute......................................................  19
         Section 24. Amendments; Waivers; Etc........................................................  19
         Section 25. Addresses for Notices...........................................................  20
         Section 26. Continuing Security Interest; Assignments under the Credit Agreement............  20
         Section 27. Release and Termination.........................................................  20
         Section 28. Governing Law; Terms............................................................  21
         Section 29. JURISDICTION....................................................................  21
         Section 30. WAIVER OF JURY TRIAL............................................................  22
         Section 31. Counterparts....................................................................  22
</TABLE>

                                        i

<PAGE>






                                   Schedules

     Schedule I          Pledged Shares and Pledged Debt

     Schedule II         Locations of Equipment and Inventory

     Schedule III        Trade Names



                                    Exhibits

     Exhibit A           Form of Cash Collateral Account Letter

     Exhibit B           Form of Consent and Agreement

     Exhibit C           Form of Security Agreement Supplement



                                       ii

<PAGE>


                               SECURITY AGREEMENT


     SECURITY  AGREEMENT (this  "Agreement"),  dated as of December 31, 1998, by
and among Audio Book Club, Inc., a Florida  corporation having an office at 2295
Corporate Boulevard,  N.W., Suite 222, Boca Raton, Florida 33431 (the "Borrower"
or a "Grantor"),  ABC Internet Services,  Inc., a New York corporation having an
office at 2295 Corporate  Boulevard,  N.W., Suite 222, Boca Raton, Florida 33431
("ABC"), Classic Radio Holding Corp., a Delaware corporation having an office at
2295 Corporate  Boulevard,  N.W., Suite 222, Boca Raton, Florida 33431 ("Classic
Holding"),  Classic Radio Acquisition  Corp., a Delaware  corporation  having an
office at 2295 Corporate  Boulevard,  N.W., Suite 222, Boca Raton, Florida 33431
("Classic Acquisition"),  ABC Investment Corp., a Delaware corporation,  with an
office at 103 Springer  Building,  3411 Silver Side Road,  Wilmington,  Delaware
19810,  and CH Acquisitions  Corp., a Delaware  corporation  having an office at
2295  Corporate  Boulevard,  N.W.,  Suite 222,  Boca Raton,  Florida  33431 ("CH
Acquisitions  Corp.")  the  Additional  Grantors  (as  defined in Section  24(c)
hereof) (the  Additional  Grantors,  together  with the Borrower,  ABC,  Classic
Holding,  Classic  Acquisition,  ABC Investment Corp. and CH Acquisitions Corp.,
the "Grantors") and Fleet National Bank ("Fleet"),  as administrative  agent (in
such   capacity,   together   with  its   successors  in  such   capacity,   the
"Administrative  Agent")  for the  Secured  Parties  (as  defined  in the Credit
Agreement referred to below).

                             PRELIMINARY STATEMENTS

     (1) The Borrower has entered into a Credit Agreement, dated as of even date
herewith   (said   Agreement,   as  it  may  hereafter  be  amended,   restated,
supplemented,  extended or  otherwise  modified  from time to time,  the "Credit
Agreement";  the terms defined  therein and not otherwise  defined  herein being
used herein as therein  defined),  with the banks,  financial  institutions  and
other  institutional  lenders party thereto (the  "Lenders"),  Fleet, as Initial
Issuing Bank, as Swing Line Bank and as Administrative Agent.

     (2) Each Grantor is the owner of the shares (such shares being the "Pledged
Shares") set forth  opposite such  Grantor's name in Part I of Schedule I hereto
and  issued  by the  corporations  named  therein  and of the  indebtedness  for
borrowed  money (the "Pledged  Debt") set forth  opposite such Grantor's name in
Part II of Schedule I and issued by the obligors named therein.

     (3) If and when determined by the Administrative  Agent, the Administrative
Agent will open a non-interest  bearing cash  collateral  account (the "L/C Cash
Collateral  Account")  with  Fleet at its  office at Fleet  National  Bank,  One
Federal Street,  Boston,  Massachusetts  02110, (or at such other institution as
may be acceptable to the Administrative  Agent), in the name of the Borrower but
under the sole control and dominion of the  Administrative  Agent and subject to
the terms of this Agreement.


                                        1

<PAGE>


     (4) Each Grantor  other than the Borrower is a  wholly-owned  Subsidiary of
the Borrower and will derive substantial  benefit from the Advances made to, and
the issuance of Letters of Credit on behalf of, the Borrower.

     (5) It is a condition  precedent  to the Lenders'  making of Advances,  the
Issuing Bank's  issuing of Letters of Credit under the Credit  Agreement and the
Hedge Banks entering into Bank Hedge  Agreements  with the Borrower from time to
time that the Borrower shall have granted the  assignment and security  interest
and made the pledge and assignment contemplated by this Agreement.

     NOW, THEREFORE, in consideration of the premises and in order to induce the
Lenders to make Advances under the Credit  Agreement,  the Issuing Bank to issue
Letters of Credit under the Credit  Agreement  and the Hedge Banks to enter into
Bank Hedge  Agreements with the Borrower from time to time, each of the Grantors
hereby  agrees  with  the   Administrative   Agent,   for  the  benefit  of  the
Administrative Agent and the ratable benefit of the Secured Parties, as follows:

     Section 1. Grant of  Security.  Each of the  Grantors  hereby  assigns  and
pledges to the Administrative Agent, for the benefit of the Administrative Agent
and the  ratable  benefit  of the  Secured  Parties,  and  hereby  grants to the
Administrative  Agent,  for the  benefit  of the  Administrative  Agent  and the
ratable  benefit of the Secured  Parties,  a security  interest in the following
(collectively, the "Collateral"):

     (a) all of such  Grantor's  machinery  and  equipment  in all of its forms,
whether now owned or hereafter  arising or acquired,  wherever  located,  now or
hereafter  existing,  all  fixtures  and all parts  thereof  and all  accessions
thereto  (any  and all such  equipment,  fixtures,  parts  and  accessions,  the
"Equipment");

     (b) all of such Grantor's inventory in all of its forms,  whether now owned
or hereafter arising or acquired,  wherever located,  now or hereafter  existing
(including,  without  limitation,  (i) raw materials  and work in process,  (ii)
finished  goods,  (iii)  materials  used  or  consumed  in  the  manufacture  or
production thereof,  (iv) goods in which such Grantor has an interest in mass or
a joint or other interest or right of any kind (including,  without  limitation,
goods in which such Grantor has an interest or right as consignee) and (v) goods
that  are  returned  to or  repossessed  by such  Grantor),  and all  accessions
thereto,  products  thereof and documents  therefor (any and all such inventory,
accessions, products and documents, the "Inventory");

     (c)  all of  such  Grantor's  accounts,  contract  rights,  chattel  paper,
instruments, deposit accounts and other claims of any kind, whether now owned or
hereafter arising or acquired, now or hereafter existing, whether or not arising
out of or in  connection  with the sale or  lease of goods or the  rendering  of
services,  and all  rights  now or  hereafter  existing  in and to all  security
agreements,  leases and other  contracts  securing or otherwise  relating to any
such accounts, contract rights, chattel paper, instruments,  deposit accounts or
claims, except that the Grantor shall not grant, for so long as such grant would
be prohibited by the terms of any such agreements, leases or other


                                        2

<PAGE>



contracts  or by  applicable  law, a security  interest in any such  agreements,
leases or other  contracts  with  respect  to which  the  grant of any  security
interest or collateral assignment contemplated hereby is prohibited by its terms
or by applicable law (any and all such accounts, contract rights, chattel paper,
instruments,  deposit  accounts  and  claims,  to the extent not  referred to in
clause  (d),  (e) or (f) below,  being the  "Receivables",  and any and all such
leases, security agreements and other contracts being the "Related Contracts");

     (d) all of such Grantor's right,  title and interest,  whether now existing
or  hereafter  arising  or  acquired,  in and to the  following  (the  "Security
Collateral"), without duplication:

          (i) the Pledged Shares and the  certificates  representing the Pledged
     Shares, including without limitation, the shares of capital stock of all of
     such Grantor's Subsidiaries,  and the certificates representing the Pledged
     Shares; provided,  however, that only 65% of the shares of capital stock of
     such Grantor's Foreign  Subsidiaries  shall be pledged,  and all dividends,
     cash, instruments and other property from time to time received, receivable
     or  otherwise  distributed  in respect of or in exchange  for any or all of
     such Pledged Shares;

          (ii) the Pledged Debt and the instruments evidencing the Pledged Debt,
     and all interest,  cash,  instruments  and other property from time to time
     received,  receivable or otherwise distributed in respect of or in exchange
     for any or all of the Pledged Debt;

          (iii)  all  additional  shares of stock of any  issuer of the  Pledged
     Shares from time to time acquired by such Grantor in any manner,  provided,
     however,  that only 65% of the  shares of capital  stock of such  Grantor's
     Foreign  Subsidiaries shall be pledged pursuant to this Agreement,  and the
     certificates representing such additional shares, and all dividends,  cash,
     instruments  and other property from time to time  received,  receivable or
     otherwise  distributed  in respect of or in exchange for any or all of such
     shares;

          (iv) all additional  indebtedness for borrowed money from time to time
     owed to such Grantor by any obligor of the Pledged Debt and the instruments
     evidencing such indebtedness, and all interest, cash, instruments and other
     property from time to time received, receivable or otherwise distributed in
     respect of or in exchange for any or all of such indebtedness;

          (v) all additional  "investment  property" (as defined in the UCC) now
     owned or hereafter arising or acquired by such Grantor  including,  without
     limitation,  (A) all securities,  whether  certificated or  uncertificated,
     including,   without  limitation,   stocks,  bonds,  interests  in  limited
     liability companies,  partnership  interests,  treasuries,  certificates of
     deposit,  and mutual fund  shares;  (B) all security  entitlements  of such
     Grantor including,  without  limitation,  the rights of such Grantor to any
     securities



                                       3
<PAGE>


     account and the financial assets held by a securities  intermediary in such
     securities  account and any free credit balance or other money owing by any
     securities  intermediary  with respect to that account;  (C) all securities
     accounts held by such Grantor;  (D) all  commodity  contracts  held by such
     Grantor; and (E) all commodity accounts held by such Grantor.

     (e) each of the  agreements  to which such Grantor is now or may  hereafter
become a party,  and each Hedge  Agreement  to which such  Grantor is now or may
hereafter  become a  party,  in each  case as such  agreements  may be  amended,
restated or otherwise  modified from time to time, unless and for so long as the
Grantor is not  permitted  to grant a security  interest  therein or  collateral
assignment thereof (collectively, the "Assigned Agreements"), including, without
limitation,  (i) all rights of such Grantor to receive  moneys due and to become
due  under or  pursuant  to the  Assigned  Agreements,  (ii) all  rights of such
Grantor to receive  proceeds of any insurance,  indemnity,  warranty or guaranty
with  respect to the  Assigned  Agreements,  (iii)  claims of such  Grantor  for
damages  arising  out  of  or  for  breach  of or  default  under  the  Assigned
Agreements,  and (iv) the  right  of such  Grantor  to  terminate  the  Assigned
Agreements,  to  perform  thereunder  and to compel  performance  and  otherwise
exercise all  remedies  thereunder  (all such  Collateral  being the  "Agreement
Collateral");

     (f) all of such Grantor's right,  title and interest,  whether now existing
or hereafter  arising or acquired,  in and to the following  (collectively,  the
"Account Collateral"):

          (i) the L/C Cash  Collateral  Account,  all funds held therein and all
     certificates  and  instruments,  if any, from time to time  representing or
     evidencing the L/C Cash Collateral Account;

          (ii) all deposit accounts of such Grantor,  all funds held therein and
     all certificates and instruments, if any, from time to time representing or
     evidencing such deposit accounts;

          (iii) all Collateral Investments (as hereinafter defined) from time to
     time  and all  certificates  and  instruments,  if any,  from  time to time
     representing or evidencing the Collateral Investments;

          (iv) all notes,  certificates of deposit, deposit accounts, checks and
     other  instruments  from time to time  hereafter  delivered to or otherwise
     possessed by the  Administrative  Agent for or on behalf of such Grantor in
     substitution  for or in addition to any or all of the then existing Account
     Collateral; and

          (v) all interest, dividends, cash, instruments and other property from
     time to time received, receivable or otherwise distributed in respect of or
     in exchange for any or all of the then existing Account Collateral;


                                       4
<PAGE>


     (g) all of such Grantor's  corporate and business records,  customer lists,
credit  files,  computer  program  printouts  and other  computer  materials and
records;

     (h)  without  limitation  of any of the  foregoing,  all of such  Grantor's
general intangibles, including, without limitation,

     (i)  all  choses  in  action,  claims  and  causes  of  action or rights of
          recovery or set-off of every kind and  character,  and the goodwill of
          the business of such Grantor as a going concern;

     (ii) (A) all rights of such Grantor to receive moneys due and to become due
          under or pursuant to any general  intangibles,  (B) all rights of such
          Grantor to receive proceeds of any insurance,  indemnity,  warranty or
          guaranty with respect to any general  intangibles,  (C) claims of such
          Grantor for damages  arising out of or for breach of or default  under
          any  general  intangibles,  and  (D) the  right  of  such  Grantor  to
          terminate any general intangibles, to perform thereunder and to compel
          performance and otherwise exercise all remedies thereunder;

    (iii) all of such Grantor's right, title and interest,  whether now owned or
          hereafter arising or acquired, in and to the following (individually a
          "Copyright" and  collectively,  "Copyrights"):  (A) all copyrights and
          general   intangibles   of  like   nature   (whether   registered   or
          unregistered), now owned or existing or hereafter adopted or acquired,
          all  registrations  and recordings  thereof,  and all  applications in
          connection  therewith,  including all  registrations,  recordings  and
          applications in the United States  Copyright  Office or in any similar
          office or agency of the United States, any state or territory thereof,
          or any other country or any political subdivision thereof, and (B) all
          reissues, extensions or renewals thereof;

     (iv) all rights of such Grantor now owned or hereafter  arising or acquired
          under any and all agreements granting any right to use any Copyright;

     (v)  all of such Grantor's right, title and interest,  whether now existing
          or   hereafter   arising  or  acquired,   in  and  to  the   following
          (individually a "Patent" and collectively, "Patents"): (A) all letters
          patent of the United States or any other  country,  all  registrations
          and recordings thereof, and all applications for letters patent of the
          United  States  or  any  other   country,   including   registrations,
          recordings and  applications in the United States Patent and Trademark
          Office or in any similar  office or agency of the United  States,  any
          State or Territory thereof,


                                       5
<PAGE>


          or  any  other   country,   and  (B)  all   reissues,   continuations,
          continuations-in-part or extensions thereof;

     (vi) all rights of such Grantor now owned or hereafter  arising or acquired
          under any and all  agreements  granting  any right with respect to any
          invention on which a Patent is in existence;

    (vii) all of such Grantor's right, title and interest,  whether now existing
          or   hereafter   arising  or  acquired,   in  and  to  the   following
          (individually a "Trademark" and collectively,  "Trademarks"):  (A) all
          trademarks,  trade  names,  corporate  names,  business  names,  trade
          styles,  service marks,  logos, other source or business  identifiers,
          prints  and  labels on which any of the  foregoing  have  appeared  or
          appear,  designs  and  general  intangibles  of like  nature  (whether
          registered  or  unregistered),  now  owned or  existing  or  hereafter
          adopted or acquired, all registrations and recordings thereof, and all
          applications  in  connection   therewith,   including   registrations,
          recordings and  applications in the United States Patent and Trademark
          Office or in any similar  office or agency of the United  States,  any
          state or  territory  thereof,  or any other  country or any  political
          subdivision  thereof;  and (B) all  reissues,  extensions  or renewals
          thereof; and

   (viii) all  rights  of such  Grantor  now  owned or  hereafter  arising  or
          acquired under all agreements  granting any right to use any Trademark
          or Trademark registration.

     (i) all  proceeds of any and all of the  foregoing  Collateral  (including,
without limitation,  proceeds that constitute property of the types described in
clauses (a) - (h) of this Section 1) and, to the extent not otherwise  included,
all (i) payments under insurance (whether or not the Administrative Agent is the
loss payee thereof), or any indemnity,  warranty or guaranty,  payable by reason
of  loss  or  damage  to or  otherwise  with  respect  to any  of the  foregoing
Collateral and (ii) cash.

     Section 2. Security for Obligations.  This Agreement secures the payment of
all  Obligations  of each  Grantor  now or  hereafter  existing  under  the Loan
Documents,  whether for principal,  interest,  fees,  expenses or otherwise (all
such  Obligations  being  the  "Secured  Obligations").   Without  limiting  the
generality of the foregoing,  this Agreement  secures the payment of all amounts
that  constitute  part of the  Secured  Obligations  and  would  be owed by such
Grantor  to the  Administrative  Agent or the  Secured  Parties  under  the Loan
Documents  and the  Bank  Hedge  Agreements  but  for the  fact  that  they  are
unenforceable   or  not   allowable  due  to  the  existence  of  a  bankruptcy,
reorganization or similar proceeding involving such Grantor.

     Section  3.  Grantors  Remain  Liable.  Anything  herein  to  the  contrary
notwithstanding,  (a) each Grantor  shall remain  liable under the contracts and
agreements included


                                       6
<PAGE>


in the  Collateral  to which it is a party to the  extent  set forth  therein to
perform all of its duties and  obligations  thereunder  to the same extent as if
this  Agreement had not been  executed,  (b) the exercise by the  Administrative
Agent of any of the rights  hereunder  shall not release any Grantor from any of
its duties or  obligations  under the contracts and  agreements  included in the
Collateral to which it is a party and (c) neither the  Administrative  Agent nor
any Secured Party shall have any obligation or liability under the contracts and
agreements included in the Collateral by reason of this Agreement, nor shall the
Administrative  Agent or any Secured  Party be  obligated  to perform any of the
obligations  or  duties of any  Grantor  under  such  contracts  and  agreements
included  in the  Collateral  to which it is a party  or to take any  action  to
collect or enforce any claim for payment assigned hereunder.

     Section 4.  Delivery of Security  Collateral  and Account  Collateral.  All
certificates or instruments  representing or evidencing  Security  Collateral or
Account   Collateral  (except  those  relating  to  cash  accounts  and  deposit
instruments  not  required by the  Administrative  Agent to be  delivered to the
Administrative  Agent on the  Closing  Date (but which it  retains  the right to
require)  shall be delivered  to and held by or on behalf of the  Administrative
Agent pursuant hereto and shall be in suitable form for transfer by delivery, or
shall be accompanied  by duly executed  instruments of transfer or assignment in
blank, all in form and substance  satisfactory to the Administrative  Agent. The
Administrative  Agent shall have the right,  upon the  occurrence and during the
continuation of an Event of Default and on five (5) business days' notice to the
Borrower,  to transfer to or to register in the name of the Administrative Agent
or any of its  nominees any or all of the  Security  Collateral  and the Account
Collateral,  subject only to the revocable rights specified in Section 13(a). In
addition,  the Administrative Agent shall have the right at any time to exchange
certificates or instruments  representing or evidencing  Security  Collateral or
Account  Collateral  for  certificates  or  instruments  of  smaller  or  larger
denominations.

     Section 5.  Maintaining  the L/C Cash  Collateral  Account.  So long as any
Advance shall remain  unpaid,  any Letter of Credit shall be  outstanding or any
Lender shall have any Commitment under the Credit Agreement or any Hedge Bank or
any Loan Party shall have any obligations under any Hedge Agreement:

     (a) The Borrower will maintain the L/C Cash Collateral Account with Fleet.

     (b) It shall be a term and  condition of the L/C Cash  Collateral  Account,
notwithstanding  any term or condition  to the  contrary in any other  agreement
relating to the L/C Cash Collateral Account and, except as otherwise provided by
the provisions of Section 7 and Section 20, that no amount  (including  interest
on Collateral  Investments)  shall be paid or released to or for the account of,
or  withdrawn by or for the account of, any Grantor or any other Person from the
L/C Cash Collateral Account.

The L/C Cash Collateral  Account shall be subject to such  applicable  laws, and
such  applicable  regulations,  of the Board of Governors of the Federal Reserve
System and of any other appropriate  banking or governmental  authority,  as may
now or hereafter be in effect.


                                       7
<PAGE>


     Section 6.  Investing  of Amounts in the L/C Cash  Collateral  Account.  If
requested  by the  Borrower,  the  Administrative  Agent  will,  subject  to the
provisions  of Section 7 and Section 20, from time to time invest (a) amounts on
deposit  in the L/C Cash  Collateral  Account  in such Cash  Equivalents  as the
Borrower may select, in each case which investments shall be made in the name of
the Administrative Agent on behalf of the Borrower, and (b) interest paid on the
Cash Equivalents referred to in clause (a) above, and reinvest other proceeds of
any such Cash  Equivalents that may mature or be sold, in each case in such Cash
Equivalents as the Borrower may select,  in each case which investments shall be
made in the name of the Administrative Agent on behalf of the Borrower (the Cash
Equivalents  referred  to in  clauses  (a)  and  (b)  above  being  collectively
"Collateral  Investments").  Interest  and  proceeds  that are not  invested  or
reinvested in Collateral  Investments  as provided  above shall be deposited and
held in the L/C Cash Collateral Account.

     Section 7. Release of Amounts. Upon the drawing of any Letter of Credit for
which funds are on deposit in the L/C Cash Collateral Account,  such funds shall
be applied to reimburse the Issuing Bank or the  Revolving  Credit  Lenders,  as
applicable, as provided in the Credit Agreement.

     Section 8.  Representations  and  Warranties.  Each Grantor  represents and
warrants as follows:

     (a) All of such Grantor's  existing  Equipment and Inventory are located at
the places specified for such Grantor on Schedule II hereto.  The chief place of
business  and chief  executive  office of such Grantor and the office where such
Grantor  keeps its  records  concerning  the  Receivables,  and,  to the  extent
possessed,  the original copies of each Assigned  Agreement and all originals of
all  chattel  paper that  evidence  Receivables,  are  currently  located at the
address  specified  below the name of such Grantor on the signature pages hereof
(or in the case of any  Additional  Grantor at the address  specified  below the
name of such Additional  Grantor on the signature page of the Security Agreement
Supplement  (as  defined  in  Section  24(c))  executed  and  delivered  by such
Additional Grantor). None of the material Receivables or Agreement Collateral is
evidenced by a promissory note or other instrument.

     (b) Such  Grantor  is the  legal  and  beneficial  owner of the  Collateral
pledged  by such  Grantor  hereunder  free and  clear of any  Lien,  except  for
security  interests  created or permitted  under the Loan Documents  (including,
without  limitation,  any Liens  disclosed  on  Schedule  6.1(c)  to the  Credit
Agreement).  No effective  financing  statement or other  instrument  similar in
effect  covering all or any part of the  Collateral  is on file in any recording
office,  except such as may have been filed: (i) in favor of the  Administrative
Agent relating to this  Agreement or (ii) with respect to Permitted  Liens or as
otherwise permitted pursuant to the Credit Agreement.

     (c) Set  forth  below  each  Grantor's  name on  Schedule  III  hereto is a
complete and  accurate  list of (i) all names under which such Grantor is or has
been doing business within the last five years (including,  without  limitation,
all trade names, division names and fictitious names), (ii) all trade names that
such Grantor owns or is licensed to use (including the expiration date of such


                                       8
<PAGE>


license) and (iii) all trade names that such Grantor has  established  the right
to use  (collectively,  the "Trade Names").  Such Grantor has not changed within
the past six months its name or identity, by reorganization or otherwise, or its
address set forth below the name of such Grantor on the  signature  pages hereof
or the Security Agreement  Supplement  executed and delivered by it, as the case
may be, except as set forth on Schedule III hereto.

