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                                                                   EXHIBIT 10.14

 
                                   SCHEDULE 5

                               FACILITY AGREEMENT


                               DATED 12 MAY 1998


                         MULTICURRENCY CREDIT FACILITY
                              up to DM214,000,000


                     THE DERBY CYCLE CORPORATION AND OTHERS
                         as Borrowers and/or Guarantors


                              CHASE MANHATTAN plc
                                  as Arranger


                           THE FINANCIAL INSTITUTIONS
                                  NAMED HEREIN
                                    as Banks


                     CHASE MANHATTAN INTERNATIONAL LIMITED
                               as Facility Agent


                     CHASE MANHATTAN INTERNATIONAL LIMITED
                               as Security Agent


                               Dibb Lupton Alsop
                                125 London Wall
                                     LONDON
                                    EC2Y 5AE

                               Tel: 0345 26 27 28
                               Fax: 0171 600 1650
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                                    CONTENTS

1.   INTERPRETATION..............................................   1
     1.1  Definitions ...........................................   1
     1.2  Financial Terms .......................................  31
     1.3  Construction ..........................................  37
     1.4  Relationship with the Intercreditor Agreements.........  39
 
2.   THE FACILITY................................................  39
     2.1  The Facility ..........................................  39
     2.2  Nature of Banks' obligations and rights................  40
     2.3  Nature of Borrowers' rights and obligations hereunder..  40
     2.4  Maximum Total Commitments..............................  41
 
3.   PURPOSE OF FACILITIES.......................................  41
 
4.   CONDITIONS PRECEDENT TO FIRST UTILISATION...................  42

5.   CONDITIONS PRECEDENT TO EACH UTILISATION BY WAY OF     ADVANCES AND STANDBY
                                                                   L/CS  42
6.   UTILISATION OF THE FACILITIES...............................  43
     6.1   Delivery of a Drawdown Request........................  43
     6.2   Completion of Drawdown Request........................  43
     6.3   Amount of each Bank's participation in an Advance.....  44
     6.4   Delivery of a Standby L/C Request.....................  45
     6.5   Completion of Standby L/C Request.....................  45
     6.6   Issuing of Standby L/Cs ..............................  46
     6.7   Facility Agent's Authority............................  47
     6.8   Copy of Standby L/C ................................... 47 
     6.9   No Enquiry ...........................................  47
     6.10  Definitions ..........................................  47
     6.11  Calculation ..........................................  53
     6.12  Determination.........................................  53
     6.13  Undrawn amount........................................  54
 
7.  ANCILLARY FACILITIES.........................................  54
    7.1  Ancillary Facilities ...................................  54
    7.2  Operation of Ancillary Facilities.......................  56
 
8.  INTEREST.....................................................  59
    8.1  Standby L/C ............................................  59
    8.2  Interest rate ..........................................  59
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    8.3  Due date ...............................................  59
    8.4  Duration ...............................................  60
    8.5  Notification of LIBOR by Facility Agent.................  60
 
9.  DEFAULT INTEREST ............................................  60
    9.1  Failure to Pay..........................................  60
    9.2  Rate ...................................................  60
    9.3  Default Interest Period.................................  60
    9.4  Unexpired Portion ......................................  61
 
10. MARKET DISRUPTION............................................  61
    10.1  Disruption events .....................................  61
    10.2  Effect ................................................  62
 
11. REPAYMENT, PREPAYMENT AND CANCELLATION.......................  62
    11.1  Reduction of the Facility .............................  62
    11.2  Repayment of Advances..................................  63
    11.3  Facility Agent to notify Banks of demand...............  63
    11.4  L/C indemnity..........................................  63
    11.5  Banks' Discretion .....................................  64
    11.6  Voluntary cancellation.................................  64
    11.7  Mandatory Prepayment on Listing........................  64
    11.8  Prepayment Fee.........................................  66
    11.9  Cancellation and Prepayment of a Bank's Revolving
          Commitment and Standby L/C Commitment..................  66 
    11.10 Notices of prepayment and cancellation ................  66
    11.11 Notification of Bank(s) ...............................  67
    11.12 Only method ...........................................  67
    11.13 European Economic and Monetary Union ..................  67
 
12. PARTIAL PAYMENTS.............................................  69
 
13. PAYMENTS.....................................................  70
    13.1  To Facility Agent .....................................  70
    13.2  Distribution by the Agents ............................  70
    13.3  Currency ..............................................  71
    13.4  Set-off and counterclaim...............................  72
 
14. TAXES........................................................  72
    14.1  Payment of Taxes ......................................  72
    14.2  Gross-up ..............................................  73
    14.3  Tax indemnity..........................................  73
    14.4  Notification of claims.................................  73
    14.5  Tax receipts ..........................................  73
    14.6  Tax Saving ............................................  74
    14.7  U.S Taxation-delivery of forms and statements..........  74
    14.8  Double tax-treaties ...................................  76
    14.9  Qualifying Bank .......................................  76
 
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15.  INCREASED COSTS ............................................   76
     15.1  Indemnity for increased costs.........................   76
     15.2  Exceptions ...........................................   77
     15.3  Notification by Bank .................................   78
     15.4  Regulation D Compensation.............................   78
                                                                    
16.  ILLEGALITY..................................................   78
     16.1  Illegality in relation to Advances....................   78
     16.2  Illegality in relation to Standby L/Cs................   79
                                                                    
17.  MITIGATION..................................................   79
     17.1  Mitigation ...........................................   79
     17.2  Costs and Expenses of Mitigation......................   80
                                                                    
18.  REPRESENTATIONS AND WARRANTIES..............................   80
     18.1  General representations and warranties................   80
     18.2  Repetition of representations and warranties..........   92
 
19.  UNDERTAKINGS................................................   93
     19.1  Information undertakings..............................   93
     19.2  Form of financial statements..........................  100
     19.3  Variation of financial undertakings ..................  100
     19.4  Positive undertakings.................................  101
     19.5  Negative undertakings.................................  111
 
20.  FINANCIAL UNDERTAKINGS......................................  125
 
21.  EVENTS OF DEFAULT...........................................  133
     21.1  The Events of Default.................................  133
     21.2  Acceleration .........................................  139
 
22.  ADDITIONAL BORROWERS........................................  140
 
23.  GUARANTEES..................................................  141
     23.1  Guarantee ............................................  141
     23.2  Continuing Guarantee..................................  143
     23.3  Reinstatement ........................................  143
     23.4  Waiver of Defences ...................................  143
     23.5  Immediate Recourse ...................................  144
     23.6  Preservation of Rights................................  144
     23.7  Non-competition ......................................  145
     23.8  Additional Security ..................................  146
     23.9  Certificate ..........................................  146
     23.10 Guarantee Fees
 
24.  RELEASE OF GUARANTORS AND SECURITY..........................  146
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     24.1  Guarantors ...........................................  146
     24.2  Assets ...............................................  146
     24.3  Conditions for Release................................  147
     24.4  Release of Group Members..............................  147
 
25.  INDEMNITIES.................................................  147
     25.1  Indemnifiable events .................................  147
     25.2  Stamp duty............................................  148
 
26.  FEES........................................................  148
     26.1  Commitment fee........................................  148
     26.2  Utilisation Fee ......................................  149
     26.3  Applicable Rate ......................................  149
     26.4  Calculation ..........................................  149
     26.5  Payment of Utilisation Fee ...........................  150
     26.6  Agency fees ..........................................  150
     26.7  Arrangement fee ......................................  150
 
27.  COSTS AND EXPENSES..........................................  150
     27.1  Initial Costs ........................................  150
     27.2  Amendments ...........................................  150
     27.3  Protection, enforcement, etc..........................  151
 
28.  THE AGENTS AND THE ARRANGER.................................  151
     28.1  Appointment of the Agents ............................  151
     28.2  Duties of the Agents .................................  152
     28.3  Exculpatory provisions................................  153
     28.4  Assumptions ..........................................  153
     28.5  Agents and Arranger not responsible to other Parties..  154
     28.6  Delegation and advisers...............................  154
     28.7  Indemnity ............................................  154
     28.8  Resignation of the Agents ............................  155
     28.9  Separate entity ......................................  156
     28.10 Reliance .............................................  156
     28.11 Credit approval ......................................  156
     28.12 Tax Confirmation .....................................  156
     28.13 Miscellaneous provisions .............................  157
 
29.  TRANSFERS...................................................  157
     29.1  Obligors .............................................  157
     29.2  Banks ................................................  157
     29.3  Time of transfer .....................................  158
     29.4  Administration fee ...................................  158
     29.5  Additional amounts payable to transferee..............  159
     29.6  Disclosure of information ............................  159
 
30.  REDISTRIBUTION PROVISIONS...................................  159
     30.1  Redistributions ......................................  159
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     30.2  Repayment of a Discharged Amount......................  160
     30.3  Exceptions ...........................................  160
 
31.  CALCULATIONS AND EVIDENCE OF DEBT...........................  161
     31.1  Calculations .........................................  161
     31.2  Financial Accounts ...................................  161
     31.3  Control account ......................................  161
     31.4  Standby L/C Accounts..................................  161
     31.5  Actual amount received................................  162
     31.6  Prima facie evidence .................................  162
     31.7  Certificates and determinations.......................  162
     31.8  Reference Banks ......................................  163
     31.9  Unavailability of ECU/ecu ............................  163
 
32.  AMENDMENTS AND WAIVERS......................................  163
     32.1  Majority Banks........................................  163
     32.2  All Banks ............................................  164
     32.3  Super Majority Banks..................................  164
     32.5  The Agents ...........................................  165
 
33.  NOTICES.....................................................  165
     33.1  Method of delivery ...................................  165
     33.2  Addresses ............................................  165
     33.3  Agents' details ......................................  165
     33.4  Receipt of notices ...................................  166
     33.5  Language .............................................  166
 
34.  PARTIAL INVALIDITY..........................................  166
 
35.  REMEDIES AND WAIVERS........................................  166
 
36.  COUNTERPARTS................................................  167
 
37.  SECURITY....................................................  167
 
38.  JURISDICTION................................................  167
     38.1  Courts of England ....................................  167
     38.2  Non-exclusivity ......................................  167
     38.3  Service of process agent..............................  167
     38.4  Non-convenience of forum..............................  168
 
39.  GOVERNING LAW...............................................  168
 
SCHEDULE 1.......................................................  169
     THE BORROWERS...............................................  169
 
SCHEDULE 2.......................................................  170
     THE GUARANTORS .............................................  170
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SCHEDULE 3.......................................................  172
    THE BANKS....................................................  172
 
SCHEDULE 4.......................................................  173
    ACCESSION AGREEMENT .........................................  173
 
SCHEDULE 5.......................................................  176
    DOCUMENTS TO ACCOMPANY ADDITIONAL ...........................  176

SCHEDULE 6.......................................................  178
    CONDITIONS PRECEDENT ........................................  178
 
SCHEDULE 7.......................................................  185
    Part 1 ......................................................  185
    FORM OF DRAWDOWN REQUEST ....................................  185
    Part 2 ......................................................  186
    FORM OF STANDBY L/C REQUEST .................................  186
    Part 3 ......................................................  188
    FORM OF STANDBY L/C .........................................  188
 
SCHEDULE 8.......................................................  196
    NOVATION CERTIFICATE ........................................  196
 
SCHEDULE 9.......................................................  200
    ADDITIONAL COSTS ............................................  200
 
SCHEDULE 10......................................................  202
    COMPLIANCE CERTIFICATE ......................................  202
 
SCHEDULE 11......................................................  204
    MATERIAL GROUP MEMBERS ......................................  204
 
SCHEDULE 12......................................................  205
    DESCRIPTION OF ECU ..........................................  205
 
SCHEDULE 13......................................................  207
    Nominee Notice ..............................................  207
 
SCHEDULE 14......................................................  209
    SECURITY DOCUMENTS ..........................................  209
 
<PAGE>
 
THIS FACILITY AGREEMENT is made the 12th day of May 1998

BETWEEN:

(1)  THE DERBY CYCLE CORPORATION a company incorporated in Delaware, the United
     States of America, having its principal office at 22710 72nd Avenue South,
     Kent, Washington 98032 (the "Company");

(2)  THE COMPANIES identified as Borrowers in Schedule 1;

(3)  THE COMPANIES identified as Guarantors in Schedule 2;

(4)  CHASE MANHATTAN plc (the "Arranger");

(5)  THE FINANCIAL INSTITUTIONS identified as Banks in Schedule 3;

(6)  CHASE MANHATTAN INTERNATIONAL LIMITED (the "Facility Agent"); and

(7)  CHASE MANHATTAN INTERNATIONAL LIMITED (the "Security Agent").

WHEREAS

The Banks have agreed, subject to the terms and conditions of this Agreement, to
provide a revolving credit facility of up to DM214,000,000 (or the equivalent
thereof in other currencies) of which up to DM65,000,000 may be utilised by way
of Ancillary Facilities (less amounts utilised by the issuance of Standby L/Cs
under the Standby L/C Facility) and DM15,000,000 (or the equivalent in other
currencies) may be utilised by the issuance of Standby L/Cs.

                                     PART 1

1.   INTERPRETATION

1.1  Definitions

In this Agreement:

"Accession Agreement" means:

(a)  when designated "Borrower", an agreement substantially in the form of
     Schedule 4 made pursuant to Clause 22 (together the "Borrower Accession
     Agreements");

(b)  when designated "Guarantor", an agreement substantially in the form of
     Schedule 4 made pursuant to Clauses 19.4(d), 19.4(e), 19.4(f) or 19.4(g)
     (together the "Guarantor Accession Agreements"); and

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(c)  without any such designation, a Borrower Accession Agreement or a Guarantor
     Accession Agreement and "Accession Agreements", without any such
     designation means some or all (as the context requires) of the Borrower
     Accession Agreements and the Guarantor Accession Agreements together.

"Accountant's Report" means

(i)  each of the reports dated on or before Closing prepared by Arthur Andersen
     on the Group as a result of separate letters of instruction from each of
     the Company and the Arranger in relation thereto; and

(ii) the reports prepared by Arthur Andersen dated 31 January 1998 and August
     1998 and made in relation to Western State Import Inc and Bejka Trading AB
     and in connection with the Diamond Back Acquisition.

"Accounts" has the meaning given to such term in Clause 6.10.

"Accounting Date" means each 31 December regardless of which day it falls upon,
and each 31 March, 30 June, 30 September, provided that if any such date does
not fall on a Sunday, then the date which is the Sunday immediately prior to or
after such date in accordance with the Company's usual accounting practice as
notified to the Facility Agent prior to the date of this Agreement.

"Account Debtor" has the meaning given to such term in Clause 6.10.

"Accounting Period" in relation to any Person means any period of approximately
one month, three months or one year for which Financial Accounts or, as the case
may be, Pre-Closing Proforma Accounts of such Person are required to be prepared
for the purposes of this Agreement ending, in the case of each quarterly and
each one year period, on an Accounting Date.

"Acquired Assets" means the shares in the capital of the Subsidiaries of the
Company immediately following the Recapitalisation.

"Additional Borrower" means any entity other than a Group Member incorporated in
South Africa which becomes party to this Agreement as a Borrower pursuant to a
Borrower Accession Agreement.

"Additional Cost" in relation to each Advance or Overdue Amount  means, for the
Term relating to that Advance or, as the case may be, Default Interest Period
relating to that Overdue Amount, the cost as calculated by the Facility Agent in
accordance with Schedule 9 imputed to each Bank participating in such Advance or
Overdue Amount through a Facility Office in the United Kingdom of compliance
with the mandatory liquid assets requirements of the Bank of England during that
Term, or as the case may be, that Default Interest Period and/or any charge
imposed by the Financial Services Authority (or any other authority which
replaces all or any of its functions) expressed as a percentage rate per annum.

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<PAGE>
 
"Additional Guarantor" means any entity which becomes a party hereto as a
Guarantor pursuant to a Guarantor Accession Agreement or otherwise provides a
Guarantee.

 
"Adjusted Available Amount" has the meaning given to such term in Clause 6.10.

"Adjusted Borrowing Base" has the meaning given to such term in Clause 6.10.

"Advance" means the principal amount of each borrowing under this Agreement
under the Revolving Facility or the principal amount of each such borrowing
outstanding from time to time, as the context requires.

"Affiliate" means, in relation to a body corporate, any of its Holding Companies
or Subsidiaries or any other Subsidiary of any of its Holding Companies.

"Agent" means:

(a)  when designated "Facility", includes any of its successors pursuant to
     Clause 28.8;

(b)  when designated "Security", includes any of its successors pursuant to
     Clause 28.8 and any corresponding provision of any Security Document; and

(c)  without any such designation, the Facility Agent or the Security Agent, as
     the context requires, and "Agents" without any such designation means one
     or more of the Facility Agent and the Security Agent, as the context
     requires.

"Ancillary Bank" means any Bank which becomes an Ancillary Bank by the operation
of Clause 7.

"Ancillary Commitment" means in relation to an Ancillary Bank, the maximum
amount (actual or contingent) from time to time of the Ancillary Facilities to
be made available by that Ancillary Bank which has been authorised as such under
Clause 7.1(a) to the extent not cancelled under this Agreement.

"Ancillary Outstanding" means, at any time, and with respect to any Ancillary
Bank, the Deutschmark Equivalent of all the following amounts outstanding at
such time under the Ancillary Facilities of that Ancillary Bank then in force:

(a)  all amounts of principal then outstanding under any overdraft, BACS, cheque
     drawing or other current account facilities;

(b)  twenty per cent of the gross amounts payable to that Ancillary Bank under
     any contracts (for a period not exceeding eighteen months) entered into for
     the provision of spot or forward foreign exchange facilities or the
     purchase of foreign exchange options for a period not exceeding eighteen
     months (in each case in accordance with the Approved Hedging

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     Programme) (or such other amount as such Ancillary Bank may agree with the
     Facility Agent and the Group Member to whom the relevant facilities are
     made available in accordance with its usual practice for calculating
     exposure for similar facilities);

(c)  the maximum face amount (excluding amounts stated to be in respect of
     interest) of all guarantees, bonds and letters of credit then outstanding
     under any guarantee, bonding or letter of credit facilities; and

(d)  in respect of any other facility or financial accommodation such other
     amount as the relevant Ancillary Bank may (acting reasonably and in
     consultation with the Facility Agent and the Obligors' Agent) determine
     fairly represents the aggregate exposure at such time of the Ancillary Bank
     providing the same.

"AON Insurance Report" means the insurance review of Derby Bicycle Group
prepared by AON Mergers and Acquisitions Group dated February 1998.

"AON Pensions Report" means the employee benefits due diligence report on the
Derby Bicycle Group prepared by AON Consulting dated 4 December 1997.

"Applicable Accounting Principles" means, for the purposes of the preparation
and/or audit of the Pre-Closing Proforma Accounts, the Accountant's Report and
any Financial Accounts (whether combined, consolidated or unconsolidated) of the
Company and/or the Group, to be delivered under this Agreement, the accounting
principles and practices generally accepted in the United States of America, and
for Group Members other than the Company the accounting principles and practices
generally accepted in their respective country of incorporation and in each
case, approved by the relevant accounting standards board or other applicable
authority and which are the same as the accounting principles and practices
applied in the preparation of the Business Plan and any variation of such
accounting principles and practices which has been agreed in writing by the
Majority Banks.

"Approved Bank" means a Bank whose long term unsecured unsubordinated debt
rating is at least A2 (Moody's) or A (Standard & Poors) that has been given and
has acknowledged all notices reasonably required by the Facility Agent and in
substantially the agreed form and/or required by the Security Documents and
through a branch situated in Ireland, England, Germany or the Netherlands (as
applicable) or through such other branch of a Bank situated in a country not
specifically mentioned above provided that the Facility Agent has, in respect of
any such other branch, previously given its approval to such arrangement prior
thereto.

"Approved Hedging Programme" means, as at the date of this Agreement, the paper
so entitled, in the agreed form provided by the Company for the purposes of
satisfying paragraph 27 of Schedule 6, as the same may be amended from time to
time with the prior written consent of the Facility Agent.

"Approved Provisioning Procedure" means, the paper so entitled in the agreed
form provided by the Company for the purposes of satisfying paragraph 36 of
Schedule 6, as the same may be

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amended from time to time with the prior written consent of the Facility
Agent.

"Articles of Association" means, in relation to any Group Member, its articles
of association or by-laws (or equivalent in the country of its incorporation) as
the same are amended from time to time.

"Auditors" means Arthur Andersen (or any successor through merger) and/or any
other firm of independent public accountants of international standing approved
by the Facility Agent, which is appointed to audit the consolidated annual
accounts of the Company.