     (d)  Except as set forth for each  Grantor  on  Schedule  II  hereto,  such
Grantor has  exclusive  possession  and control of the  existing  Equipment  and
Inventory pledged by such Grantor hereunder.

     (e) The Pledged Shares owned by such Grantor have been duly  authorized and
validly issued and are fully paid and  non-assessable.  To the best knowledge of
such  Grantor,  the Pledged Debt owed to such Grantor has been duly  authorized,
authenticated  or issued and  delivered  and,  is the legal,  valid and  binding
obligation of the issuers thereof and is not in default.

     (f)  The  Pledged  Shares  constitute  the  percentage  of the  issued  and
outstanding  shares of stock of the issuers thereof indicated on Schedule I. The
Pledged Debt is outstanding in the principal amount indicated on Schedule I.

     (g) The Assigned Agreements to which such Grantor is a party have been duly
authorized,  executed  and  delivered by such  Grantor.  There exists no default
under any  material  Assigned  Agreement  to which such  Grantor is a party,  by
Grantor or, to Grantor's  knowledge,  any other party thereto,  except under any
Assigned Agreement which involves a sum not in excess of $50,000 individually or
$250,000 in the aggregate per annum for any default which individually or in the
aggregate  with  other  defaults  would not  reasonably  be  expected  to have a
Material Adverse Effect. If reasonably required by the Administrative Agent each
party to the Assigned  Agreements  to which such Grantor is a party,  other than
such  Grantor,  has  executed  and  delivered  to such  Grantor  a  consent,  in
substantially  the form of Exhibit C hereto,  to the assignment of the Agreement
and Collateral to the Administrative Agent pursuant to this Agreement.

     (h)  Upon   either   the  filing  by  the   Administrative   Agent  or  its
representatives  of the  proper  financing  statements  referred  to in  Section
3.1(a)(ii)  of the Credit  Agreement  or the taking of  possession  thereof,  as
applicable,  this  Agreement,  the pledge of the  Security  Collateral  pursuant
hereto and the pledge and assignment of the Account  Collateral  pursuant hereto
create a valid and perfected first priority  security interest in the Collateral
of such  Grantor  which can be  perfected  by such  filings  or by the taking of
possession,  to the extent possession is so taken by the  Administrative  Agent,
securing  the  payment of the  Secured  Obligations,  and all  filings and other
actions  necessary or desirable  to perfect and protect such  security  interest
shall have been duly taken.

     (i) No consent of any other Person and no authorization,  approval or other
action  by,  and no notice to or filing  with,  any  governmental  authority  or
regulatory  body or other third  party is  required  either (i) for the grant by
such Grantor of the assignment and security  interest  granted  hereby,  for the
pledge by such Grantor of the Security Collateral pursuant hereto or for the


                                       9
<PAGE>


execution,  delivery or performance of this Agreement by such Grantor,  (ii) for
the perfection or maintenance  of the pledge,  assignment and security  interest
created hereby  (including the first priority nature of such pledge,  assignment
or  security  interest),  except for the filing of  financing  and  continuation
statements under the Uniform Commercial Code, which financing  statements are in
proper form and are duly executed and except for any other  actions  required to
be taken as requested by the Administrative Agent which have been duly taken, or
(iii) for the exercise by the Administrative Agent of its voting or other rights
provided  for in this  Agreement  or the  remedies in respect of the  Collateral
pursuant to this  Agreement,  except as may be required in  connection  with the
disposition  of any portion of the Security  Collateral  by laws  affecting  the
offering and sale of securities generally.

     (j) The Inventory which has been produced by such Grantor has been produced
in compliance with all requirements of the Fair Labor Standards Act.

     Section 9. Further Assurances.

     (a) Each of the Grantors  agrees that from time to time,  at the expense of
the  Borrower,  such  Grantor  will  promptly  execute  and  deliver all further
instruments and documents,  and take all further action,  that may be necessary,
or that the Administrative Agent may reasonably request, in order to perfect and
protect any pledge,  assignment or security  interest granted or purported to be
granted hereby or to enable the Administrative Agent to exercise and enforce its
rights and remedies  hereunder with respect to any Collateral.  Without limiting
the generality of the  foregoing,  such Grantor will,  upon any such  reasonable
request of the  Administrative  Agent:  (i) upon the  occurrence  and during the
continuance of an Event of Default mark  conspicuously each document included in
the Inventory pledged by such Grantor hereunder,  each chattel paper included in
the Receivables pledged by such Grantor hereunder, each Related Contract pledged
by such  Grantor  hereunder,  each  Assigned  Agreement  pledged by such Grantor
hereunder and each of its records pertaining to the Collateral with a legend, in
form and substance  satisfactory to the  Administrative  Agent,  indicating that
such document, chattel paper, Related Contract, Assigned Agreement or Collateral
is subject to the  security  interest  granted  hereby;  (ii) if any  Collateral
pledged by such Grantor  hereunder  shall be  evidenced by a promissory  note or
other  instrument  or chattel  paper,  deliver and pledge to the  Administrative
Agent  hereunder  such note or  instrument  or chattel  paper duly  indorsed and
accompanied by duly executed instruments of transfer or assignment,  all in form
and substance  satisfactory to the Administrative  Agent; and (iii) execute such
financing or  continuation  statements,  or amendments  thereto,  and such other
instruments  or notices as may be  reasonably  requested  by the  Administrative
Agent in order to perfect and  preserve  the  pledge,  assignment  and  security
interest granted or purported to be granted hereby.

     (b) Each Grantor hereby authorizes the Administrative  Agent to file one or
more financing or continuation statements,  and amendments thereto,  relating to
all or any part of the Collateral pledged by such Grantor hereunder, without the
signature  of such  Grantor  where  permitted  by law in  order to  perfect  and
preserve the pledge, assignment and security interest granted or purported to be
granted hereby. A copy of each such statement and amendment will be timely


                                       10
<PAGE>



provided to such Grantor. A photocopy or other reproduction of this Agreement or
any  financing  statement  covering its  Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.

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

     (d) Each  Grantor  hereby  agrees,  upon the request of the  Administrative
Agent at any time  following the  occurrence  and during the  continuance  of an
Event of Default,  and at the expense of the Borrower,  (i) within fourteen (14)
days after such request deliver to the  Administrative  Agent a letter agreement
among such Grantor,  Fleet and the  Administrative  Agent in respect of the main
cash  concentration  account  of  such  Grantor,  which  agreement  shall  be in
substantially  the form of Exhibit A hereto,  (ii) within  twenty-one  (21) days
after such request deliver to the  Administrative  Agent a letter agreement,  in
substantially  the form of  Exhibit B hereto,  in respect  of each  lockbox  and
blocked  deposit  account of such  Grantor,  (iii) within thirty (30) days after
such request, take whatever action (including, without limitation, the filing of
Uniform Commercial Code financing  statements) as may be reasonably necessary or
advisable  in the sole  discretion  of the  Administrative  Agent to vest in the
Administrative  Agent  (or in any  representative  of the  Administrative  Agent
designated by it), for the benefit of the  Administrative  Agent and the ratable
benefit of the  Secured  Parties,  valid and  subsisting  Liens on the main cash
concentration  accounts of the Borrower and each other Grantor and the lockboxes
and blocked deposit accounts of the Grantors, and (iv) at any time and from time
to time,  promptly  execute  and deliver  any and all  further  instruments  and
documents  and take all such other action as the  Administrative  Agent may deem
reasonably  necessary  in  obtaining  the full  benefits  of the Liens on, or in
preserving the Liens in, such main concentration accounts, lockboxes and blocked
deposit accounts.

     Section 10. As to Equipment and Inventory.  (a) Each Grantor shall keep the
Equipment and Inventory  (other than  Inventory  sold in the ordinary  course of
business) pledged by such Grantor hereunder at the places therefor  specified in
Section  8(a)  or,  upon  fifteen  (15)  days'  prior  written   notice  to  the
Administrative  Agent,  at such other places in a jurisdiction  where all action
required  by  this   Agreement  to  maintain   the  security   interest  of  the
Administrative  Agent in such Equipment and Inventory  granted hereby shall have
been taken with respect to such Equipment and Inventory.

     (b)  Each  Grantor  shall  cause  the  Equipment  pledged  by such  Grantor
hereunder  which  individually or in the aggregate is material to such Grantor's
business to be maintained  and preserved in good working  condition,  repair and
working order,  ordinary wear and tear excepted and except for insured  casualty
losses and shall forthwith,  or in the case of any loss or damage to any of such
Equipment, as quickly as practicable after the occurrence thereof, make or cause
to be made all  repairs,  replacements  and  other  improvements  in  connection
therewith  that are  necessary  or desirable  to such end.  Each  Grantor  shall
promptly furnish to the Administrative Agent a statement


                                       11
<PAGE>


respecting  any loss or damage to any of the  Equipment  pledged by such Grantor
hereunder  (other than immaterial loss or damage) or loss or damage to Equipment
which  individually  or in the  aggregate  is not  material  to  such  Grantor's
business.

     (c) Each  Grantor  shall  timely pay when due all property and other taxes,
assessments  and  governmental  charges or levies  imposed upon,  and all claims
(including claims for labor,  materials and supplies) against, the Equipment and
Inventory  pledged  by such  Grantor  hereunder;  provided,  however,  that such
Grantor shall not be required to pay any such tax,  assessment,  charge or claim
that is being contested in good faith and by proper  proceedings and as to which
appropriate  reserves are being maintained,  unless and until any Lien resulting
therefrom attaches to its property and becomes  enforceable against the Borrower
or any of its  Subsidiaries.  In producing the Inventory pledged by such Grantor
hereunder,  each  Grantor  shall  comply  in  all  material  respects  with  all
requirements of the Fair Labor Standards Act.

     Section 11. Insurance.

     (a) Each Grantor shall, at its own expense, maintain insurance with respect
to the  Equipment  and  Inventory  pledged  by such  Grantor  hereunder  in such
amounts, against such risks, in such form and with such insurers, as required by
the Credit Agreement.  Each policy for liability insurance shall provide for all
losses to be paid on  behalf of the  Administrative  Agent and each  Grantor  as
their interests may appear and each policy for property  damage  insurance shall
provide  for all  losses  (except so long as the payor  shall not have  received
notice  from the  Administrative  Agent to the  effect  that an Event of Default
shall have  occurred  and is  continuing  for losses of less than  $250,000  per
occurrence) to be paid directly to the Administrative  Agent and with respect to
losses of $250,000  or more per  occurrence  but not in excess of  $500,000  per
occurrence or $500,000 in the aggregate,  the Administrative Agent shall, unless
an Event of  Default  shall  have  occurred  and then be  continuing,  make such
insurance   proceeds  available  to  the  subject  Grantor  for  the  repair  or
replacement  of the subject  Collateral.  Each such policy shall in addition (i)
name such Grantor and the  Administrative  Agent as insured  parties  thereunder
(without any representation or warranty by or obligation upon the Administrative
Agent) as their interests may appear,  (ii) contain the agreement by the insurer
that any loss thereunder in excess of $250,000 per occurrence unless an Event of
Default  shall  have  occurred  and  be  continuing  shall  be  payable  to  the
Administrative  Agent   notwithstanding  any  action,   inaction  or  breach  of
representation or warranty by such Grantor, (iii) provide that there shall be no
recourse  against  the  Administrative  Agent for  payment of  premiums or other
amounts with respect thereto and (iv) provide that the insurer shall endeavor to
provide at least thirty (30) days' prior written  notice of  cancellation  or of
lapse to the  Administrative  Agent.  Each Grantor shall, if so requested by the
Administrative  Agent, deliver to the Administrative Agent original or duplicate
policies  of such  insurance  and,  as often  as the  Administrative  Agent  may
reasonably  request,  a report of a reputable  insurance  broker with respect to
such   insurance.   Further,   each  Grantor  shall,   at  the  request  of  the
Administrative Agent, duly exercise and deliver instruments of assignment of its
insurance  policies to comply with the  requirements  of Section 9 and cause the
insurers to acknowledge notice of such assignment.


                                       12
<PAGE>


     (b) Reimbursement under any liability  insurance  maintained by any Grantor
pursuant  to this  Section 11 may be paid  directly to the Person who shall have
incurred  liability  covered by such  insurance.  In case of any loss  involving
damage to Equipment  or  Inventory  which  individually  or in the  aggregate is
material to such  Grantor's  business when  subsection (c) of this Section 11 is
not applicable,  the Grantor that owns such Equipment or Inventory shall make or
cause to be made the necessary  repairs to or  replacements of such Equipment or
Inventory out of available net proceeds of insurance  maintained by such Grantor
pursuant to this Section 11.

     (c) Upon the occurrence and during the  continuance of any Event of Default
or the  loss  (equal  to or in  excess  of  $500,000  per  occurrence  or in the
aggregate) of any Equipment or Inventory,  all insurance  payments in respect of
such Equipment or Inventory shall,  except as provided in Section 11(a), be paid
to and applied by the Administrative Agent as specified in Section 20(b).

     Section 12. Place of Perfection; Record; Collection of Receivables.

     (a) Each of the  Grantors  shall keep its chief place of business and chief
executive  office  and the  office  where it keeps its  records  concerning  the
Collateral,  and, to the extent  possessed,  the original copies of the Assigned
Agreements and all originals of all chattel paper that evidence Receivables,  at
the  location  therefor  specified  in Section  8(a) or, upon fifteen (15) days'
prior written notice to the  Administrative  Agent, at such other locations in a
jurisdiction  where all actions  required  by this  Agreement  to  maintain  the
security interest of the Administrative  Agent in such Collateral granted hereby
shall have been taken with respect to the Collateral. Each of the Grantors shall
hold and preserve such records,  Assigned Agreements and chattel paper and shall
permit  representatives  of the  Administrative  Agent at any time during normal
business  hours to inspect  and make  abstracts  from such  records  and chattel
paper.

     (b)  Except as  otherwise  provided  in this  subsection  (b),  each of the
Grantors  shall continue to collect,  at its own expense,  all amounts due or to
become due such Grantor under the Receivables  pledged by such Grantor hereunder
provided  that,  so long as no Event of Default has occurred and is  continuing,
each  Grantor  may  settle or  compromise  the  amount of  payment of any of its
Receivables,  release wholly or partly any Obligor thereof,  or allow any credit
or discount thereon in the ordinary course of business.  In connection with such
collections,  each  Grantor  may  take  such  action  as such  Grantor  may deem
necessary or advisable to enforce collection of the Receivables  pledged by such
Grantor hereunder;  provided,  however, that the Administrative Agent shall have
the right at any time,  upon the  occurrence  and during the  continuance  of an
Event of Default and upon five business (5) days' written notice to the Borrower
of its intention to do so, to notify the obligors  under any  Receivables of the
assignment of such  Receivables to the  Administrative  Agent and to direct such
Obligors to make  payment of all  amounts  due or to become due to such  Grantor
thereunder directly to the Administrative  Agent and, upon such notification and
at the expense of such Grantor,  to enforce  collection of any such Receivables,
and to adjust,  settle or compromise the amount or payment thereof,  in the same
manner and to the same extent as such Grantor might have done.  After receipt by
any Grantor of the notice from the Administrative Agent


                                       13
<PAGE>


referred to in the proviso of the  preceding  sentence upon the  occurrence  and
during the  continuance  of an Event of Default,  (i) all  amounts and  proceeds
(including  instruments)  received by such Grantor in respect of the Receivables
pledged by such Grantor  hereunder shall be received in trust for the benefit of
the Administrative Agent hereunder, shall be segregated from other funds of such
Grantor and shall be forthwith paid over to the Administrative Agent in the same
form as so received (with any necessary  endorsement)  to be applied as provided
by Section 20(b) and (ii) without the prior consent of the Administrative Agent,
such Grantor shall not adjust, settle or compromise the amount or payment of any
of its Receivables,  release wholly or partly any Obligor thereof,  or allow any
credit or discount thereon.

     Section 13. Voting Rights; Dividends; Etc.

     (a) So long as no Event of Default shall have occurred and be continuing:

          (i) The Grantors  shall be entitled to exercise any and all voting and
     other consensual rights  pertaining to the Security  Collateral or any part
     thereof for any purpose not  inconsistent  with the terms of this Agreement
     or the other Loan Documents; provided, however, that the Grantors shall not
     exercise or refrain  from  exercising  any such right if such action  would
     reasonably  be expected to have a material  adverse  effect on the value of
     the Security Collateral or any part thereof.

          (ii) The Grantors  shall be entitled to receive and retain any and all
     dividends  and  interest  paid  in  respect  of  the  Security  Collateral;
     provided, however, that any and all

               (A)  dividends and interest paid or payable other than in cash in
          respect of, and instruments and other property received, receivable or
          otherwise  distributed in respect of, or in exchange for, any Security
          Collateral,

               (B) dividends and other  distributions paid or payable in cash in
          respect of any Security  Collateral  in  connection  with a partial or
          total  liquidation or dissolution or in connection with a reduction of
          capital, capital surplus or paid-in-surplus, and

               (C) cash paid,  payable or  otherwise  distributed  in respect of
          principal  of, or in  redemption  of, or in exchange for, any Security
          Collateral

shall be, and shall be forthwith,  delivered to the Administrative Agent to hold
as  Security  Collateral  and shall,  if  received  by any of the  Grantors,  be
received in trust for the benefit of the  Administrative  Agent,  be  segregated
from the other  property or funds of such Grantor and be forthwith  delivered to
the Administrative  Agent as Security Collateral in the same form as so received
(with any necessary endorsement);  provided further,  however, that the Grantors
shall be entitled to retain any such payments  referred to in clause (A), (B) or
(C) above to the extent such  payments  are made  between the  Borrower  and its
Subsidiaries  or  between  the  Borrower's  Subsidiaries  and in each  case  are
otherwise  permitted  by the terms of the Credit  Agreement,  including  without
limitation Sections


                                       14
<PAGE>


6.4 and 6.7 thereof and in each case to the extent relating to Investments prior
to the occurrence and during the continuance of a Default subject however to any
prepayment requirements under the Credit Agreement.

          (iii) The Administrative  Agent shall execute and deliver (or cause to
     be executed  and  delivered)  to each of the  Grantors all such proxies and
     other  instruments  as such Grantor may request for the purpose of enabling
     such  Grantor  to  exercise,   prior  to  the  occurrence  and  during  the
     continuance of an Event of Default,  the voting and other rights that it is
     entitled to exercise  pursuant  to  paragraph  (i) above and to receive the
     dividends or interest  payments that it is authorized to receive and retain
     pursuant to paragraph (ii) above.

     (b) Upon the occurrence and during the continuation of an Event of Default:

          (i) All rights of each of the Grantors (x) to exercise or refrain from
     exercising the voting and other  consensual  rights that it would otherwise
     be entitled to exercise  pursuant to Section  13(a)(i) shall  automatically
     cease and (y) to receive the dividends and interest  payments that it would
     otherwise be authorized to receive and retain pursuant to Section 13(a)(ii)
     shall  automatically  cease,  and all such rights shall thereupon be vested
     solely in the  Administrative  Agent,  which shall  thereupon have the sole
     right to  exercise  or  refrain  from  exercising  such  voting  and  other
     consensual  rights  and to receive  and hold as  Security  Collateral  such
     dividends and interest payments.

          (ii) All dividends  and interest  payments that are received by any of
     the Grantors  contrary to the  provisions  of paragraph (i) of this Section
     13(b)  shall be  received  in trust for the  benefit of the  Administrative
     Agent,  shall be  segregated  from other funds of such Grantor and shall be
     forthwith paid over to the Administrative  Agent as Security  Collateral in
     the same form as so received (with any necessary endorsement).

     Section 14. As to the Assigned Agreements.

     (a) Each of the Grantors shall, at its expense:

          (i) perform and observe all the material  terms and  provisions of the
     Assigned  Agreements  to which such  Grantor is a party to be  performed or
     observed by it, maintain such Assigned  Agreements in full force and effect
     and enforce such Assigned Agreements in accordance with their terms, except
     where  the  failure  to do so  would  not be  reasonably  likely  to have a
     Material Adverse Effect and take all such action to such end as may be from
     time to time reasonably requested by the Administrative Agent; and

          (ii) furnish to the Administrative Agent promptly upon receipt thereof
     copies of all material  notices  received by such Grantor (other than those
     created  or  arising  in the  ordinary  course)  under or  pursuant  to the
     Assigned Agreements to which such Grantor is a party relating to any breach
     or  default by any party  which  could  reasonably  be  expected  to have a
     Material


                                       15
<PAGE>


     Adverse  Effect,  and from time to time (A)  furnish to the  Administrative
     Agent such information and reports regarding the Collateral pledged by such
     Grantor hereunder as the  Administrative  Agent may reasonably  request and
     (B) upon the reasonable request of the  Administrative  Agent, make to each
     other party to any such  Assigned  Agreement  such demands and requests for
     information  and reports or for action as such  Grantor is entitled to make
     thereunder.

     (b) Each of the  Grantors  agrees  that it shall not without the consent of
the  Administrative  Agent if any such action would reasonably be expected to be
adverse to the interests of, or impair the security value of such Collateral to,
the  Administrative  Agent or the  Lenders  (except  if  adverse,  or causing an
impairment, in each case only in an immaterial way or with respect to Collateral
which  individually  or in the  aggregate  is not  material  to  such  Grantor's
business) and shall not in any event take any such action at any time  following
the occurrence and during the continuance of a Default or an Event of Default:

          (i) cancel or terminate  any Assigned  Agreement to which such Grantor
     is a party,  or  consent  to or  accept  any  cancellation  or  termination
     thereof;

          (ii) amend or otherwise  modify any  Assigned  Agreement to which such
     Grantor is a party, or give any consent, waiver or approval thereunder;

          (iii)  waive any  material  default  under or  material  breach of any
     Assigned Agreement to which such Grantor is a party;

          (iv)  consent  to or permit or accept  any  prepayment  of  amounts to
     become due under or in connection with any Assigned Agreement to which such
     Grantor is a party, except as expressly provided therein; or

          (v) take any other action in connection with any Assigned Agreement to
     which such Grantor is a party,  that would impair the value of the interest
     or rights of such Grantor  thereunder  or that would impair the interest or
     rights of the Administrative Agent.

     Section  15.  Payments  Under  the  Assigned   Agreements.   Following  the
occurrence  and  continuance  of an  Event  of  Default,  if  requested  by  the
Administrative Agent, each of the Grantors shall effectively instruct each other
party to each  Assigned  Agreement  to which such  Grantor is a party,  that all
payments  due or to  become  due  under  or in  connection  with  such  Assigned
Agreement   shall  be  made  in  accordance   with  the   instructions   of  the
Administrative Agent. In such event the Administrative Agent shall instruct such
party to make (A) such  payments to the  Borrower so long as no Event of Default
shall have occurred and be continuing or (B) such payments to the Administrative
Agent if any Event of Default shall have occurred and be continuing. Any payment
made to the  Administrative  Agent  under  this  Section  15 shall be applied as
provided in Section 20(b).

     Section 16. Transfers and Other Liens; Additional Shares.


                                       16
<PAGE>


     (a) Each of the  Grantors  agrees  that it shall not (i) sell,  assign  (by
operation of law or otherwise) or otherwise dispose of, or grant any option with
respect to, any of the  Collateral,  except  sales of  Inventory in the ordinary
course of business or sales or other  dispositions of other assets  permitted by
the Credit  Agreement,  or (ii)  create or suffer to exist any Lien upon or with
respect to any of the  Collateral  except  for (A) the  pledge,  assignment  and
security  interest  created by this Agreement and (B) any other Liens  expressly
permitted under Section 6.1 of the Credit Agreement.

     (b) Each of the Grantors  agrees that it shall (i) cause each issuer of the
Pledged  Shares which it controls not to issue any stock or other  securities in
addition to or in  substitution  for the Pledged  Shares  issued by such issuer,
except  to  such  Grantor  and  except  as  otherwise  permitted  by the  Credit
Agreement, and (ii) pledge hereunder, immediately upon its acquisition (directly
or  indirectly)  thereof,  any and all  additional  shares  of  stock  or  other
securities owned by such Grantor of each issuer of the Pledged Shares; provided,
however,  that in no  event  shall  more  than 65% of the  capital  stock of any
Foreign  Subsidiary of a Grantor be pledged pursuant to this Agreement except if
and to the extent otherwise provided in the Credit Agreement.

     Section 17.  Administrative Agent Appointed  Attorney-in-Fact.  Each of the
Grantors hereby  irrevocably  appoints the  Administrative  Agent such Grantor's
attorney-in-fact, with full authority in the place and stead of the Borrower and
in the name of the Borrower or  otherwise,  upon the  occurrence  and during the
continuance  of an Event of  Default,  to take any  action  and to  execute  any
instrument  that the  Administrative  Agent may deem  necessary  or advisable to
accomplish the purposes of this Agreement, including, without limitation:

     (a)  to  obtain  and  adjust   insurance   required   to  be  paid  to  the
Administrative Agent pursuant to Section 11,

     (b) to ask for, demand, collect, sue for, recover, compromise,  receive and
give  acquittance  and  receipts  for  moneys  due and to become due under or in
respect of any of its Collateral,

     (c) to  receive,  endorse  and  collect  any  drafts or other  instruments,
documents and chattel paper, in connection with clause (a) or (b) above, and

     (d) to file any claims or take any action or institute any proceedings that
the  Administrative  Agent may deem necessary or desirable for the collection of
any of its  Collateral  or  otherwise to enforce  compliance  with the terms and
conditions of any Assigned Agreement or the rights of the  Administrative  Agent
with respect to any of its Collateral.

     Section 18.  Administrative Agent May Perform. If any of the Grantors fails
to perform any agreement contained herein, the Administrative  Agent may itself,
upon reasonable prior notice to such Grantor,  perform, or cause performance of,
such agreement, and the reasonable and


                                       17
<PAGE>


actual  expenses of the  Administrative  Agent incurred in connection  therewith
shall be payable by such Grantor under Section 22(b).

     Section 19.  Administrative  Agent's  Duties.  The powers  conferred on the
Administrative  Agent  hereunder  are  solely to  protect  its  interest  in the
Collateral  and shall not impose any duty upon it to exercise  any such  powers.
Except  for  the  safe  custody  of any  Collateral  in its  possession  and the
accounting  for moneys  actually  received by it hereunder,  the  Administrative
Agent  shall have no duty as to any  Collateral,  as to  ascertaining  or taking
action with respect to calls,  conversions,  exchanges,  maturities,  tenders or
other  matters  relative  to  any  Security  Collateral,   whether  or  not  the
Administrative  Agent or any Secured Party has or is deemed to have knowledge of
such  matters,  or as to the taking of any  necessary  steps to preserve  rights
against  any  parties or any other  rights  pertaining  to any  Collateral.  The
Administrative   Agent  shall  exercise  reasonable  care  in  the  custody  and
preservation  of  any  Collateral  in  its  possession  and  shall  accord  such
Collateral treatment equal to that which Fleet accords other similar property in
its possession.

     Section 20.  Remedies.  If any Event of Default  shall have occurred and be
continuing:

     (a) The Administrative Agent may exercise in respect of the Collateral,  in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and  remedies of a secured  party upon  default  under the
Uniform  Commercial  Code in  effect  in the State of New York at such time (the
"N.Y. Uniform Commercial Code") (whether or not the N.Y. Uniform Commercial Code
applies to the affected  Collateral)  and also may (i) require any or all of the
Grantors to, and each Grantor hereby agrees that it will at its expense and upon
request  of the  Administrative  Agent  forthwith,  assemble  all or part of the
Collateral as directed by the Administrative  Agent and make it available to the
Administrative  Agent at a place to be  designated by the  Administrative  Agent
that is reasonably  convenient to both parties and (ii) without notice except as
specified  below and as required by law, sell the Collateral or any part thereof
in one or more parcels at public or private sale,  at any of the  Administrative
Agent's offices or elsewhere,  for cash, on credit or for future  delivery,  and
upon  such  other  terms  as the  Administrative  Agent  may  deem  commercially
reasonable.  Each  Grantor  agrees that,  to the extent  notice of sale shall be
required by law, at least ten (10) days'  notice to such Grantor of the time and
place of any public sale or the time after which any private  sale is to be made
shall constitute reasonable notification.  The Administrative Agent shall not be
obligated  to make any sale of  Collateral  regardless  of notice of sale having
been given. The Administrative Agent may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor, and such sale
may,  without  further notice except as required by law, be made at the time and
place to which it was so adjourned.

     (b) Any cash held by or on behalf of the Administrative Agent as Collateral
and all cash  proceeds  received by the  Administrative  Agent in respect of any
sale  of,  collection  from,  or other  realization  upon all or any part of the
Collateral  may, in the discretion of the  Administrative  Agent, be held by the
Administrative  Agent as Collateral  for,  and/or then or at any time thereafter
applied  (after  payment  of any  amounts  payable to the  Administrative  Agent
pursuant to Section 22)


                                       18
<PAGE>

in whole or in part by the  Administrative  Agent for the ratable benefit of the
Secured  Parties  against,  all or any part of the Secured  Obligations  in such
order as is specified by the Credit  Agreement and, if the Credit Agreement does
not so specify an order of application against the Obligations, in such order as
the Administrative Agent shall elect, provided, however, that this Section 20(b)
shall be subject to the provisions of Section 11(a). Any surplus of such cash or
cash proceeds held by the  Administrative  Agent and remaining  after payment in
full  of all the  Secured  Obligations  shall  be  paid  over to the  applicable
Grantors or to whomsoever may be lawfully entitled to receive such surplus.

     (c) The  Administrative  Agent may exercise any and all rights and remedies
of any of the Grantors  under or in connection  with the Assigned  Agreements or
otherwise in respect of the Collateral,  including,  without limitation, any and
all rights of any Grantor to demand or otherwise  require  payment of any amount
under, or performance of any provision of, any Assigned Agreement.

     (d) All payments  received by any Grantor under or in  connection  with any
Assigned  Agreement or otherwise in respect of the Collateral  shall be received
in trust for the benefit of the  Administrative  Agent, shall be segregated from
other  funds  of  such  Grantor  and  shall  be  forthwith   paid  over  to  the
Administrative  Agent  in the  same  form as so  received  (with  any  necessary
endorsement or assignment).

     (e) The  Administrative  Agent may,  with  reasonable  notice to any of the
Grantors  and at any time or from time to time,  charge,  set-off  or  otherwise
apply all or any part of the Secured Obligations against the L/C Cash Collateral
Account or any part thereof; provided,  however, that the failure to give notice
shall not affect the validity of such charge, set-off or application.

     (f) Each  Grantor  will  furnish to the  Administrative  Agent  correct and
complete  customer  lists and updates  thereof as the  Administrative  Agent may
reasonably request, all in reasonable detail.

     Section 21.  Registration  Rights;  Private Sale. (a) If the Administrative
Agent shall  determine  to exercise its right to sell all or any of the Security
Collateral  pursuant  to  Section 20  pursuant  to a public  offering  (it being
understood by each of the Grantors that the Administrative  Agent shall be under
no obligation to do so and may, in its sole discretion,  dispose of the Security
Collateral  in any manner  permitted  by law that the  Administrative  Agent may
select),  each Grantor agrees that,  upon request of the  Administrative  Agent,
such Grantor will, at its own expense:

          (i)  execute  and  deliver,  and cause  each  issuer  of the  Security
     Collateral  contemplated to be sold and the directors and officers  thereof
     to execute and deliver all such instruments and documents,  and do or cause
     to be done all such other acts and  things as may be  necessary  or, in the
     sole  discretion  of the  Administrative  Agent,  desirable to register its
     Security  Collateral under the provisions of the Securities Act of 1933, as
     amended (the "Securities Act"), to cause a registration  statement relating
     thereto to become  effective  and to remain  effective  for such  period as
     prospectuses  are  required  by  law  to be  furnished,  and  to  make  all
     amendments and supplements  thereto and to the related  prospectus that, in
     the sole discretion of the Administrative


                                       19
<PAGE>


     Agent, are necessary or desirable,  all in conformity with the requirements
     of the Securities  Act and the rules and  regulations of the Securities and
     Exchange Commission applicable thereto;

          (ii) use its best efforts to qualify its Security Collateral under the
     state   securities   or  "Blue  Sky"  laws  and  to  obtain  all  necessary
     governmental  approvals  for  the  sale  of  the  Security  Collateral,  as
     requested by the Administrative Agent in its sole discretion;

          (iii)  cause  each  such  issuer  to make  available  to its  security
     holders,  as soon as practicable,  an earnings  statement that will satisfy
     the provisions of Section 10(a) of the Securities Act;

          (iv) provide the Administrative  Agent with such other information and
     projections  as  may  be  necessary  or,  in  the  sole  discretion  of the
     Administrative  Agent,  desirable  to enable  the  Administrative  Agent to
     effect the sale of its Security Collateral; and

          (v) do or cause to be done all such  other  acts and  things as may be
     necessary to make such sale of its Security  Collateral or any part thereof
     valid and binding and in compliance with applicable law.

The  Administrative  Agent is  authorized,  in  connection  with any sale of the
Security  Collateral pursuant to Section 20, to deliver or otherwise disclose to
any  prospective  purchaser  of the  Security  Collateral  (A) any  registration
statement or prospectus,  and all supplements and amendments  thereto,  prepared
pursuant to clause (i) above, (B) any information and projections provided to it
pursuant to clause (iv) above and (C) any other  information  in its  possession
relating to the Security Collateral.

     (b) The  Grantors  recognize  that,  upon the  occurrence  and  during  the
continuance of an Event of Default,  the  Administrative  Agent may be unable to
effect a public  sale of all or a part of the  Security  Collateral,  and may be
compelled  to  resort  to one or more  private  sales to a  restricted  group of
purchasers who will be obligated to agree,  among other things,  to acquire such
securities  for their own  account,  for  investment  and not with a view to the
distribution or resale thereof.  The Grantors  acknowledge that any such private
sales may be at places and on terms less  favorable  to the sellers than if sold
at public sales and agrees that such private  sales shall be deemed to have been
made in a commercially  reasonable manner, and that the Administrative Agent has
no  obligation to delay the sale of any such  securities  for the period of time
necessary to permit any such securities to be registered for public sale.



                                       20
<PAGE>


     Section 22. Indemnity and Expenses.

     (a) Each of the Grantors hereby agrees, jointly and severally, to indemnify
the  Administrative  Agent  from and  against  any and all  claims,  losses  and
liabilities arising out of or resulting from this Agreement (including,  without
limitation, enforcement of this Agreement), except claims, losses or liabilities
resulting from the Administrative Agent's gross negligence or willful misconduct
as determined by a final judgment of a court of competent jurisdiction.

     (b) The  Borrower  will upon  demand  pay to the  Administrative  Agent the
amount of any and all reasonable  expenses,  including the  reasonable  fees and
expenses of its counsel and of any experts and agents,  that the  Administrative
Agent may incur in connection  with (i) the  administration  of this  Agreement,
(ii) the custody,  preservation, use or operation of, or the sale of, collection
from or other  realization  upon, any of the  Collateral,  (iii) the exercise or
enforcement  of any of the  rights of the  Administrative  Agent or the  Secured
Parties  hereunder or (iv) the failure by the  Borrower or any other  Grantor to
perform or observe any of the provisions hereof.

     Section 23.  Security  Interest  Absolute.  The obligations of each Grantor
under this Agreement are independent of the Secured Obligations,  and a separate
action or actions may be brought and prosecuted  against each Grantor to enforce
this  Agreement,  irrespective  of whether  any action is  brought  against  the
Borrower or any other  Grantor or whether the  Borrower or any other  Grantor is
joined in any such action or actions. All rights of the Administrative Agent and
the pledge,  assignment and security interest hereunder,  and all obligations of
each Grantor hereunder, shall be absolute and unconditional, irrespective of:

     (a) any lack of  validity  or  enforceability  of any Loan  Document or any
other agreement or instrument relating thereto;

     (b) any change in the time,  manner or place of payment of, or in any other
term of, all or any of the Secured  Obligations or any other amendment or waiver
of or any consent to any departure  from any Loan Document,  including,  without
limitation, any increase in the Secured Obligations resulting from the extension
of  additional  credit  to the  Borrower  or  any  Guarantor  or  any  of  their
subsidiaries or otherwise;

     (c)  any  taking,   exchange,   release  or  non-perfection  of  any  other
collateral,  or any  taking,  release  or  amendment  or waiver of or consent to
departure from any guaranty, for all or any of the Secured Obligations;

     (d) any manner of application of collateral, or proceeds thereof, to all or
any of the Secured  Obligations,  or any manner of sale or other  disposition of
any collateral for all or any of the Secured  Obligations or any other assets of
the Borrower or any Guarantor or any of their subsidiaries;

     (e) any change,  restructuring or termination of the corporate structure or
existence of the Borrower or any Guarantor or any of their subsidiaries; or


                                       21
<PAGE>


     (f) any  other  circumstance  that  might  otherwise  constitute  a defense
available  to, or a  discharge  of, any  Grantor or a third  party  grantor of a
security interest.

     Section 24. Amendments; Waivers; Etc.

     (a) No  amendment  or waiver of any  provision  of this  Agreement,  and no
consent  to any  departure  by any  Grantor  herefrom,  shall  in any  event  be
effective  unless the same shall be in writing and signed by the  Administrative
Agent,  and then such waiver or consent shall be effective  only in the specific
instance and for the specific purpose for which given.

     (b) No failure on the part of the Administrative Agent to exercise,  and no
delay in exercising,  any right hereunder shall operate as a waiver thereof; nor
shall any single or partial  exercise  of any such right  preclude  any other or
further exercise thereof or the exercise of any other right.

     (c) Upon the  execution  and delivery by any Person of a supplement to this
Agreement,  in each case in  substantially  the form of Exhibit D hereto (each a
"Security  Agreement  Supplement"),  (i) such Person  shall be referred to as an
"Additional  Grantor" and shall be and become a Grantor,  and each  reference in
this Agreement to an "Additional  Grantor" or a "Grantor" shall also mean and be
a reference  to such  Additional  Grantor and each  reference  in any other Loan
Document to a "Grantor"  or a "Loan Party" shall also mean and be a reference to
such  Additional  Grantor,  and (ii) the  supplements  attached to each Security
Agreement  Supplement  shall  be  incorporated  into  and  become  a part of and
supplement  the  Schedules  to  this   Agreement,   as   appropriate,   and  the
Administrative  Agent may attach such  supplements to such  Schedules,  and each
reference to such Schedules shall mean and be a reference to such Schedules,  as
supplemented pursuant hereto.

     Section 25.  Addresses  for Notices.  All notices and other  communications
provided for hereunder shall be in writing (including  telegraphic,  telecopy or
telex communication) and mailed, telegraphed,  telecopied,  telexed or delivered
if to any Grantor addressed to it at the address set forth below its name on the
signature  pages hereof;  if to any Additional  Grantor,  addressed to it at the
address  set  forth  below  its  name on the  signature  pages  to the  Security
Agreement  Supplement  executed and delivered by such Additional  Grantor; if to
the  Administrative  Agent,  addressed to it at its address set forth in Section
11.2 of the Credit  Agreement or, as to each other party,  at such other address
as shall be designated by such party in a written notice to the Grantors and the
Administrative  Agent. All such notices and communications shall, when mailed by
certified mail, return receipt requested, telegraphed, telecopied or telexed, be
effective three (3) Business Days after mailing,  or two (2) Business Days after
being deposited with a recognized  overnight  delivery  service with all changes
prepaid or billed to the  account of the  sender,  or upon  transmission  to the
telegraph  company,  upon delivery by telecopier or upon  confirmation  by telex
answerback,  respectively,  addressed as aforesaid.  Any party hereto may change
the  Person,  address or  telecopier  number to whom or which  notices are to be
given hereunder,  by notice duly given hereunder;  provided,  however,  that any
such  notice  shall be deemed to have been given  hereunder  only when  actually
received by the party to which it is addressed.


                                       22
<PAGE>


     Section 26.  Continuing  Security  Interest;  Assignments  under the Credit
Agreement.  This Agreement  shall create a continuing  security  interest in the
Collateral  and shall (a) remain in full force and effect until the later of (i)
the indefeasible payment in full in cash of the Secured Obligations and (ii) the
Termination  Date, (b) be binding upon each Grantor,  its successors and assigns
and (c) inure, together with the rights and remedies of the Administrative Agent
hereunder,  to the benefit of the  Administrative  Agent, the Lender Parties and
their  respective  successors,  transferees  and assigns.  Without  limiting the
generality  of the  foregoing  clause  (c),  any Lender may assign or  otherwise
transfer  all or any  portion  of its rights  and  obligations  under the Credit
Agreement (including,  without limitation, all or any portion of its Commitment,
the Advances  owing to it and the Note or Notes held by it) to any other Person,
and such other Person  shall  thereupon  become  vested with all the benefits in
respect  thereof  granted to such Lender  herein or  otherwise,  in each case as
provided in Section 11.7 of the Credit Agreement. Notwithstanding the foregoing,
no Grantor  may assign any of its  rights or  obligations  under this  Agreement
without the prior written consent of the Administrative Agent, which consent may
be withheld for any reason.

     Section 27. Release and Termination.

     (a) Upon any sale,  lease,  transfer  or other  disposition  of any item of
Collateral  in  accordance  with the express  terms of the Loan  Documents,  the
Administrative Agent will, at the Grantors' expense, execute and deliver to each
Grantor such documents as such Grantor shall reasonably  request to evidence the
release of such item of Collateral  from the  assignment  and security  interest
granted hereby; provided, however, that (i) at the time of such request and such
release no Default  shall have  occurred  and be  continuing,  (ii) such Grantor
shall deliver to the  Administrative  Agent, at least ten (10) days prior to the
date of the proposed release,  a written request for release describing the item
of Collateral and the terms of the sale, lease, transfer or other disposition in
reasonable  detail,  including  the price thereof and any expenses in connection
therewith,  together with a form of release for execution by the  Administrative
Agent and a certification  by such Grantor to the effect that the transaction is
in  compliance  with the Loan  Documents  and as to such  other  matters  as the
Administrative  Agent may  request,  and (iii) the  proceeds  of any such  sale,
lease,  transfer or other disposition  required to be applied in accordance with
Section 2.6 or any other  provision of the Credit  Agreement shall be applied as
required by the terms of the Credit Agreement.

     (b) Upon the latest of (i) the indefeasible  payment in full in cash of the
Secured Obligations, (ii) the expiration,  termination or cancellation of all of
the Letters of Credit and (iii) the Termination Date, the pledge, assignment and
security interest granted by each of the Grantors hereby shall terminate and all
rights to the Collateral shall revert to the appropriate Grantor.  Upon any such
termination,  the Administrative  Agent will, at the Grantors' expense,  execute
and deliver to the  appropriate  Grantor such  documents  as such Grantor  shall
reasonably request to evidence such termination.

     (c) To the  extent  any one or more  provisions  of  this  Agreement  shall
conflict with one or more provisions in the Credit Agreement,  the provisions of
the  Credit   Agreement  shall  control  and  supersede  any  such   conflicting
provision(s) of this Agreement.


                                       23
<PAGE>



     Section 28.  Governing Law; Terms.  THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK,  EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTERESTS  HEREUNDER,  OR
REMEDIES HEREUNDER,  IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE
LAWS OF A  JURISDICTION  OTHER  THAN THE  STATE OF NEW  YORK.  Unless  otherwise
defined herein or in the Credit  Agreement,  terms used in Article 9 of the N.Y.
Uniform Commercial Code are used herein as therein defined.

     Section 29. JURISDICTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY  SUBMITS,  FOR  ITSELF  AND ITS  PROPERTY,  TO THE  NONEXCLUSIVE
JURISDICTION  OF ANY NEW YORK STATE COURT OR FEDERAL  COURT OF THE UNITED STATES
OF AMERICA  SITTING IN NEW YORK CITY, NEW YORK AND ANY APPELLATE  COURT FROM ANY
THEREOF,  IN ANY  ACTION  OR  PROCEEDING  ARISING  OUT OF OR  RELATING  TO  THIS
AGREEMENT  OR ANY OF THE OTHER  LOAN  DOCUMENTS  TO WHICH IT IS A PARTY,  OR FOR
RECOGNITION  OR  ENFORCEMENT  OF ANY  JUDGMENT,  AND EACH OF THE PARTIES  HERETO
HEREBY IRREVOCABLY AND UNCONDITIONALLY  AGREES THAT ALL CLAIMS IN RESPECT OF ANY
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH NEW YORK STATE
COURT OR, TO THE EXTENT  PERMITTED  BY LAW, IN SUCH FEDERAL  COURT.  EACH OF THE
PARTIES  HERETO  AGREES THAT A FINAL  JUDGMENT IN ANY SUCH ACTION OR  PROCEEDING
SHALL BE CONCLUSIVE  AND MAY BE ENFORCED IN OTHER  JURISDICTIONS  BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL
AFFECT ANY RIGHT THAT ANY LENDER PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR
PROCEEDING  RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS IN THE
COURTS OF ANY JURISDICTION.

     EACH OF THE PARTIES HERETO IRREVOCABLY AND  UNCONDITIONALLY  WAIVES, TO THE
FULLEST  EXTENT IT MAY LEGALLY AND  EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER  HAVE TO THE LAYING OF VENUE OF ANY SUIT,  ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS  AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS
TO  WHICH IT IS A PARTY IN ANY NEW YORK  STATE  OR  FEDERAL  COURT.  EACH OF THE
PARTIES HERETO HEREBY  IRREVOCABLY  WAIVES,  TO THE FULLEST EXTENT  PERMITTED BY
LAW, THE DEFENSE OF AN  INCONVENIENT  FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.

     Section 30. WAIVER OF JURY TRIAL.  EACH OF THE BORROWER,  THE LOAN PARTIES,
THE ADMINISTRATIVE AGENT AND THE SECURED PARTIES VOLUNTARILY,  INTENTIONALLY AND
IRREVOCABLY  WAIVES  ALL  RIGHT TO TRIAL BY JURY IN ANY  ACTION,  PROCEEDING  OR
COUNTERCLAIM  (WHETHER BASED ON CONTRACT,  TORT OR OTHERWISE)  ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN  DOCUMENTS,  THE ADVANCES OR




                                       24
<PAGE>


THE ACTIONS OF THE ADMINISTRATIVE AGENT OR ANY SECURED PARTY IN THE NEGOTIATION,
ADMINISTRATION,  PERFORMANCE OR ENFORCEMENT  THEREOF.  THIS WAIVER CONSTITUTES A
MATERIAL  INDUCEMENT  FOR THE SECURED  PARTIES AND THE  ADMINISTRATIVE  AGENT TO
ENTER INTO THIS AGREEMENT AND TO MAKE ADVANCES PURSUANT TO THE LOAN DOCUMENTS.