"Authorised Signatory" in relation to any Obligor and any communication to be
made or document to be executed or certified by that Obligor means, at any time,
any Person:

(a)  who is at such time duly authorised by a resolution of the board of
     directors of that Obligor or by virtue of his appointment by that Obligor
     to a particular office to make that communication or to execute or certify
     that document on behalf of that Obligor and in respect of whom the Facility
     Agent has received a certificate of a director or the secretary of that
     Obligor setting out the name and signature of that Person and confirming
     that Person's authority so to act; and

(b)  in respect of whom no notice has been received by the Facility Agent from
     that Obligor to the effect that Person is no longer an Authorised Signatory
     of that Obligor.

"Availability Period" means:

(a)  in respect of the Revolving Facility and the Standby L/C Facility, the
     period from the opening of business in London on the date of this Agreement
     to close of business in London on the day falling one month prior to the
     Final Repayment Date or such later date as all the Banks may agree in
     writing on or after the date hereof; and

(b)  in respect of an Ancillary Facility, as the same is determined in
     accordance with Clause 7.

"Bank" means each of the following:

(a)  each Bank and each Ancillary Bank;

(b)  each bank or other financial institution to which rights and/or obligations
     under this Agreement are assigned or transferred pursuant to Clause 29.2 or
     which assumes rights and obligations pursuant to a Novation Certificate;
     and

(c)  any successor or successors in title to any of the foregoing,

(together the "Banks"), provided that upon (i) termination in full of all the
Revolving Commitment, the Standby L/C Commitment and the Ancillary Commitment of
any Bank, and (ii) irrevocable

                                       5
<PAGE>
 
payment in full of all amounts which may be or become payable to such Bank under
the Senior Finance Documents, such Bank shall not be regarded as being a Bank
for the purposes of determining whether any provision of any of the Senior
Finance Documents requiring consultation with or the consent or approval of or
instructions from the Banks or the Majority Banks has been complied with.

"Beneficiary" means, in respect of a Standby L/C, the Person in whose favour
such Standby L/C is issued provided that Person is not a Group Member
incorporated in South Africa or a financial institution providing credit to a
Group Member incorporated in South Africa.

"Blocked Account(s)" means the account(s) denominated in Deutschmarks, Guilders,
Sterling and Dollars held at The Chase Manhattan Bank, Nos. 22782101, 22782102,
22782103, 22782104 respectively in each case in the name of The Derby Bicycle
Group-Closing Account or such other account or accounts as the Arranger shall
nominate for this purpose.

"Borrower" means each entity identified as a Borrower in Schedule 1 and each
Additional Borrower (together the "Borrowers").

"Borrowing Base" has the meaning given to such term in Clause 6.10.

"Borrowing Base Summary" has the meaning given to such term in Clause 6.10.

"Business Day" means:

(a)  a day (excluding a Saturday and Sunday) on which banks and foreign exchange
     markets are open for business in London and Frankfurt; and

(b)  (in respect of a day on which a payment or other transaction in an Optional
     Currency is required under this Agreement) a day (not being a Saturday or
     Sunday) on which banks and foreign exchange markets are also open for
     business in the principal financial centre of the country of such Optional
     Currency.

"Business Plan" means the document dated on or about the date hereof in the
agreed form provided to the Facility Agent pursuant to paragraph 9 of Schedule 6
and identified by the Company and the Facility Agent as being the Business Plan.

"Canadian Borrower" means any Borrower incorporated in Canada.

"Canadian Dollars" means the lawful currency for the time being of Canada.

"Cash" means any credit balances on any deposit, savings or current account with
a Bank and cash in hand.

"Cash Collateral Amount" has the meaning given to such term in Clause 6.10.

                                       6
<PAGE>
 
"Cash Equivalent Investments" means:

(a)  debt securities denominated in Sterling issued by the Government of the
     United Kingdom or Dollars issued by the Government of the United States of
     America having not more than six months to final maturity which are not
     convertible into any other form of security;

(b)  debt securities (denominated in Dollars or an Optional Currency) which have
     not more than 180 days to final maturity, are not convertible into any
     other form of security, are rated at least P-1 (Moody's) or A-1 (Standard &
     Poors) and are not issued or guaranteed by any Group Member;

(c)  any cash deposits which have not more than a 90 day term denominated in
     Sterling or Dollars; and

(d)  such other securities (if any) as are approved as such in writing by the
     Facility Agent,

Provided that in each case the debt securities, cash deposits, or other
securities (as referred to in paragraphs (a) to (d) inclusive above), are
beneficially owned by an Obligor and are deposited with an Approved Bank.

"Certificate of Incorporation" means the amended and restated Certificate of
Incorporation of the Company.

"Certified Copy" means, in respect of any document, agreement or communication
to be delivered in connection with this Agreement, a copy thereof which has been
certified by an Authorised Signatory of the Person providing the document,
agreement or communication as being a true copy of the original or their duly
appointed solicitor or other legal counsel.

"Chief Executive Officer" means  Gary S. Matthews or in his absence his deputy
(being an Authorised Signatory of the Company) and their respective successors
from time to time.

"Chief Financial Officer" means the Group Financial Controller of the Company
or, as the case may be, the Chief Financial Officer of the Company, (being Simon
J. Goddard at Closing) or in his absence his deputy (being an Authorised
Signatory of the Company).

"Closing" means the completion of the Recapitalisation.

"Completion Accounts" means the accounts that are to be prepared by the Company
on a proforma basis in respect of the period commencing on 1 January 1998 and
ending on the date of such accounts containing a proforma balance sheet prepared
on the assumption that the Recapitalisation had taken effect, a profit and loss
statement and a cash flow of statement of the Group as at 3 May 1998.

"Compliance Certificate" means a Compliance Certificate in substantially the
same form as is set out at Schedule 10.

                                       7
<PAGE>
 
"Dangerous Substance" means any radioactive, radiowave, electromagnetic,
microwave emissions and any natural or artificial substance (whether in the form
of a solid, liquid, gas or vapour) the generation, transportation, storage,
treatment, use or disposal of which (whether alone or in combination with any
other substance) including (without limitation) any controlled, special
hazardous, toxic, radioactive or dangerous waste or discharge, gives rise to a
risk of causing material harm to man or any other living organism or materially
damaging the Environment or public health or welfare.

"Debentures" means each of the debentures governed by the laws of England
entered into by certain Group Members in favour of the Security Agent and
forming part of the Security Documents (each a "Debenture").

"Default" means an Event of Default or a Potential Event of Default.

"Default Interest Period" is defined at Clause 9.1.

"Derby Cycle Group Combined Budget" means the budget in an agreed form and
prepared by the Company in respect of the Diamond Back Acquisition and existing
operations of the Group for the financial year ended 31 December 1999;

"Derby International" means Derby International Corporation S.A..

"Derby L.L.C." means DC Cycle L.L.C..

"Deutschmarks" and "DM" means the lawful currency for the time being of the
Federal Republic of Germany.

"Deutschmark Amount" in relation to any Advance or Standby L/C means:

(a)  (if denominated in Deutschmarks) the principal amount thereof; or

(b)  (if denominated in an Optional Currency) the Deutschmark Equivalent of the
     principal amount thereof calculated, in the case of an Advance not
     denominated in Sterling, two Business Days prior to its Drawdown Date, in
     the case of an Advance denominated in Sterling on its Drawdown Date and, in
     the case of a Standby L/C, on the date that the Standby L/C Request
     relating thereto was delivered to the Facility Agent under this Agreement.

"Deutschmark Equivalent" in relation to an amount expressed or denominated in a
currency other than Deutschmarks means the equivalent thereof in Deutschmarks
converted at the Facility Agent's Spot Rate of Exchange on the date of the
relevant calculation.

"DFS" means Derby Finance S.a.r.l..

"Diamond Back Acquired Assets" means the assets acquired by the Company, or as
the case may

                                       8
<PAGE>
 
be, the Swedish Obligor pursuant to the Diamond Back Acquisition Agreement.

"Diamond Back Acquisition" means the proposed acquisition by the Company and
Derby Sweden AB of certain assets pursuant to the Diamond Back Acquisition
Agreement;

"Diamond Back Acquisition Agreement" means the acquisition agreement dated 8
December 1998 and made between the Company and Derby Sweden AB as purchasers and
Diamond Back International Limited, Western States Import Company Inc and Bejka
Trading AB as vendors;

"Diamond Back Acquisition Legal Due Diligence Report" means each of:

(i)  the report prepared by Kirkland & Ellis dated 9 December 1998 in respect of
     the Diamond Back Acquisition addressed to the Arranger, the Facility Agent
     and the Security Agent; and

(ii) the report dated 17 December 1998 and prepared by Simmons & Simmons and
     addressed to the Company and Derby Holding BV in respect of the Diamond
     Back Acquisition Agreement.

"Directors" means each of Frederic V. Malek, Carl J. Rickertsen, Paul G. Stern,
Alan J. Finden-Crofts, A. Edward Gottesman and Dr. Thomas H. Thomsen (each a
"Director").

"Disclosure Exhibits" means the disclosure exhibits given in respect of the
Recapitalisation Agreement on or about the date of the Recapitalisation
Agreement in the agreed form together with all schedules, annexures and exhibits
thereto forming the "Disclosure Exhibits" referred to in the Recapitalisation
Agreement.

"Disclosure Letter" means the letter accompanying the Disclosure Exhibits.

"Dollars" and "$" means the lawful currency for the time being of the United
States of America.

"Dormant Company" means each Group Member which is not an Obligor, does not
trade (whether for its own account or for that of another), is not required to
make entries into its accounting records in accordance with Section 221 of the
Companies Act 1985 (or any equivalent legislation in the jurisdiction of
incorporation of such company) or, to the extent that there is no equivalent
legislation in the jurisdiction of incorporation of such company, would be a
Dormant Company if the principles enshrined in Section 221 of the Companies Act
1985 were applied to it and does not hold or own (whether legally or
beneficially) any assets or property with a book value in excess of $10,000 (or
its equivalent in other currencies) other than amounts due from other Group
Members of no more than $50,000; or owe or have outstanding any liabilities with
a book value in excess of $10,000 (or its equivalent in other
currencies)(excluding liabilities owed to Obligors) Provided that,
notwithstanding the foregoing, a Group Member that holds any interest in any
Material Intellectual Property Right shall not be a Dormant Company.

                                       9
<PAGE>
 
"Drawdown Date" means, in respect of an Advance, the date such Advance is made,
or is proposed to be made, under this Agreement.

"Drawdown Request" means a request substantially in the form set out at Part 1
of Schedule 7.

"Dutch Borrower" means a Borrower incorporated in the Netherlands.

"Dutch Guilders" and "DFl" means the lawful currency for the time being of the
Kingdom of the Netherlands.

"ECU" is defined at Schedule 12.

"Eligible Finished Goods" has the meaning given to such term in Clause 6.10.

"Eligible Receivables" has the meaning given to such term in Clause 6.10.

"Eligible Raw Materials" has the meaning given to such term in Clause 6.10.

"Encumbrance" means any security, assignation in security, bond and floating
charge, mortgage, pledge, lien, charge, assignment for the purpose of providing
security, hypothecation, right in security, security interest or trust
arrangement for the purpose of providing security, and any other security
agreement or other arrangement having the effect of providing security
(including, without limitation, the deposit of monies or property with a Person
with the primary intention of affording such Person a right of set-off or lien).

"Environment" means all, or any of, the following media, the air (including,
without limitation, the air within buildings and the air within other natural or
man-made structures above or below ground), water (including, without
limitation, ground and surface water) and land (including, without limitation
surface and sub-surface soil).

"Environmental Claim" means any claim by any Person:

(a)  in respect of any loss or liability suffered or incurred by that Person as
     a result of or in connection with any violation of Environment Law; or

(b)  that arises as a result of or in connection with Environmental
     Contamination and that could give rise to any remedy or penalty (whether
     interim or final) that may be enforced or assessed by private or public
     legal action or administrative order or proceedings including, without
     limitation, any such claim that arises from injury to Persons, property or
     natural resources.

"Environmental Contamination" means each of the following and their
consequences:

(a)  any material release, emission, leakage or spillage of any Dangerous
     Substance at or from any site owned, occupied or used by any Group Member
     into any part of the Environment; or

                                       10
<PAGE>
 
(b)  any material accident, fire, explosion or sudden event at any site owned,
     occupied or used by any Group Member which is directly or indirectly caused
     by or attributable to any Dangerous Substance; or

(c)  any other pollution of the Environment.

"Environmental Law" means all laws (including, without limitation, common law),
regulations, codes of practice, circulars, guidance notices and the like having
legal effect (whether in the United Kingdom, the United States of America or
elsewhere) concerning the protection of human health, the Environment, the
conditions of the work place or the generation, transportation, storage,
treatment or disposal of Dangerous Substances.

"Environmental Reports" means each of the environmental reports prepared by ERM
dated December 1997 or January 1998 in relation to the Group and the Kirkland &
Ellis Memorandum dated 16 December 1997 entitled "Summary of Material
Environmental Issues" (each an "Environmental Report").

"Environmental Licence" means any permit, licence, authorisation, consent or
other approval required by any Environmental Law.

"ERISA" means the Employee Retirement Income Security Act of 1974 of the USA as
amended from time to time or any successor statute and any regulations
promulgated thereunder.

"ERISA Affiliate" means each Person (as defined in Section 3(9) of ERISA whether
or not incorporated, which is a Subsidiary of or under common control or would
be considered a single employer with any Obligor domiciled in the United States
within the meaning of section 414(b), (c), (m) or (o) of the IRC and regulations
promulgated under those sections or within the meaning of section 4001(b) of
ERISA.

"Escrow Letter" means the letter from the Facility Agent acknowledged by the
Company dated on or about the date hereof regarding the various payments to be
made at or about the Closing in respect of the Closing.

"Euro-Dollar Reserve Percentage" means, for any day, that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System of the USA (or any successor), for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion Dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category or
extensions of credit or other assets which includes loans by a non-United States
of America office of any bank to United States of America residents).

"Event of Default" means any one of the events specified in Clause 21.1.

                                       11
<PAGE>
 
"Exchange Agreement" means the exchange agreement executed and delivered or to
be executed and delivered (as the case may be) by Derby, L.L.C and Perseus Cycle
L.L.C pursuant to the terms of the Recapitalisation Agreement and in the form
exhibited thereto.

"Executive" means any of Klaas Dantuma, William J. Austin Farid Vaiya, Kim
Roether, Mark Todd, John V. Spon-Smith and Irwin R. Slotar and Peter Miller and
any replacement for any of them (together the "Executives").

"Executive Officer" means any of the Chief Executive Officer and the Chief
Financial Officer.

"Existing Financial Indebtedness" means the Financial Indebtedness of the
Company and its Subsidiaries immediately prior to Closing that is defined as
such in the Funds Flow Memorandum and which is identified therein as being
required to be repaid in full, and the commitment in respect thereof (if any) is
to be cancelled and reduced to zero at Closing.

"Expiry Date" means, in relation to a Standby L/C, the date specified as such in
the Standby L/C Request relating thereto.

"Facility" means

(a)  when designated "Revolving", the revolving credit facility referred to in
     Clause 2.1;

(b)  when designated "Ancillary", one of the ancillary facilities referred to in
     Clause 2.1;

(c)  when designated "Standby L/C", the standby letter of credit facility
     referred to in Clause 2.1; and

(d)  without any such designation, the Revolving Facility, the Ancillary
     Facilities or the Standby L/C Facility as the context requires;

and the "Facilities" means the Revolving Facility, the Ancillary Facility and
the Standby L/C Facility taken together.

"Facility Agent's Spot Rate of Exchange" with respect to any Optional Currency
on any day means the spot rate of exchange of the Facility Agent (as determined
by the Facility Agent based on market rates then prevailing and capable of being
obtained by the Facility Agent) for the purchase of the appropriate amount of
such Optional Currency with Deutschmarks in the London Foreign Exchange Market
in the ordinary course of business at or about 10.00 a.m. on the day in question
for delivery, if the Optional Currency is Sterling, on such day and, in all
other cases, two Business Days thereafter.

"Facility Office" means, in respect of any Finance Party, the office through
which it will perform its obligations under this Agreement as notified to the
Facility Agent prior to it becoming a Finance Party or (unless otherwise agreed
by the Facility Agent) by five Business Days' notice.

                                       12
<PAGE>
 
"Fee Letters" means each of the letters referred to in Clause 26.6 and 26.7 in
relation to the agency fees and the arrangement fee respectively.

"Final Repayment Date" means the date falling 84 months after 12 May 1998.

"Finance Documents" means, the Senior Finance Documents, the Note Documents, the
Recapitalisation Documents, the GSIC Note Documents, and any other document
notified by the Facility Agent (acting reasonably) to the Company as being a
"Finance Document" (any such document being a "Finance Document" from the date
of the notification being given in respect thereof by the Facility Agent) (each
a "Finance Document").

"Finance Party" means the Arranger, each Bank, the Security Agent and the
Facility Agent (together the "Finance Parties").

"Financial Accounts" means from time to time:

(a)  the latest audited consolidated annual accounts of the Group;

(b)  the latest unaudited consolidated quarterly accounts of the Group;

(c)  the latest unaudited monthly management accounts of the Group;

(d)  any other audited or unaudited consolidated or unconsolidated accounts or
     management accounts (if any) of the Group or any Group Member; and

(e)  in respect of any period prior to Closing, the Pre-Closing Proforma
     Accounts of the Group for such period,

delivered or required to be delivered to the Facility Agent pursuant to this
Agreement, or such of those accounts as the context requires.

"Funds Flow Memorandum" means the flow of funds memorandum in the agreed form
prepared on behalf of the Company by Arthur Andersen containing details of the
flow of funds at Closing.

"Gazelle" means Koninklijke Gazelle BV.

"General Provisions" is defined in the Approved Provisioning Procedure.

"Germany" means the Federal Republic of Germany.

"Group" means the Company and its Subsidiaries from time to time.

"Group Member" means, at any time, a member of the Group at such time.

                                       13
<PAGE>
 
"GSIC Loan" means the senior subordinated loan agreement in the agreed form and
made between the Company and the GSIC Noteholder dated on or around 28 January
1999 pursuant to which the Company is to issue a series of 19% fixed rate
subordinated unsecured loan notes due 2009 (with an annual effective rate of
20.9%) in an aggregate amount of US$20,000,000.

"GSIC Noteholder" means Vencap Holdings (1992) Pte Ltd.

"GSIC Note Documents" means the GSIC Loan, the GSIC Notes, the Stockholders'
Agreement and the Side Letter as at the date of the completion of the Diamond
Back Acquisition.

"GSIC Note Issuer" means The Derby Cycle Corporation (in its capacity as the
issuer of the GSIC Notes).

"GSIC Notes" means the unsecured, subordinated, payment-in-kind and non-
guaranteed notes issued or to be issued by the GSIC Note Issuer to the GSIC
Noteholder, pursuant to the GSIC Loan as at the date of the completion of the
Diamond Back Acquisition.

"Guarantee" means:

(a)  in relation to any UK Obligor or U.S. Obligor the form of guarantee set out
     in Clause 23 of this Agreement; and

(b)  in relation to any other Obligor the form of guarantee set out in Clause 23
     of this Agreement or such other form of guarantee as the relevant Obligor
     shall be required to provide in accordance with the terms of this Agreement
     so as to give either:

     (i) at least the same level of support as such Obligor would have provided
had such Obligor been able to become a party to this Agreement as a result of
having executed and delivered a duly completed Guarantor Accession Agreement if
to do so would not be contrary to applicable laws; or

     (ii) the maximum level of support as such Obligor may provide having regard
to the applicable laws.

"Guarantor" means each entity identified as a Guarantor in Schedule 2 and each
Additional Guarantor (together the "Guarantors").

"Hedging Counterparty" means any Bank who enters into a Hedging Protection
Agreement as permitted by and in accordance with the terms of this Agreement and
the Approved Hedging Programme.

"Hedging Protection Agreements" means any and all interest cap and/or other
hedging agreements entered into or committed to be entered into by a Group
Member in relation to the Group's floating rate interest and/or currency
exposure under the Finance Documents as have been (and/or as may hereafter be)
agreed in writing between the Company and the Facility Agent to constitute the

                                       14
<PAGE>
 
Hedging Protection Agreements (each a "Hedging Protection Agreement").

"Holding Company" means, in respect of any Person, any company or corporation
(or for the purposes of Clause 19.5(aa) only) other legal entity of which such
Person is a Subsidiary.

"IGF Liquidation" means the proposed liquidation of the Inter Derby Group
Finance N.V. in a manner satisfactory to the Facility Agent.