     Section 31.  Counterparts.  This Agreement may be executed in any number of
several  counterparts,  each of which  shall be deemed an  original,  but all of
which  together  shall  constitute  one and the  same  instrument.  Delivery  by
telecopier  of an executed  counterpart  of a signature  page to this  Agreement
shall be as effective  as delivery of a manually  executed  counterpart  to this
Agreement.

                            [SIGNATURE PAGE FOLLOWS]



                                       25
<PAGE>


     IN WITNESS  WHEREOF,  each of the Grantors has caused this  Agreement to be
duly executed and delivered by its officer  thereunto duly  authorized as of the
date first above written.

                                         AUDIO BOOK CLUB, INC.


                                         By:___________________________________
                                         Title:________________________________
                                         Address: 2295 Corporate Boulevard, N.W.
                                                  Suite 222
                                                  Boca Raton, Florida 33431


                                         ABC INTERNET SERVICES, INC.


                                         By:___________________________________
                                         Title:________________________________
                                         Address: 2295 Corporate Boulevard, N.W.
                                                  Suite 222
                                                  Boca Raton, Florida 33431


                                         CLASSIC RADIO HOLDING CORP.


                                         By:___________________________________
                                         Title:________________________________
                                         Address: 2295 Corporate Boulevard, N.W.
                                                  Suite 222
                                                  Boca Raton, Florida 33431

                                         CLASSIC RADIO ACQUISITION CORP.


                                         By:___________________________________
                                         Title:________________________________
                                         Address: 2295 Corporate Boulevard, N.W.
                                                  Suite 222
                                                  Boca Raton, Florida 33431


<PAGE>


                                         ABC INVESTMENT CORP.

                                         By:___________________________________
                                         Title:________________________________
                                         Address: 103 Springer Building
                                                  3411 Silver Side Road
                                                  Wilmington, DE 19810

                                         CH ACQUISITIONS CORP.

                                         By:___________________________________
                                         Title:________________________________
                                         Address: 2295 Corporate Boulevard, N.W.
                                                  Suite 222
                                                  Boca Raton, Florida 33431


<PAGE>



ACCEPTED:


FLEET NATIONAL BANK, AS ADMINISTRATIVE AGENT


By: _______________________________________

Title: ____________________________________



                                       28

<PAGE>



                                  EXHIBIT A TO
                               SECURITY AGREEMENT


                           [Grantor Name and Address]


                                                             _____________, ____


[Name of Depository Account Bank]
[Address]



Ladies and Gentlemen:

     Reference is made to deposit account  no.[_________]  (the "Cash Collateral
Account")  maintained with you by [GRANTOR NAME], a [_____________]  corporation
(the "Grantor").  Pursuant to the Security  Agreement,  dated November ___, 1998
(as amended,  supplemented,  renewed,  restated,  extended or otherwise modified
from time to time,  the  "Security  Agreement";  terms  defined  therein  unless
otherwise defined herein being used herein as therein defined),  the Grantor has
granted to Fleet  National  Bank, as  administrative  agent  (together  with any
successor   appointed  pursuant  to  Article  X  of  the  Credit  Agreement  (as
hereinafter  defined),  the  "Administrative  Agent")  for the  Secured  Parties
referred  to in the  Credit  Agreement,  dated  as of  ________,  ____  (as such
agreement may be amended, supplemented,  renewed, extended or otherwise modified
from time to time, the "Credit Agreement"),  by and among Audio Book Club, Inc.,
(the  "Borrower"),  the Lender Parties party thereto,  the Secured Parties named
therein and Fleet  National Bank, as Swing Line Bank, as Issuing Bank and as the
Administrative  Agent, a security interest in certain property and assets of the
Grantor,   including,   among  other  things,   the   following   (the  "Account
Collateral"):  (a) the Cash Collateral  Account,  all funds held therein and all
certificates  and  instruments,  if  any,  from  time to  time  representing  or
evidencing  the Cash  Collateral  Account;  (b) all interest,  dividends,  cash,
instruments and other property and assets from time to time received, receivable
or otherwise distributed in respect of or in exchange for any or all of the then
existing  Account  Collateral;  and  (c)  all  proceeds  of any  and  all of the
foregoing Account Collateral and, to the extent not otherwise included,  all (i)
payments under insurance  (whether or not the  Administrative  Agent is the loss
payee thereof) or any indemnity,  warranty or guaranty payable by reason of loss
or  damage  to or  otherwise  with  respect  to  any of  the  foregoing  Account
Collateral, and (ii) cash. It is a condition to the continued maintenance of the
Cash Collateral Account with you that you agree to this letter agreement.

     By signing this letter  agreement,  you acknowledge  notice of the Security
Agreement and the terms and conditions thereof related to the Account Collateral
and confirm to the Administrative  Agent that (a) the Cash Collateral Account is
maintained  with you at your offices at




                               Exhibit A - Page 1
<PAGE>

the address set forth above, is entitled as set forth in subparagraph  (i) below
and the account number  therefor is as set forth in the first  paragraph of this
letter  agreement  and (b) you have  received  no notice of any other  pledge or
assignment  of, or any lien on or  security  interest  in,  the Cash  Collateral
Account. Further, you hereby agree with the Administrative Agent that:

          (i) The Cash  Collateral  Account shall be  maintained  solely for the
     benefit  of the  Administrative  Agent,  on behalf of itself  and the other
     Secured  Parties,  shall be entitled  "[NAME OF GRANTOR],  cash  collateral
     account for the benefit of Fleet  National Bank, as  Administrative  Agent"
     and shall be subject to  written  instructions  only from an officer of the
     Administrative  Agent  or,  so long as you have not  been  notified  by the
     Administrative  Agent or the  Grantor  that a Default has  occurred  and is
     continuing  and  solely to the  extent  set forth in  subparagraph  (iv)(B)
     below,  an officer of the  Grantor,  as agent for, and with the consent of,
     the Administrative Agent.

          (ii) The Cash Collateral  Account is and shall be subject to the terms
     and  conditions of the Security  Agreement,  and such  applicable  laws and
     regulations of the Board of Governors of the Federal  Reserve System and of
     any other appropriate banking or governmental  authority,  as are in effect
     from time to time,  and to the extent any term or  condition of this letter
     agreement is  inconsistent  with the terms and  conditions  of the Security
     Agreement, the terms and conditions of the Security Agreement shall govern.

          (iii) You shall maintain a record of all deposits  received in and all
     disbursements  made from the Cash  Collateral  Account  and, in addition to
     providing the Grantor with records and other documents of such deposits and
     disbursements  on a daily  basis in  accordance  with the  arrangements  in
     effect  between  you and the  Grantor  on the date  hereof,  furnish to the
     Administrative  Agent a monthly statement of the Cash Collateral Account to
     be mailed to the Administrative  Agent in accordance with the provisions of
     this letter agreement.

          (iv) (A) Upon the instructions of the Administrative  Agent, you shall
     transfer,  in immediately  available  funds, on each of your business days,
     all  amounts  to be  applied  by the  Administrative  Agent  on such day to
     obligations  then due and payable under the Credit  Agreement and the other
     Loan  Documents  to the  following  account  (the  "Administrative  Agent's
     Account"),  which amounts  shall be specified to you by the  Administrative
     Agent:

                       Fleet Bank, as Administrative Agent
                       Account No. ___________________
                       One Federal Street
                       Boston, Massachusetts 02110
                       Attention:  Loan Administration
                       Ref: __________________________

     Any funds  remaining in the Cash  Collateral  Account  after  effecting the
     release of funds set forth in the immediately  preceding  sentence shall be
     released to the Grantor in accordance


                               Exhibit A - Page 2
<PAGE>

     with subparagraph (iv)(B) below.

          (B) After  transferring  to the  Administrative  Agent  all  available
     amounts on  deposit  in the Cash  Collateral  Account  in  accordance  with
     subparagraph (iv)(A) above, and so long as neither the Administrative Agent
     nor the Grantor has  notified you that an Event of Default has occurred and
     is continuing, you shall transfer, in accordance with the instructions from
     the   Grantor,   acting  as  agent  for,  and  with  the  consent  of,  the
     Administrative  Agent, all or a portion of the available  remaining amounts
     on deposit in the Cash Collateral Account that are required for the conduct
     of the business of the Grantor and its subsidiaries in the ordinary course,
     which  instructions  shall  specify  the  person or  entity or the  account
     therefor to which such amounts shall be transferred.

          (C) After complying with the provisions of  subparagraphs  (iv)(A) and
     (iv)(B) above, you shall hold any remaining  amounts in the Cash Collateral
     Account as Collateral for the Secured Obligations.

     Except as provided in  subparagraph  (iv)(B)  above,  in no event shall you
     release  any  amounts  on  deposit  in the Cash  Collateral  Account at the
     request of any Person or entity other than the  Administrative  Agent. Each
     such transfer of funds shall neither comprise only part of a remittance nor
     reflect the rounding off of any funds so transferred.

          (v) All  transfers  from the Cash  Collateral  Account  referred to in
     subparagraph  (iv) above shall be made by you  irrespective of, and without
     deduction for, any counterclaim,  defense,  recoupment or set off and shall
     be final,  and you will not seek to recover from the  Administrative  Agent
     for any reason any such payment once made.

          (vi) All service  charges and fees with respect to the Cash Collateral
     Account  shall be  payable  by the  Grantor,  but may be charged to another
     account  maintained by the Grantor with you (other than the Cash Collateral
     Account or any Lock Box Account  maintained with you). In the event you are
     unable to obtain  sufficient  funds from such charges to cover such service
     charges and fees, the Grantor shall indemnify you therefor.

          (vii) The  Administrative  Agent shall be entitled to exercise any and
     all rights of the  Grantor in  respect  of the Cash  Collateral  Account in
     accordance with the terms of the Security  Agreement,  and you shall comply
     in  all  respects  with  such  exercise.   You  hereby   acknowledge   that
     notwithstanding  any other provision of this letter agreement,  upon notice
     from the Grantor or the  Administrative  Agent of an Event of Default under
     the Credit Agreement,  you will only accept  instructions in respect of the
     Cash  Collateral   Account  and  the  other  Account  Collateral  from  the
     Administrative Agent.

          (viii) The security interest of the Administrative Agent, on behalf of
     the Secured Parties,  in the Cash Collateral  Account and the other Account
     Collateral  shall  not be  terminated  until  you  receive  notice  of such
     termination from the Administrative Agent.


                               Exhibit A - Page 3
<PAGE>



     This letter  agreement  shall be binding upon you and your  successors  and
assigns  and  shall  inure  to the  benefit  of,  and  be  enforceable  by,  the
Administrative  Agent  and  the  other  Secured  Parties  and  their  respective
successors,  transferees  and assigns.  You may terminate this letter  agreement
upon  thirty  (30)  days'   prior   written   notice  to  the  Grantor  and  the
Administrative  Agent. Upon any such  termination,  you (a) shall close the Cash
Collateral  Account and  transfer  all  available  funds in the Cash  Collateral
Account in accordance with the instructions of the Administrative  Agent and (b)
shall nonetheless  remain obligated to transfer  promptly to the  Administrative
Agent, at the account designated by the  Administrative  Agent at such time, all
funds and other property received in respect of the Cash Collateral Account.

     You shall  exercise  reasonable  care in  maintaining  the Cash  Collateral
Account and any Account Collateral received in respect thereof and in fulfilling
your obligations under or in respect of this letter agreement.  You shall not be
held liable for any claims,  damages, losses or expenses incurred by the Grantor
or the Administrative  Agent in connection  therewith other than for (a) claims,
damages,  losses or  expenses  resulting  from your gross  negligence  or wilful
misconduct  or (b) failure to maintain the Cash  Collateral  Account or any such
Account  Collateral or to fulfill your  obligations  under or in respect of this
letter  agreement with reasonable care as required by the first sentence of this
paragraph. Any liability incurred by you pursuant to the terms of this paragraph
shall be limited to damages  directly  caused by you or  resulting  from,  or in
connection  with,  your  actions or  omissions  to act, and shall not be for any
incidental, indirect, punitive or consequential damages.

     All  notices  and  other  communications  provided  for under  this  letter
agreement  shall be by (a)  telephone  promptly  confirmed  in writing or (b) in
writing (including  telegraphic,  telecopy or telex communication) and delivered
by hand or overnight courier, telegraphed,  telecopied or telexed, to each party
at the address set forth below the name of such party on the signature  pages of
this  letter  agreement  or to such other  address as such party may  specify in
writing to each other party. All such notices and communications  shall (i) when
made by telephone,  be effective when promptly confirmed in writing or (ii) when
delivered by hand or overnight courier,  telegraphed,  telecopied or telexed, be
effective  upon  delivery  by hand,  one (1) day after  delivery  to the courier
company, when delivered to the telegraph company, when transmitted by telecopier
or when confirmed by telex answerback, respectively, addressed as aforesaid.

     This letter  agreement may be executed in any number of counterparts and by
different  parties  hereto  in  separate  counterparts,  each of  which  when so
executed shall be deemed to be an original and all of which taken together shall
constitute  one and the same  agreement.  Delivery by  telecopier of an executed
counterpart of a signature page to this letter  agreement  shall be as effective
as delivery of a manually executed counterpart of this letter agreement.


                               Exhibit A - Page 4
<PAGE>


     This letter  agreement  shall be governed by, and  construed in  accordance
with,  the laws of the State of New York (without  giving effect to its conflict
of laws principles).

                                         Very truly yours,

                                         FLEET NATIONAL BANK,
                                         as Administrative Agent


                                         By____________________________________
                                           Name:
                                           Title:

                                         Person and Address for Notices:

                                         Fleet National Bank
                                         One Federal Street
                                         Boston, Massachusetts 02110
                                         Attention: ___________________________
                                         Telephone: ___________________________
                                         Facsimile No.: _______________________


                                         [NAME OF GRANTOR, as Grantor]


                                         By________________________________
                                           Name:
                                           Title:

                                         Person and Address for Notices:

                                         [Name]
                                         [Address]
                                         [Address]
                                         [Address]


Acknowledged and agreed to as
of the date first above written:


                               Exhibit A - Page 5
<PAGE>



[NAME OF DEPOSITORY ACCOUNT BANK]


By__________________________________
  Name:
  Title:

Person and Address for Notices:

[Name]
[Address]
[Address]
[Address]


                               Exhibit A - Page 6
<PAGE>


                                  EXHIBIT B TO
                               SECURITY AGREEMENT


                          FORM OF CONSENT AND AGREEMENT


     The undersigned  hereby  acknowledges  notice of, and consents to the terms
and provisions of, the Security  Agreement,  dated as of November ___, 1998 (the
"Security  Agreement";  the terms  defined  therein being used herein as therein
defined),  from [Name of Grantor],  (the  "Grantor") to Fleet  National Bank, as
administrative  agent  (the  "Administrative  Agent")  for the  Secured  Parties
referred to therein, and hereby agrees with the Administrative Agent that:

          (a) The  undersigned  will make all payments to be made by it under or
     in  connection  with the ________  Agreement,  dated  _________,  19__ (the
     "Assigned  Agreement"),  between the  undersigned and Grantor in accordance
     with the instructions of the Administrative Agent.

          (b) All payments  referred to in paragraph  (a) above shall be made by
     the   undersigned   irrespective   of,  and  without   deduction  for,  any
     counterclaim,  defense,  recoupment or set-off and shall be final,  and the
     undersigned will not seek to recover from the  Administrative  Agent or any
     Lender Party for any reason any such payment once made.

          (c) The Administrative Agent shall be entitled to exercise any and all
     rights and  remedies of the Grantor  under the Assigned  Agreement  and the
     undersigned shall comply in all respects with any such exercise.

          (d) The  undersigned  shall not,  without the prior written consent of
     the Administrative Agent, (i) cancel or terminate the Assigned Agreement or
     consent to or accept any cancellation or termination  thereof,  (ii) amend,
     restate or  otherwise  modify the  Assigned  Agreement  or (iii)  except as
     expressly  provided  therein,  make any prepayment of amounts to become due
     under or in connection with the Assigned Agreement.

     This Consent and Agreement  shall be binding upon the  undersigned  and its
successors and assigns,  and shall inure,  together with the rights and remedies
of the  Administrative  Agent  hereunder,  to the benefit of the  Administrative
Agent,  the Lender  Parties and their  respective  successors,  transferees  and
assigns.  THIS  CONSENT AND  AGREEMENT  SHALL BE GOVERNED  BY AND  CONSTRUED  IN
ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ITS
CONFLICTS OF LAWS PROVISIONS).


                               Exhibit B - Page 1
<PAGE>

     IN WITNESS  WHEREOF,  the  undersigned  has duly  executed this Consent and
Agreement as of the date set forth below.


Dated: ________, 1998                    [NAME OF OBLIGOR]



                                         By:____________________________________

                                         Title:_________________________________


                               Exhibit B - Page 2
<PAGE>


                                  EXHIBIT C TO
                               SECURITY AGREEMENT



                      FORM OF SECURITY AGREEMENT SUPPLEMENT



                                                              ____________, ___



Fleet Bank, as Administrative Agent
One Federal Street
Boston, MA 02110
Attention: Corporate Banking Group


               Security Agreement, dated as of November ___, 1998,
                          made by Audio Book Club, Inc.
          and the other Grantors party thereto, to Fleet National Bank,
                 as Administrative Agent for the Secured Parties

Ladies and Gentlemen:

     Reference is made to the above-captioned  Security Agreement (such Security
Agreement,  as in effect on the date hereof and as it may  hereafter be amended,
supplemented,  restated,  or otherwise modified from time to time, the "Security
Agreement").  Capitalized  terms used and not otherwise  defined herein have the
meanings ascribed to them in the Security Agreement.

     The  undersigned  hereby  agrees,  as of the date first above  written,  to
become a Grantor  under the Security  Agreement as if it were an original  party
thereto and agrees that each  reference in the  Security  Agreement to "Grantor"
shall also mean and be a reference to the undersigned.

     The undersigned hereby assigns and pledges to the Administrative Agent, for
the benefit of the Administrative  Agent and the ratable benefit of the Lenders,
the  Swing  Line  Bank  and  the  Issuing   Bank,   and  hereby  grants  to  the
Administrative  Agent,  for the  benefit  of the  Administrative  Agent  and the
ratable benefit of the Secured Parties, as security for the Secured Obligations,
a lien on, and security interest in, all of the right, title and interest of the
undersigned,  whether now owned or hereafter acquired,  in and to the Collateral
owned by the undersigned,  including, but not limited to, the property listed on
the attached  supplements  to Schedules I through IV to the Security  Agreement.
The undersigned hereby certifies that such supplements have been


                               Exhibit C - Page 1


<PAGE>


prepared by the undersigned in substantially  the form of such Schedules and are
true, accurate and complete as of the date hereof.

     The undersigned hereby makes each  representation and warranty set forth in
Section 8 of the Security Agreement (as modified by the attached  supplements to
the  Schedules  to the  Security  Agreement)  to the same  extent as each  other
Grantor  and  hereby  agrees  to be bound as a  Grantor  by all of the terms and
provisions of the Security Agreement to the same extent as each other Grantor.

     THIS LETTER SHALL BE GOVERNED BY, AND  CONSTRUED IN  ACCORDANCE  WITH,  THE
LAWS OF THE STATE OF NEW YORK  (WITHOUT  GIVING  EFFECT TO ITS CONFLICTS OF LAWS
PROVISIONS).

     EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY  SUBMITS,
FOR ITSELF AND ITS PROPERTY,  TO THE  NONEXCLUSIVE  JURISDICTION OF ANY NEW YORK
STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK
CITY,  NEW YORK AND ANY  APPELLATE  COURT  FROM ANY  THEREOF,  IN ANY  ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS  TO WHICH IT IS A PARTY,  OR FOR  RECOGNITION  OR  ENFORCEMENT  OF ANY
JUDGMENT,  AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING  MAY BE HEARD
AND  DETERMINED IN ANY SUCH NEW YORK STATE COURT OR, TO THE EXTENT  PERMITTED BY
LAW,  IN SUCH  FEDERAL  COURT.  EACH OF THE PARTIES  HERETO  AGREES THAT A FINAL
JUDGMENT  IN ANY  SUCH  ACTION  OR  PROCEEDING  SHALL BE  CONCLUSIVE  AND MAY BE
ENFORCED IN OTHER  JURISDICTIONS  BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED  BY LAW.  NOTHING  IN THIS  AGREEMENT  SHALL  AFFECT ANY RIGHT THAT ANY
LENDER PARTY MAY OTHERWISE  HAVE TO BRING ANY ACTION OR  PROCEEDING  RELATING TO
THIS  AGREEMENT  OR  ANY OF THE  OTHER  LOAN  DOCUMENTS  IN  THE  COURTS  OF ANY
JURISDICTION.

     EACH OF THE PARTIES HERETO IRREVOCABLY AND  UNCONDITIONALLY  WAIVES, TO THE
FULLEST  EXTENT IT MAY LEGALLY AND  EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER  HAVE TO THE LAYING OF VENUE OF ANY SUIT,  ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS  AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS
TO  WHICH IT IS A PARTY IN ANY NEW YORK  STATE  OR  FEDERAL  COURT.  EACH OF THE
PARTIES HERETO HEREBY  IRREVOCABLY  WAIVES,  TO THE FULLEST EXTENT  PERMITTED BY
LAW, THE DEFENSE OF AN  INCONVENIENT  FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT.

     THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION,   PROCEEDING  OR  COUNTERCLAIM  (WHETHER



                               Exhibit C - Page 2
<PAGE>


BASED ON CONTRACT,  TORT OR  OTHERWISE)  ARISING OUT OF THE LOAN  DOCUMENTS  (AS
DEFINED IN THE CREDIT AGREEMENT),  THE TRANSACTIONS  CONTEMPLATED THEREBY OR THE
ACTIONS  OF THE  ADMINISTRATIVE  AGENT,  ANY LENDER OR THE  ISSUING  BANK IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.

                                         Very truly yours,

                                         [NAME OF ADDITIONAL GRANTOR]
                                         [Address of chief executive office]
                                         [Address of chief executive office]


                                         By: ___________________________________

                                         Title:_________________________________


                               Exhibit C - Page 3

<PAGE>




                        EXHIBIT G TO THE CREDIT AGREEMENT

                    INTELLECTUAL PROPERTY SECURITY AGREEMENT


                                December 31, 1998


                                      from

                             AUDIO BOOK CLUB, INC.,

                          ABC INTERNET SERVICES, INC.,

                          CLASSIC RADIO HOLDING CORP.,

                        CLASSIC RADIO ACQUISITION CORP.,

                            ABC INVESTMENT CORP., and

                              CH ACQUISITIONS CORP.