"Indemnity Undertaking" means the indemnity undertaking in the agreed form dated
on or about the date of this Agreement pursuant to which, inter alia, Derby
L.L.C and Perseus Cycle L.L.C agree to make claims arising in respect of Clauses
6 and 9 of the Recapitalisation Agreement and to apply the proceeds of any such
claim in the manner detailed therein.

"Immediate Subsidiary" means each Group Member that is an immediate Subsidiary
of the Company or Lyon Investments B.V. being, as at the date of this Agreement
Lyon Investments B.V., Sturmey Archer Limited, Raleigh Industries of Canada
Limited, Derby Trading Co. Inc and Derby Holding B.V. and Derby Sweden AB.

"Information Memoranda" means the information memorandum so entitled dated April
1998 prepared by the Arranger at the Company's request and on its behalf in
connection with this Agreement as supplemented by all relevant information
contained in the Senior Notes' Offering Memoranda dated April 1998 and May 1998
respectively.

"Information Package" means the Business Plan, the Information Memorandum, the
Reports, the Transaction Costs Letter and any other information distributed by
the Arranger at the Company's request and on its behalf in connection with this
Agreement.

"Initial Note Purchasers" means Chase Securities, Inc., Chase Manhattan Bank AG
and Chase Manhattan International Limited.

"Intellectual Property Rights" means all know-how, patents, trademarks, service
marks, designs, business names, topographical or similar rights, copyrights and
other intellectual property rights and any interests (including by way of
licence) in any of the foregoing (in each case whether registered or not and
including all applications for the same) of any Group Member.

"Intercreditor Agreements" means:

(i)  the agreement entitled "Intercreditor Agreement" dated 13 May 1998 made
     between, amongst others, the parties to this Agreement and each Hedging
     Party pursuant to which their respective interests in the Group and amongst
     themselves are regulated;

(ii)  the agreement dated on or about [28 January 1999] and made between,
      amongst others, the parties to this Agreement, the Persons described
      therein as the Subordinated Note Holders and the Subordinated Note Issuers
      and pursuant to which the claims of the said Subordinated Note Holders
      against the said Subordinated Note Issuers are subordinated to the
      interests

                                       15
<PAGE>
 
      and rights of the Finance Parties under the Senior Finance Documents; and
 
(iii) the agreement dated on or about [28 January 1999] and made between,
      amongst others, the parties to this Agreement and the GSIC Noteholder
      pursuant to which the rights of the GSIC Noteholder are subordinated to
      the interests and rights of the Finance Parties under the Senior Finance
      Documents;

(each agreement referred to at (i), (ii) and (iii) above an "Intercreditor
Agreement").

"Intercreditor Agreement Accession Memorandum" means in respect of an
Intercreditor Agreement an Accession Memorandum as defined in and delivered
under or pursuant to such Intercreditor Agreement.

"Interest Date" means, in relation to any Advance or any Overdue Amount, the
last day of the Term or, as the case may be, the Default Interest Period
relating thereto.

"Intra-Group Loan Memorandum" means the memorandum in the agreed form detailing
all intra-group loans existing at and which will be in existence immediately
after Closing prepared by the Company and delivered to the Facility Agent
hereunder.

"Inventory" has the meaning given to such term in Clause 6.10.

"Investment" is defined at Clause 19.5(n).

"Investors" means each of those Persons that subscribe for (or agree to
subscribe for) Shares pursuant to or in connection with the Recapitalisation
Agreement or are a shareholder of the Company.

"IRC" means the Internal Revenue Code of 1986 (as amended from time to time) of
the USA.

"Irish Debentures" means each of the debentures governed by the laws of Ireland
entered into by certain Group Members in favour of the Security Agent and
forming part of the Security Documents (each an "Irish Debenture").

"Issue Date" means, in relation to any Standby L/C, the date for the issue
thereof as specified in the Standby L/C Request relating thereto.

"Joint Venture" means all joint venture entities, whether a company,
unincorporated firm, undertaking, joint venture, association, partnership or
other entity in which any Group Member has an interest from time to time.

"Legal Due Diligence Report" means the report prepared by Kirkland & Ellis dated
18 March 1998 addressed to the Facility Agent for itself and on behalf of the
Banks.

"Letter of Engagement" means, in respect of any Report, the letter of
instruction pursuant to

                                       16
<PAGE>
 
which person that prepared such Report was engaged to do so.
 
"LIBOR" means in relation to any Advance or Overdue Amount, on any day, the
London Interbank Offered Rate for deposits in the specified currency, being
determined by the Facility Agent to be either:

(a)  the offered rate (if any) for the specified term which appears on page 3750
     of the Telerate screen which displays British Bankers Association Interest
     Settlement Rates for deposits in the specified currency for the period for
     which such rate is to determined at 11.00am London time on the relevant
     Quotation Date or, if such page or such service shall cease to be
     available, such other page or service displaying the London Interbank
     Offered Rates in such currency of prime banks as the Facility Agent shall,
     after consultation with the Banks and with the approval of the Company,
     such approval not to be unreasonably withheld or delayed, select as at
     11.00am London time on the relevant Quotation Date for the specified term;
     or

(b)  if no such display rate is then available for such period or currency and,
     at the time, the Facility Agent has not selected any alternative service as
     contemplated in (a) above, the arithmetic mean (rounded upwards, if not
     already such a multiple, to the nearest whole multiple of one sixteenth of
     one per cent. per annum) of the respective rates notified to the Facility
     Agent by each of the Reference bank as the rate at which it is offered
     deposits in an amount approximately equal to the relevant Advance or unpaid
     sum in the specified currency and for the specified term by prime banks in
     the London Interbank Market at 11.00am London time on the relevant
     Quotation Date for the specified term,

and for the purpose of this definition "specified currency" means the currency
of such Advance or, as the case may be, Overdue Amount and "specified term"
means the Term of such Advance or, as the case may be, the period in respect of
which LIBOR falls to be determined on that day in relation to such unpaid sum.

"Listing" means a listing of equity on the London Stock Exchange or any other
stock exchange as the same is determined by the Facility Agent acting reasonably
(and "Listed" shall be construed accordingly).

"Majority Banks" means a Bank or group of Banks whose aggregate Revolving
Commitments amount to more than sixty-six and two thirds per cent. of the Total
Commitments or, if each Bank's Commitment has been reduced to zero, would have
amounted in aggregate to more than sixty-six and two thirds per cent. of the
Total Commitments, immediately prior to such reduction to zero and, for the
purposes of this definition, the provisions of Clause 7 and any Ancillary
Commitment of any Ancillary Bank shall be ignored and be treated as if such
Bank's Revolving Commitment had not been reduced in accordance with Clause 7.

"Management Agreement" means the management agreement (if any) in the agreed
form between Thayer and the Company.

                                       17
<PAGE>
 
"Margin" means two per cent. (2.00%) per annum, provided that if at any time any
consolidated Financial Accounts of the Group delivered to the Facility Agent
pursuant to Clause 19.1(a)(i) for an annual Accounting Period or Clause
19.1(a)(ii) for a quarterly Accounting Period, disclose that:

(a)  Consolidated Adjusted EBITDA calculated on a Rolling 4 Quarterly basis is
     more than $45,000,000 and the ratio of Consolidated Adjusted EBITDA to
     Consolidated Net Interest Payable calculated on a Rolling 4 Quarterly basis
     is greater than 2.35:1 the Margin shall be 1.75 per cent. per annum;

(b)  Consolidated Adjusted EBITDA calculated on a Rolling 4 Quarterly basis is
     more than $50,000,000 and the ratio of Consolidated Adjusted EBITDA to
     Consolidated Net Interest Payable calculated on a Rolling 4 Quarterly basis
     is greater than 2.75:1 the Margin shall be 1.50 per cent. per annum; and

(c)  Consolidated Adjusted EBITDA calculated on a Rolling 4 Quarterly basis is
     more than $55,000,000 and the ratio of Consolidated Adjusted EBITDA to
     Consolidated Net Interest Payable calculated on a Rolling 4 Quarterly basis
     is greater than 3.00:1 the Margin shall be 1.25 per cent per annum,

in each case during (but only during) the period from (and including) the date
on which the Facility Agent has received the relevant Financial Accounts
pursuant to Clause 19 and the report and certificate relating thereto pursuant
to Clause 19 or has received the relevant Financial Accounts for each of those
four consecutive quarterly Accounting Periods pursuant to Clause 19 and the
certificates relating thereto pursuant to Clause 19, as the case may be, until
(but excluding) the earlier of the following dates:

 (i)   the date on which the Facility Agent next receives the relevant
       Financial Accounts for an annual Accounting Period pursuant to Clause
       19 and a report and certificate relating thereto pursuant to Clause
       19;

 (ii)  the date on which the Facility Agent receives the relevant Financial
       Accounts for the next succeeding quarterly Accounting Period of the
       Group pursuant to Clause 19 and a certificate relating thereto
       pursuant to Clause 19;

(iii)  the latest date (the "Latest Date") by which the Facility Agent
       should have received any such Financial Accounts and certificates in
       accordance with the terms of such Clauses where the Facility Agent
       has not received the same by such date.

Provided that:

(i)   until the first anniversary of Closing the Margin will be two per
      cent. (2.00%) per annum;

(ii)  if the Facility Agent receives any such Financial Accounts, report
      and/or certificates after the Latest Date and such Financial Accounts
      and certificates show that the tests in sub-paragraphs (a), (b) or,
      as the case may be, (c) are met then the Margin shall be adjusted

                                       18
<PAGE>
 
       with effect from the date of such receipt (and without retrospective
       effect) to the level provided for above; and

(iii)  if a Default has occurred, the Margin will be two per cent. (2.00%)
       per annum until such time, if any, as no Default is continuing that
       has not been waived or remedied in accordance with the provisions of
       this Agreement, as a different percentage should apply in accordance
       with this definition.

"Market Reports" means the reports dated 28 January 1998 prepared by the Coba
Group entitled "Market Assessment of The Derby Bicycle Group" addressed to,
inter alios, the Company and the Facility Agent for itself and on behalf of the
Banks.

"Material Adverse Effect" means any effect which could reasonably be expected:

(a)  to be materially adverse to (i) the ability of the Company or any other
     Obligor to perform its obligations under any of the Finance Documents, or
     (ii) the business, assets, prospects or financial condition of any Material
     Group Member; and/or

(b)  (where the context so admits) to result in any of the Transaction Documents
     not being legal, valid and binding on, and enforceable substantially in
     accordance with its material terms against any party to that Transaction
     Document and/or (in the case of Security Documents) not providing to the
     Security Agent for itself and on behalf of the Banks, perfected,
     enforceable security over the assets expressed to be covered by that
     Security Document, in a manner and to an extent reasonably considered by
     the Majority Banks to be materially adverse to their interests under the
     Senior Finance Documents.

"Material Group Member" means each Obligor and each other Group Member (a) whose
earnings before interest, tax, depreciation and amortisation represent five per
cent. or any greater percentage, of the Consolidated Adjusted EBITDA of the
Group, or (b) the book value of whose gross assets is five per cent. or more of
the consolidated gross assets of the Group, in either case determined in
accordance with the Applicable Accounting Principles, or (c) whose aggregate
sales to non-Group Members in any annual Accounting Period, in accordance with
the Applicable Accounting Principles and excluding VAT and/or sales tax, have
been, or are budgeted to be, at least five per cent. or more of the aggregate
sales of the Group to non-Group Members (similarly calculated), and for this
purpose:

(i)  in the case of a company which itself has Subsidiaries, the calculation
     shall be made by using the consolidated earnings before interest, tax,
     depreciation and amortisation, gross assets or aggregate sales, as the case
     may be, of it and its Subsidiaries;

(ii) the calculation of consolidated earnings before interest, tax, depreciation
     and amortisation or gross assets or aggregate sales shall be made by
     reference to:

(A)  the latest Financial Accounts of the relevant company (or, as the case may
     be) (a consolidation of the Financial Accounts of it and its Subsidiaries)
     used for the purpose of

                                       19
<PAGE>
 
      the then latest unaudited quarterly or audited annual consolidated
      Financial Accounts of the Group delivered to the Facility Agent under
      Clause 19.1;

(B)   those unaudited quarterly or audited annual consolidated Financial
      Accounts (as the case may be) of the Group; and

(C)   shall exclude any intra-Group item; and

(iii) any Subsidiary not falling within paragraphs (a), (b) or (c) above but
      which, as a result of any intra-Group transfer re-organisation or
      acquisition would, adopting any of the tests referred to in paragraphs
      (a), (b) or (c) above and as if the Financial Accounts referred to in such
      paragraphs had been drawn up immediately following such transfer,
      reorganisation or acquisition, be a Material Group Member Provided that
      such Subsidiary shall only become a Material Group Member upon the
      completion of such transfer, reorganisation or acquisition.

"Material Insurances" means the each of those insurances specified as being
material in the list provided pursuant to paragraph 17 of Schedule 6 and such
other insurances as are designated material insurances by the Facility Agent
(acting reasonably) for the purposes of this Agreement from time to time.

"Material Intellectual Property Right" means, any Intellectual Property Right
which the Facility Agent has determined to be material for the purposes of the
Senior Finance Documents whether or not such Intellectual Property Right is
actively used by any Group Member at the time of such determination or has been
used by any Group Member previously or otherwise and shall include the
Intellectual Property Rights specifically listed in the Security Documents.

"Maximum Amount" means the maximum extent of the obligations of the Swedish
Obligor under Clause 23 in accordance with the provisions of Clause 23.1(v).

"Model" means the management case financial model for the Derby Bicycle
Corporation detailed in the Information Memorandum.

"Moody's" means Moody's Investor Services Limited.

"MS Group Option" means the right of Robert Holzer to purchase such number of
shares of Univega Beteiligungen GmbH as shall represent 10% of the beneficial
ownership of MS Sport Vertriebs GmbH and MS Sport Vertriebs AG. Switzerland
under Section 8(b) of Part 2 of the notarial deed No. 270/1997 of the Hamburg
notary Jonetzi dated August 8, 1997).

"month" means a period starting on one day in a calendar month and ending on the
numerically corresponding day in the following calendar month, unless such
corresponding day is not a Business Day, in which case it shall end on the next
day which is a Business Day or, if there is not a corresponding day in that
calendar month, the last Business Day in that calendar month.

                                       20
<PAGE>
 
"Multiemployer Plan" means a plan which is a multiemployer plan as defined in
section 4001 (a)(3) of ERISA.

"Netherlands" means the Kingdom of the Netherlands.

"New Bank" means a bank or financial institution to which a Bank seeks to
transfer all or part of such Bank's rights and obligations hereunder.

"Non-UK Obligor" means any Obligor that is not a UK Obligor.

"Note Documents" means (to the extent that the same are entered into by the
entities expressed to be a party thereto) the Note Indentures, the Senior Notes,
the Note Purchase Agreement and the Registration Rights Agreement, any related
engagement, fee or indemnity agreements and any ancillary agreements
contemplated by the foregoing.

"Note Indentures" means the indentures in the agreed forms dated the date of
this Agreement among the Note Issuers, and the applicable Note Trustee pursuant
to which the Senior Notes will be issued.

"Note Issuers" means collectively The Derby Cycle Corporation and Lyon
Investments B.V. (each a "Note Issuer").

"Note Purchase Agreement" means the note purchase agreement in the agreed form
dated 12 May 1998 among the Note Issuers and the Initial Purchasers in
connection with the offering of Senior Notes.

"Note Trustee" means, as of 12 May 1998, the entity described therein as Trustee
under each of the Note Indentures, and any other Person appointed to such
position from time to time, in accordance with the provisions of the applicable
Note Indenture.

"Noteholder" means a Person who is the beneficial owner of one or more Senior
Notes (together "the Noteholders").

"Novation Certificate" means a certificate substantially in the form set out at
Schedule 8.

"Obligor" means each Borrower and each Guarantor and any other Group Member
which has been required to enter into (whether or not it has yet entered into)
any Accession Agreement and/or Security Document pursuant to Clauses 19.4(d),
19.4(e), 19.4(f), 19.4(g) or 23 (together the "Obligors").

"Obligors' Agent" means the Company, appointed to act on behalf of each Obligor
in relation to the Finance Documents pursuant to Clause 2.3(c).

"Optional Currency" means any currency which is freely transferable and freely
convertible into Deutschmarks and which is available to banks in the London
Interbank Market.

                                       21
<PAGE>
 
"Overdue Amount" is defined at Clause 9.

"Party" means any Person party to this Agreement.

"PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.

"Permitted Acquisition" is defined at Clause 19.5(d)(v).

"Permitted Amount" means, in any annual Accounting Period the aggregate of:

(i)   to the extent that the Investment or, as the case may be, the Permitted
      Acquisition, is to be financed by means of funds raised by means of the
      issuance of ordinary shares in the Company or subordinated unsecured debt
      on terms acceptable to the Majority Banks (in accordance with the
      provisions of the Senior Finance Documents), $10,000,000 (or in the annual
      Accounting Period ending 31 December 1999 only $42,800,000 provided such
      amount is used solely for the Diamond Back Acquisition) (or the equivalent
      in other currencies); and

(ii)  to the extent that the Investment or, as the case may be, the Permitted
      Acquisition, is to be financed by means of Financial Indebtedness not
      subordinated on terms satisfactory to the Majority Banks raised from third
      party financial institutions;

(i)   if the Margin at the beginning of the relevant annual Accounting Period
      is 2.00 per cent. per annum, $5,000,000 (or its equivalent in other
      currencies);

(ii)  if the Margin at the beginning of the relevant annual Accounting Period is
      1.75 per cent. per annum, $7,500,000 (or its equivalent in other
      currencies); and

(iii) if the Margin at the beginning of the relevant annual Accounting Period is
      1.50 per cent. per annum or less, $10,000,000 (as its equivalent in other
      currencies),

Provided that, if all or any Investment or, as the case may be, the Permitted
Acquisition is to be financed (whether in whole or part) or, in the case of a
contingent liability or exposure of a Group Member in respect of an Investment,
will be financed (whether in whole or in part) by means of Financial
Indebtedness raised from third party financial institutions, the Facility Agent
shall have received at least 5 Business Days' prior notice thereof, together
with a certificate signed by both of the Executive Officers (without incurring
personal liability) confirming (i) that the Investment or, as the case may be,
the Permitted Acquisition will not, immediately thereafter, result in any Group
Member being responsible for any contingent liabilities as a result of such
Investment or, as the case may be, such Permitted Acquisition other than (if it
is the case) as a result of a guarantee given in respect thereof, the maximum
contingent exposure thereunder of which has been included in determining whether
the Investment or, as the case may be, the Permitted Acquisition is permitted
pursuant to the provisions of the Senior Finance Agreements; and (ii) that in
the twelve months immediately following the date of such certificate, together
with such supporting evidence

                                       22
<PAGE>
 
as the Facility Agent may request (including, without limitation, a report
prepared by the Auditors addressed to the Facility Agent and the Banks), no
Default could reasonably be expected to occur as a result of the proposed
Investment or, as the case may be, the proposed Permitted Acquisition and that
there will be no breach of Clause 20.

"Permitted Encumbrance" means:

(a)   Encumbrances constituted or evidenced by the Security Documents;
    
(b)   Encumbrances existing as at 12 May 1998, details of which have been
      disclosed in writing and which are acceptable to the Facility Agent prior
      to the Closing Provided that the Financial Indebtedness to which such
      Encumbrance relates is not owed to a Beneficiary of a Standby L/C that has
      been provided in support of such Financial Indebtedness;
    
(c)   Encumbrances arising by operation of law provided that the same do not
      arise as a result of default and any such unpaid fees are discharged as
      soon as is reasonably practicable after the Company (or the relevant Group
      Member) becomes aware thereof;
    
(d)   a lien arising in favour of a warehouseman or shipper that arises under
      the standard terms and conditions of such warehouseman or, as the case may
      be, such shipper that relates to unpaid fees payable to such warehousemen
      or, as the case may be, such shipper in such capacity only Provided that
      the same do not arise as a result of a default and are discharged as soon
      as is reasonably practicable after the Company (or the relevant Group
      Member) becomes aware thereof and, in any event within 30 days of such
      amount becoming payable;

(e)   any Encumbrance over or affecting any assets of any company which becomes
      a Group Member (that is not an Obligor) after the date hereof, where such
      Encumbrance is created prior to the date on which such company becomes a
      Group Member Provided that:

(i)   such Encumbrance was not created at the request of any Group Member in
      contemplation of such company becoming a Group Member;

(ii)  the amount thereby secured (save any overdrawn amount on the current
      account of any such company within the terms (in existence on the date
      when such company becomes a Group Member) of an overdraft (or other
      equivalent facility granted to such company prior to its becoming a Group
      Member) has not been increased in contemplation of, or since the date of,
      such company becoming a Group Member;

(iii) the Person in whose favour the Encumbrance was granted does not have
      recourse to any Group Member (or any of their respective assets) (other
      than the Group Member that granted the Encumbrance) in respect of the
      indebtedness to which such Encumbrance relates; and

(iv)  the Encumbrance relates only to assets of the relevant Group Member that
      were in existence at the time such company became a Group Member; and

                                       23
<PAGE>
 
(f)  Encumbrances not referred to at paragraphs (a) - (e) above or (g) or (h)
     below, provided that the aggregate book value of the asset or assets over
     which all such Encumbrances have been granted by Obligors does not exceed
     (in aggregate) $1,000,000 (or the equivalent in other currencies), and, in
     respect of Group Members that are not Obligors, does not exceed (in
     aggregate) $1,000,000 (or the equivalent in other currencies).

(g)  Encumbrances existing as at 12 May 1998 to secure Financial Indebtedness
     over the assets of a Group Member incorporated in South Africa;

(h)  Encumbrances granted in favour of an Ancillary Bank arising solely out of
     arrangements concerning the Ancillary Facility provided by such Ancillary
     Bank to Group Members whereby outstanding debit and credit balances
     thereunder may, from time to time, be netted off or consolidated; and

(i)  For the avoidance of doubt, at no time shall a Group Member grant an
     Encumbrance in respect of the GSIC Notes in favour of the GSIC Noteholder
     and the GSIC Trustee and their permitted successors, assignees or
     transferees.

(j)  Encumbrances created as at the date of the completion of the Diamond Back
     Acquisition granted by the Swedish Obligor to the issuing bank in respect
     of the Financial Indebtedness referred to at part (vii) of the definition
     of Permitted Financial Indebtedness provided that such Encumbrances are
     released within 30 days of the completion of the Diamond Back Acquisition.

"Permitted Financial Indebtedness" means (without double-counting):

     (a) in respect of the Company, any indebtedness (i) incurred under the
Finance Documents, (ii) as permitted under Clause 19.5(c) of this Agreement or
(iii) as contemplated in the definition of Permitted Amount;

     (b) in respect of Lyon Investments B.V., any indebtedness (i) incurred
under the Note Documents and in respect of the Notes and (ii) as permitted under
Clause 19.5(c) of this Agreement; and

     (c) in respect of a Group Member (other than the Company and Lyon
Investments B.V.), any indebtedness:

     (i)   incurred under the Finance Documents other than the GSIC Note
           Documents;

     (ii)  as permitted by Clauses 19.5(c) and 19.5(d);
     
     (iii) Financial Indebtedness owed to a Beneficiary of a Standby L/C to the
           extent such Financial Indebtedness is supported by such Standby L/C;

     (iv)  in addition to any Financial Indebtedness able to be incurred or
           permitted to subsist pursuant to paragraphs (i), (ii), (iii), (v),
           (vi) or (vii) of this definition:

                                       24
<PAGE>
 
           [members of the South African Group may incur Financial Indebtedness
           (in aggregate) in the aggregate principal amount of DM11,000,000 (or
           the equivalent thereof in other currencies); and

       (B) in respect of the Group as a whole (excluding the South African
           Group) $1,000,000 (or the equivalent thereof in other currencies);

     (v)   Financial Indebtedness in respect of finance leases existing as
           at the date of this Agreement which have been disclosed in writing to
           the Facility Agent prior to the date of this Agreement;

     (vi)  Financial Indebtedness incurred by a Dormant Subsidiary as at Closing
           to the extent disclosed prior to the date of this Agreement;

     (vii) Financial Indebtedness existing as at the date of the completion of
           the Diamond Back Acquisition in respect of  letters of credit or, as
           the case may be, custom guarantees issued at the request of Bejka
           Trading AB in an amount not exceeding in aggregate US$360,000 and
           details of which have been disclosed to the Facility Agent prior to
           such date provided that they are cancelled within 30 days of the
           completion of the Diamond Back Acquisition and an amount in cash
           equal to the aggregate issued amount of such letters of credit is
           credited to the account of the relevant issuing bank  on the date of
           the completion of the Diamond Back Acquisition.

"Permitted Recipient" is defined at Clause 29.6.

"Person" shall include any person, firm, company, corporation, Government, State
or agency of a State or any association or partnership (whether or not having a
separate legal personality) of two or more of the foregoing.

"Perseus" means Perseus Capital, a merchant banking venture headquartered in
Washington DC and managed by Perseus Management L.L.C..
 
"Plan" means any employee pension benefit plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which the Company or any ERISA Affiliate
is (or, if such plan were terminated, would under Section 4069 of ERISA be
deemed to be) an "employer" as defined in Section 3(5) of ERISA.

"Potential Event of Default" means:

(a)  an event which, with the passage of time, the giving of notice or the
     making of any determination (or any combination of those three), would, or
     could reasonably be expected to, become an Event of Default; or

(b)  the making of a Drawdown Request for the purpose of funding or supporting a
     payment due under the Senior Notes which the Facility Agent, acting on the
     instructions of the Majority Banks, reasonably considers it likely to
     result in an Event of Default.

                                       25
<PAGE>
 
"Pre-Closing Accounts" means the combined balance sheet, income statement and
cashflow statement of the Group in the agreed form prepared in accordance with
Applicable Accounting Principles by the Company relating to the period
commencing 1 January 1997 and ending 31 December 1997.

"Proforma Financial Accounts" means a set of proforma quarterly and monthly
accounts in the agreed form detailing the type and level of information which
will be provided in each of the Accounts specified in Clauses 19.1(a)(ii) and
19.1(a)(iii) and the type of issues to be covered in any written report to be
provided by the Executive Officers as part of such Financial Accounts and
showing the heading, format and other characterisations of each of such
Financial Accounts.

"Qualifying Bank" means:

(a)  in respect of a Borrower located in the United Kingdom a bank as defined in
     Section 840A Taxes Act 1988 for the purposes of Section 349 of that Act
     which is within the charge to UK Corporation tax in respect of any interest
     payable or paid to it under this Agreement;

(b)  in respect of a Borrower located in a jurisdiction other than the United
     Kingdom or Canada:

     (i)   a bank for the time being lending through a branch, Affiliate or
           agency in that other jurisdiction; or

     (ii)  a bank lending through any other branch, Affiliate or agency if, at
           the time the bank becomes a party to this Agreement, the bank or
           Affiliate (as the case may be) is resident or incorporated in a
           country with which that other jurisdiction has an appropriate double
           taxation treaty pursuant to which that bank or Affiliate (as the case
           may be) is entitled to receive interest and fees under this Agreement
           from the Borrower without deduction or withholding of that other
           jurisdiction's income Tax, or is otherwise entitled to receive
           interest and fees without such deduction or withholding and where, at
           such time, there has been no public announcement made by the relevant
           taxing authorities in such jurisdiction of an intention to change the
           entitlement of the bank or Affiliate to receive principal, interest
           and fees under this Agreement from any such Borrower without such
           deduction or withholding; or

     (iii) any Bank that is a party to this Agreement as at the date hereof or
           becomes a party hereto within thirty days of the date hereof; and

(c)  in respect of a Borrower incorporated in Canada, any Bank.

"Quotation Date" means, in relation to any period for which an interest rate is
to be determined hereunder, the day on which quotations would ordinarily be
given by prime banks in the London Interbank Market for deposits in the currency
in relation to which such rate is to be determined for delivery on the first day
of that period Provided that, if for any such period quotations would ordinarily
be given on more than one date, the Quotation Date for that period shall be the
last of those dates.

"Recapitalisation" means the reorganisation of Derby International and its
Subsidiaries and the

                                       26
<PAGE>
 
recapitalisation of the Company (in each case) pursuant to the Recapitalisation
Agreement.
 
"Recapitalisation Agreement" means the agreement dated 11 March 1998, as
amended, among Derby International, DFS, Derby L.L.C., Perseus Cycle L.L.C. and
the Company in relation to the Recapitalisation (and includes, inter alia, any
tax covenants, disclosure letters and all other documents delivered to or by any
party thereto pursuant or in relation to such agreement).

"Recapitalisation Documents" means the Recapitalisation Agreement, the Exchange
Agreement, the Disclosure Exhibits, the Recapitalisation Agreement Assignment,
the Shareholders Agreement, the Registration Agreement, the Certificate of
Incorporation together with any other agreement or document relating to, or
giving effect to, the Recapitalisation.

"Reference Banks" means the principal London office of Chase Manhattan Bank,
Midland Bank PLC and ABN Amro N.V. and/or such other Banks as may become
Reference Banks pursuant to Clause 31.8.

"Registration Agreement" means the Agreement so entitled among the Company, DFS,
Perseus Cycle L.L.C and Derby Cycle L.L.C in relation to the Recapitalisation.

"Registration Rights Agreement" means the Exchange and Registration Rights
Agreement in the agreed form dated the date of this Agreement among the Note
Issuers and the Initial Purchasers in connection with the offering of Senior
Notes.

"Relevant Purchaser" means for the purposes of Clause 19.5(aa)(1) only any
Person, and for the purposes of Clause 19.5(aa)(2) only DC Cycle LLC or Perseus
Cycle LLC, and for the purposes of Clause 19.5(aa)(3) only, DC Cycle LLC or any
of its Affiliates (other than a Group Member) or a Person carrying on the
business of a bicycle manufacturer or/and bicycle distributor which is not an
existing investor of the Company or, with the prior consent of the Facility
Agent, any Person.

"Repayment Date" means, in relation to any Advance, the last day of the Term
thereof.

"Reports" means each of the Accountant's Report, the Diamond Back Acquisition
Due Diligence Report, the Legal Due Diligence Report, the Market Reports, the
AON Insurance Report, the AON Pensions Report, the Environmental Reports and the
Property Report.

"Request" means a Drawdown Request or a Standby L/C Request as the context may
require.

"Requested Amount" means:

(a)  in respect of a Drawdown Request, the principal amount requested to be
     borrowed under that Drawdown Request; and

(b)  in respect of a Standby L/C Request, the amount of the Standby L/C
     requested to be issued under that Standby L/C Request.

"Revolving Commitment" in relation to a Bank means the amount of the commitment
set opposite

                                       27
<PAGE>
 
its name in Schedule 3 under the heading "Revolving Commitment" or in the
Novation Certificate, or other document by which it became a party to or
acquired rights under this Agreement as reduced or increased by substitution or
transfer pursuant to Clause 29 and any Novation Certificate to which such Bank
is a party and to the extent not cancelled, reduced or terminated under this
Agreement.

"Revolving Facility Available Amount" has the meaning given to such term in
Clause 6.10.

"RIC" means Raleigh Industries of Canada Limited.

"Schedule" refers, unless otherwise stated, to a schedule to this Agreement.

"Security Documents" means the share charges and other security documents
identified in Schedule 14 in a form and substance satisfactory to the Security
Agent and such other security documents as may be required by the Security Agent
to be entered into by any Obligor including in relation to the accession of any
Obligor hereunder at the request of the Facility Agent pursuant to any of the
Senior Finance Documents.

"Sellers" means Derby International and DFS.

"Senior Finance Documents" means this Agreement, each Standby L/C, each
Intercreditor Agreement, the Security Documents, the Accession Agreements, any
Guarantee, any Novation Certificate, , the Indemnity Undertaking, the Fee
Letters and any other document determined by the Facility Agent, from time to
time, as being a "Senior Finance Document".

"Senior Unsecured Notes" means the unsecured, senior notes (including, for the
avoidance of doubt, the Initial Securities and the Exchange Securities, as
defined in each of the Note Indentures), issued or to be issued by the Note
Issuers (or either of them) pursuant to each of the Note Indentures in
substantially the forms attached as exhibits to the applicable Note Indenture.

"Service Contracts" means the contracts of service made between (i) each of the
Executives and a Group Member and (ii) each Director and a Group Member.

"Shareholders Agreement" means the agreement dated on or about the date of this
Agreement between the Company, DFS, Derby L.L.C. and Perseus Cycle L.L.C.
entitled "Shareholders' Agreement" pursuant to which, amongst other things, DFS,
Derby L.L.C. and Perseus Cycle L.L.C. agree to regulate their respective rights
with respect to the voting and transfer of shares in the Company.

"Side Letter" means the letter in the agreed form dated on or about the date of
the completion of the Diamond Back Acquisition made between the GSIC Noteholder,
the Company and DC Cycle LLC in respect of the right to grant the GSIC
NoteholderPIK C Preferred Shares in lieu of further GSIC Notes pursuant to the
terms of the GSIC Loan.

"South Africa" mean the Republic of South Africa.

"South African Group" means Derby Investment Holdings (Pty) Limited and each of
its Subsidiaries.

                                       28
<PAGE>
 
"South African Rand" means the lawful currency for the time being of South
Africa.

"Standard & Poor's" means Standard & Poor's Rating Services, a division of The
McGraw Hill Companies.

"Standby L/C" means a letter of credit in the form, or substantially in the
form, of that set out at Part 3 of Schedule 7, (or such other form as shall be
agreed by the Facility Agent acting on the instructions of the Majority Banks)
issued or to be issued to a Beneficiary under this Agreement.

"Standby L/C Commitment" in relation to a Bank means the amount of the
commitment set opposite its name in Schedule 3 under the heading "Standby L/C
Commitment" or in the Novation Certificate or other document by which it became
a party to or acquired rights under this Agreement as reduced or increased by
substitution or transfer pursuant to Clause 29 and any Novation Certificate to
which such Bank is a party and to the extent not cancelled, reduced or
terminated under this Agreement, such commitment forming a sub-set of, and not
being additional to, such Bank's Revolving Commitment.

"Standby L/C Request" means a request substantially in the form set out at Part
2 of Schedule 7.

"Sterling" and "(Pounds)" mean the lawful currency for the time being of the
United Kingdom.

"Stockholders' Agreement" means the agreement dated on or aboutthe date of the
completion of the Diamond Back Acquisition and made between DC Cycle LLC,
Perseus Cycle LLC and the GSIC Noteholder in relation to the GSIC Notes.

"Structure Memorandum" means the memorandum and charts provided pursuant to
paragraph 29 of Schedule 6 describing the capital and share ownership of the
Group (and giving details of any minority shareholdings in any Subsidiary),
identifying all Group Members and all interests of Group Members in other
companies, partnerships, Joint Ventures and the like, all as of and immediately
after Closing, and all reorganisational steps with respect to the Group Members
to be taken at or shortly prior to Closing or as amended post Closing and agreed
and notified to the Facility Agent.

"Swedish Obligor" means Derby Sweden AB.

"Subsidiary" means (a) a subsidiary as defined in Section 736 of the Companies
Act 1985 as amended, and/or (b) a subsidiary undertaking as defined in Section
258 of the Companies Act 1985 as amended, or, in either case, any statutory re-
enactment or replacement thereof and/or (c), (whether or not falling within (a)
or (b) above, in relation to any Person, any entity which is controlled directly
or indirectly by that Person and any entity (whether or not so controlled) is
treated as a subsidiary in the latest financial statements of that Person from
time to time, and "control" for this purpose means the direct or indirect
ownership of the majority of the voting share capital of such entity or the
right or ability to direct management to comply with the type of material
restrictions and obligations contemplated in this Agreement or to determine the
composition of a majority of the board of directors (or like board) of such
entity, in each case

                                       29
<PAGE>
 
whether by virtue of ownership of share capital, contract or otherwise.
 
"Tax" shall be construed so as to include all present and future taxes, charges,
imposts, duties, levies, deductions, withholdings or amounts or charges of a
similar nature, or any amount payable on account of, or as security for, any of
the foregoing, including any penalties, fines, surcharges or interest payable in
connection with such amounts, and "Taxes" and "Taxation" shall be construed
accordingly.

"Term" means, in relation to an Advance, the period for which such Advance is
requested to be borrowed, as adjusted under this Agreement.

"Thayer" means Thayer Equity Investors III, L.P. .

"Total Commitments" means, at any time, the aggregate for the time being of the
Banks' Revolving Commitments.

"Transaction Costs" means all fees, out-of-pocket costs and expenses and stamp
duty, registration, transfer and similar taxes incurred by the Company or any
Subsidiary thereof in connection with the negotiation, preparation and execution
of the Transaction Documents or otherwise in connection with, or resulting from,
the Recapitalisation each in the aggregate amount as set out in a letter in an
agreed form from the Company to the Facility Agent entitled "Transaction Costs"
and provided to the Facility Agent pursuant to paragraph 14 of Schedule 6 (the
"Transaction Costs Letter").

"Transaction Documents" means the Recapitalisation Documents, the Finance
Documents, the Service Contracts, the Escrow Letter, the Structure Memorandum
and the Diamond Back Acquisition Agreement.

"UK Obligors" means, at any time, each of the Obligors, at such time,
incorporated in England and Wales, Scotland and Northern Ireland.

"USA" "United States of America" means the United States of America, any of its
states or territories and the District of Columbia.

"U.S. Obligor" means, at any time, each Group Member at such time incorporated
in the United States and any other Obligor which is a U.S. Person.

"U.S. Patent Assignment for Security Purposes" means the assignment for security
purposes dated 13 May 1998 and granted by the Company in favour of the Security
Agent as the same may be amended from time to time.

"U.S. Patent and Trademark Security Agreement" means the patent and trademark
agreement dated 13 May 1998 and granted by the Company in favour of the Security
Agent as the same may be amended from time to time.

"U.S. Person" means a Person who is a citizen or resident of the USA, and any
corporation of other entity created or organised in or under the laws of the
USA.

                                       30
<PAGE>
 
"U.S. Pledge Agreement" means the pledge agreement dated 13 May 1998 granted by
the Company in favour of the Security Agent as the same may be amended from time
to time;

"U.S. Security Agreement" means the security agreement dated 13 May 1998 and
granted by the Company in favour of the Security Agent as the same may be
amended from time to time;

"Utilisation" means:

(a)  when designated "Standby L/C", a utilisation under this Agreement of the
     Standby L/C Facility;

(b)  when designated "Revolving", a utilisation under this Agreement of the
     Revolving Facility; and

(c)  without any such designation, a utilisation of the Standby L/C Facility or
     the Revolving Facility as the context requires.

"Utilisation Date" means in relation to each Advance, the date specified as such
in the relevant Drawdown Request.
 
"VAT" means value added tax owed to the United Kingdom Customs & Excise or any
similar or analogous tax in any jurisdiction owed to an equivalent authority or
body.

"Year 2000 Expenditure" means, in respect of any Person, any expenditure
incurred relating to the reprogramming required to permit the proper
functioning, in and following the Year 2000 of such Person's computer systems
and equipment containing embedded microchips (including systems and equipment
supplied by others or with which such Person's systems interface) and the
testing of all such systems and equipment, as so reprogrammed.

1.2  Financial Terms

"A Common Stock" means the voting A Common Stock of the Company authorised by
the constitutive documents of the Company as at the date hereof.

"B Common Stock" means the non-voting B Common Stock of the Company authorised
by the constitutive documents of the Company as at the date hereof.

"C Common Stock" means the voting C Common Stock of the Company authorised by
the constitutive documents of the Company as at the date of the completion of
the Diamond Back Acquisition.

"Capital Expenditure" means any expenditure which should be treated as capital
expenditure in the audited consolidated Financial Accounts of the Group in
accordance with the Applicable Accounting Principles.