                                  as Grantors,


                                       to


                              FLEET NATIONAL BANK,


                             as Administrative Agent


124870.5


<PAGE>



                                TABLE OF CONTENTS



INTELLECTUAL PROPERTY SECURITY AGREEMENT ..................................    1

PRELIMINARY STATEMENTS ....................................................    1
         SECTION 1.  Grant of Security ....................................    1
         SECTION 2.  Security for Obligations .............................    3
         SECTION 3.  Grantors Remain Liable ...............................    3
         SECTION 4.  Representations and Warranties .......................    3
         SECTION 5.  Further Assurances ...................................    6
         SECTION 6.  Transfers and Other Liens ............................    8
         SECTION 7.  Administrative Agent Appointed Attorney-in-Fact ......    8
         SECTION 8.  Administrative Agent May Perform .....................    9
         SECTION 9.  The Administrative Agent's Duties ....................    9
         SECTION 10. Remedies .............................................    9
         SECTION 11. Indemnity and Expenses ...............................   11
         SECTION 12. Security Interest Absolute ...........................   11
         SECTION 13. Amendments; Waivers; Supplements; Etc ................   12
         SECTION 14. Addresses for Notices ................................   12
         SECTION 15. Continuing Security Interest, Assignments ............   13
         SECTION 16. Release and Termination ..............................   13
         SECTION 17. Execution in Counterparts ............................   14
         SECTION 18. Governing Law; Terms .................................   14

EXHIBIT A .................................................................   21




<PAGE>



                                    SCHEDULES

Schedule I     -    Patents and Patent Applications
Schedule II    -    Trademark Registrations and Applications
Schedule III   -    Copyright Registrations and Applications
Schedule IV    -    Licenses
Schedule 4(i)  -    Litigation




<PAGE>


                    INTELLECTUAL PROPERTY SECURITY AGREEMENT


     INTELLECTUAL  PROPERTY  SECURITY  AGREEMENT dated December 31, 1998 made by
AUDIO BOOK CLUB,  INC., a Florida  corporation  with an office at 2295 Corporate
Boulevard, Suite 222, Boca Raton, Florida 33431 (the "Borrower"), the Additional
Grantors, ABC INTERNET SERVICES,  INC., a New York corporation with an office at
2295 Corporate  Boulevard,  Suite 222, Boca Raton,  Florida 33431, CLASSIC RADIO
HOLDING  CORP.,  a  Delaware  corporation  with  an  office  at  2295  Corporate
Boulevard,  Suite 222, Boca Raton,  Florida  33431,  CLASSIC  RADIO  ACQUISITION
CORP., a Delaware corporation, with an office at 2295 Corporate Boulevard, Suite
222, Boca Raton,  Florida 33431, ABC Investment  Corp., a Delaware  corporation,
with an office at 103 Springer Building,  3411 Silver Side Road, Wilmington,  DE
19810 and CH ACQUISITIONS CORP., a Delaware corporation,  with an office at 2295
Corporate Boulevard, Suite 222, Boca Raton, Florida 33431,(as defined in Section
13(c)) (the Additional Grantors,  together with the Borrower, the "Grantors") to
FLEET NATIONAL BANK, as  administrative  agent (in such capacity,  together with
successors in such capacity, the "Administrative Agent") for the Secured Parties
(as defined in the Credit Agreement referred to below).

     PRELIMINARY STATEMENTS:

     (1) The Borrower has entered  into a Credit  Agreement,  dated of even date
herewith (said Agreement, as it may hereafter be amended, supplemented, restated
or otherwise modified from time to time, being the "Credit Agreement"; the terms
defined  therein and not otherwise  defined  herein being used herein as therein
defined) with the banks,  financial institutions and other institutional lenders
party thereto (the  "Lenders"),  Fleet  National  Bank, as the Issuing Bank, and
Fleet National Bank, as the Administrative Agent.

     (2) It is a condition  precedent  to the making of Advances by the Lenders,
the issuance of Letters of Credit by the Issuing Bank under the Credit Agreement
and the Hedge Banks'  entering into the Bank Hedge  Agreements with the Borrower
from time to time that the  Borrower  shall  have  granted  the  assignment  and
security  interest  and made the  pledge  and  assignment  contemplated  by this
Agreement.

     NOW, THEREFORE, in consideration of the premises and in order to induce the
Secured Parties to make Advances under the Credit Agreement, the Issuing Bank to
issue Letters of Credit under the Credit Agreement, and the Hedge Banks to enter
into Bank Hedge  Agreements  with the  Borrower  from time to time,  each of the
Grantors  hereby  agrees with the  Administrative  Agent for its benefit and the
ratable benefit of the Secured Parties as follows:

     SECTION  1.  Grant of  Security.  Each of the  Grantors  hereby  assigns as
collateral  and  pledges to the  Administrative  Agent for its  benefit  and the
ratable


<PAGE>

benefit of the Secured Parties,  and hereby grants to the  Administrative  Agent
for its  benefit  and the  ratable  benefit  of the  Secured  Parties a security
interest in the following,  in each case, as to each type of property  described
below,  whether now owned or hereafter acquired by such Grantor, and whether now
or hereafter existing (collectively, the "Intellectual Property Collateral"):

     (a) all patents, patent applications and patentable inventions,  including,
without  limitation,  each patent  identified in Schedule I attached  hereto and
made a part hereof and each patent  application  identified  in such Schedule I,
and including, without limitation, (i) all inventions and improvements described
and claimed  therein and the right to make, use or sell the same, (ii) the right
to sue or otherwise recover for any misappropriations thereof, (iii) all income,
royalties,  damages and other payments now and hereafter due and/or payable with
respect  thereto  (including,  without  limitation,  payments under all licenses
entered  into in  connection  therewith,  and damages and  payments for past and
future  infringements  thereof),  and  (iv)  all  rights  corresponding  thereto
throughout   the   world   and   all   reissues,    divisions,    continuations,
continuations-in-part,   substitutes,   renewals  and  extensions  thereof,  all
improvements thereon and all other rights of any kind whatsoever of each Grantor
accruing thereunder or pertaining thereto (the "Patents");

     (b) all  trademarks,  service  marks,  trade  names,  trade  dress or other
indicia  of  trade  origin,  trademark  and  service  mark  registrations,   and
applications  for  trademark  or service  mark  registrations  and any  renewals
thereof (to the extent that assignment of such application is permissible  under
15  U.S.C.  1060),   including,   without  limitation,   each  registration  and
application  identified  in Schedule II attached  hereto and made a part hereof,
and including, without limitation, (i) the right to sue or otherwise recover for
any and  all  past,  present  and  future  infringements  and  misappropriations
thereof,  (ii)  all  income,  royalties,  damages  and  other  payments  now and
hereafter  due  and/or  payable  with  respect   thereto   (including,   without
limitation,  payments under all licenses  entered into in connection  therewith,
and damages and payments for past or future  infringements  thereof),  and (iii)
all rights  corresponding  thereto  throughout the world and all other rights of
any kind whatsoever of the Grantor  accruing  thereunder or pertaining  thereto,
together in each case with the goodwill of the business  connected  with the use
of, and  symbolized by, each such  trademark,  service mark,  trade name,  trade
dress or other indicia of trade origin (the "Trademarks");

     (c) all copyrights, whether statutory or common law, and whether or not the
underlying works of authorship have been published,  and all works of authorship
and other  intellectual  property rights therein,  all copyrights of works based
on,  incorporated  in,  derived  from  or  relating  to  works  covered  by such
copyrights,  all right,  title and  interest to make and exploit all  derivative
works  based on or  adopted  from  works  covered  by such  copyrights,  and all
copyright  registrations  and  copyright  applications,   and  any  renewals  or
extensions thereof,  including,  without limitation, each copyright registration
and copyright application  identified in Schedule III attached hereto and made a
part hereof,  and  including,  without  limitation,  (i) the right to reproduce,
prepare  derivative  works,  distribute  copies,  perform or display  any of the
foregoing,  (ii) the  right to sue or  otherwise  recover  for any and all past,
present  and  future  infringements  and  misappropriations  thereof,  (iii) all
income,  royalties,  damages and other  payments  now and



                                       2
<PAGE>


hereafter  due  and/or  payable  with  respect   thereto   (including,   without
limitation,  payments under all licenses  entered into in connection  therewith,
and damages and payments for past or future infringements thereof), and (iv) all
rights  corresponding  thereto  throughout the world and all other rights of any
kind whatsoever of the Grantor  accruing  thereunder or pertaining  thereto (the
"Copyrights");

     (d) all  license  agreements  (subject  to the rights of the other  parties
thereto) with any other Person in connection with any of the Patents, Trademarks
or Copyrights, or such other Person's patents, trade names, trademarks,  service
marks,  copyrights  or works of  authorship,  or  other  intellectual  property,
whether such Grantor is a licensor or licensee under any such license agreement,
including,  without  limitation,  the license  agreements  listed on Schedule IV
attached hereto and made a part hereof,  and any right to prepare for sale, sell
and advertise for sale, all Inventory (as defined in the Security Agreement) now
or  hereafter  owned by the  Grantor  and now or  hereafter  covered by any such
licenses  (the  "Licenses");  provided,  however,  that to the  extent  that the
consent of any other party to any of the Licenses is  required,  under the terms
thereof,  for the collateral  assignment thereof,  then this Agreement shall not
effect any  collateral  assignment  of (or otherwise be applied so as to cause a
default under) such Licenses; and

     (e) all proceeds of any of the foregoing  Patents,  Trademarks,  Copyrights
and Licenses,  including, without limitation, any claims by such Grantor against
third  parties  for  infringement  of the  Patents,  Trademarks,  Copyrights  or
Licenses.

     (f) As used in this  Agreement,  the terms (i) "ABC  Intellectual  Property
Collateral" shall mean the Intellectual  Property Collateral of the Grantors not
acquired as a result of the  consummation of the Acquisitions and (ii) "Acquired
Intellectual   Property   Collateral"  shall  mean  the  Intellectual   Property
Collateral  of the  Grantors  acquired  as a result of the  consummation  of the
Acquisitions.

     SECTION 2. Security for Obligations.  This Agreement secures the payment of
all  Obligations  of each  Grantor  now or  hereafter  existing  under  the Loan
Documents,  whether for principal,  interest,  fees,  expenses or otherwise (all
such Obligations secured being the "Secured Obligations").

     SECTION  3.  Grantors  Remain  Liable.  Anything  herein  to  the  contrary
notwithstanding,  (a) each Grantor  shall remain  liable under the contracts and
agreements  included in the  Intellectual  Property  Collateral to which it is a
party  to the  extent  set  forth  therein  to  perform  all of its  duties  and
obligations  thereunder  to the same  extent as if this  Agreement  had not been
executed,  (b) the exercise by the Administrative  Agent of any of the rights or
remedies  hereunder  shall not  release  any  Grantor  from any of its duties or
obligations  under  any  of  the  contracts  and  agreements   included  in  the
Intellectual  Property Collateral,  and (c) neither the Administrative Agent nor
any  Secured  Party  shall have any  obligation  or  liability  under any of the
contracts and agreements  included in the  Intellectual  Property  Collateral by
reason of this  Agreement,  nor shall the  Administrative  Agent or any  Secured
Party be  obligated to perform any



                                       3
<PAGE>


of the obligations or duties of any Grantor  thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.

     SECTION  4.  Representations  and  Warranties.  The  Grantors  jointly  and
severally represent and warrant as follows:

     (a) Each  Grantor  is the legal and  beneficial  owner of the  Intellectual
Property  Collateral  pledged by such Grantor free and clear of any Lien, claim,
option or right of others,  except for the liens and security  interests created
under this Agreement or permitted under the Loan Documents  (including,  without
limitation,  any  Liens  disclosed  in  Section  6.1 of the  Credit  Agreement);
provided,   however,   Grantors  may  possess  derivative  copyrights  in  works
considered to be in the "public  domain" as to which third parties may also have
claims. No effective  financing  statement or other instrument similar in effect
covering all or any part of the Intellectual  Property Collateral or listing any
Grantor or any of its  Subsidiaries  or any trade name of any  Grantor or any of
its  Subsidiaries  as  debtor  is on file in any  recording  office  (including,
without limitation, the United States Patent and Trademark Office and the United
States  Copyright  Office) (except that the foregoing  representation  as to the
Acquired  Intellectual  Property Collateral is made only to the knowledge of the
Grantors in respect of filings or  recordings  that are not  Uniform  Commercial
Code filings), except such as may have been filed in favor of the Administrative
Agent relating to this Agreement or one of the other Loan  Documents,  or as may
be permitted pursuant to the Credit Agreement.

     (b) Set forth in Schedule I is a complete and accurate  list of all patents
owned by each Grantor.  Set forth in Schedule II is a complete and accurate list
of all  trademark and service mark  registrations  and all trademark and service
mark applications owned by each Grantor. Set forth in Schedule III is a complete
and accurate list of all  copyright  registrations  and  copyright  applications
owned by each Grantor. Set forth in Schedule IV is a complete and accurate list,
in all  material  respects,  of all  Licenses  in which  each  Grantor  is (i) a
licensor with respect to any of the Patents, Trademarks, or Copyrights or (ii) a
licensee of any other Person's patents, trade names, trademarks,  service marks,
copyrights or works of authorship.  Such Grantor has made all necessary  filings
and  recordations  to protect and maintain  its interest in the patents,  patent
applications,  trademark and service mark  registrations,  trademark and service
mark  applications,  copyright  registrations  and  copyright  applications  and
Licenses  set forth in  Schedules I, II, III and IV hereto which are part of the
ABC Intellectual Property Collateral,  except where the failure to make any such
filings and recordations would not have a Material Adverse Effect.

     (c)  Each   patent,   patent   application,   trademark   or  service  mark
registration, trademark or service mark application, copyright registration, and
copyright  application of each Grantor set forth in Schedule I, II or III hereto
(except  for any  which  is  immaterial  to the  business  of such  Grantor)  is
subsisting and has not been adjudged  invalid,  unregisterable or unenforceable,
in whole or in part, and is valid, registrable and enforceable.  Each License of
each Grantor  identified  in Schedule IV (except for any which is  immaterial to
the  business  of such  Grantor)  is, to the best of each  Grantor's  knowledge,
subsisting and has not been adjudged  invalid or



                                       4
<PAGE>


unenforceable,  in  whole  or in part,  and is,  to the  best of each  Grantor's
knowledge, valid and enforceable. No Grantor is aware of any uses of any item of
Intellectual  Property  Collateral  (except for any which is  immaterial  to the
business of such Grantor)  which would be expected to lead to such item becoming
invalid or unenforceable,  including unauthorized uses by third parties and uses
which were not  supported by the goodwill of the  business  connected  with such
Intellectual Property Collateral.

     (d) No Grantor has made any  previous  assignment,  transfer  or  agreement
constituting a present or future  assignment,  transfer or encumbrance of any of
the Intellectual  Property Collateral (except for any which is immaterial to the
business of such Grantor).  Except as set forth on Schedule 4(d), no Grantor has
granted any license  (other than those  listed on Schedule IV hereto),  release,
covenant  not to sue, or  non-assertion  assurance to any Person with respect to
any  part of the  Intellectual  Property  Collateral  (except  for any  which is
immaterial to the business of such Grantor).

     (e) Each Grantor has used proper  statutory  notice in connection  with its
use of each  patent,  each  registered  trademark  and  service  mark  and  each
copyright contained in Schedule I, II or III (except for any which is immaterial
to the business of such Grantor).

     (f) This Agreement creates in favor of the Administrative  Agent, on behalf
of itself and the Lender Parties,  a valid (upon filing of financing  statements
and with the appropriate  U.S.  patent and trademark or copyright  office) first
priority  security  interest in the  Intellectual  Property  Collateral  of each
Grantor  which can be  perfected  by such  filings,  securing the payment of the
Secured Obligations, and all filings and other actions necessary or desirable to
perfect and protect such  security  interest as requested by the  Administrative
Agent have been duly taken; provided however, it is understood that with respect
to any rights which any Grantor may have in copyrights licensed or acquired from
third  parties,  a security  interest in such  copyrights  can only be perfected
through  filing  in the U.S.  Copyright  Office  if such  copyrights  have  been
previously  registered with the U.S.  Copyright  Office;  and provided  further,
except as set forth in the  Schedules  attached  hereto,  each Grantor  makes no
representations  or warranties about which, if any, of such copyrights have been
registered with the U.S. Copyright Office.

     (g) Except as set forth in Schedule  4.4 of the Credit  Agreement,  and any
required  consent of other parties to Licenses,  no consent of any Person and no
authorization, approval or other action by, and no notice to or filing with, any
governmental  authority or  regulatory  body or other Person is required (i) for
the grant by any Grantor of the assignment and security interest granted hereby,
for the pledge by any Grantor of the Intellectual  Property  Collateral pursuant
hereto, or for the execution,  delivery or performance of this Agreement by each
Grantor,  (ii) for the perfection or  maintenance of the pledge,  assignment and
security  interest  created hereby  (including the first priority nature of such
pledge,  assignment and security  interest),  except for the filing of financing
and continuation  statements under the Uniform  Commercial Code, which financing
statements have been duly filed,  and the filing and recording of this Agreement
in the United States Patent and Trademark Office and the United States



                                       5
<PAGE>


Copyright Office against each patent,  patent application,  trademark or service
mark   registration,   trademark   or  service   mark   application,   copyright
registration, and copyright application of each Grantor set forth in Schedule I,
II or III hereto, or (iii) for the exercise by the  Administrative  Agent of its
rights  provided  for in  this  Agreement  or the  remedies  in  respect  of the
Intellectual Property Collateral pursuant to this Agreement.  To the extent that
any of the  Licenses  entered  into  after the date  hereof is  material  to the
business of the subject Grantor or accounted for or could reasonably be expected
to account for more than  $250,000  in gross  revenues  to the  Grantors  during
Borrower's  current or  subsequent  fiscal year,  such  Grantor  will  hereafter
promptly use its  commercially  reasonable  efforts  (without  being required to
incur any  unreasonable  expense) to obtain any required third party consent for
the assignment of such License hereunder.

     (h) Except as set forth on Schedule  4(i) hereto or Schedule  4.4 or 4.9 to
the  Credit  Agreement,  no claim  has  been  made to or by any  Grantor  and is
continuing  or  threatened  to or by any Grantor  that any item of  Intellectual
Property Collateral (except that which is immaterial to such Grantor's business)
is invalid or  unenforceable  or that the use by any Grantor of any Intellectual
Property Collateral (except that which is immaterial to such Grantor's business)
does or may  violate  the rights of any  Person.  To the best of each  Grantor's
knowledge, there is currently no infringement or unauthorized use of any item of
Intellectual  Property  Collateral  (except  that  which is  immaterial  to such
Grantor's  business) or could not reasonably be expected to result in a claim or
claiming against such Grantor for amount exceeding  $250,000  individually or in
the aggregate.

     (i) Each Grantor has taken all reasonably necessary steps to use consistent
standards of quality in the  manufacture,  distribution and sale of all products
sold and the provision of all services  provided under or in connection with any
of the Intellectual  Property Collateral,  which is part of the ABC Intellectual
Property Collateral and material to such Grantor's  business,  and has taken all
commercially  reasonable  steps to ensure that all licensed  users of any of the
Intellectual Property Collateral, which is part of the ABC Intellectual Property
Collateral  and  material  to  such  Grantor's  business,  use  such  consistent
standards of quality.

     (j) Nothing has come to the  attention  of any Grantor  which  causes it to
believe  that any  representation  or  warranty  received  by such  Grantor  and
contained in the Acquisition  Agreements  relating to the Acquired  Intellectual
Property  Collateral  of such Grantor  contains an untrue  statement of material
fact or omits to state a material  fact  necessary  to make the  statements  not
misleading  which  fact or  omission  could  reasonably  be  expected  to have a
material  adverse  effect on the business,  condition  (financial or otherwise),
results of operations, performance, reasonably foreseeable business prospects or
properties of such Grantor.

     (k) For  purposes of any of the  representations,  warranties  or covenants
contained in this Agreement, the phrase "material to business of any Grantor" or
other similar phrase shall be deemed, when referring to effects of any events or
items on either Classic Radio Holding Corp. or Classic Radio Acquisition  Corp.,
to  refer  to the  effects  of any such  events  or  items  on their  respective
businesses taken as a whole and not individually.


                                       6
<PAGE>


     SECTION  5.  Further  Assurances.  (a)  Each of the  Grantors  jointly  and
severally  agrees that from time to time, at the expense of such  Grantor,  such
Grantor  shall  promptly  execute  and  deliver  all  further   instruments  and
documents,  and take all further action, that the Administrative  Agent believes
may be reasonably  necessary,  or that the  Administrative  Agent may reasonably
request,  in order to perfect and protect  any  pledge,  assignment  or security
interest   granted  or  purported  to  be  granted   hereby  or  to  enable  the
Administrative  Agent to exercise and enforce its rights and remedies  hereunder
with  respect  to any  part of the  Intellectual  Property  Collateral.  Without
limiting the generality of the foregoing, each Grantor will, upon the reasonable
request of the Administrative  Agent, with respect to the Intellectual  Property
Collateral   owned  by  such  Grantor,   execute  and  file  such  financing  or
continuation  statements,  or amendments thereto,  and such other instruments or
notices,  as may be reasonably  necessary,  or as the  Administrative  Agent may
reasonably request, in order to perfect and preserve the pledge,  assignment and
security interest granted or purported to be granted hereby.

     (b) Each Grantor hereby authorizes the Administrative  Agent to file one or
more financing or continuation statements,  and amendments thereto,  relating to
all or any part of the Intellectual Property Collateral without the signature of
such Grantor where  permitted by law. A photocopy or other  reproduction of this
Agreement  or  any  financing  statement  covering  the  Intellectual   Property
Collateral or any part thereof will be sufficient as a financing statement where
permitted by law.

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

     (d) Each Grantor  agrees that,  if it obtains an ownership  interest in any
patent, patent application, patentable invention, trademark, service mark, trade
name,  trade dress,  other  indicia of trade  origin,  trademark or service mark
registration,  trademark  or  service  mark  application,  copyright,  copyright
registration, copyright application, work of authorship or License, which is not
now a part  of the  Intellectual  Property  Collateral,  (i) the  provisions  of
Section 1 will  automatically  apply thereto,  and (ii) any such patent,  patent
application,  patentable invention,  trademark,  service mark, trade name, trade
dress,  indicia  of  trade  origin,  trademark  or  service  mark  registration,
trademark  or  service  mark  application  (together  with the  goodwill  of the
business  connected  with the use of same and  symbolized  by same),  copyright,
copyright  registration,  copyright  application,  work of authorship or License
will  automatically  become  part  of  the  Intellectual   Property  Collateral;
provided, however, that to the extent the consent of any other party to any such
License is required,  under the terms  thereof,  for the  collateral  assignment
thereof,  then this Agreement shall not effect any collateral  assignment of (or
otherwise be applied so as to cause a default under) such License for so long as
(but  only for so long  as) such  consent  would  be  required  and has not been
obtained.   Each  Grantor   further   agrees  that  it  shall   deliver  to  the
Administrative  Agent a written report, in reasonable detail, on an annual basis
(starting on or about  December 31, 1999, and thereafter on or about December 31
of each succeeding  year),



                                       7
<PAGE>


setting  forth each new patent,  patent  application,  trademark or service mark
registration,  trademark or service mark  application,  copyright  registration,
copyright  application  or License  that such  Grantor  has filed,  acquired  or
otherwise  obtained in U.S.  the  preceding  six month  reporting  period.  Such
Grantor authorizes the Administrative Agent to modify this Agreement by amending
Schedules I, II, III and IV hereto (and shall cooperate with the  Administrative
Agent  in  effecting  any  such   amendment)  to  include  any  patent,   patent
application,  trademark or service mark registration,  trademark or service mark
application,  copyright  registration,  copyright  application  or License which
becomes part of the Intellectual Property Collateral.