"Consolidated Adjusted EBITDA"  means for any period comprising an annual
Accounting Period of the Company or four consecutive quarterly Accounting
Periods of the Company (taken together as one period) means the operating income
of the Group for such period:

                                       31
<PAGE>
 
before taking into account all Extraordinary Items (whether positive or
negative) and one-off expenses not exceeding, in aggregate, $2,900,000 incurred
in the annual Accounting Period ending 31 December 1997;

before taking into account any Transaction Costs required to be expensed through
the income statement up to a maximum aggregate amount of $6,200,000 in the
annual Accounting Period ending 31 December 1998 whether an Extraordinary Item
or otherwise and any one-off payments of premia or otherwise made by any Group
Member in connection with Hedging Protection Agreements entered into in
accordance with the Approved Hedging Programme within 30 days of the date of
this Agreement;

before taking into account to the extent deducted from operating income any
amounts expended that relate solely to Year 2000 Expenditure to the extent that
such expenditure, when aggregated with any other Year 2000 Expenditure incurred
since the date of this Agreement and prior to 31 December 1999 does not exceed
$2,700,000 (or the equivalent in other currencies);

before deducting income tax expense;

before deducting charges to depreciation and amortisation excluding amortisation
attributable to a prepaid cash item arising in the ordinary course of business,
the amortisation of any goodwill and amortisation of Transaction Costs in an
amount not exceeding $8,800,000 in aggregate in all Accounting Periods post
Closing;

before deducting Interest (whether accrued, paid, deferred or capitalised) as an
obligation of any Group Member or Interest accrued in favour of, or paid to, any
Group Member;

after deducting (to the extent otherwise included in operating income) any gain
over book value arising in favour of the Group on the sale, lease or other
disposal of any fixed or intangible asset during such period and any gain
arising on any revaluation of any fixed or tangible asset during such period;

after adding back (to the extent otherwise deducted in operating income) any
loss against book value incurred by the Group on the sale, lease or other
disposal of any fixed or intangible asset during such period and any loss
arising on any revaluation of any fixed or intangible assets during such period;

after deducting (to the extent otherwise included) the amount of retained profit
(or adding back the retained loss) of any Group Member (other than the Company)
which is attributable to the interest of any shareholder of or, as the case may
be, partner in such Group Member which is not a Group Member other than the
amount of retained profit or the amount of the retained loss of RIC which is
attributable to such non-Group Member's interest in RIC Preference Shares for so
long as such shares may be exchanged solely for B Common Stock of the Company
and carry no rights greater than as at the date of this Agreement and RIC is
prohibited from redeeming such RIC Preference Shares pursuant to the provisions
of this Agreement;

                                       32
<PAGE>
 
after deducting items which have not, or are not due to be paid in cash,
including any amortisation, credit, income or provision release (where such
provision was not originally increased by reducing operating income) or other
credit where cash was received in an earlier period.  For the avoidance of
doubt, any income related to the defined benefit pensions plans of the Group
recognised in accordance with FAS 87 and FAS 132 shall be deducted when
calculating Consolidated Adjusted EBITDA and any unrealised income or loss in
respect of the change in the mark to market value of foreign exchange contracts
recognised in accordance with FAS 52 and FAS 133 where such contracts are in
accordance with the Approved Hedging Programme, shall not be included when
calculating Consolidated Adjusted EBITDA;

and for the purposes of the foregoing no item shall be effectively taken into
account more than once in this calculation and all items shall be determined on
a consolidated basis and subject only as may be required in order to reflect the
express inclusion or exclusion of items as specified in this definition) in
accordance with the Applicable Accounting Principles and as determined from the
consolidated Financial Accounts of the Group for such annual Accounting Period
or for the quarterly Accounting Periods falling within such period or, to the
extent that such period, or part thereof, relates to the period prior to
Closing, from the Pre-Closing Accounts relating to such period;

"Consolidated Net Worth" means the amount (including any additional paid in
capital) for the time being paid up or credited as paid up on the issued share
capital of the Company (other than any Excluded Share Capital):

     plus an amount (of up to $45,000,000) in respect of the value attributable
     to equity retained by on or behalf of DFS;

     plus any amount standing to the credit of, or (as the case may be) minus
     any amount standing to the debit of the consolidated income statement of
     the Group before any adjustment made in respect of dividends on any class
     of shares of the Company to the extent that the holder of such share(s) is
     only entitled to receive, in respect thereof, payment in kind, and not cash
     or other assets;;

     minus any amount included in the above which is attributable to (a) the
     aggregate of all goodwill (to the extent created or purchased after
     Closing), titles, trademarks, copyrights, patents, capitalised research and
     development expenditure (other than research and development expenditure
     which is capitalised in accordance with the accounting policies of the
     Company in force at the date of this Agreement) and other intangible
     assets, and (b) any upwards revaluation of assets by any Group Member after
     Closing; and

     minus (to the extent otherwise included) the amount attributable to the
     interests (if any) of outside holders of issued share capital in any Group
     Member other than the Company other than RIC Preference Shares for so long
     as the same are exchangeable solely for B Common Stock and carry no rights
     greater than as at the date of this Agreement and RIC is prohibited from
     redeeming such RIC Preference Shares pursuant to the provisions of this
     Agreement.

                                       33
<PAGE>
 
For the purposes of the foregoing, no items shall be effectively taken into
account more than once in this calculation and all items shall be calculated on
a consolidated basis and (subject only as may be required in order to reflect
the express inclusion or exclusion of items as specified in this definition) in
accordance with the Applicable Accounting Principles and, where the calculation
is being made as at the end of any Accounting Period for which a consolidated
balance sheet of the Group has been or is required to be delivered to the
Facility Agent hereunder, shall be as determined from that balance sheet.

"Consolidated Net Interest Payable" for any period comprising an annual
Accounting Period of the Company or four consecutive quarterly Accounting
Periods of the Company or less where such period ends on or before 28 March 1999
(taken together as one period) means, the Interest accrued during such period as
an obligation of any Group Member under or in respect of any Financial
Indebtedness (whether or not paid, capitalised or accrued during, or deferred
for payment after, such period) together with interest paid, payable,
capitalised, accrued or deferred for payment under any interest rate or currency
Hedging Protection Agreement or instruments under which the parties are in
compliance with their payment obligations or other obligations (excluding for
the avoidance of doubt interest accrued or payable on the GSIC Notes to the
extent the same is not payable in cash and any item comprised in Transaction
Costs amortised in accordance with Applicable Accounting Principles) less
Interest received in respect of Cash and together with Cash Equivalent
Investments during such period together with Interest received or receivable by
any Group Member during such period under any interest rate and/or currency
hedging agreements or instruments (calculated on an accrual basis) under which
all parties are in compliance with their payment and other obligations all
determined on a consolidated basis and avoiding double counting and (subject
only as may be required in order to reflect the express inclusion or exclusion
of items as specified in this definition) in accordance with the Applicable
Accounting Principles and as shown in the consolidated Financial Accounts of the
Group for such annual Accounting Period or for the quarterly Accounting Periods
falling within such period.

"Dollar Equivalent" means, in respect of any currency other than Dollars, the
amount of Dollars able to be purchased with such currency at the rate of
exchange applied by the Company or, as the case may be, the Auditors, in
compiling the financial statements to which the calculation relates.

"Excluded Share Capital" of the Group means shares in the capital including
associated share premium of any Group Member owned by a Person which is not a
Group Member which by their terms are or may become redeemable (whether or not
subject to the occurrence of any contingency) at any time whilst any Advance or
other amount remains outstanding hereunder (whether or not due and payable) or
any commitment is in force, without the unanimous prior written consent of the
Banks Provided that PIK A Preferred Shares, PIK B Preferred Shares  RIC
Preference Shares, the PIK C Preferred Shares and the "C" Common Stock shall not
constitute Excluded Share Capital for the purposes of this definition Provided
further in the case of the RIC Preference Shares and PIK B Preferred Shares that
the holders of such shares do not have any greater rights than in existence at
the date of this Agreement and in the case of the RIC Preference Shares RIC is
prohibited from redeeming such Preference Shares pursuant to the provisions of
this Agreement.

"Extraordinary Items" shall be determined in accordance with Applicable
Accounting Principles.

"Financial Indebtedness" means any indebtedness for, or for interest (or
dividends in the case of paragraph (c)) or other charges relating to, or
otherwise in respect of or pursuant to:

                                       34
<PAGE>
 
(a)  monies borrowed or monies raised which are in the nature of borrowings or
     having the commercial effect of borrowing, including, without limitation,
     monies raised by the sales of receivables, invoices, bills or notes or
     other financial assets on terms that recourse may be had to the vendor in
     the event of non-payment of such receivables or financial assets when due
     (but only to the maximum extent, actual or contingent, of such right of
     recourse) and monies raised under acceptance credit facilities and through
     the issue of bonds, notes, debentures, bills, loan stocks and other debt
     securities (including any debt security convertible, but not at the
     relevant time converted, into share capital);

(b)  the acquisition cost of assets or services to the extent payable on
     deferred payment terms after the time of acquisition or possession thereof
     by the party liable (whether or not evidenced by any bond, note, debenture,
     loan stock or other debt security), excluding (i) retentions of acquisition
     consideration normal in the trade concerned, (ii) any payment relating to
     construction works or the acquisition of fixed assets which will become
     payable only upon completion or commissioning of certain stages in such
     works or in the supply programme for such fixed assets and which has not
     yet become payable by reason of the non-completion or non-commissioning (as
     the case may be) of such stages, (iii) any such cost payable on deferred
     payment terms which are normal in the trade concerned, and which do not
     involve any deferral of payment of any sum for more than four months;

(c)  any outstanding Excluded Share Capital (and notwithstanding anything to the
     contrary contained in this Agreement or in any rule of law or accounting,
     such Excluded Share Capital shall be deemed for the purposes of this
     definition to constitute indebtedness of the issuer of it);

(d)  moneys received in consideration for the supply of goods and/or services to
     the extent received more than three months before the due date for such
     supply (but excluding any liability in respect of bona fide progress
     payments and deposits or annual subscriptions received from customers in
     the ordinary course of trade);

(e)  instalments under conditional sale agreements entered into primarily as a
     method of raising finance;

(f)  amounts payable under leases (whether in respect of land, machinery,
     computers, equipment or otherwise) and amounts payable under hire purchase
     agreements and similar agreements and instruments, in each case where such
     leases, agreements or instruments are treated as finance leases in
     accordance with the Applicable Accounting Principles;

(g)  (i)   any guarantee, indemnity, letter of credit or other legally binding
           instrument to assure payment of, or against loss in respect of non-
           payment of, any of the indebtedness specified in this definition and
           any counter-indemnity in respect of any thereof; and/or

     (ii)  any legally binding agreement or other instrument entered into in
           connection with any of the indebtedness specified in this definition
           requiring, or giving any Person the right (contingently or otherwise)
           to require, that any other Person invest in, make advances to,
           purchase assets of or maintain the solvency or financial condition of
           any other Person;

                                       35
<PAGE>
 
(h)  any interest rate swap, currency swap, currency exchange transaction, cap,
     floor, collar or option arrangement and any other hedging or treasury
     transaction (or any combination of any such transactions) which is entered
     into with a view to managing exposure to fluctuations in interest rates or
     currency exchange rates (the amount of such Financial Indebtedness in
     relation to any such transaction shall be calculated by the mark-to-market
     valuation of such transaction at the time such valuation is carried out);

(i)  transactions which involve or have the commercial effect of the borrowing
     of commodities as part of an arrangement for or in substitution for the
     raising of finance, the value of indebtedness concerned for this purpose
     being the sum which must be paid and/or the value in money terms of the
     commodities which must be delivered by the "borrower" to, or to the order
     of, the "lender"; and

(j)  transactions involving an agreement to sell commodities and a related
     agreement to purchase at a future date, the same or other commodities where
     such transactions are entered into primarily as a means of raising finance.

Whenever an amount of Financial Indebtedness of any Person or Persons is to be
determined for any purpose, double counting shall be avoided.

"Interest" means:

(a)  interest and amounts in the nature of interest (including, without
     limitation, the interest element of finance leases) accrued;

(b)  prepayment penalties or premiums incurred in repaying or prepaying any
     Financial Indebtedness;

(c)  discount fees and acceptance fees payable or deducted in respect of any
     Financial Indebtedness (including all fees payable in connection with any
     letter of credit or guarantee);

(d)  any other costs, expenses and deductions of the like effect and any net
     payment or amount payable or receipt receivable (or, if appropriate in the
     context, receipt) under any interest rate hedging agreement or instrument
     (including without limitation under the Hedging Protection Agreements)
     taking into account any premiums payable for the same and the interest
     element of any net payment (plus or minus any accrued exchange gains or
     losses) under any currency hedging instrument or arrangement and dividends;
     and

(e)  any other distribution in respect of Excluded Share Capital.

For the avoidance of doubt "Interest" includes commitment, utilisation and non-
utilisation fees (including, without limitation, those payable under this
Agreement) but excludes agent's and front-end, management, arrangement and
participation fees with respect to any Financial Indebtedness (including,
without limitation, those payable under this Agreement) and (other than in
respect of 

                                       36
<PAGE>
 
paragraph (d) above) any up-front premium or front-end fee payable pursuant to
any Hedging Protection Agreement.

"Net Average Financial Indebtedness" means, in relation to any period, the
aggregate of the Dollar Equivalent of the Financial Indebtedness of the Group as
at the end of each of the twelve immediately preceding and consecutive monthly
Accounting Periods ending on the Accounting Date to which the calculation
relates, divided by twelve less:

(a)  the aggregate of the Dollar Equivalent of the Cash and Cash Equivalent
     Investments owned by the Group as at the end of each of the twelve
     immediately preceding and consecutive monthly Accounting Periods ending on
     the Accounting Date to which the calculation relates divided by twelve; and

(b)  the aggregate of the Dollar Equivalent of duty deferment bonds, (including
     letters of credit and guarantees of a similar nature to duty deferment
     bonds, as at the end of each of the twelve immediately preceding and
     consecutive monthly Accounting Periods ending on the Accounting Date to
     which the calculation relates divided by twelve up to a maximum aggregate
     amount of $7,000,000,

provided that, if the Accounting Date is less than twelve months from Closing,
the "Net Average Financial Indebtedness" shall be determined in accordance with
the foregoing save that the figure twelve shall, in each case, be replaced by
the number of monthly Accounting Periods occurring between Closing and the
Accounting Date to which the calculation relates.

"PIK A Preferred Shares" means the Series A Preferred Shares of the Company
authorised by the constitutive documents of the Company as at the date hereof.

"PIK B Preferred Shares" means the non-voting Series B Preferred Shares of the
Company authorised by the constitutive documents of the Company as at the date
hereof.

"PIK C Preferred Shares" means the non-voting Series C Preferred Shares in the
Company authorised by the constitutive documents of the Company as at the date
of the completion of the Diamond Back Acquisition.

"RIC" means Raleigh Industries of Canada.

"RIC Preference Shares" means the non-voting Preference Shares of RIC authorised
by the constitutive documents of RIC that are exchangeable to A Common Stock
and/or B Common Stock pursuant to the terms of such constitutive documents as at
the date hereof.

"Rolling 4 Quarterly basis" refers to the calculation of a ratio or an amount
made on an Accounting Date based on the sum of the amounts by reference to which
such ratio or amount is determined over the quarterly Accounting Period ending
on such Accounting Date and the immediately preceding and consecutive 3
quarterly Accounting Periods.

"Total Assets" means the sum of fixed and current assets (including, for the
avoidance of doubt, Cash, Cash Equivalent Investments and amounts falling due
after more than one year) of the Group 

                                       37
<PAGE>
 
determined initially by aggregating the fixed and current assets (including, for
the avoidance of doubt, Cash and amounts falling due after more than one year)
specified in the Pre-Closing Accounts and, following delivery to the Facility
Agent pursuant to Clause 19.1 of the consolidated Financial Accounts of the
Group subsequently determined by reference to the consolidated Financial
Accounts of the Group most recently delivered to the Facility Agent in
accordance with Clause 19.1 (adjusted as the Facility Agent (after consultation
with the Company) may reasonably consider appropriate to take account of any
change in circumstances which occur thereafter).

1.3  Construction

In this Agreement, save where the context otherwise requires:

(a)  references to documents being in the "agreed form" means documents in a
     form previously agreed in writing by or on behalf of the Company and the
     Facility Agent;

(b)  references to "assets" shall include revenues and the right thereto and
     property and rights of every kind, present, future and contingent and
     whether tangible or intangible (including uncalled share capital),
     references to "shares" shall include stock and references to "freehold
     property" shall include heritable property in Scotland and other similar
     interests in real property in other jurisdictions;

(c)  the expressions "hereof", "herein", "hereunder" and similar expressions
     shall be construed as references to this Agreement as a whole (including
     all Schedules) and shall not be limited to the particular clause or
     provision in which the relevant expression appears, and references to "this
     Agreement" and all like indications shall include references to this
     Agreement as supplemented by the Accession Agreements, the Novation
     Certificates and any other agreement or instrument supplementing or
     amending this Agreement;

(d)  references to "indebtedness" shall be construed so as to include any
     obligation or liability (whether present or future, actual or contingent)
     for the payment, repayment or redemption of any obligation expressed by
     reference to monetary value or quantity or value of commodities (whether
     such obligation is performable by the payment of money or in some other
     way);

(e)  references to any of the Transaction Documents and any other agreement,
     document or instrument shall be construed as a reference to the same as
     amended, varied, supplemented or novated from time to time (including,
     where relevant, by any Accession Agreement and/or Novation Certificate);

(f)  references (by whatever term) to the Company, each Obligor, the Arranger,
     each Bank, each Reference Bank, each Agent, each Executive, the Note
     Trustee, each Noteholder or the parties to this Agreement shall, where
     relevant and subject as otherwise provided in this Agreement, be deemed to
     be references to or to include, as appropriate, their respective
     successors, replacements and assigns, transferees and substitutes permitted
     by the terms of the Senior Finance Documents;

(g)  reference to a time of day is, unless otherwise stated, a reference to
     London time;

                                       38
<PAGE>
 
(h)  the contents page of, and headings in, this Agreement are for convenience
     only and shall be ignored in construing this Agreement;

(i)  any reference to "certificate", "certifications" (or any like term) in
     relation to an amount shall be a reference to a certificate containing a
     reasonable amount of detail as to how such amount was calculated;

(j)  reference to a "judgment" shall include a decree;

(k)  words importing the singular shall include the plural and vice versa;

(l)  all references to statutes and other legislation include all re-enactments
     and amendments of those statutes and that legislation; and

(m)  all references to "the date of this Agreement" or "as at the date hereof"
     (or terms or phrases having a similar meaning) shall, unless otherwise
     specified, mean 12 May 1998.


1.4  Relationship with the Intercreditor Agreements

This Agreement is entered into subject to, and with the benefit of, the terms of
the Intercreditor Agreements.

                                    PART 2

2.   THE FACILITY

2.1  The Facility

Subject to the terms and conditions of this Agreement (and in the case of an
Ancillary Facility, the terms and conditions of the documents evidencing the
same) the Banks grant to the Borrowers facilities of up to DM214,000,000 (or the
equivalent thereof in Optional Currencies); of which:

     (a) up to DM170,000,000 may be utilised by the Borrowers listed below in
     Column 1 in the amount and currency set opposite such Borrower in Column 2
     on the Closing:
 
===========================================================================  
Column 1                                Column 2              Currency
Borrower                             Deutschmark Amount
===========================================================================  
 
Derby Holding Deutschland GmbH            76,000,000          DM

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

Gazelle                                   52,000,000          $

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

Raleigh Industries of Canada Ltd...       17,000,000          Dfl

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

Raleigh Industries of Canada Ltd.          5,000,000          C$

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

                                       39
<PAGE>
 
          of which up to:


          (i) DM64,000,000 (or the equivalent thereof in Optional Currencies)
          may be made available by the Ancillary Banks to those Borrowers as
          Ancillary Facilities less the Deutschmark Amount of any outstanding
          Standby L/Cs at such time; and

          (ii) up to DM15,000,000 (or its equivalent thereof in Optional
          Currencies) may be utilised by those Borrowers by means of Standby
          L/Cs; and

     (b) the full amount of the Facilities may be utilised (in accordance with
         the terms and conditions of this Agreement) by the Borrowers on the
         Business Day immediately following Closing of which up to:

          (i)   DM214,000,000 (or its equivalent in Optional Currencies);

          (ii)  DM64,000,000 or the equivalent thereof in Optional Currencies
                may be made available by the Ancillary Banks to the Borrowers as
                Ancillary Facilities less the Deutschmark Amount of any
                outstanding Standby L/Cs at such time; and

          (iii) up to DM15,000,000 (or its equivalent thereof in Optional
                Currencies) may be utilised by means of Standby L/Cs,

          Provided that, subject to the terms and conditions of this Agreement,
          at no time shall the aggregate Deutschmark Amount of outstanding
          Advances, Standby L/Cs, amounts owing and unpaid under Clause 11.3 and
          Ancillary Commitments exceed DM214,000,000.

2.2  Nature of Banks' obligations and rights

(a)  The obligations of each of the Banks under this Agreement are several. The
     failure of a Bank to perform any of its obligations will not:

     (i)  increase the liability of any other Bank under this Agreement nor
          impose any liability on the Facility Agent; or

     (ii) relieve any other Party from their respective obligations under this
          Agreement.

(b)  The rights of a Finance Party under this Agreement are several.  A Finance
     Party may, except as otherwise stated in this Agreement, separately enforce
     those rights.

2.3  Nature of Borrowers' rights and obligations hereunder

(a)  Rights and Obligations:  The obligations of the Borrowers under this
     Agreement in their capacities as such shall be separate and independent and
     not joint and several, provided that the Company and not the other
     Borrowers (save in their capacity as Guarantors) shall be liable for:
 

                                       40
<PAGE>
 
     (i)  payment of all amounts becoming due under Clause 15 to the extent that
          such amounts are not referable to Utilisations made by or to monies
          received or receivable from or to Revolving Commitments or, as the
          case may be, Standby L/C Commitments which are only available (subject
          to satisfaction of conditions) for drawing by a particular Borrower or
          Borrowers or are not otherwise in the reasonable opinion of the
          Facility Agent referable to a particular Borrower or Borrowers: and

     (ii) payment of all amounts due under Clause 25, to the extent that in the
          reasonable opinion of the Facility Agent such amounts are not
          referable to a particular Borrower or Borrowers.

(b)  Facility Agent's determination:  The written determination of the Facility
     Agent with regard to any matter which is to be determined according to its
     reasonable opinion shall, in the absence of manifest error, be conclusive.
     No Person shall have any recourse to the Facility Agent in relation to any
     such determination if it proves to be the case that its opinion was
     incorrect.

(c)  Company as Obligors' Agent:  Each Obligor (other than the Company) by its
     execution of this Agreement or an Accession Agreement irrevocably
     authorises the Company to act on its behalf as its agent in relation to the
     Senior Finance Documents and irrevocably authorises the Company on its
     behalf to give all notices and instructions (including, in the case of a
     Borrower, any Request), to execute on its behalf any Accession Agreement
     and to make such agreements capable of being given or made by any Obligor
     notwithstanding that they may affect such Obligor without further reference
     to or the consent of such Obligor and such Obligor shall be bound thereby
     as though such Obligor itself had given such notices and instructions
     (including, without limitation any Request) or executed or made such
     agreements.

(d)  Company's acts binding: Every act, omission, agreement, undertaking,
     settlement, waiver notice or other communication given or made by the
     Company under this Agreement, or in connection with this Agreement,
     (whether or not known to any other Obligor and whether occurring before or
     after such other Obligor became an Obligor under this Agreement) shall be
     binding for all purposes on all other Obligors as if the other Obligors had
     expressly made, given or concurred with the same.  In the event of any
     conflict between any notices or other communications of the Company and any
     other Obligor, those of the Company shall prevail.  For the avoidance of
     doubt, references in this Clause 2.3(d) to "Company" shall include the
     Company acting in its capacity as Obligors' Agent.

2.4  Maximum Total Commitments

     The Total Commitment shall not at any time exceed DM214,000,000 (or its
     equivalent thereof in Optional Currencies).

                                       41
<PAGE>
 
3.   PURPOSE OF FACILITIES

(a)  The proceeds of each Utilisation (if any) made on the date of Closing shall
     be applied as follows:

     (i)  first in or towards financing repayment in full by the relevant
          Borrower its portion of the Existing Financial Indebtedness or, in the
          case of any Standby L/C issued on behalf of a Borrower in or towards
          the support of any of its existing Permitted Financial Indebtedness
          and in each case in accordance with the Funds Flow Memorandum at
          Closing; and

     (ii) second in or towards financing payment by the Company of the
          Transaction Costs.

(b)  The proceeds of each Utilisation hereunder (other than the Utilisations (if
     any) made on the date of Closing) shall be applied in or towards financing
     the general working capital requirements and/or other corporate purposes of
     the relevant Borrower and its Subsidiaries, or, in the case of a Standby
     L/C, such standby L/C shall be issued to support the relevant Borrower's
     Permitted Financial Indebtedness provided by the Beneficiary of such
     Standby L/C to such Borrower.

(c)  Without affecting the obligations of any of the Borrowers under (a) or (b)
     above, no Finance Party shall be obliged to concern itself with the
     application of amounts raised by any of the Borrowers under this Agreement.

(d)  Each Borrower undertakes that no Advance,Standby L/C or Ancillary Facility
     shall be used in any way which would be illegal under, or would cause the
     invalidity or unenforceability (in whole or in part) of any Senior Finance
     Document under any applicable law.

(e)  For the avoidance of doubt no proceeds of any Utilisation shall be used in
     respect of or in connection with the completion of the Diamond Back
     Acquisition.

4.   CONDITIONS PRECEDENT TO FIRST UTILISATION

The obligations of each Finance Party to the Company and the Borrowers under
this Agreement are subject to the condition precedent that on or before Closing:

(a)  the Facility Agent shall have received all of the documents and evidence
     listed in Schedule 6 in each case in the agreed form or, where there is no
     agreed form, in form and substance satisfactory to the Facility Agent.
     Each of the documents referred to in Schedule 6 as being certified shall be
     certified by an Authorised Signatory of the relevant Obligor as being
     genuine and in full force and effect (and, if a copy, as being true and
     complete) as at the date such document is required to be delivered; and

(b)  all of the representations and warranties in Clause 18.1 being correct in
     all material respects on Closing and no Default having occurred with
     respect to the Company or any of its Subsidiaries and be continuing
     immediately before the making of the Utilisations to be made on Closing and
     the refinancing of the Existing Financial Indebtedness by reference to the

                                       42
<PAGE>
 
     facts and circumstances subsisting immediately before the making of such
     Utilisation nor will a Default occur if the initial Utilisations are made
     as contemplated in this Agreement.

5.   CONDITIONS PRECEDENT TO EACH UTILISATION BY WAY OF ADVANCES AND 
     STANDBY L/CS

     The obligation of each Bank to participate in any Utilisation by way of
Advances or Standby L/Cs is subject to the condition precedent that:

     (a)  on both the date that the relevant Request is delivered to the
          Facility Agent and the Drawdown Date for that Advance or Issue Date
          for that Standby L/C (as the case may be):

          (i)  no Default has occurred which is either continuing or has not
               been waived in writing by the Facility Agent pursuant to Clause
               32;

          (ii)  the representations in Clause 18.1 which are to be repeated
                pursuant to Clause 18.2 on those dates are true and correct; and

          (iii) no other event is outstanding which constitutes (or with the
                giving of notice, lapse of time, determination of maturity or
                the fulfilment of any other applicable condition or any
                combination of the foregoing, is reasonably likely to
                constitute) a default under any document which is binding on any
                Obligor or any Material Group Member or any asset of such
                Obligor or Material Group Member to an extent or in a matter
                which might have a material adverse effect on the financial
                condition of any Obligor or Material Group Member or the ability
                of any Obligor to perform its obligations under the Finance
                Documents; and

     (b)  if the information contained in the latest Borrowing Base Summary
          delivered under this Agreement relates, in respect of Eligible
          Finished Goods, Eligible Raw Materials or Trade Payables, to a date
          occurring 50 or more days prior to such Request and, insofar as the
          information relates to Eligible Receivables or Cash, such information
          relates to a date occurring more than 10 days prior to the Request an
          updated Borrowing Base Summary has been delivered to the Facility
          Agent such that the information contained therein in respect of
          Eligible Finished Goods, Eligible Raw Materials and Trade Payables
          does not relate to a date occurring more than 50 days prior to such
          Request and the information contained therein in respect of Eligible
          Receivables and Cash does not relate to a date occurring more than 10
          days prior to such Request.

                                       43
<PAGE>
 
6.   UTILISATION OF THE FACILITIES

6.1  Delivery of a Drawdown Request

(a)  Subject to the terms and conditions of this Agreement (including, without
     limitation, Clause 6.15) the Obligor's Agent may utilise the Revolving
     Facility by delivering to the Facility Agent, not later than 11.00 a.m. on
     the day falling three Business Days before the Drawdown Date for that
     Advance, a duly completed Drawdown Request (save in respect of the
     Utilisation of the Revolving Facility to be made on Closing which may be
     requested by delivery of a duly completed Drawdown Request no later than
     9.00 a.m. on the day falling two Business Days before the Drawdown Date for
     such Advances provided that the Facility Agent has previously confirmed to
     the Company that Clause 4 has been satisfied).

(b)  Each Drawdown Request delivered to the Facility Agent shall oblige the
     relevant Borrower to borrow the Requested Amount on its Drawdown Date on
     the terms and on the conditions stated in this Agreement

(c)  No more than 15 Advances may be outstanding at any time.

(d)  Lyon Investments B.V. may not utilise or attempt to utilise the Revolving
     Facility.

(e)  The South African Group may not utilise or attempt to utilise the Revolving
     Facility.

6.2  Completion of Drawdown Request

Each Drawdown Request delivered to the Facility Agent pursuant to Clause 6.1
shall be irrevocable and shall not be considered to have been duly completed
unless it specifies:

(a)  the proposed Drawdown Date, which shall be a Business Day occurring during
     the Availability Period;

(b)  the identity of the Borrower;

(c)  the Requested Amount of the proposed Advance which shall be a Deutschmark
     Amount which is less than or equal to the Adjusted Available Amount for
     such Utilisation and which, if less than the Adjusted Available Amount for
     such Utilisation is a minimum amount of DM5,000,000 and an integral
     multiple of DM1,000,000 and, in the case of the Company, shall be an amount
     which when aggregated with all its other outstandings hereunder including,
     for the avoidance of doubt, any contingent obligation the Company may have
     in respect of any outstanding Standby L/C (other than in its capacity as a
     Guarantor)) will not exceed the Deutschmark Equivalent of $7,500,000 taking
     into account the Deutschmark Amount of any Advances scheduled to be made,
     repaid or prepaid and any Standby L/Cs scheduled to be issued or to expire
     by assuming that the same occurs when due.;

(d)  the currency of the Advance (being Deutschmarks or an Optional Currency);

                                       44
<PAGE>
 
(e)  the Term of the Advance being requested, which shall be a period of one,
     two or three months (or such other duration as the Banks may have
     previously agreed in writing for such Advances) which will begin on the
     proposed Drawdown Date and end on a Business day which is or precedes the
     Final Repayment Date save in respect of any Advance made between the date
     of this Agreement and the date falling three months thereafter, each of
     which shall be of such duration as the Facility Agent shall determine
     (acting reasonably) having regard to the syndication process (provided that
     each such Term shall be at least seven days and not exceed one month); and

(f)  the account to which the proceeds of the proposed Utilisation are to be
     paid (which, in the case of each of the Advances that are drawndown on the
     date of Closing, shall be a Blocked Account).

6.3  Amount of each Bank's participation in an Advance

(a)  Subject to the terms of this Agreement, each Bank shall, on the date
     specified in any Drawdown Request for an Advance, make available to the
     Facility Agent in the currency of the Advance concerned for the account of
     the relevant Borrower the amount of its participation in that Advance in
     the proportion (applied to the Requested Amount) which its Revolving
     Commitment bears to the amount of the Total Commitments, the amount of a
     Bank's Revolving Commitment and the Total Commitments being reduced to take
     account of the amount of the Ancillary Commitment of any Ancillary Bank at
     such time).  All such amounts shall be made available to the Facility Agent
     in accordance with Clause 13.1 for disbursement to or to the order of the
     relevant Borrower in accordance with the provisions of this Agreement;

(b)  If a Bank's Revolving Commitment is reduced in accordance with this
     Agreement after the Facility Agent has received a Drawdown Request, then
     such part of the proposed Utilisation as is attributable to that Bank and
     exceeds its portion of the Revolving Facility Available Amount (as so
     reduced) shall not be made and the amount of such Utilisation shall be
     reduced accordingly.

6.4  Delivery of a Standby L/C Request

(a)  Subject to the terms and conditions of this Agreement (including, without
     limitation, Clause 6.15) the Obligors' Agent may utilise the Standby L/C
     Facility by delivering to the Facility Agent, not later than 11.00 a.m. on
     the day falling five Business Days or, if the Standby L/C requested on
     behalf of a Borrower (the "Requested Standby L/C") has an Issue Date that
     coincides with the Expiry Date of an outstanding Standby L/C (the
     "Outstanding Standby L/C") issued on behalf of such Borrower, the
     Beneficiary of the Requested Standby L/C is the same Beneficiary as the
     Beneficiary of the Outstanding Standby L/C and the Requested Standby L/C is
     requested to be in the same currency and for the same amount as the
     Outstanding Standby L/C, three Business Days before the Issue Date for that
     Standby L/C, a duly completed Standby L/C Request (save in respect of the
     Utilisation of the Standby L/C Facility to be made on Closing which may be
     requested by delivery of a duly completed Standby L/C Request no later than
     9.00 a.m. on the day falling two Business Days before the Issue Date for
     such Standby L/C Provided that the Facility Agent has previously confirmed
     to the Company that Clause 4 has been satisfied).

                                       45
<PAGE>
 
(b)  Each Standby L/C Request delivered to the Facility Agent shall oblige the
     relevant Borrower to incur liabilities under this Agreement equal to the
     Requested Amount on its Issue Date on the terms and on the conditions
     stated in this Agreement.

(c)  No more than 5 Standby L/Cs may be outstanding at any time.

(d)  Lyon Investments B.V. may not utilise or attempt to utilise the Standby L/C
     Facility.

(e)  The South African Group may not utilise or attempt to utilise the Standby
     L/C Facility.

6.5  Completion of Standby L/C Request

Each Standby L/C Request delivered to the Facility Agent pursuant to Clause 6.4
shall be irrevocable and shall not be considered to have been duly completed
unless it specifies:

(a)  the proposed Issue Date, which shall be a Business Day occurring during the
     Availability Period;

(b)  the identity of the Borrower;

(c)  the Requested Amount of the proposed Utilisation which shall be a
     Deutschmark Amount which is less than or equal to the lesser of (i) the
     then Adjusted Available Amount and, (ii) the then Standby L/C Available
     Facility Amount for such Utilisation and which, if less than the lesser of
     the Adjusted Available Amount and the Standby L/C Available Amount for such
     Utilisation is a minimum amount of DM3,000,000 and an integral multiple of
     DM1,000,000, Provided that, without prejudice to the foregoing, in the case
     of the Company, the Requested Amount shall be an amount which, when
     aggregated with all its other outstandings hereunder (including, for the
     avoidance of doubt, any contingent obligation the Company may have in
     respect of any outstanding Standby L/C (other than in its capacity as a
     Guarantor), will not exceed the Deutschmark Equivalent of $7,500,000 taking
     into account the Deutschmark Amount of any Advances scheduled to be made,
     repaid or prepaid and any Standby L/Cs scheduled to be issued or to expire
     by assuming that the same occurs when due;

(d)  the currency of the Standby L/C (being Deutschmarks or an Optional
     Currency);

(e)  the Expiry Date of such Standby L/C which shall be no more than twelve
     months after the Issue Date of such Standby L/C and be no later than the
     Final Repayment Date save in respect of a Utilisation of the Standby
     Facility made between the date of the Agreement and the date falling three
     months thereafter, each of which shall have an Expiry Date determined by
     the Facility Agent (acting reasonably) having regard to the syndication
     process provided that it shall be at least seven days after its respective
     Issue Date; and

(f)  the identity of the Beneficiary, together with such other details relating
     thereto and the liabilities of the Borrower to which the Standby L/C
     relates as the Facility Agent shall consider appropriate.

                                       46
<PAGE>
 
6.6  Issuing of Standby L/Cs

(a)  If a Borrower requests the issuing of a Standby L/C in accordance with this
     Agreement, then, subject to sub-paragraph (c) below and Clause 16.2, with
     effect from the proposed Issue Date for such Standby L/C the Facility Agent
     on behalf of each of the Banks that are to participate in the issue of such
     Standby L/C shall issue the same to the relevant Beneficiary, the amount of
     each such Banks' participation in that Standby L/C being the proportion
     (applied to the Requested Amount) which its Revolving Commitment bears to
     the amount of the Total Commitments (the amount of a Ancillary Banks'
     Revolving Commitment and the Total Commitments being reduced to take amount
     of the amount of the Ancillary Commitment of any Ancillary Bank at such
     time).

(b)  If a Bank's Standby L/C Commitment is reduced in accordance with this
     Agreement after the Facility Agent has received a Standby L/C Request, then
     such part of the proposed Utilisation as is attributable to that Bank and
     exceeds its portion of the Standby L/C Available Facility Amount (as so
     reduced) shall not be made and the amount of such Utilisation shall be
     reduced accordingly.

(c)  If at any time following delivery of a Standby L/C Request, and prior to
     the issuance of the Standby L/C requested therein any Bank notifies the
     Facility Agent that it does not agree, by reason of, the Beneficiary
     thereof being an institution which appears in the Specially Designated
     National and Blocked Persons List produced by the U.S. Government Office of
     Foreign Assets Control or on any other such Governmental list or list of
     any Supranational authority in any other relevant jurisdiction in which
     such Bank is resident, domiciled or has its Facility Office or is an
     institution which is not similarly vetoed by any Government or
     Supranational entity in relation to such Bank in such jurisdiction that
     such Standby L/C be issued, the Facility Agent shall, promptly upon receipt
     of such notification inform each of the other Finance Parties and such
     Standby L/C Request shall be treated, for all purposes, as if it had not
     been delivered and be void ab initio and the Standby L/C requested therein
     shall not be made.

(d)  The maximum amount required to be paid by the Banks under or in respect of
     a Standby L/C shall not exceed the "Maximum Amount" (as defined in such
     Standby L/C) notwithstanding any payments made in respect of such Standby
     L/C by any Group Member, whether pursuant to Clause 11.3 or otherwise.

6.7  Facility Agent's Authority

For the purposes of Clause 6.6 each Bank hereby authorises the Facility Agent to
complete each Standby L/C in which such Bank is to participate (which it shall
do through its Facility Office) in the manner contemplated by the relevant
Standby L/C Request and this Agreement and to sign such Standby L/C on its
behalf and to issue the same to the relevant Beneficiary.

                                       47
<PAGE>
 
6.8  Copy of Standby L/C

The Facility Agent shall, promptly following the issue of a Standby L/C pursuant
to Clause 6.6, forward a copy thereof to the Company, the relevant Borrower on
whose behalf such Standby L/C was issued and to each Bank participating therein.

6.9  No Enquiry

No Finance Party need, before the issue of any Standby L/C, make any enquiry or
otherwise concern itself as to whether any event has occurred which, under the
terms hereof, would relieve such Finance party from its obligations to issue or
to participate in the issue of such Standby L/C and accordingly no Borrower
shall have any right to resist any claim under Clause 11.3 or otherwise on the
ground that the relevant event had occurred before the issue of such Standby
L/C.

6.10 Definitions

For the purposes of determining the Adjusted Available Amount Clause 6.2(c) and
6.5(c), and the Standby L/C Available Facility Amount in Clause 6.5(c) and
otherwise in this Agreement:

"Account Debtor" in relation to any Person means any other Person who is or may
become obligated to such Person under, with respect to, or on account of, an
Account;

"Accounts" in relation to any Person means all accounts, accounts receivable,
other receivables, contract rights, instruments, documents, and notes, whether
now owned or hereafter acquired by such Person arising out of the sale, lease or
disposal of goods or provision of services by such Person in the ordinary course
of its trade which constitute a legal, valid and binding obligation of the
relevant Account Debtor (each an "Account");

"Adjusted Available Amount" in relation to an Obligor means the lesser of:

(a)  in respect of the Revolving Facility, the amount of the Revolving Facility
     Available Amount and in respect of the Standby L/C Facility, the amount of
     the Standby L/C Facility Available Amount; and

(b)  the Deutschmark Equivalent at or about 11:00 a.m. on the Business Day
     preceding the date of the relevant Request delivered to the Facility Agent
     in respect to the relevant Advance or, as the case may be, the relevant
     Standby L/C of the Adjusted Borrowing Base of the relevant Obligor;

"Adjusted Borrowing Base" in relation to any Obligor and any Request, means at 
any time:

(a)  the amount of the Borrowing Base relating to such Obligor;

(b)  less the aggregate Deutschmark Amount of Ancillary Facilities (excluding
     that portion of Ancillary Facilities which are solely available for foreign
     exchange transactions) and Advances made to, and Standby L/Cs issued on
     behalf of, such Obligor that are, at such time, outstanding and, in respect
     of a Utilisation, not scheduled to be repaid or, as the case 

                                       48
<PAGE>
 
     may be, expire prior to or at the same time as such Utilisation and, taking
     into account any other Utilisations requested by such Obligor that are
     scheduled to be made or, as the case may be issued;
 
(c)  less the Deutschmark Amount of such Obligor's Borrowing Base (if any) that
     has been utilised at such time so as to increase the Adjusted Borrowing
     Base of another Obligor under the provisions of this definition contained
     in paragraph (d) below and taking into account any repayment of any Advance
     scheduled to be made and the amount of any Standby L/C which is scheduled
     to expire on or before the proposed Utilisation in relation to the Request
     in question in respect of which such Obligor's Borrowing Base was so
     utilised;

Provided that for the purposes of this definition, the sum of (a) minus (b)
minus (c) shall never be less than zero,

(d)  plus (except in the case of the Company) the aggregate of the lesser of (in
     respect of each Obligor (other than such Obligor itself and without double-
     counting)):

     (i)  the Adjusted Borrowing Base at such time of each such Obligor; and

     (ii) the Maximum Guarantee Amount of each such other Obligor at such time,
          as the same is determined by the Facility Agent acting, where it
          considers appropriate, on the advice of local counsel;

"Borrowing Base" means, at any time;

     (a) in relation to any Obligor incorporated in Germany or such other
     country or countries as the Facility Agent may, from time to time specify
     for this purpose having regard to applicable laws and current trade
     practices therein the aggregate of:

          (i)   the sum of 40% of the aggregate of its Eligible Raw Materials
                and its Eligible Finished Goods less the Deutschmark Equivalent
                of such Obligor's Trade Payables;

          (ii)  80% of its Eligible Receivables after deducting (A) any VAT
                payable thereon, (B) to the extent that such Obligor's Trade
                Payables exceeds the Deutschmark Equivalent of the sum of such
                Obligor's Eligible Raw Materials and its Eligible Finished Goods
                an amount equal to such excess and (C) General Provisions; and

          (iii) 100% of its Cash Collateral Amount,

          Provided that:

          (iv)  such Obligor's Borrowing Base shall be determined in accordance
                with the order stated above; and

          (vi)  if any amount, determined in accordance with the above shall be
                a negative figure, it shall be deemed to be zero for the purpose
                of such determination; and
 

                                       49
<PAGE>
 
     (b) in relation to any Obligor not incorporated in Germany or in respect of
         which the Facility Agent has not specified as subject to paragraph (a)
         above, the Deutschmark Equivalent of the aggregate of:

          (i)   80% of its Eligible Receivables after deducting (A) VAT payable
                thereon and (B) General Provisions;

          (ii)  (other than in respect of the Inventory owned, from time to
                time, by the Swedish Obligor which shall not be included) the
                sum of 40% of the aggregate of its Eligible Raw Materials and of
                its Eligible Finished Goods; and

          (iii) 100% of the Cash Collateral Amount;

          in each case determined by reference to the latest Borrowing Base
     Summary.