     (e) With respect to each patent,  patent application,  trademark or service
mark registration, trademark or service mark application, copyright registration
and copyright  application set forth in Schedule I, II or III hereto (except for
those which  individually  and in the aggregate are  immaterial to the Grantor's
business),   each  Grantor  agrees  to  take  all  reasonably  necessary  steps,
including,  without limitation, in the United States Patent and Trademark Office
and the United  States  Copyright  Office or in any court,  to (i) maintain each
such patent, trademark or service mark registration, and copyright registration,
and (ii)  pursue  each  such  patent  application,  trademark  or  service  mark
application  and  copyright   application  now  or  hereafter  included  in  the
Intellectual Property Collateral,  including,  without limitation, the filing of
responses to office  actions  issued by the United  States  Patent and Trademark
Office,  the filing of affidavits  under  Sections 8 and 15 of the United States
Trademark Act, the filing of divisional, continuation,  continuation-in-part and
substitute  applications,  the filing of applications  for re-issue,  renewal or
extensions,   the  payment  of  maintenance   fees,  and  the  participation  in
interference,   reexamination,   opposition,   cancellation,   infringement  and
misappropriation  proceedings.  Each Grantor agrees to take corresponding  steps
with respect to each new or acquired patent,  patent  application,  trademark or
service mark  registration,  trademark or service  mark  application,  copyright
registration,  or  copyright  application  to which  it is now or later  becomes
entitled  (except  for  those  which  individually  and  in  the  aggregate  are
immaterial  to the  Grantor's  business).  Any  and  all  expenses  incurred  in
connection with such activities will be borne by such Grantor.  No Grantor shall
discontinue  use  of  or  otherwise  abandon  any  patent,  patent  application,
trademark or service mark, trademark or service mark registration,  trademark or
service mark application,  copyright registration,  or copyright application now
or hereafter included in the Intellectual  Property Collateral (except for those
which  individually  and in  the  aggregate  are  immaterial  to  the  Grantor's
business),  unless the relevant Grantor shall have first determined in its sound
and reasonable business judgment that such use or pursuit or maintenance of same
is no longer desirable in the conduct of such Grantor's business, in which case,
such Grantor shall give written notice of any such abandonment or discontinuance
to the  Administrative  Agent  pursuant  to  the  annual  reporting  requirement
contained in Section 5(d) above.

     (f) Each Grantor agrees to notify the Administrative  Agent promptly and in
writing if it learns (i) that any item of the Intellectual  Property  Collateral
(except for those which  individually and in the aggregate are immaterial to the
Grantor's business) has been determined to have become abandoned or dedicated to
the public, (ii) of the institution of any proceeding by or against such Grantor
(including, without limitation, the institution of any proceeding in the


                                       8
<PAGE>


United  States  Patent  and  Trademark   Office  or  any  court)  regarding  any
infringement or  unauthorized  use of (or similar claim with respect to) item of
the  Intellectual  Property  Collateral  which  is  material  to such  Grantor's
business, or (iii) of any adverse determination in any such proceeding.

     (g) In the event that a Grantor  makes a  determination  in its  reasonable
business judgment that any item of the Intellectual  Property Collateral,  which
is material to such Grantor's  business,  is infringed or  misappropriated  by a
third party,  such Grantor shall promptly  notify the  Administrative  Agent and
will take such actions as such Grantor or,  following the  occurrence and during
the continuance of a Default of an Event of Default,  the  Administrative  Agent
deems  reasonable  and  appropriate  under the  circumstances  to  protect  such
Intellectual  Property  Collateral,  including,  without  limitation,  suing for
infringement or misappropriation and for an injunction against such infringement
or  misappropriation.  Any expense  incurred in connection  with such activities
will be borne by such Grantor.

     (h) Each Grantor shall use proper  statutory  notice in connection with its
use of each  of its  patents,  registered  trademarks  and  service  marks,  and
copyrights  contained  in  Schedule  I,  II  or  III  (except  for  those  which
individually and in the aggregate are immaterial to the Grantor's business).

     (i) Each Grantor shall take all steps which it or, following the occurrence
and  during  the  continuance  of  a  Default  or  an  Event  of  Default,   the
Administrative Agent deems reasonable and appropriate under the circumstances to
preserve and protect its Intellectual Property Collateral,  which is material to
such Grantor's business, including, without limitation,  maintaining the quality
of any and all products or services used or provided in  connection  with any of
the  Intellectual  Property  Collateral,  consistent  with  the  quality  of the
products  and services as of the date  hereof,  and taking all steps  reasonably
appropriate  to  ensure  that  all  licensed  users  of any of the  Intellectual
Property Collateral use such consistent standards of quality.

     SECTION 6. Transfers and Other Liens.  Each of the Grantors  agrees that it
shall not (i) sell,  assign (by  operation  of law or  otherwise)  or  otherwise
dispose  of,  or grant any  option  with  respect  to,  any of the  Intellectual
Property  Collateral except as expressly  permitted by the Credit Agreement,  or
(ii)  create or suffer  to exist  any Lien  upon or with  respect  to any of the
Intellectual Property Collateral except for the pledge,  assignment and security
interest  created by this Agreement and except for Liens expressly  permitted by
Section 6.1 of the Credit  Agreement;  provided,  however,  that this  Section 6
shall  not,  unless an Event of Default  has  occurred  and is then  continuing,
prohibit,  impair or limit the right or ability of any Grantor to grant licenses
in respect of any of the Intellectual Property Collateral in the ordinary course
of business.


     SECTION 7.  Administrative  Agent Appointed  Attorney-in-Fact.  Each of the
Grantors hereby  irrevocably  appoints the  Administrative  Agent such Grantor's
attorney-in-fact,

                                       9
<PAGE>


with full  authority  in the place and stead of such  Grantor and in the name of
such Grantor or otherwise,  upon the occurrence and during the continuance of an
Event of  Default  and upon  notice to such  Grantor  to take any  action and to
execute  any  instrument  that the  Administrative  Agent  may  deem  reasonably
necessary or advisable to accomplish the purposes of this Agreement,  including,
without limitation:

     (a) to ask for, demand, collect, sue for, recover, compromise,  receive and
give  acquittance  and  receipts  for  moneys  due and to become due under or in
respect of any of the Intellectual Property Collateral;

     (b) to  receive,  endorse  and  collect  any  drafts or other  instruments,
documents and chattel paper, in connection with clause (a) above; and

     (c) to file any claims or take any action or institute any proceedings that
the  Administrative  Agent may deem necessary or desirable to enforce the rights
of the  Administrative  Agent with respect to any of the  Intellectual  Property
Collateral.

     SECTION 8.  Administrative  Agent May Perform. If any of the Grantors fails
to perform any agreement contained herein, the Administrative  Agent may itself,
upon fifteen (15) days' notice to such Grantor,  perform,  or cause  performance
of, such  agreement,  and the reasonable  expenses of the  Administrative  Agent
incurred in connection therewith shall be borne by such Grantor.

     SECTION 9. The  Administrative  Agent's Duties. The powers conferred on the
Administrative  Agent  hereunder  are  solely to  protect  its  interest  in the
Intellectual  Property  Collateral  and  shall  not  impose  any duty upon it to
exercise  any such  powers.  Except  for the safe  custody  of any  Intellectual
Property  Collateral in its possession  and the  accounting for moneys  actually
received by it hereunder,  the Administrative Agent shall have no duty as to any
Intellectual Property Collateral, whether or not the Administrative Agent or any
other Secured Party has or is deemed to have knowledge of such matters, or as to
the taking of any necessary  steps to preserve rights against any parties or any
other  rights   pertaining  to  any  Intellectual   Property   Collateral.   The
Administrative   Agent  shall  exercise  reasonable  care  in  the  custody  and
preservation of any Intellectual Property Collateral in its possession and shall
accord such Intellectual  Property Collateral  treatment equal to that which the
Administrative Agent accords its own property.

     SECTION 10.  Remedies.  If any Event of Default  shall have occurred and be
continuing:

     (a) The  Administrative  Agent may exercise in respect of the  Intellectual
Property  Collateral,  in addition to other  rights and  remedies  provided  for
herein or in any other  Loan  Document  or  otherwise  available  to it, all the
rights and remedies of a secured  party upon default  under the New York Uniform
Commercial  Code in effect  in the  State of New York at such



                                       10
<PAGE>


time (the "N.Y.  Uniform  Commercial  Code")  (whether  or not the N.Y.  Uniform
Commercial Code applies to the affected  Intellectual  Property  Collateral) and
also may (i) require any and all of the  Grantors  to, and each  Grantor  hereby
agrees that it will at its expense and upon request of the Administrative  Agent
forthwith,  assemble all or part of the documents and things  embodying any part
of the Intellectual  Property Collateral as directed by the Administrative Agent
and make them  available to the  Administrative  Agent at a place and time to be
designated by the Administrative  Agent; (ii) without notice except as specified
below and as required by law, sell the Intellectual  Property  Collateral or any
part  thereof in one or more  parcels at public or private  sale,  at any of the
Administrative  Agent's offices or elsewhere,  for cash, on credit or for future
delivery,  and upon  such  other  terms  as the  Administrative  Agent  may deem
commercially  reasonable;  and (iii) occupy any premises  owned or leased by any
Grantor  where  documents  and  things  embodying  the   Intellectual   Property
Collateral or any part thereof are assembled or located for a reasonable  period
in order to effectuate its rights and remedies  hereunder or under law,  without
obligation  to such Grantor in respect of such  occupation.  In the event of any
sale,  assignment,  or other  disposition  of any of the  Intellectual  Property
Collateral, the goodwill of the business connected with and symbolized by any of
the  Intellectual  Property  Collateral  subject  to  such  disposition  will be
included,  and such  Grantor  will  supply  to the  Administrative  Agent or its
designee  such  Grantor's  know-how  and  expertise,  and  documents  and things
embodying the same, relating to the manufacture,  distribution,  advertising and
sale of  products or the  provision  of  services  relating to any  Intellectual
Property Collateral subject to such disposition and, including,  but not limited
to, such Grantor's  customer  lists and other records and documents  relating to
such  Intellectual  Property  Collateral and to the  manufacture,  distribution,
advertising and sale of such products and services. Each Grantor agrees that, to
the extent  notice of sale  shall be  required  by law,  at least ten (10) days'
written  notice to such  Grantor of the time and place of any public sale or the
time  after  which any  private  sale is to be made will  constitute  reasonable
notification.  The Administrative  Agent shall not be obligated to make any sale
of  Intellectual  Property  Collateral  regardless of notice of sale having been
given. The Administrative Agent may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such sale may,
without  further notice except as required by law, be made at the time and place
to which it was so adjourned.

     (b) All cash proceeds  received by the  Administrative  Agent in respect of
any sale of,  collection from, or other realization upon, all or any part of the
Intellectual  Property  Collateral may, in the discretion of the  Administrative
Agent, be held by the Administrative  Agent as collateral for, and/or then or at
any time  thereafter  applied  (after  payment  of any  amounts  payable  to the
Administrative  Agent  pursuant to Section  11(b)),  in whole or in part, by the
Administrative Agent, for the ratable benefit of the Secured Parties against all
or any part of the Secured  Obligations  in such order as the Loan Documents may
require and otherwise as the Administrative Agent may elect. Any surplus of such
cash or cash  proceeds  held by the  Administrative  Agent and  remaining  after
payment  in full of all of the  Secured  Obligations  shall be paid  over to the
applicable  Grantors or to whomever  may be  lawfully  entitled to receive  such
surplus.


                                       11
<PAGE>


     (c) The  Administrative  Agent may exercise any and all rights and remedies
of any of the Grantors in respect of the Intellectual Property Collateral.

     (d) All  payments  received by any  Grantor in respect of the  Intellectual
Property  Collateral  shall  be  received  in  trust  for  the  benefit  of  the
Administrative  Agent,  shall be segregated from other funds of such Grantor and
shall be forthwith paid over to the Administrative  Agent in the same form as so
received (with any necessary or desirable endorsement or assignment).

     SECTION 11. Indemnity and Expenses. (a) Each of the Grantors hereby jointly
or severally agrees to indemnify the  Administrative  Agent from and against any
and all claims,  losses and  liabilities  growing out of or resulting  from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims,  losses or liabilities  resulting from the Administrative  Agent's gross
negligence  or  willful  misconduct  as  determined  by a  final  non-appealable
judgment of a court of competent jurisdiction.

     (b) The Borrower will,  upon demand,  pay to the  Administrative  Agent the
amount of any and all reasonable  expenses,  including the  reasonable  fees and
expenses of its counsel and of any experts and agents,  that the  Administrative
Agent may incur in connection  with (i) the  administration  of this  Agreement,
(ii) the custody, preservation, use, or operation of, or the sale of, collection
from or other  realization  upon, any of the Intellectual  Property  Collateral,
(iii) the  exercise or  enforcement  of any of the rights of the  Administrative
Agent or the Lender  Parties  hereunder  or (iv) the  failure by any  Grantor to
perform or observe any of the provisions hereof.

     SECTION 12.  Security  Interest  Absolute.  The obligations of each Grantor
under this Agreement are independent of the Secured Obligations,  and a separate
action or actions may be brought and  prosecuted  against any or all Grantors to
enforce this  Agreement,  irrespective  of whether any action is brought against
the  Borrower or whether  the  Borrower is joined in any such action or actions.
All rights of the Administrative  Agent and the pledge,  assignment and security
interest  hereunder,  and all  obligations of each Grantor  hereunder,  shall be
absolute and unconditional, irrespective of:

     (a) any lack of  validity  or  enforceability  of any Loan  Document or any
other agreement, instrument or document relating thereto;

     (b) any change in the time,  manner or place of payment of, or in any other
term  of,  all or  any  of the  Secured  Obligations  or  any  other  amendment,
restatement or other  modification  or waiver of or any consent to any departure
from any Loan  Document,  including,  without  limitation,  any  increase in the
Secured  Obligations  resulting  from the extension of additional  credit to the
Borrower or any Grantor or any of their Subsidiaries or otherwise;


                                       12
<PAGE>



     (c)  any  taking,   exchange,   release  or  non-perfection  of  any  other
collateral, or any taking, release or amendment, restatement, other modification
or waiver of or consent to any departure  from any  guaranty,  for all or any of
the Secured Obligations;

     (d) any manner of application of collateral, or proceeds thereof, to all or
any of the Secured  Obligations,  or any manner of sale or other  disposition of
any collateral for all or any of the Secured  Obligations or any other assets of
the Borrower, any Grantor or any of their Subsidiaries;

     (e) any change,  restructuring or termination of the corporate structure or
existence of the Borrower or any Grantor or any of their Subsidiaries; or

     (f) any  other  circumstance  that  might  otherwise  constitute  a defense
available  to, or a  discharge  of, any  Grantor or a third  party  grantor of a
security interest.

     SECTION 13.  Amendments;  Waivers;  Supplements;  Etc.  (a) No amendment or
waiver of any  provision of this  Agreement,  and no consent to any departure by
any Grantor  herefrom,  shall in any event be effective unless the same shall be
in writing and signed by the  Administrative  Agent and the  Grantors,  and then
such waiver or consent shall be effective only in the specific  instance and for
the specific purpose for which given.

     (b) No failure on the part of the Administrative Agent to exercise,  and no
delay in exercising,  any right hereunder shall operate as a waiver thereof; nor
shall any single or partial  exercise  of any such right  preclude  any other or
further exercise thereof or the exercise of any other right.

     (c) Upon the  execution  and  delivery  by any  Person  of an  intellectual
property security agreement  supplement,  in each case in substantially the form
of  Exhibit  A  hereto  (each  an  "Intellectual   Property  Security  Agreement
Supplement"),  (i) such Person shall be referred to as an  "Additional  Grantor"
and shall be and become a  Grantor,  and each  reference  in this  Agreement  to
"Grantor" shall also mean and be a reference to such Additional Grantor and each
reference in any other Loan Document to a "Grantor" or a "Loan Party" shall also
mean and be a  reference  to such  Additional  Grantor,  and  (ii)  the  annexes
attached to each Intellectual  Property Security  Agreement  Supplement shall be
incorporated  into and become a part of and supplement  Schedules I, II, III and
IV, as appropriate,  hereto and the Administrative Agent may attach such annexes
as supplements  to such  Schedules,  and each reference to such Schedules  shall
mean and be a reference to such Schedules, as so supplemented.

     SECTION 14.  Addresses  for Notices.  All notices and other  communications
provided for hereunder shall be in writing (including  telegraphic,  telecopy or
telex communication) and, mailed, telegraphed, telecopied, telexed or delivered,
if to any  Grantor,  addressed  to it at the address set forth below its name on
the signature pages hereof; if to any Additional Grantor, addressed to it at the
address  set forth  below  its name on the  signature  page



                                       13
<PAGE>


to  the  Intellectual   Property  Security  Agreement  Supplement  executed  and
delivered by such Additional Grantor; if to the Administrative Agent,  addressed
to it at its address set forth in Section 11.2 of the Credit  Agreement;  or, as
to each other party,  at such other address as shall be designated by such party
in a written  notice to the  Grantors  and the  Administrative  Agent.  All such
notices and  communications  shall be effective  three (3)  Business  Days after
being mailed by certified mail, return receipt requested,  two (2) Business Days
after being  deposited  with a recognized  overnight  delivery  service with all
charges  prepaid or billed to the  account of the sender,  upon  delivery to the
telegraph company,  upon personal delivery or transmission by telecopier or upon
confirmation by telex answerback, respectively, addressed as aforesaid.

     SECTION 15. Continuing Security Interest, Assignments. This Agreement shall
create a continuing  security interest in the Intellectual  Property  Collateral
and  shall (a)  remain in full  force  and  effect  until the  latest of (i) the
indefeasible payment in full in cash of all of the Secured Obligations, (ii) the
expiration,  termination  or  cancellation  of all of the  Letters of Credit and
(iii) the date of  termination  in whole of all  Commitments  under  the  Credit
Agreement,  (b) be binding upon each Grantor, its successors and assigns and (c)
inure,  together  with the  rights  and  remedies  of the  Administrative  Agent
hereunder, to the benefit of the Lender Parties and their respective successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(c), any Lender may,  subject to and in accordance with the  requirements of the
Credit Agreement,  assign or otherwise transfer all or any portion of its rights
and obligations under the Credit Agreement (including,  without limitation,  all
or any portion of its Commitment, the Advances owing to it and the Note or Notes
held by it) to any other Person,  and such other Person shall  thereupon  become
vested with all the benefits in respect thereof granted to such Lender herein or
otherwise, in each case as provided in Section 11.7 of the Credit Agreement).

     SECTION 16. Release and Termination.  (a) Upon any sale, lease, transfer or
other disposition of any item of Intellectual  Property  Collateral  (subject to
compliance,   if  required,   with  any  terms  of  the  Loan  Documents),   the
Administrative Agent will, at the Grantors' expense, execute and deliver to such
Grantor such documents as such Grantor shall reasonably  request to evidence the
release of such item of Intellectual Property Collateral from the assignment and
security  interest granted hereby;  provided,  however,  that (i) at the time of
such request and such release, no Default shall have occurred and be continuing,
(ii) such Grantor shall have delivered to the Administrative Agent, at least ten
(10) days  prior to the date of the  proposed  release,  a written  request  for
release describing the item of Intellectual Property Collateral and the terms of
the sale, lease,  transfer or other disposition in reasonable detail,  including
the price thereof and any expenses in connection therewith, together with a form
of release for execution by the Administrative Agent and a certification by such
Grantor  to the  effect  that the  transaction  is in  compliance  with the Loan
Documents  and  as to  such  other  matters  as  the  Administrative  Agent  may
reasonably  request and (iii) the proceeds of any such sale, lease,  transfer or
other  disposition  required to be applied in accordance with Section 2.6 of the
Credit  Agreement shall be paid to, or in accordance with the  instructions  of,
the Administrative Agent at the closing or thereafter, as the case may be.


                                       14
<PAGE>


     (b) Upon the latest of (i) the indefeasible  payment in full in cash of the
Secured Obligations,  (ii) the expiration,  termination or cancellation (or full
cash  collateralization  thereof as provided in the Credit  Agreement) of all of
the  Letters  of  Credit  and  (iii)  the  date of  termination  in whole of all
Commitments  under the Credit  Agreement,  the pledge,  assignment  and security
interest  granted by each of the Grantors  hereby shall terminate and all rights
to the Intellectual Property Collateral shall revert to the appropriate Grantor.
Upon any such  termination,  the  Administrative  Agent will,  upon receipt of a
written  request  and at the  Grantors'  expense,  execute  and  deliver  to the
appropriate  Grantor such documents as such Grantor shall reasonably  request to
evidence  such  termination,  and shall  return to the  appropriate  Grantor all
Intellectual  Property  Collateral in the  Administrative  Agent's possession or
under its control.

     (c) To the  extent  any one or more  provisions  of  this  Agreement  shall
conflict with one or more provisions in the Credit Agreement,  the provisions of
the  Credit   Agreement  shall  control  and  supersede  any  such   conflicting
provision(s) of this Agreement.

     SECTION 17.  Execution in  Counterparts.  This Agreement may be executed in
any number of  counterparts  and by the  different  parties  hereto in  separate
counterparts,  each of which when so executed  shall be deemed to be an original
and all of which taken  together shall  constitute  one and the same  agreement.
Delivery of an executed  counterpart  of a signature  page to this  Agreement by
telecopier shall be as effective as delivery of a manually executed  counterpart
of this Agreement.

     SECTION 18.  Governing Law; Terms.  This Agreement shall be governed by and
construed in accordance  with the laws of the State of New York (without  giving
effect  to its  conflicts  of law  principles),  except to the  extent  that the
validity  or  perfection  of  the  security  interest  hereunder,   or  remedies
hereunder,  in respect of the Intellectual  Property  Collateral are governed by
the laws of a jurisdiction  other than the State of New York.  Unless  otherwise
defined herein or in the Credit  Agreement,  terms used in Article 9 of the N.Y.
Uniform Commercial Code are used herein as therein defined.

                            [SIGNATURE PAGE FOLLOWS]


                                       15
<PAGE>


     IN WITNESS  WHEREOF,  each  Grantor  has caused this  Agreement  to be duly
executed and delivered by its officer, thereunto duly authorized, as of the date
first above written.

                                         AUDIO BOOK CLUB, INC.


                                         By:________________________

                                         Name:
                                         Title:

                                         Address: 2295 Corporate Boulevard
                                                  Suite 222
                                                  Boca Raton, Florida 33431


                                         CLASSIC RADIO HOLDING CORP.


                                         By:________________________

                                         Name:
                                         Title:
                                         Address: 2295 Corporate Boulevard
                                                  Suite 222
                                                  Boca Raton, Florida 33431


                                         CLASSIC RADIO ACQUISITION CORP.


                                         By:________________________

                                         Name:
                                         Title:

                                         Address: 2295 Corporate Boulevard
                                                  Suite 222
                                                  Boca Raton, Florida 33431


<PAGE>


                                         ABC INTERNET SERVICES, INC.


                                         By:________________________

                                         Name:
                                         Title:

                                         Address: 2295 Corporate Boulevard
                                                  Suite 222
                                                  Boca Raton, Florida 33431


                                         ABC INVESTMENT CORP.