"Borrowing Base Summary" means the information required to be prepared by or on
behalf of each Obligor and the Company pursuant to the terms hereof in the
agreed form in respect of each Obligor's Eligible Receivables, Eligible Finished
Goods, Eligible Raw Materials, Cash Collateral Amount and, if applicable, Trade
Payables and delivered on a monthly basis in any event and more frequently if
required pursuant to the terms hereof and all schedules appendices and other
documents exhibited or attached thereto;

Cash Collateral Amount" in relation to an Obligor, means the amount from time to
time standing to the credit of each account of such Obligor from time to time
subject to the terms of a Debenture or an Irish Debenture relating to such
Obligor;

"Eligible Finished Goods" in relation to any Obligor, means an amount equal to
the lower of cost and the market value of the Inventory of such Obligor which
consists only of finished goods (as determined by reference to Applicable
Accounting Principles) and which is:

(a)  subject to the security granted by or pursuant to the Security Documents
     and in compliance therewith and;

(b)  insured in accordance with the requirements of the Senior Finance
     Documents,

                                       50
<PAGE>
 
Provided that, in respect of any Obligor:

(i)  all finished goods:

     (AA) against which such Obligor has made or should have made a provision or
          reserve in accordance with the Approved Provisioning Procedure shall
          not be included:

     (BB) all finished goods which are held by or in the possession of Person(s)
          other than the relevant Obligor in relation to whom "Eligible Finished
          Goods" falls to be determined (unless held by such Person to the order
          of or on trust or as bailee (subject to the trustee or bailee having
          no right or interest thereto or therein other than a Permitted
          Encumbrance) for the relevant Obligor) shall not be included; and

Provided further that this definition may be amended, varied or supplemented by
the Facility Agent (acting on the advice of local counsel) so as to reflect any
changes to applicable laws or regulations so as to afford the Finance Parties
the same level of protection in respect of such Obligor and its "finished goods"
as at the date of this Agreement, or, in the case of an Acceding Borrower or as
the case may be, an Acceding Guarantor, as the date it became a party to this
Agreement; and

"Eligible Raw Materials" in relation to any Obligor, means an amount equal to
the lower of cost and the net realisable value of the Inventory of such Obligor
which consists of raw materials and consumables (as defined by reference to
Applicable Accounting Principles) which is:

(a)  subject to the security granted by or pursuant to the Security Documents
     and in compliance therewith; and

(b)  insured in accordance with the requirements of the Senior Finance
     Documents;

Provided that in respect of any Obligor:

(a) all Inventory which consists only of raw materials and consumables as
    determined by reference to Applicable Accounting Principles against which
    the Obligor has made or should have made a provision or reserve in
    accordance with the Approved Provisioning Procedure shall not be included to
    the extent of such provision or reserve shall not be included ; and

(b) all Inventory which consists only of raw materials and consumables (as
    determined in accordance with Applicable Accounting Principles) which is
    held by or in the possession of Person(s) other than the relevant Obligor in
    relation to whom "Eligible Raw Materials" falls to be determined (unless
    held by such Person to the order of or on trust or as bailee (subject to the
    trustee or bailee having no right or interest thereto or therein other than
    pursuant to a Permitted Encumbrance) for such Obligor shall not be included;
    and

(c) this definition may be amended, varied or supplemented by the Facility
    Agent (acting on the advice of legal counsel) so as to reflect any changes
    to applicable laws or regulations so as to afford the Finance Parties the
    same level of protection in respect of the Obligor and its Inventory which
    consists only of raw materials and consumables (as determined in accordance
    with Applicable Accounting Principles) as at the date of this Agreement, or,
    in

                                       51
<PAGE>
 
    the case of an Acceding Obligor or, as the case may be, an Acceding
    Guarantor the date it became a party to this Agreement:

"Eligible Receivables" in relation to any Obligor means the amount of the gross
outstanding balance, less all finance charges, late fees and other fees which
are unearned, of Accounts which are:

(a)  subject to the security granted by or pursuant to the Security Documents
     and in compliance therewith and;

(b)  insured in accordance with the requirements of the Senior Finance
     Documents;

Provided that in respect of any Obligor, Accounts shall not be included:
 
     (i)    if the Account Debtor has taken any corporate action or other steps
            have been taken or legal proceedings have been started for its
            winding-up, administration, dissolution or re-organisation or for
            the appointment of a receiver, administrator, administrative
            receiver, trustee or similar officer of it or of any or all of its
            revenues and assets or the Account Debtor is or has been deemed
            unable to pay its debts as they fall due, commenced negotiations
            with any one or more of its creditors with a view to the general
            readjustment or rescheduling of its indebtedness or has made a
            general assignment for the benefit of or a composition with its
            creditors or a moratorium in respect of all or any indebtedness has
            been applied for, ordered or declared;

     (ii)   if such Account(s) are outstanding for a period exceeding 30 days
            after the due date (provided that if the due date is not specified,
            the due date shall be deemed to be 30 days after the date of the
            relevant invoice) or such other period as the Facility Agent shall
            in its discretion deem to be the minimum such period;
             
 
      (iii) if the Account Debtor is a Group Member or an associate or employee
            thereof;
   
     (iv)   if such Account(s) relate to a transaction entered into on a sale or
            return or similar basis;

     (v)    if such Account(s) are payable more than 270 days after the date of
            the relevant invoice or if less such other ageing basis as is
            specified in the Borrowing Base Summary relating to such Obligor
            and, in any event, such that they do not give rise to a breach of
            Clause 20.2(e);

     (vi)   if such Account(s) have been prepaid to the extent of such
            prepayment;

     (vii)  if such Account(s) are payable otherwise than in cash;

     (viii) to the extent such Account(s) are subject to Encumbrances (other
            than pursuant to the Security Documents), set off or selling
            arrangements or are the subject of any legal action or dispute by
            the Account Debtor;

                                       52
<PAGE>
 
     (ix)   if such Account(s) are not evidenced by an invoice or in writing;

     (x)    if such Account(s) arise under any licence and the Account Debtor is
            wholly or partly owned (directly or indirectly) by any Group Member;
            and

     (xi)   if such Account is owed by an Account Debtor to the Swedish Obligor;
            and

     (xii)  any Account owed by an Account Debtor in respect of which the
            Obligor has made a provision as a result of the Obligor's
            determination of such Account Debtors' creditworthiness and such
            Account is not excluded pursuant to one or more of paragraphs (i) -
            (xi) above;

Provided further that this definition may be amended, varied or supplemented by
the Facility Agent (acting on the advice of legal counsel) so as to reflect any
changes to applicable laws or regulations so as to afford the Finance Parties
the same level of protection in respect of such Obligor and its "Accounts" as at
the date of this Agreement, or, in the case of an Acceding Borrower or, as the
case may be, an Acceding Guarantor the date it became a party to this Agreement;

"Inventory" in relation to an Obligor, means any and all inventory and other
stocks in all of its forms, wherever located, now or hereafter existing and
whether acquired by purchase, merger or otherwise and all raw materials and
work-in-progress, all finished goods thereof and all materials used or consumed
in the manufacture, in each case, determined in accordance with Applicable
Accounting Principles;

"Maximum Guarantee Amount" means, in respect of any Obligor and a particular
Borrower, at any time, the maximum Deutschmark Amount such Obligor would be able
to pay (net of any Tax or other amounts payable (other than to the Facility
Agent) in connection therewith) to the Facility Agent under its Guarantee if a
demand was made thereunder at such time in accordance with the terms and
conditions of its Guarantee in respect of any amounts payable by such Borrower
under the Senior Finance Documents without contravening any existing applicable
law, statute, rule or regulation or any judgment, decree, consent  or permit to
which such Obligor is subject, or conflict with, or result in any breach of any
of the terms of, or constitute a default under any agreement or other instrument
to which such Obligor is expressed to be party or is subject to or by which it,
or any of its property is bound;

"Revolving Facility Available Amount" at any time means the aggregate amount of
the Revolving Commitments (taking into account any reduction in the Revolving
Commitment of a Bank which is an Ancillary Bank, as provided for in Clause 7 and
the reduction in the Total Commitments, as provided for in Clause 11.1) less the
aggregate of:

(a)  the Deutschmark Amount of the outstanding Advances at such time, taking
     into account, in respect of a proposed Utilisation, any Advances scheduled
     to be made, repaid or prepaid by assuming that the same occurs when due;
     and

(b)  the undrawn portion of all Standby L/Cs issued under this Agreement that
     are outstanding at such time plus any amounts due and payable by any
     Borrower under Clause 11.3 in respect of any Standby L/C but unpaid and
     taking into account any Standby L/Cs scheduled to be issued or expire by
     assuming that the same occurs when so scheduled;

                                       53
<PAGE>
 
"Standby L/C Facility Available Amount" at any time in respect of the Standby
L/C Facility means the lesser of:

(a)  the amount of the Standby L/C Commitments taking into account any reduction
     in the Standby L/C Commitment of a Bank which is an Ancillary Bank, as
     provided for at Clause 7 less (i) the aggregate of the undrawn portion of
     all Standby L/Cs issued under this Agreement that are outstanding at such
     time and (ii) any amount due and payable by any Borrower under Clause 11.3
     in respect of any Standby L/C but unpaid and taking into account any
     Standby L/Cs scheduled to be issued or to expire by assuming that the same
     occurs when so scheduled; and

(b)  the Revolving Facility Available Amount; and

"Trade Payables" means, in relation to an Obligor and at any time, the amount
owed to trade creditors (other than another Group Member) in respect of the
supply of Inventory to such Obligor at such time by such Obligor.

6.11 Calculation

When calculating the Eligible Receivables, Eligible Finished Goods, the Eligible
Raw Materials or Trade Payables of any Obligor such calculation shall be made in
the Local Currency of such Obligor.

6.12 Determination

The Facility Agent shall determine from time to time the Adjusted Available
Amount by reference to each of the then latest relevant Borrowing Base Summaries
delivered to the Facility Agent pursuant to the terms hereof provided that the
Facility Agent shall not be required to have regard to any Borrowing Base
Summary which is delivered to it later than two Business Days prior to the date
of such determination.

6.13 Undrawn amount

Any part of the Facilities undrawn or unutilised at the end of its respective
Availability Period shall be immediately cancelled.

6.14 Deutschmarks in lieu of Optional Currency

Notwithstanding that any Borrower has in any Request delivered hereunder made a
request for a Utilisation in an Optional Currency any Bank may by notification
to the Facility Agent at any time up to the notification of LIBOR in respect of
such Utilisation or, in relation to a Utilisation by way of Standby L/C's issue,
confirm that it is unwilling to participate in such Utilisation in such Optional
Currency in which case it shall, if it would otherwise be required to
participate in such Utilisation in such Optional Currency, not be obliged to do
so, but instead be required to participate in such Utilisation in Deutschmarks.

                                       54
<PAGE>
 
6.15 Dutch Borrowers

At all times following the date falling 30 days after the date of this Agreement
the Company shall procure that no Borrower, other than the Company, shall
utilise the Revolving Facility or the Standby L/C Facility at any time if, at
such time, the aggregate Deutschmark Amount of Advances drawn down by Gazelle is
less than the Deutschmark equivalent of 75 per cent of the sum of the book value
of the gross assets of Gazelle at such time determined in accordance with
Applicable Accounting Principles and for this purpose:

(a)  If Gazelle has Subsidiaries, the calculation shall be made by using the
     gross assets of it and its Subsidiaries; and

(b)  the calculation of gross assets shall be made by reference to the latest
     Financial Accounts of Gazelle or, as the case may be a consolidation of the
     Financial Accounts of it and its Subsidiaries used for the purpose of the
     then latest unaudited quarterly or audited annual consolidated Financial
     Accounts of the Group delivered to the Facility Agent under Clause 19.1.

7.   ANCILLARY FACILITIES

7.1  Ancillary Facilities

(a)  Subject to the terms and conditions of this Agreement the Obligors' Agent
     may from time to time by notice in writing to the Facility Agent, request
     the establishment of an Ancillary Facility by an Ancillary Bank, each such
     Ancillary Facility to become available with effect from the date (the
     "Effective Date") (or such later date as the Obligors' Agent and the
     Facility Agent may agree from time to time) specified in such notice being
     a date not less than seven Business Days after the date such notice is
     received by the Facility Agent.  Any such notice shall specify:

     (i)   the proposed Borrower;

     (ii)  the proposed Effective Date and expiry date for the Ancillary
           Facility concerned being, in the case of the expiry date, a Business
           Day on or prior to the Final Repayment Date;

     (iii) the type of the proposed Ancillary Facility which may be a committed
           overdraft facility, BACS, cheque drawing, letter of credit,
           guarantee, foreign exchange, banking and/or such other cash
           management facility as such Ancillary Bank may agree provided that no
           Ancillary Facility shall be made available in respect of any currency
           other than Deutschmarks or an Optional Currency or such other
           currencies as are notified to the Facility Agent by the Borrower;

     (iv)  the proposed Ancillary Bank;

     (v)   the Ancillary Commitment under the proposed Ancillary Facility at any
           time (which, when aggregated with the actual and contingent liability
           of such Ancillary Bank 

                                       55
<PAGE>
 
           under all other Facilities made available by it, shall not exceed
           such Ancillary Bank's Revolving Commitment); and

     (vi)  the portion (if any) of the Ancillary Facility that may be utilised
           by way of overdraft, advance, letter of credit or similar facilities
           and the portion (if any) that may be utilised for the purpose of
           foreign exchange transactions; and

     (vii) such other details as to the nature, amount and operation of the
           proposed Ancillary Facility as the Facility Agent may reasonably
           require,

     and the Facility Agent shall promptly notify each Bank upon receipt of any
     such notice.

(b)  Subject to the terms and conditions of this Agreement, any Bank so
     nominated shall make the proposed Ancillary Facility available with effect
     on and from the Effective Date subject to the approval of the Facility
     Agent (acting reasonably) and the Facility Agent having received
     notification from such Ancillary Bank that it approves of the proposed
     Ancillary Facility.

(c)  Any material variation in any Ancillary Facility or any proposed increase
     or reduction in the amount thereof shall be effected on, and subject to the
     provisions, mutatis mutandis, of this Clause 7.

(d)  The maximum aggregate Ancillary Commitments under all of the Ancillary
     Facilities at any time shall not exceed the lesser of (i) the Revolving
     Facility Available Amount and (ii) DM64,000,000 or (its equivalent in
     Optional Currencies) less (in either case), the sum of the Deutschmark
     Amount of any outstanding Standby L/Cs at such time and any amounts due and
     payable by any Borrower under Clause 11.3 in respect of any Standby L/C but
     unpaid and taking into account any Standby L/Cs scheduled to be issued or
     expire by assuming that the same occurs when so scheduled.

(e)  Without prejudice to paragraph (d) the sum of the portions of the Ancillary
     Facilities that may be utilised by way of overdraft, advance, letter of
     credit or similar facilities may not exceed DM43,000,000 or its equivalent
     in Optional Currencies and the sum of the portions of the Ancillary
     Facilities that may be utilised for the purpose of foreign exchange
     transactions may not exceed DM32,000,000 or its equivalent in Optional
     Currencies in each case determined by reference to the definition
     "Ancillary Outstanding".

(f)  Any Ancillary Facility provided by an Ancillary Bank shall terminate no
     later than the Final Repayment Date.

(g)  Any amounts owing or outstanding under any Ancillary Facility and all
     banking facilities provided thereunder on the Final Repayment Date shall be
     repaid and/or, as the case may be, cancelled in full by the relevant
     Borrower on the Final Repayment Date.

(h)  Subject to the terms and conditions of this Agreement and without prejudice
     to the proviso contained in Clause 7.2(f), the Revolving Commitment of an
     Ancillary Bank shall be reduced by an amount equal to such Ancillary Bank's
     Ancillary Commitment and its 

                                       56
<PAGE>
 
     Standby L/C Commitment shall be reduced by a proportionate amount, until
     such time as all or part of its Ancillary Facility is cancelled, whereupon
     such Bank's Revolving Commitment shall be increased by the amount its
     Ancillary Facility has been so cancelled and its Standby L/C Commitment
     shall be increased by a proportionate amount.

(i)  The maximum amount outstanding under Ancillary Facilities made to the
     Company shall not at any time (when aggregated with all other outstandings
     hereunder (including, for the avoidance of doubt, any contingent obligation
     the Company may have in respect of any outstanding Standby L/C (other than
     in its capacity as a Guarantor)) exceed the Deutschmark Equivalent of
     $7,500,000 (determined by reference to the definition "Ancillary
     Outstanding") taking into account any Advances scheduled to be made to, or
     repaid or prepaid by the Company and Standby L/Cs issued on behalf of the
     Company scheduled to be issued or expire by assuming that the same occurs
     when so scheduled.

(j)  Lyon Investments B.V. may not utilise or attempt to utilise the Ancillary
     Facilities.

(k)  The South African Group may not utilise or attempt to utilise the Ancillary
     Facilities.

7.2  Operation of Ancillary Facilities

(a)  The rate of interest, fees and other remuneration in respect of each
     Ancillary Facility shall be determined by agreement between the Ancillary
     Bank and the relevant Borrower concerned and the interest, fees and other
     remuneration for all Ancillary Facilities shall be based upon the normal
     market rates and terms from time to time of the Ancillary Bank and shall
     not be more onerous than the corresponding provisions (if any) of this
     Agreement.

(b)  In the case of inconsistency between any term of an Ancillary Facility and
     of this Agreement, the terms of this Agreement shall prevail.

(c)  Subject to Clause 7.2(a) and (b) above, the terms governing the operation
     of any Ancillary Facility (including the terms of any counter-indemnity
     required in connection therewith) shall be those determined by agreement
     between the Ancillary Bank and the Borrower concerned, provided that such
     terms are based upon normal commercial terms, save as may be varied by this
     Agreement.  A copy of any such terms shall on request by the Facility Agent
     be provided by the Ancillary Bank to the Facility Agent (and each Borrower
     consents to such copies being provided to the Facility Agent and, if
     requested, any Bank).

(d)  Each Borrower and each Ancillary Bank agrees with and for the benefit of
     each Bank that the Ancillary Outstandings under any Ancillary Facility
     provided by that Ancillary Bank shall not exceed the Revolving Commitment
     of that Ancillary Bank or the amount of the relevant Ancillary Facility.

(e)  Each Borrower and the Ancillary Bank will, promptly upon request by the
     Facility Agent, supply the Facility Agent with such information relating to
     the operation of each Ancillary Facility provided by such Ancillary Bank to
     such Borrower (including, without limitation, the Ancillary Outstandings
     thereunder) as the Facility Agent may from time to time request.  Each
     Borrower consents to all such information being released to the Facility
     Agent and each Bank.