                                         By:________________________

                                         Name:
                                         Title:

                                         Address:


                                         CH ACQUISITIONS CORP.


                                         By:________________________

                                         Name:
                                         Title:

                                         Address: 2295 Corporate Boulevard
                                                  Suite 222
                                                  Boca Raton, Florida 33431


<PAGE>






            [Intellectual Property Security Agreement Signature Page]



                                       18
<PAGE>


STATE OF      )
              ) ss:
COUNTY OF     )


     On  the  31st  day  of   December,   1998,   before  me   personally   came
_________________________ to me known, who, before me duly sworn, did depose and
say  that  he  is  _________________________  of  Audio  Book  Club,  Inc.,  the
corporation  described in and which executed the above  instrument;  that he has
been  authorized to execute said instrument on behalf of said  corporation;  and
that he signed said  instrument on behalf of said  corporation  pursuant to said
authority.

                                         _______________________________________
                                                       Notary Public


<PAGE>




STATE OF      )
              ) ss:
COUNTY OF     )


     On  the  31st  day  of   December,   1998,   before  me   personally   came
_________________________ to me known, who, before me duly sworn, did depose and
say that he is  _________________________  of ABC Internet  Services,  Inc., the
corporation  described in and which executed the above  instrument;  that he has
been  authorized to execute said instrument on behalf of said  corporation;  and
that he signed said  instrument on behalf of said  corporation  pursuant to said
authority.

                                         _______________________________________
                                                       Notary Public




<PAGE>


STATE OF     )
             ) ss:
COUNTY OF    )


     On  the  31st  day  of   December,   1998,   before  me   personally   came
_________________________ to me known, who, before me duly sworn, did depose and
say that he is  _________________________  of Classic Radio Holding  Corp.,  the
corporation  described in and which executed the above  instrument;  that he has
been  authorized to execute said instrument on behalf of said  corporation;  and
that he signed said  instrument on behalf of said  corporation  pursuant to said
authority.

                                         _______________________________________
                                                       Notary Public


[Notarial Seal]


<PAGE>



STATE OF     )
             ) ss:
COUNTY OF    )


     On  the  31st  day  of   December,   1998,   before  me   personally   came
_________________________ to me known, who, before me duly sworn, did depose and
say that he is _________________________ of Classic Radio Acquisition Corp., the
corporation  described in and which executed the above  instrument;  that he has
been  authorized to execute said instrument on behalf of said  corporation;  and
that he signed said  instrument on behalf of said  corporation  pursuant to said
authority.

                                         _______________________________________
                                                       Notary Public



[Notarial Seal]


<PAGE>



STATE OF         )
                 ) ss:
COUNTY OF        )

     On  the  31st  day  of   December,   1998,   before  me   personally   came
_________________________ to me known, who, before me duly sworn, did depose and
say  that  he  is   _________________________   of  ABC  Investment  Corp.,  the
corporation  described in and which executed the above  instrument;  that he has
been  authorized to execute said instrument on behalf of said  corporation;  and
that he signed said  instrument on behalf of said  corporation  pursuant to said
authority.

                                         _______________________________________
                                                       Notary Public



[Notarial Seal]


                                       23

<PAGE>



STATE OF        )
                ) ss:
COUNTY OF       )


     On  the  31st  day  of   December,   1998,   before  me   personally   came
_________________________ to me known, who, before me duly sworn, did depose and
say  that  he  is   _________________________  of  CH  Acquisitions  Corp.,  the
corporation  described in and which executed the above  instrument;  that he has
been  authorized to execute said instrument on behalf of said  corporation;  and
that he signed said  instrument on behalf of said  corporation  pursuant to said
authority.

                                         _______________________________________
                                                       Notary Public



[Notarial Seal]





            [Notary page to Intellectual Property Security Agreement]


                                       24
<PAGE>



                                    EXHIBIT A

                                       to

                    Intellectual Property Security Agreement


                          FORM OF INTELLECTUAL PROPERTY
                          SECURITY AGREEMENT SUPPLEMENT



                                                                  ________, 19__

Fleet National Bank, as Administrative Agent
  under the Credit Agreement
  referred to below
One Federal Street
Boston, MA 02110


Attention: Corporate Banking Group


Intellectual Property Security Agreement,
dated as of December 31,  1998,
made by AUDIO BOOK CLUB, INC.
and the other Grantors to
Fleet National Bank, as Administrative Agent


Ladies and Gentlemen:

     Reference is made to the  above-captioned  Intellectual  Property  Security
Agreement (such Intellectual  Property Security  Agreement,  as in effect on the
date  hereof and as it may  hereafter  be  amended,  supplemented,  restated  or
otherwise modified from time to time, being the "Intellectual  Property Security
Agreement")  made by Audio  Book Club,  Inc.,  and the other  Grantors  to Fleet
National Bank, as  Administrative  Agent.  The terms defined in the Intellectual
Property Security Agreement (or in the Credit Agreement referred to therein) and
not otherwise defined herein are used herein as therein defined.

     The  undersigned  hereby  agrees,  as of the date first above  written,  to
become a Grantor under the  Intellectual  Property  Security  Agreement as if it
were  an  original   party  thereto  and  agrees  that  each  reference  in  the
Intellectual  Property Security  Agreement to "Grantor" shall also mean and be a
reference to the undersigned.


                                       25

<PAGE>


     The undersigned hereby assigns and pledges to the Administrative Agent, for
the benefit of the  Administrative  Agent and the ratable benefit of the Secured
Parties, and hereby grants to the Administrative  Agent, for the ratable benefit
of the Secured Parties, as security for the Secured  Obligations,  a lien on and
security  interest in, all of the right,  title and interest of the undersigned,
whether  now  owned  or  hereafter  acquired,  in and to  Intellectual  Property
Collateral owned by the undersigned, including, but not limited to, the property
listed on Annex I, II,  III and IV  hereto.  Schedules  I, II, III and IV to the
Intellectual  Property Security Agreement are hereby  supplemented by Annexes I,
II, III and IV hereto, respectively.  The undersigned hereby certifies that such
Annexes  have been  prepared by the  undersigned  in  substantially  the form of
Schedules I, II, III and IV to the Intellectual  Property Security Agreement and
are true, accurate and complete as of the date hereof.

     The undersigned hereby makes each  representation and warranty set forth in
Section 4 of the Intellectual  Property  Security  Agreement (as supplemented by
the attached Annexes) to the same extent as each other Grantor and hereby agrees
to be bound as a Grantor by all of the terms and provisions of the  Intellectual
Property Security Agreement to the same extent as each other Grantor.

     This Intellectual  Property Security Agreement Supplement shall be governed
by and construed in accordance with the laws of the State of New York.

                                         Very truly yours,

                                         [NAME OF ADDITIONAL INTELLECTUAL
                                          PROPERTY GRANTOR]


                                         By:____________________________________

                                         Name:__________________________________

                                         Title:_________________________________

                                         Address:_______________________________



                                       26

<PAGE>


                        EXHIBIT H TO THE CREDIT AGREEMENT

                               SUBSIDIARY GUARANTY


                          Dated as of December 31, 1998

                                      From


                           ABC INTERNET SERVICES, INC.

                              ABC INVESTMENT CORP.

                          CLASSIC RADIO HOLDING CORP.,

                        CLASSIC RADIO ACQUISITION CORP.,

                                       and

                              CH ACQUISITIONS CORP.

                                 as Guarantors,

                                   in favor of

                              FLEET NATIONAL BANK,

                             as Administrative Agent




<PAGE>



                                TABLE OF CONTENTS

Section                                                                    Page

Section 1.  Guaranty; Limitation of Liability ............................   1

Section 2.  Guaranty Absolute ............................................   2

Section 3.  Waivers and Acknowledgments ..................................   3

Section 4.  Subrogation ..................................................   3

Section 5.  Payments Free and Clear of Taxes, Etc ........................   4

Section 6.  Representations and Warranties ...............................   6

Section 7.  Covenants ....................................................   7

Section 8.  Amendments, Etc ..............................................   7

Section 9.  Notices, Etc .................................................   7

Section 10. No Waiver; Remedies ..........................................   7

Section 11. Right of Setoff ..............................................   7

Section 12. Indemnification ..............................................   8

Section 13. Continuing Guaranty; Assignments Under the Credit Agreement ..   8

Section 14. Governing Law; Jurisdiction; Waiver of July Trial, Etc .......   8

Section 15. Counterparts .................................................   9


                                  i

<PAGE>


                                    GUARANTY


     GUARANTY (this "Guaranty"),  dated as of December 31, 1998, made by each of
the Persons listed on the signature pages hereof, and the Additional  Guarantors
(as  defined  in  Section  8(b))  (such  Persons  so listed  and the  Additional
Guarantors being,  each, a "Guarantor",  and collectively,  the "Guarantors") in
favor of Fleet National Bank, as Administrative Agent under the Credit Agreement
referred  to below (the  "Administrative  Agent") for the benefit of the Secured
Parties (as defined in such Credit Agreement).

     PRELIMINARY  STATEMENT.  Audio Book Club, Inc., a Delaware corporation (the
"Borrower"), has entered into a Credit Agreement, dated as of November___,  1998
(said Credit Agreement, as it may hereafter be amended,  supplemented,  restated
or  otherwise  modified  from  time  to  time,  being  the  "Credit  Agreement";
capitalized  terms  used and not  otherwise  defined  herein  have the  meanings
ascribed  to  them  in  the  Credit  Agreement),   with  the  banks,   financial
institutions  and other  institutions  and  other  institutional  lenders  party
thereto and Fleet National Bank, as Initial Issuing Bank, as Swing Line Bank and
as the  Administrative  Agent.  It is a  condition  precedent  to the  making of
Advances  by the Lender  Parties  and the  issuance  of Letters of Credit by the
Issuing Bank under the Credit Agreement and to the entry by the Hedge Banks into
Bank Hedge Agreements with the Borrower,  from time to time, that the Guarantors
shall have executed and delivered this Guaranty.

     NOW, THEREFORE, in consideration of the premises and in order to induce the
Lender  Parties to make  Advances  and Issuing  Bank to issue  Letters of Credit
under the  Credit  Agreement,  and the  Hedge  Banks to enter  into  Bank  Hedge
Agreements with the Borrower, from time to time, each Guarantor hereby agrees as
follows:

     Section 1. Guaranty; Limitation of Liability.

     (a) Each  Guarantor  hereby,  jointly and  severally,  unconditionally  and
irrevocably  guarantees  to the Secured  Parties the punctual  payment when due,
whether at stated maturity, by acceleration or otherwise,  of all Obligations of
the  Borrower  or any other Loan Party to the Secured  Parties now or  hereafter
existing  under the Loan  Documents,  whether  for  principal,  interest,  fees,
expenses or otherwise (such Obligations being the "Guaranteed Obligations"), and
agrees  to pay  any and all  expenses  (including  counsel  fees  and  expenses)
incurred by the Administrative Agent or any other Secured Party in enforcing any
rights under this  Guaranty.  Without  limiting the generality of the foregoing,
each  Guarantor's  liability shall extend to all amounts that constitute part of
the Guaranteed  Obligations  and would be owed by the Borrower or any other Loan
Party to the  Administrative  Agent or any other  Secured  Party  under the Loan
Documents but for the fact that they are  unenforceable  or not allowable due to
the existence of a bankruptcy,  reorganization or similar  proceeding  involving
the Borrower.

     (b)  Each  Guarantor,   and  by  its  acceptance  of  this  Guaranty,   the
Administrative  Agent and each other Secured Party,  hereby  confirms that it is
the intention of all such parties that this Guaranty not constitute a fraudulent
transfer or conveyance for purposes of any Bankruptcy

                                        1

<PAGE>



Law, the Uniform Fraudulent  Conveyance Act, the Uniform Fraudulent Transfer Act
or any similar  federal,  state or foreign law which may be  applicable  to this
Guaranty.  To effectuate the foregoing intention,  the Administrative Agent, the
other  Secured  Parties and the  Guarantors  hereby  irrevocably  agree that the
Obligations  of each  Guarantor  under  this  Guaranty  shall be  limited to the
maximum amount as will, after giving effect to such maximum amount and all other
contingent and fixed  liabilities of such Guarantor that are relevant under such
laws,  and  after  giving  effect to any  collections  from,  rights to  receive
contribution  from or payments  made by or on behalf of any other  Guarantor  in
respect of the Obligations of such other  Guarantor under this Guaranty,  result
in the  Obligations  of such  Guarantor  under this Guaranty not  constituting a
fraudulent transfer or conveyance.  For purposes hereof,  "Bankruptcy Law" means
Title 11,  U.S.  Code,  or any  similar  federal  or state law for the relief of
debtors.

     Section 2. Guaranty Absolute. Each Guarantor guarantees that the Guaranteed
Obligations  will be paid  strictly  in  accordance  with the  terms of the Loan
Documents, regardless of any law, regulation or order now or hereafter in effect
in  any  jurisdiction  affecting  any  of  such  terms  or  the  rights  of  the
Administrative  Agent or any other  Secured  Party  with  respect  thereto.  The
Obligations  of each  Guarantor  under  this  Guaranty  are  independent  of the
Guaranteed  Obligations  or any other  Obligations of any other Loan Party under
the Loan  Documents,  and a  separate  action  or  actions  may be  brought  and
prosecuted  against any  Guarantor to enforce  this  Guaranty,  irrespective  of
whether any action is brought  against  the  Borrower or any other Loan Party or
whether  the  Borrower  or any other Loan Party is joined in any such  action or
actions.   The  liability  of  each  Guarantor  under  this  Guaranty  shall  be
irrevocable,  absolute and  unconditional,  irrespective  of, and each Guarantor
hereby  irrevocably  waives any defenses it may now or hereafter have in any way
relating to, any or all of the following:

     (a) any lack of  validity  or  enforceability  of any Loan  Document or any
agreement or instrument relating thereto;

     (b) any change in the time,  manner or place of payment of, or in any other
term of, all or any of the Guaranteed  Obligations  or any other  Obligations of
any other Loan Party under the Loan Documents,  or any amendment or waiver of or
any consent to departure from any Loan Document,  including, without limitation,
any  increase in the  Guaranteed  Obligations  resulting  from the  extension of
additional credit to the Borrower or any of its Subsidiaries or otherwise;

     (c) any taking, exchange,  release or non-perfection of any Collateral,  or
any taking,  release or amendment or waiver of or consent to departure  from any
other guaranty, for all or any of the Guaranteed Obligations;

     (d) any manner of application of Collateral, or proceeds thereof, to all or
any of the Guaranteed Obligations, or any manner of sale or other disposition of
any  Collateral  for  all  or any of the  Guaranteed  Obligations  or any  other
Obligations of any other Loan Party under the Loan Documents or any other assets
of the Borrower or any of its Subsidiaries;


                                        2

<PAGE>


     (e) any change,  restructuring or termination of the corporate structure or
existence of the Borrower or any of its Subsidiaries;

     (f) any  failure of any Secured  Party to  disclose to the  Borrower or any
Guarantor  any  information  relating to the  financial  condition,  operations,
properties  or  prospects  of any other Loan Party now or in the future known to
any Secured  Party (each  Guarantor  waiving any duty on the part of the Secured
Parties to disclose such information); or

     (g) any other circumstance (including,  without limitation,  any statute of
limitations)  or any  existence  of or  reliance  on any  representation  by the
Administrative  Agent or any other Secured Party that might otherwise constitute
a defense  available to, or a discharge of, the Borrower,  such Guarantor or any
other guarantor or surety.

This Guaranty shall  continue to be effective or be reinstated,  as the case may
be, if at any time any payment of any of the Guaranteed Obligations is rescinded
or must  otherwise be refused by any Secured  Party or any other Person upon the
insolvency, bankruptcy or reorganization of the Borrower or any other Loan Party
or otherwise, all as though such payment had not been made.

     Section 3. Waivers and Acknowledgments.

     (a)  Each  Guarantor  hereby  waives  promptness,   diligence,   notice  of
acceptance  and  any  other  notice  with  respect  to  any  of  the  Guaranteed
Obligations and this Guaranty and any requirement that the Administrative  Agent
or any other Secured Party  protect,  secure,  perfect or insure any Lien or any
property  subject  thereto or exhaust  any right or take any action  against the
Borrower, any Guarantor or any other Person or any Collateral.

     (b) Each  Guarantor  hereby waives any right to revoke this  Guaranty,  and
acknowledges  that this  Guaranty  is  continuing  in nature and  applies to all
Guaranteed Obligations, whether existing now or in the future.

     (c)  Each  Guarantor   acknowledges  that  it  will  receive  material  and
substantial  direct  and  indirect  benefits  from  the  financing  arrangements
contemplated  by the  Loan  Documents  and that the  waivers  set  forth in this
Section 3 are knowingly made in contemplation of such benefits.

     Section 4. Subrogation. Each Guarantor will not exercise any rights that it
may now or hereafter  acquire  against the Borrower or any other  guarantor that
arise  from  the  existence,   payment,   performance  or  enforcement  of  such
Guarantor's  obligations  under  this  Guaranty  or  any  other  Loan  Document,
including,   without  limitation,  any  right  of  subrogation,   reimbursement,
exoneration, contribution or indemnification and any right to participate in any
claim or remedy of the  Administrative  Agent or any other Secured Party against
the  Borrower  or any other  guarantor  or any  Collateral,  whether or not such
claim,  remedy or right  arises in equity or under  contract,  statute or common
law,  including,  without  limitation,  the  right to take or  receive  from the
Borrower


                                        3

<PAGE>



or any other guarantor,  directly or indirectly, in cash or other property or by
setoff or in any other  manner,  payment or  security  on account of such claim,
remedy or right,  unless  and until all of the  Guaranteed  Obligations  and all
other amounts payable under this Guaranty shall have been  independently paid in
full in cash,  all Letters of Credit  have  expired or have been  terminated  or
canceled,  all Bank Hedge  Agreements  shall have expired or terminated  and the
Commitments  shall have expired or terminated.  If any amount shall be paid to a
Guarantor in violation of the preceding  sentence at any time prior to the later
of (i) the  indefeasible  payment in full in cash of the Guaranteed  Obligations
and all other amounts  payable under this Guaranty and (ii) the later of (x) the
Termination Date, (y) the expiration, termination or cancellation or all Letters
of Credit,  and (z) the expiration or termination of all Bank Hedge  Agreements,
such amount shall be held in trust for the benefit of the  Administrative  Agent
and the other Secured Parties and shall forthwith be paid to the  Administrative
Agent to be credited  and applied to the  Guaranteed  Obligations  and all other
amounts payable under this Guaranty, whether matured or unmatured, in accordance
with the  terms  of the  Loan  Documents,  or to be held as  Collateral  for any
Guaranteed  Obligations or other amounts payable under this Guaranty  thereafter
arising.  If (i) a Guarantor shall make payment to the  Administrative  Agent or
any other Secured Party of all or any part of the Guaranteed  Obligations,  (ii)
all of the  Guaranteed  Obligations  and all other  amounts  payable  under this
Guaranty shall be  indefeasibly  paid in full in cash and (iii) the  Termination
Date shall  have  occurred,  all  Letters  of Credit  have  expired or have been
terminated  or  canceled  and all Bank Hedge  Agreements  shall have  expired or
terminated,  the  Administrative  Agent  and  the  other  Secured  Parties  will
promptly,  at such Guarantor's request and expense,  execute and deliver to such
Guarantor appropriate documents,  without recourse and without representation or
warranty, necessary to evidence the transfer by subrogation to such Guarantor of
an interest in the  Guaranteed  Obligations  resulting from such payment by such
Guarantor.

     Section 5. Payments Free and Clear of Taxes, Etc.

     (a) Any and all payments made by each Guarantor hereunder shall be made, in
accordance  with  Section  2.12 of the Credit  Agreement,  free and clear of and
without  deduction  for any and all present or future  Taxes.  If any  Guarantor
shall be  required  by law to deduct  any Taxes  from or in  respect  of any sum
payable  hereunder to the  Administrative  Agent or any other Secured Party, (i)
the sum payable  shall be increased as may be necessary so that after making all
required deductions  (including deductions applicable to additional sums payable
under this Section) the Administrative Agent or such other Secured Party (as the
case may be) receives an amount  equal to the sum it would have  received had no
such  deductions  been made,  (ii) such Guarantor shall make such deductions and
(iii) such Guarantor shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.

     (b) In addition,  each Guarantor  agrees to pay any present or future Other
Taxes.

     (c) Each Guarantor will indemnify the  Administrative  Agent and each other
Secured  Party for the full amount of Taxes or Other Taxes  (including,  without
limitation, any Taxes


                                        4

<PAGE>


or Other  Taxes  imposed  by any  jurisdiction  on  amounts  payable  under this
Section)  imposed on or paid by the  Administrative  Agent or such other Secured
Party (as the case may be) and any  liability  (including,  without  limitation,
penalties,  additions to tax,  interest and expenses)  arising therefrom or with
respect thereto,  except with respect to the Administrative Agent or any Secured
Party, as the case may be, for such a liability arising from the  Administrative
Agent's or such Secured Party's, as the case may be, willful misconduct or gross
negligence.  This indemnification shall be made within thirty (30) days from the
date on which the Administrative  Agent or such other Secured Party, as the case
may be, makes written demand specifying in reasonable detail the basis therefor.

     (d) Within thirty (30) days after the date of any payment of Taxes by or on
behalf of a Guarantor,  such Guarantor will furnish to the Administrative Agent,
at its address referred to in Section 11.2 of the Credit Agreement, the original
receipt of payment  thereof or a certified copy of such receipt.  In the case of
any  payment  hereunder  by or on behalf of a  Guarantor  through  an account or
branch outside the United States or by or on behalf of such Guarantor by a payor
that is not a United States person,  if such Guarantor  determines that no Taxes
are payable in respect  thereof,  such Guarantor  shall furnish,  or shall cause
such payor to furnish, to the Administrative  Agent, at such address, an opinion
of counsel acceptable to the  Administrative  Agent stating that such payment is
exempt from Taxes.  For purposes of this  subsection (d) and subsection (e), the
terms  "United  States"  and  "United  States  person"  shall have the  meanings
specified in Section 7701 of the Internal Revenue Code.

     (e) Each Secured Party organized  under the laws of a jurisdiction  outside
the United States  shall,  on or prior to the date of its execution and delivery
of the Credit  Agreement in the case of each Initial  Lender or Initial  Issuing
Bank, as the case may be, and on the date of the  Assignment  and  Acceptance or
other agreement  pursuant to which it became a Secured Party in the case of each
other Secured  Party (but only so long  thereafter as such Secured Party remains
lawfully able to do so), provide each of the Administrative Agent and Guarantors
with  two  originals  of  Internal   Revenue  Service  Form  1001  or  4224,  as
appropriate,  or any successor or other form prescribed by the Internal  Revenue
Service,  certifying  that such Secured Party is exempt from or is entitled to a
reduced  rate of United  States  withholding  tax on  payments  under the Credit
Agreement or the Notes. If the form provided by a Secured Party at the time such
Secured Party first becomes a party to the Credit  Agreement  indicates a United
States interest withholding tax rate in excess of zero,  withholding tax at such
rate shall be considered excluded from Taxes unless and until such Secured Party
provides the appropriate  form certifying that a lesser rate applies,  whereupon
withholding tax at such lesser rate only shall be considered excluded from Taxes
for periods governed by such form; provided, however, that if at the date of the
Assignment and Acceptance  pursuant to which a Secured Party assignee  becomes a
party to the Credit  Agreement,  the  Secured  Party  assignor  was  entitled to
payments under  subsection (a) in respect of United States  withholding tax with
respect to interest  paid at such date,  then,  to such  extent,  the term Taxes
shall  include  (in  addition  to  withholding  taxes that may be imposed in the
future or other amounts otherwise includable in Taxes) United States withholding
tax, if any, applicable with respect to the Secured Party assignee on such date.
If any form or document  referred to in this  subsection  (e) and requested



                                       5
<PAGE>


by a Guarantor  pursuant to this  subsection  (e)  requires  the  disclosure  of
information,  other than  information  necessary  to compute the tax payable and
information required on the date hereof by Internal Revenue Service Form 1001 or
4224,  that the Secured  Party  reasonably  considers  to be  confidential,  the
Secured  Party  shall give  notice  thereof to such  Guarantor  and shall not be
obligated to include in such form or document such confidential information.


     (f) For any  period  with  respect  to which a Secured  Party has failed to
provide any Guarantor,  following such Guarantor's  request therefor pursuant to
subsection  (e) above,  with the  appropriate  form  described in subsection (e)
(other than if such failure is due to a change in law  occurring  after the date
on which a form originally was required to be provided or if such form otherwise
is not required under  subsection (e)), such Secured Party shall not be entitled
to indemnification  under subsection (a) or (c) with respect to Taxes imposed by
the United States; provided, however, that should a Secured Party become subject
to Taxes  because  of its  failure to deliver a form  required  hereunder,  such
Guarantor  shall  take all such steps as such  Secured  Party  shall  reasonably
request to assist such Secured Party to recover such Taxes.

     (g) Any Secured Party claiming any additional  amounts payable  pursuant to
this Section 5 agrees to use best efforts  (consistent  with its internal policy
and  legal  and  regulatory  restrictions)  to change  the  jurisdiction  of its
Eurodollar  Lending  Office if the making of such a change  would avoid the need
for, or reduce the amount of, any such  additional  amounts that may  thereafter
accrue and would not,  in the  judgment  of such  Secured  Party,  be  otherwise
disadvantageous to such Secured Party.

     (h)  Without  prejudice  to the  survival  of any other  agreement  of each
Guarantor  hereunder  or under any  other  Loan  Document,  the  agreements  and
obligations  of each  Guarantor  contained in this  Section 5 shall  survive the
payment in full of the  Guaranteed  Obligations  and all other  amounts  payable
under this Guaranty and the other Loan Documents.

     Section 6.  Representations  and Warranties.  The Guarantors hereby jointly
and severally represent and warrant as follows:

     (a) There are no conditions precedent to the effectiveness of this Guaranty
that have not been satisfied or waived.

     (b)  Each  Guarantor  has,  independently  and  without  reliance  upon the
Administrative  Agent or any other Secured Party and based on such documents and
information  as it has  deemed  appropriate,  made its own credit  analysis  and
decision  to enter  into  this  Guaranty,  and each  Guarantor  has  established
adequate  means of obtaining  from any other Loan Parties on a continuing  basis
information  pertaining  to (and is now,  and on a  continuing  basis  will  be,
completely familiar with) the financial  condition,  operations,  properties and
prospects of the Borrower and the other Loan Parties.


                                       6
<PAGE>


     (c) Each of the representations and warranties applicable to the Guarantors
in the Credit Agreement is true and correct in all material respects on the date
hereof.

     Section 7. Covenants.  Each Guarantor  hereby covenants and agrees that, so
long as any part of the Guaranteed  Obligations shall remain unpaid,  any Letter
of Credit shall be outstanding,  any Bank Hedge Agreement shall not have expired
or  terminated  or any Lender Party shall have any  Commitment,  such  Guarantor
will,  unless the  Administrative  Agent and Required  Lenders  shall  otherwise
consent  in  writing,  perform  or  observe  all of  the  terms,  covenants  and
agreements  that this  Guaranty  and the other  Loan  Documents  state that such
Guarantor shall perform or observe.

     Section 8. Amendments,  Etc. (a) No amendment or waiver of any provision of
this Guaranty, and no consent to any departure by any Guarantor therefrom, shall
in any event be effective  unless the same shall be in writing and signed by the
Administrative Agent and Required Lenders, and then such waiver or consent shall
be effective  only in the specific  instance,  and for the specific  purpose for
which given;  provided,  however,  that no amendment,  waiver or consent  shall,
unless in writing and signed by all of the Lenders  (other than any Lender Party
which is, at such time, a  Defaulting  Lender),  (a) limit the  liability of any
Guarantor hereunder or (b) postpone any date fixed for payment hereunder.

     (b) Upon  the  execution  and  delivery  by any  Person  of a  supplemental
guaranty  in  substantially  the  form of  Exhibit  A hereto  (each a  "Guaranty
Supplement"),  such Person shall be referred to as an "Additional Guarantor" and
shall be and become a Guarantor for all purposes hereunder and each reference in
this  Guaranty  to a  "Guarantor"  shall  also mean and be a  reference  to such
Additional  Guarantor  and  each  reference  in any  other  Loan  Document  to a
"Guarantor" or "Subsidiary Guarantor" shall also mean and be a reference to such
Additional Guarantor.

     Section 9. Notices, Etc. All notices and other communications  provided for
hereunder  shall  be  in  writing  (including  telegraphic,  telecopy  or  telex
communication) and mailed, telegraphed,  telecopied, telexed or delivered to it,
if to a Guarantor,  addressed to it at the address  listed for such Guarantor on
the signature pages hereof (or in the applicable Guaranty Supplement), if to the
Administrative  Agent or any Lender Party,  at its address  specified in Section
11.2 of the Credit Agreement,  if to any Hedge Bank, at its address specified in
the Bank Hedge  Agreement to which it is a party,  or, as to any party,  at such
other address as shall be  designated by such party in a written  notice to each
other party.  All such notices and other  communications  shall,  when mailed by
certified mail, return receipt requested, telegraphed, telecopied or telexed, be
effective three (3) days after mailing,  upon delivery to the telegraph company,
upon  transmission  by  telecopier  or upon  confirmation  by telex  answerback,
respectively.

     Section  10.  No  Waiver;   Remedies.   No  failure  on  the  part  of  the
Administrative  Agent or any other  Secured  Party to exercise,  and no delay in
exercising, any right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right hereunder  preclude



                                       7
<PAGE>


any other or further  exercise  thereof or the exercise of any other right.  The
remedies  herein  provided  are  cumulative  and not  exclusive  of any remedies
provided by law.

     Section 11. Right of Setoff. Upon the occurrence and during the continuance
of any Event of Default,  each Lender Party and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all  deposits  (general  or  special,  time or
demand,  provisional  or final) at any time held and other  indebtedness  at any
time owing by such Lender  Party or such  Affiliate  to or for the credit or the
account  of any  Guarantor  against  any  and  all of the  Obligations  of  such
Guarantor now or hereafter  existing  under this  Guaranty,  whether or not such
Lender  Party shall have made any demand under this  Guaranty and although  such
Obligations  may be unmatured.  Each Lender Party agrees promptly to notify such
Guarantor after any such setoff and  application;  provided,  however,  that the
failure to give such  notice  shall not affect the  validity  of such setoff and
application.  The  rights of each  Lender  Party and its  Affiliates  under this
Section are in addition to the other  rights and  remedies  (including,  without
limitation,  other rights of setoff)  that such Lender Party and its  respective
Affiliates has.

     Section 12. Indemnification. Without limitation on any other Obligations of
any Guarantor or the remedies of the Secured  Parties under this Guaranty,  each
Guarantor shall, to the fullest extent permitted by law,  indemnify,  defend and
save and hold  harmless  each Secured  Party from and against,  and shall pay on
demand, any and all losses,  liabilities,  damages,  costs, expenses and charges
(including the reasonable fees and  disbursements  of such Secured Party's legal
counsel)  suffered or incurred by such Secured  Party as a result of any failure
of any Guaranteed  Obligations to be the legal, valid and binding obligations of
the  Borrower or any other  Guarantor  enforceable  against the Borrower or such
other Guarantor (as the case may be) in accordance with their terms.

     Section 13.  Continuing  Guaranty;  Assignments Under the Credit Agreement.
This  Guaranty is a  continuing  guaranty and shall (a) remain in full force and
effect  until  the  later  of the  indefeasible  payment  in full in cash of the
Guaranteed Obligations and all other amounts payable under this Guaranty and the
later  of  (i)  the  Termination  Date,  (ii)  the  expiration,  termination  or
cancellation  of all Letters of Credit,  and (iii) the expiration or termination
of all Bank Hedge Agreements, (b) be binding upon each Guarantor, its successors
and  assigns  and  (c)  inure  to  the  benefit  of and  be  enforceable  by the
Administrative  Agent  and  the  other  Secured  Parties  and  their  respective
successors,  transferees  and assigns.  Without  limiting the  generality of the
foregoing clause (c), any Secured Party may assign or otherwise  transfer all or
any portion of its rights and obligations under the Credit Agreement (including,
without limitation,  all or any portion of its Commitment, the Advances owing to
it and the Note or Notes held by it) to any other Person,  and such other Person
shall  thereupon  become vested with all the benefits in respect thereof granted
to such Secured Party by this Guaranty or otherwise, in each case to the maximum
extent provided in Section 11.7 of the Credit Agreement.

     Section 14. Governing Law; Jurisdiction; Waiver of July Trial, Etc.


                                       8
<PAGE>


     (A) THIS GUARANTY  SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE  WITH,
THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAW
PRINCIPLES).

     (B) EACH GUARANTOR  HEREBY  IRREVOCABLY AND  UNCONDITIONALLY  SUBMITS,  FOR
ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE  JURISDICTION OF ANY NEW YORK STATE
COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN NEW YORK CITY,
AND ANY APPELLATE  COURT FROM ANY THEREOF,  IN ANY ACTION OR PROCEEDING  ARISING
OUT OF OR RELATING TO THIS GUARANTY OR ANY OF THE OTHER LOAN  DOCUMENTS TO WHICH
IT IS OR IS TO BE A PARTY,  OR FOR  RECOGNITION  OR ENFORCEMENT OF ANY JUDGMENT,
AND EACH GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS
IN RESPECT OF ANY SUCH ACTION OR PROCEEDING  MAY BE HEARD AND  DETERMINED IN ANY
SUCH NEW YORK STATE COURT OR IN SUCH FEDERAL COURT  LOCATED  WITHIN THE STATE OF
NEW YORK.  EACH  GUARANTOR  AGREES  THAT A FINAL  JUDGMENT IN ANY SUCH ACTION OR
PROCEEDING  SHALL BE CONCLUSIVE  AND MAY BE ENFORCED IN OTHER  JURISDICTIONS  BY
SUIT ON THE  JUDGMENT OR IN ANY OTHER  MANNER  PROVIDED BY LAW.  NOTHING IN THIS
GUARANTY  SHALL  AFFECT  ANY RIGHT  THAT THE  ADMINISTRATIVE  AGENT OR ANY OTHER
SECURED PARTY MAY OTHERWISE  HAVE TO BRING ANY ACTION OR PROCEEDING  RELATING TO
THIS  GUARANTY OR ANY OF THE OTHER LOAN  DOCUMENTS  TO WHICH IT IS OR IS TO BE A
PARTY IN THE COURTS OF ANY JURISDICTION.

     (C) EACH GUARANTOR  IRREVOCABLY AND UNCONDITIONALLY  WAIVES, TO THE FULLEST
EXTENT IT MAY LEGALLY AND  EFFECTIVELY  DO SO, ANY OBJECTION  THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING  ARISING
OUT OF, OR RELATING  TO, THIS  GUARANTY  OR ANY OF THE OTHER LOAN  DOCUMENTS  TO
WHICH IT IS OR IS TO BE A PARTY,  IN ANY NEW YORK STATE OR FEDERAL  COURT.  EACH
GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING
IN ANY SUCH COURT.

     (D) EACH GUARANTOR HEREBY  IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION,  PROCEEDING  OR  COUNTERCLAIM  (WHETHER  BASED ON CONTRACT,  TORT OR
OTHERWISE,  IN EQUITY OR AT LAW)  ARISING  OUT OF OR RELATING TO ANY OF THE LOAN
DOCUMENTS,  THE  TRANSACTIONS   CONTEMPLATED  THEREBY  OR  THE  ACTIONS  OF  THE
ADMINISTRATIVE   AGENT  OR  ANY  OTHER   SECURED   PARTY  IN  THE   NEGOTIATION,
ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.



                                        9
<PAGE>


     Section 15.  Counterparts.  This Agreement may be executed in any number of
several  counterparts,  each of which  shall be deemed an  original,  but all of
which  together  shall  constitute  one and the  same  instrument.  Delivery  by
telecopier  of an executed  counterpart  of a signature  page to this  Agreement
shall be as effective  as delivery of a manually  executed  counterpart  to this
Agreement.


                            [SIGNATURE PAGE FOLLOWS]


                                       10
<PAGE>



     IN WITNESS  WHEREOF,  the  Guarantors  have caused this Guaranty to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.

                                           ABC INTERNET SERVICES, INC.


                                           By:__________________________________
                                           Title:_______________________________
                                           Address: 20 Community Place
                                                    P.O. Box 2346
                                                    Morristown, New Jersey 07962


                                           ABC INVESTMENT CORP.


                                           By:__________________________________
                                           Title:_______________________________
                                           Address: 20 Community Place
                                                    P.O. Box 2346
                                                    Morristown, New Jersey 07962


                                           CLASSIC RADIO HOLDING CORP.


                                           By:__________________________________
                                           Title:_______________________________
                                           Address: 20 Community Place
                                                    P.O. Box 2346
                                                    Morristown, New Jersey 07962


                                           CLASSIC RADIO ACQUISITION CORP.


                                           By:__________________________________
                                           Title:_______________________________
                                           Address: 20 Community Place
                                                    P.O. Box 2346
                                                    Morristown, New Jersey 07962


<PAGE>



                                           CH ACQUISITIONS CORP.

                                           By:__________________________________
                                           Title:_______________________________
                                           Address: 20 Community Place
                                                    P.O. Box 2346
                                                    Morristown, New Jersey 07962




<PAGE>



Accepted on behalf of
the Secured Parties:

FLEET NATIONAL BANK,
as Administrative Agent

By:____________________
Title:___________________

<PAGE>


                                    EXHIBIT A

                           FORM OF GUARANTY SUPPLEMENT


                                                               __________, _____


Fleet National Bank, as Administrative Agent
One Federal Street
Boston, Massachusetts 02110
Attention: Corporate Banking Group

          Credit  Agreement,  dated as of November  ___,  1998,  among
          Audio  Book  Club,   Inc.,  a  Delaware   corporation   (the
          "Borrower"),  the  Lenders  party to the  Credit  Agreement,
          Fleet National Bank, as Initial  Issuing Bank, as Swing Line
          Bank  and  as   Administrative   Agent   and  (the   "Credit
          Agreement")

Ladies and Gentlemen:

     Reference is made to the above-defined Credit Agreement and to the Guaranty
referred to therein  (such  Guaranty,  as in effect on the date hereof and as it
may hereafter be amended, modified,  restated or supplemented from time to time,
(the  "Guaranty").  Capitalized terms used and not otherwise defined herein have
the meanings ascribed to them in the Guaranty.

     The  undersigned  hereby,   jointly  and  severally,   unconditionally  and
irrevocably  guarantees  to the Secured  Parties the punctual  payment when due,
whether  at  stated  maturity,  by  acceleration  or  otherwise,  of  all of the
Guaranteed  Obligations  and  agrees  to pay  any and  all  reasonable  expenses
(including  reasonable counsel fees and expenses) incurred by the Administrative
Agent or any other Secured Party on the terms set forth in the Guaranty as if it
were an original party thereto.  On and after the date hereof, each reference in
the  Guaranty  to  "Guarantor"  shall  also  mean  and  be a  reference  to  the
undersigned.

     The  undersigned  hereby  agrees to be bound as a  Guarantor  by all of the
terms and provisions of the Guaranty to the same extent as each other Guarantor.

     THIS GUARANTY  SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH,  THE LAWS OF THE STATE OF NEW YORK (WITHOUT  GIVING EFFECT TO ITS CONFLICT
OF LAWS PRINCIPLES).


                                     A - 1
<PAGE>


     THE UNDERSIGNED HEREBY IRREVOCABLY AND UNCONDITIONALLY  SUBMITS, FOR ITSELF
AND ITS PROPERTY,  TO THE NONEXCLUSIVE  JURISDICTION OF ANY NEW YORK STATE COURT
OR FEDERAL COURT OF THE UNITED STATES OF AMERICA  SITTING IN NEW YORK CITY,  AND
ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THE GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS TO WHICH IT IS OR
IS TO BE A PARTY,  OR FOR  RECOGNITION OR  ENFORCEMENT OF ANY JUDGMENT,  AND THE
UNDERSIGNED  HEREBY  IRREVOCABLY AND  UNCONDITIONALLY  AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
NEW YORK STATE COURT OR IN SUCH FEDERAL  COURT  LOCATED  WITHIN THE STATE OF NEW
YORK.  THE  UNDERSIGNED  AGREES  THAT A FINAL  JUDGMENT  IN ANY SUCH  ACTION  OR
PROCEEDING  SHALL BE CONCLUSIVE  AND MAY BE ENFORCED IN OTHER  JURISDICTIONS  BY
SUIT ON THE  JUDGMENT OR IN ANY OTHER  MANNER  PROVIDED  BY LAW.  NOTHING IN THE
GUARANTY  SHALL  AFFECT  ANY RIGHT  THAT THE  ADMINISTRATIVE  AGENT OR ANY OTHER
SECURED PARTY MAY OTHERWISE  HAVE TO BRING ANY ACTION OR PROCEEDING  RELATING TO
THE  GUARANTY  OR ANY OF THE OTHER LOAN  DOCUMENTS  TO WHICH IT IS OR IS TO BE A
PARTY IN THE COURTS OF ANY JURISDICTION.

     THE UNDERSIGNED  IRREVOCABLY  AND  UNCONDITIONALLY  WAIVES,  TO THE FULLEST
EXTENT IT MAY LEGALLY AND  EFFECTIVELY  DO SO, ANY OBJECTION  THAT IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING  ARISING
OUT OF, OR RELATING TO, THE GUARANTY OR ANY OF THE OTHER LOAN DOCUMENTS TO WHICH
IT IS OR IS TO BE A  PARTY,  IN  ANY  NEW  YORK  STATE  OR  FEDERAL  COURT.  THE
UNDERSIGNED HEREBY  IRREVOCABLY  WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
THE  DEFENSE  OF AN  INCONVENIENT  FORUM TO THE  MAINTENANCE  OF SUCH  ACTION OR
PROCEEDING IN ANY SUCH COURT.

     THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION,   PROCEEDING  OR  COUNTERCLAIM  (WHETHER  BASED  ON  CONTRACT,  TORT  OR
OTHERWISE,  IN  EQUITY  OR AT  LAW)  ARISING  OUT OF  THE  LOAN  DOCUMENTS,  THE
TRANSACTIONS  CONTEMPLATED  THEREBY OR THE ACTIONS OF ANY  SECURED  PARTY IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT THEREOF.

                                                    Very truly yours,

                                                    [NAME OF ADDITIONAL
                                                    GUARANTOR]

                                                    By:_________________________



                                     A - 2
<PAGE>

                                                    Title: _____________________
                                                    Address: ___________________



                                     A - 3
<PAGE>

                                EXHIBIT I TO THE
                                CREDIT AGREEMENT


                       FORM OF SWING LINE PROMISSORY NOTE


$1,000,000                                             Dated: December ___, 1998


     FOR VALUE  RECEIVED,  the  undersigned,  Audio Book Club,  Inc.,  a Florida
corporation  (the  "Borrower"),  HEREBY PROMISES TO PAY on December ___, 2003 to
the  order  of  Fleet  National  Bank  (the  "Lender")  for the  account  of its
Applicable Lending Office (as defined in the Credit Agreement referred to below)
the aggregate  unpaid principal amount of the Swing Line Advances (as defined in
the Credit  Agreement  referred  to below)  owing to the Lender by the  Borrower
pursuant to the Credit  Agreement,  dated as of December  ___, 1998 (as amended,
supplemented,  restated or otherwise  modified,  the "Credit  Agreement";  terms
defined therein being used herein as therein defined),  among the Borrower,  the
other Loan Parties thereto, the Lender and certain other Lender Parties thereto,
Fleet National Bank, as Initial Issuing Bank, Fleet National Bank, as Swing Line
Bank, and Fleet National  Bank, as  Administrative  Agent for the Lender and the
other Lender Parties.

     This  Promissory  Note  evidences all Swing Line Advances made by Lender to
Borrower  under the  Credit  Agreement.  The  unpaid  principal  balance of this
Promissory Note shall be paid or prepaid at the times, in the amounts and in the
manner provided by the Credit Agreement The Borrower promises to pay interest on
the unpaid  principal  amount of each Swing Line  Advance  from the date of such
Swing Line Advance until such principal amount is paid in full, at such interest
rates, and payable at such times, as are specified in the Credit Agreement.

     Both  principal  and  interest  are  payable in lawful  money of the United
States of America to Fleet National Bank, as Administrative Agent for the Lender
Parties,  at One Federal Street,  Boston,  Massachusetts,  02110,  Account No. ,
Attention: Loan Administration, in same day funds. Each Swing Line Advance owing
to the Lender by the Borrower and the maturity thereof, and all payments made on
account of  principal  thereof,  shall be recorded by the Lender in its internal
records and, prior to any transfer hereof, endorsed on the grid attached hereto,
which is part of this Promissory Note;  provided,  however,  that the failure of
such Lender to so record any such  information  or any error in so recording any
such information shall not,  however,  limit or otherwise affect the obligations
of the Borrower hereunder or under any other Loan Document.

     This Promissory Note is one of the Notes referred to in, and is entitled to
the benefits of, the Credit Agreement. The Credit Agreement, among other things,
(i) provides for the making


<PAGE>



of Swing Line  Advances  by the Lender to the  Borrower  from time to time in an
aggregate  amount not to exceed at any time  outstanding  the U.S. dollar amount
first above mentioned, the indebtedness of the Borrower resulting from each such
Swing Line Advance being  evidenced by this  Promissory  Note, and (ii) contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for  prepayments on account of principal  hereof prior to
the  maturity  hereof  upon the  terms and  conditions  therein  specified.  The
obligations of the Borrower under this  Promissory  Note, and the obligations of
the other Loan Parties under the Loan  Documents,  are secured by the Collateral
as provided in the Collateral Documents.

     This  Promissory Note shall be governed by and construed in accordance with
the laws of the State of New York  without  regard to its  rules  pertaining  to
conflicts of laws, other than General  Obligations Law Section 5-1401, and shall
be deemed to be under seal.

                                                    AUDIO BOOK CLUB, INC.



                                                    By:_________________________

                                                    Name:_______________________

                                                    Title:______________________



                                       2
<PAGE>


                  SWING LINE ADVANCES AND PAYMENTS OF PRINCIPAL


<TABLE>
<CAPTION>
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                       Amount of               Amount of           Unpaid Principal          Notation Made
Date                  Swing Line           Principal Paid or            Balance                    by
                        Advance                 Prepaid
-----------------------------------------------------------------------------------------------------------
<S>                 <C>                     <C>                     <C>                      <C>

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</TABLE>