                                       57
<PAGE>
 
(f)  No Ancillary Bank may, until notice has been served under Clause 21.2,
     demand repayment of any moneys made available by it or demand cash cover in
     respect of any guarantees, documentary credits or similar contingent
     liabilities made available by it, under its Ancillary Facility or take any
     action analogous to any of the foregoing under any other type of banking
     arrangements provided by it under its Ancillary Facility unless there is at
     such time an Advance available to be drawn down under this Agreement in an
     amount equal to the amount so demanded under the Ancillary Facility
     (provided that for the purposes of determining whether or not an Advance is
     then available for drawdown the Revolving Commitment of the relevant
     Ancillary Bank shall be deemed to be increased by the amount (not exceeding
     the amount of its Ancillary Commitment) so demanded) such Advance to be
     used to repay or provide cash cover in respect of the amount so demanded
     under the Ancillary Facility.  On and subject to the terms of this
     Agreement, each of the Banks shall participate in any such Advance in such
     amount as will result, after the making of such Advance, in the proportion
     which the aggregate amount of its participation in the Advances then
     outstanding bears to the aggregate amount of the Advances then outstanding,
     being equal to the proportion which its Revolving Commitment bears to the
     aggregate of the Revolving Commitments.

7.3  Nomination

     Each of the parties hereto agrees that any Bank that has agreed, in
     accordance with the terms and conditions of this Agreement, to provide an
     Ancillary Facility may nominate its Affiliate (each such Affiliate being a
     "Nominated Affiliate"), by giving written notice to the Facility Agent, to
     discharge such Bank's obligations under this Agreement to provide such
     Ancillary Facility. To the extent that a Nominated Affiliate provides an
     Ancillary Facility on behalf of a Bank (the "Nominating Bank"), the
     Nominating Bank shall be deemed to have discharged such obligations with
     respect to such Ancillary Facility.

7.4  Delivery of Nominee Notice

     Upon a Nominating Bank nominating an Affiliate in accordance with Clause
     7.3, such Nominating Bank shall deliver to the Facility Agent a Nominee
     Notice in the form of the document contained in Schedule 13.

7.5  Date of Accession

     From the date of delivery of any executed Nominee Notice (the "Delivery
     Date") by a Nominating Bank in respect of a nominated Affiliate such
     Nominated Affiliate shall become an Ancillary Bank for the purposes of this
     Agreement and in particular this Clause 7.

7.6  Execution of Nominee Notice

     Upon receipt of each Nominee Notice duly executed by the relevant Nominated
     Affiliate the Facility Agent shall execute such Nominee Notice on its own
     behalf and on behalf of each other Finance Party.  Each Finance Party
     (other than the Facility Agent) hereby irrevocably 

                                       58
<PAGE>
 
     authorises the Facility Agent to execute such Nominee Notice on its behalf
     and each Obligor (other than the Company) hereby irrevocably authorises the
     Company to execute such Nominee Notice on its behalf.

7.7  Rights and Obligations of the Parties

     Each of the parties hereto, upon the Delivery Date, shall acquire the same
     rights and assume the same obligations, as between themselves and to the
     Nominated Affiliate, under the Senior Finance Documents, as they would have
     acquired and assumed had such Nominated Affiliate been an original party to
     the Facility Agreement.  Each Nominated Affiliate shall upon the Delivery
     Date acquire such rights and assume such obligations under the Senior
     Finance Documents (including without limitation to be a Secured Beneficiary
     as defined therein) to and against the parties hereto as if it were an
     Ancillary Bank at the date of this Agreement.

7.8  Maximum Ancillary Commitment

     The Ancillary Commitment under an Ancillary Facility, proposed to be given
     by a Nominated Affiliate who has become an Ancillary Bank pursuant to
     Clause 7.5, shall not, when aggregated with the actual and contingent
     liability (calculated without reference to Clause 7.9) of the Nominating
     Bank of such Nominated Affiliate, together with any other Ancillary
     Facilities provided by such Nominating Bank and/or any of it Affiliates,
     exceed such Nominating Bank's Revolving Commitment.

7.9  Calculations

     For the purpose of this Agreement (including without limitation the
     calculation of such Bank's Revolving Commitment, Standby L/C Commitment,
     Revolving Facility Available Amount and Standby L/C Facility Available
     Amount) any Ancillary Facility provided by a Nominated Affiliate of a
     Nominating Bank, shall be deemed to have been provided by such Nominating
     Bank.

7.10 Intercreditor

     The parties hereto agree that any Nominated Affiliate that delivers a
     Nominee Notice in accordance with the provisions of Clause 7.5 hereof
     shall, become a party to each of the Intercreditor Agreements as a Bank.

7.11 Term of Ancillary Facility

     Subject to the provisions of this Agreement, when an Ancillary Facility is
     provided by a Nominated Affiliate it shall be provided on such terms and
     conditions stipulated in this Agreement with respect to Ancillary
     Facilities.

                                       59
<PAGE>
 
                                    PART 3

8.   INTEREST

8.1  Standby L/C Commission

(a)  The Borrower identified as such in the Standby L/C Request relating to a
     Standby L/C shall, on the expiry of each period of three months after the
     Issue Date of such Standby L/C and on the Expiry Date of such Standby L/C,
     pay to the Facility Agent for the account of the Banks participating in
     that Standby L/C a commission, such commission calculated by the Facility
     Agent at the rate of the Margin on the amount of the undrawn portion of
     that Standby L/C on each day during the period beginning on the Issue Date
     of that Standby L/C is issued and ending on the Expiry Date of such Standby
     L/C.

(b)  If a Borrower procures the release of a Bank from its obligations under a
     Standby L/C pursuant to Clause 16.2 such Bank shall not be entitled to any
     commission occurring thereon after the date of such release.

8.2  Interest rate

Subject to Clause 9, the rate of interest which shall accrue on each Advance
during its Term is the rate, per annum, determined by the Facility Agent to be
the aggregate of:

(a)  LIBOR relative to such Advance for such Term;

(b)  the Margin; and

(c)  in the case of an Advance denominated in Sterling, the Additional Cost
     applicable thereto from time to time during such Term.

8.3  Due date

Save as otherwise provided in this Agreement, accrued interest on each Advance
during its Term is payable by the relevant Borrower in arrears on its Repayment
Date and, if any Term exceeds six months, on the expiry of each period of six
months during such Term.

8.4  Duration

Interest shall accrue (both before and after judgment) from (and including) the
Drawdown Date for the relevant Advance to (but excluding) the date that such
Advance is repaid in full.

8.5  Notification of LIBOR by Facility Agent

The Facility Agent shall promptly notify each of the other Parties of any
determination of LIBOR made by it under this Agreement.

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<PAGE>
 
9.   DEFAULT INTEREST

9.1  Failure to Pay

If any Borrower fails to pay any amount payable by it under this Agreement or
under the Security Documents on the due date (the unpaid balance being an
"Overdue Amount"), such Borrower shall, pay default interest on the Overdue
Amount from (and including) the due date to (but excluding) the date such
Overdue Amount is repaid in full, both before and after judgment.

9.2  Rate

Subject to Clause 9.4, default interest shall be payable on an Overdue Amount at
a rate, per annum, determined by the Facility Agent to be equal to the aggregate
of two per cent. (2.00%) plus the Margin (which shall be two per cent. (2.00%)
per annum (and, in the case of an Overdue Amount denominated in Sterling, the
Additional Cost applicable thereto from time to time) and LIBOR.

9.3  Default Interest Period

The period during which an Overdue Amount is outstanding shall be divided into
successive periods (each a "Default Interest Period"), each of which (apart from
the first) shall start on the last day of the preceding Default Interest Period.
The duration of each Default Interest Period shall (save as provided at Clause
9.4) be selected by the Facility Agent having regard, where possible, to the
likely date that the relevant Overdue Amount will be repaid in full.

9.4  Unexpired Portion

If any Overdue Amount corresponds to the principal amount payable in respect of
an Advance which has become repayable prior to its Repayment Date, the first
Default Interest Period which shall be selected by the Facility Agent shall be
of a duration equal to the unexpired portion of the Term of such Advance. The
rate of the default interest payable in respect of such Overdue Amount during
that unexpired period shall be two per cent. (2.00%) over the rate which would
have been applicable to such Advance had it not so fallen due provided that the
Margin applicable thereto shall, in all circumstances, be two per cent. (2.00%)
per annum.

9.5  On Demand

Any interest which shall have accrued under this Clause 9 in respect of an
Overdue Amount shall be payable on demand and, if not paid, compounded at the
end of its then current Default Interest Period.

10.  MARKET DISRUPTION

10.1 Disruption events

If, in relation to any Advance and its Term relative thereto:

(a)  "LIBOR" is to be determined to pursuant to paragraph (b) of the definition
     thereof and no, 

                                       61
<PAGE>
 
     or where there is more than one Reference Bank only one, Reference Bank
     supplies an interest rate to the Facility Agent as required by the
     definition of LIBOR after the Facility Agent has requested such a rate from
     the Reference Banks; or

(b)  the Facility Agent shall have received notification from a Bank or Banks
     whose participations in such Advance constitute at least thirty five per
     cent. (35%) by value of such Advance that by reason of circumstances
     affecting the London Interbank Market generally:

     (i)  deposits in the currency of such Advance for the same period as such
          Term will not be readily available to them in the London Interbank
          Market in sufficient amounts in the ordinary course of business to
          fund their respective participations in such Advance for such Term; or
 
     (ii) whilst such deposits are so available, the cost of such deposits
          exceeds LIBOR as determined in relation to such Advance for such Term;
          or

(c)  the Facility Agent shall have received notification from any Bank (an
     "Affected Bank") that by reason of applicable law or regulation it is
     unable to fund its participation in such Advance during such Term by
     deposit(s) in the currency of such Advance obtained in the London Interbank
     Marketing the ordinary course of business;
 
the Facility Agent shall promptly give written notice of such determination or
notification to the Obligors' Agent and each of the Banks.

10.2 Effect

After the giving of any notice by the Facility Agent following the occurrence of
any of the events referred to in Clause 10.1 if the requested Advance was to be
denominated:

(a)  in an Optional Currency (other than Sterling or Dollars) such Advance shall
     not be made; or

(b)  in Deutschmarks, Sterling or Dollars, the requested Advance will, subject
     to the terms and conditions of this Agreement, be made by the Banks, have a
     Term of one month and bear interest during its Term at the rate determined
     by the Facility Agent to be the aggregate of the Margin plus the rate
     determined by each Bank before the Repayment Date of the Advance to be the
     rate which expressed (as a percentage rate per annum) the cost of that Bank
     of funding its portion of the Advance from whatever source it may select
     (acting reasonably).

Within three Business Days of the Facility Agent giving a notice under Clause
10.1, the Facility Agent and the Company will enter into negotiations with a
view to agreeing a substitute basis for determining the rate of interest which
may be applicable to any future Advances.  Any substitute basis that is agreed
shall be confirmed in writing, be deemed to be a term of this Agreement, take
effect in accordance with its terms and be binding on the Parties.  The Facility
Agent confirms to the Banks that it will not agree to any substitute basis
without the prior consent of each Bank.

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<PAGE>
 
                                     PART 4

11.  REPAYMENT, PREPAYMENT AND CANCELLATION

11.1 Reduction of the Facility

On each date specified in Column 1 below (each such date being a "Reduction
Date") the Total Commitments shall be reduced such that they are equal to the
amount set opposite such Reduction Date in Column 2 below less the aggregate
amount of Commitments that have been previously cancelled under this Agreement
prior to that Reduction Date otherwise than solely as a result of the operation
of this Clause 11.1 or Clause 7, whereupon the Revolving Commitment of each Bank
(including, for the avoidance of doubt, the Revolving Commitment of each
Ancillary Bank disregarding, for this purpose its Ancillary Commitment) shall be
reduced by a proportionate amount and pro rata to their respective Revolving
Commitments at such time and the Standby L/C Commitments of the Banks shall be
reduced by a proportionate amount pro rata and the Company shall procure that
the aggregate Deutschmark Amount of all outstanding Advances, Standby L/Cs
Ancillary Facilities and amounts owing under Clause 11.3 (if any) shall on such
date (and at all times thereafter) not exceed the Total Commitments on such
date.

                                       63
<PAGE>
 
     Column 1                         Column 2
 
     Reduction Date                   Total Commitments
 
     Fifth anniversary of the date
     of this Agreement                DM194,000,000
 
     Sixth anniversary of the date
     of this Agreement                DM169,000,000

     Final Repayment Date             Zero

11.2 Repayment of Advances

(a)  Each Borrower shall repay the full amount of each Advance made to it on the
     Repayment Date relating to that Advance, provided always that the full
     amount of each Advance outstanding on the Final Repayment Date shall be
     repaid in full on the Final Repayment Date.

(b)  Without prejudice to a Borrower's obligation to repay the full amount of
     each Advance made to it on the due date, and without any change to the
     amount of any Advance involved, subject to any contrary legal requirement,
     where on the same day as such Borrower is due to repay an Advance such
     Borrower also requests to draw down (and is entitled pursuant to the terms
     of this Agreement to so draw down) an Advance in the same currency, the
     amount to be so repaid and the payment by the Facility Agent to such
     Borrower of the proceeds of the Advance being drawn shall be settled by
     netting off the one against the other so that the amount actually paid in
     cash shall be the net amount only.

(c)  Without prejudice to the provisions of Clauses 9 or this Clause, all
     amounts outstanding under this Agreement, whether principal, interest,
     costs and expenses or otherwise, shall be repayable or payable (as the case
     may be) in full on the Final Repayment Date.

11.3 Facility Agent to notify Banks of demand

As soon as practicable after it receives a demand for payment under a Standby
L/C, the Facility Agent shall notify the Borrower on whose behalf it was issued
and the Banks that participated in such Standby L/C of the amount of that demand
and the date on which the amount demanded is required to be paid, whereupon that
Borrower shall be obliged to pay to the Facility Agent for account of such Banks
on such date an amount equal to the amount demanded, as reduced by any sum then
standing to the credit of the Standby L/C Accounts (as defined in Clause 31.4)
relating to that Standby L/C.

11.4 L/C indemnity

Each Borrower hereby undertakes to indemnify and to hold harmless each Bank from
and against all liabilities, costs, losses, damages and expenses which such Bank
may at any time incur or sustain as a result of its participation in any Standby
L/C requested by such Borrower.

                                       64
<PAGE>
 
11.5 Banks' Discretion

The Banks that participated in each Standby L/C shall at all times be entitled
to make any payment under such Standby L/C for which a request, demand or other
claim has been made thereunder in accordance with the terms thereof without
further investigation or enquiry and none of them nor the Facility Agent on
their behalf need in any way concern itself with the propriety of any claim made
or purported to be made under and in the manner required by the terms of such
Standby L/C accordingly, it shall not be a defence to any demand made of any
Borrower hereunder, nor shall any of the obligations of any Borrower hereunder
be impaired by the fact (if it be the case), that any such Bank or the Facility
Agent on its behalf was or might have been justified in refusing payment, in
whole or in part, of the amounts so claimed.

11.6 Voluntary cancellation

The Obligors' Agent may, by giving to the Facility Agent not less than 10
Business Days' prior notice to that effect, cancel the whole or any part (being
a minimum amount of DM1,000,000) of the Total Commitments whereupon the
Revolving Commitment of each Bank (including, for the avoidance of doubt, the
Revolving Commitment of each Ancillary Bank disregarding, for this purpose its
Ancillary Commitment) shall be reduced by a proportionate amount and pro rata to
their respective Revolving Commitments at such time and the Standby L/C
Commitment of each Bank shall be reduced by a proportionate amount pro rata.
Provided that the Revolving Facility shall not be reduced pursuant to this
Clause 11.6 to below the Deutschmark Amount of outstanding (or scheduled to be
outstanding under this Agreement) Advances or the Standby L/C Facility be
reduced to below the Deutschmark Amount of Standby L/Cs issued that have not
expired or, in respect of which an amount is due and payable by any Borrower
under Clause 11.3, or scheduled to be issued (in accordance with this Agreement)
on the relevant date, on the assumption that any Advances due to be repaid, in
accordance with the provisions of this Agreement are so repaid and that any
Standby L/Cs due to expire so expire without the Banks party to such Standby
L/Cs being required to make any (or any further) payment thereunder.

11.7 Mandatory Prepayment on Listing

(a)  If any steps are taken in or towards the Company or any Group Member being
     Listed the Company shall immediately notify the Facility Agent thereof
     specifying the date on which the proposed Listing is to occur.

(b)  Following receipt of a notice under Clause 11.7(a) above the Facility Agent
     shall consult with the Company during the period of 30 days following such
     receipt and shall, if so instructed by the Banks, give a notice of
     continuance notwithstanding the proposed Listing (a "Listing Notice of
     Continuance") of the Facilities.  During such period a Borrower shall only
     be permitted to:

     (i)  serve a Drawdown Request hereunder which specifies that the Repayment
          Date for the Advance requested in such Drawdown Request will fall on a
          date not more than 30 days after the expiration of such period;

                                       65
<PAGE>
 
     (ii)  serve a Standby L/C Request hereunder which specifies that the Expiry
           Date for the Standby L/C requested in such Standby L/C request will
           fall on a date not more than 30 days after the expiry of such period;
           and

     (iii) utilise an Ancillary Facility such that the obligation of the
           relevant Borrower thereunder in respect of such utilisation will be
           able to be fulfilled on a date not more than 30 days after the expiry
           of such period.

     Upon receipt of a Listing Notice of Continuance, the right of each Borrower
     to serve a Drawdown Request or, as the case may be, a Standby L/C Request
     and to utilise any Ancillary Facility made available to it at such time
     without such limitation shall be reinstated.

(c)  If at the end of the period referred to in Clause 11.7(b), the Company has
     not received a Listing Notice of Continuance then the Facility Agent may,
     and shall if so instructed by the Majority Banks, declare:

     (i)   that any unutilised portion of the Facilities shall be cancelled
           whereupon the same shall be cancelled and the Revolving Commitment,
           Ancillary Commitment and Standby L/C Commitment of each Bank shall be
           reduced to zero;

     (ii)  any outstanding Advances with a Repayment Date falling on a date
           later than the relevant Listing, (the "Listing Date") shall be
           prepaid on or before the Listing Date, together with accrued interest
           thereon up to the date of payment and all other amounts payable to
           the Facility Agent and each Bank hereunder (including any amounts
           payable under Clause 25.1(b));

     (iii) each Borrower on whose behalf a Standby L/C was issued with an
           Expiry Date falling on a date later than the Listing Date shall pay
           to the Facility Agent no later than the Listing Date for the credit
           of each Bank that participated in such Standby L/C an amount in cash
           equal to the undrawn amount of such Standby L/C less any sum then
           standing to the credit of the Standby L/C Accounts (as defined at
           Clause 31.4) relating to that Standby L/C or procure the release of
           each such Bank from its obligations under each such Standby L/C; and

     (iv)  any outstanding amounts under the Ancillary Facility shall be prepaid
           or repaid on or before the Listing Date or, in respect of any
           contingent obligations of the relevant Borrower thereunder cash
           collateralised by the relevant Borrower unless on or prior to the
           Listing Date, the relevant Borrower has procured the release of the
           relevant Ancillary Bank from such contingent liability.

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11.8 Prepayment Fee

Any prepayment or cash collaterisation of any Utilisation made under any
provision of this Agreement may be made without any fee or penalty (but without
prejudice to any amount due pursuant to Clause 25.1(b)).

11.9 Cancellation and Prepayment of a Bank's Revolving Commitment and Standby
     L/C Commitment

(a)  If a Borrower is required to make any additional payment to a Bank pursuant
     to Clause 14 or a Bank claims indemnification under Clause 14 or Clause 15,
     the Obligors' Agent may, provided that the relevant circumstances are still
     continuing, serve a notice on such Bank through the Facility Agent,
     whereupon such Bank's Revolving Commitment, Ancillary Commitment (if any)
     and Standby L/C Commitment shall immediately be cancelled.

(b)  Five Business Days after the date of service of any such notice or on such
     later date as may be agreed between the Facility Agent, the Obligors' Agent
     and such Bank, each Borrower shall:

     (i)   repay the relevant Bank's proportion of the outstanding Advances
           together with accrued interest thereon and any other amounts payable
           by each Borrower to such Bank under this Agreement, including any
           amount payable in respect of breakage costs on the amount prepaid
           pursuant to Clause 25.1(b); and

     (ii)  pay to the Facility Agent for the credit to the relevant Standby L/C
           Account on such Bank's books relating to each Standby L/C in which
           such Bank has participated an amount equal to the amount of its
           participation in that Standby L/C or alternatively procure the
           release of such Bank from its obligations under such Standby L/C; and

     (iii) repay any outstanding amounts under any Ancillary Facility provided
           to it by such Bank and cash collateralise any contingent obligation
           thereunder or, if the contingent liability is that of the Ancillary
           Bank, procure the release of the Ancillary Bank from such contingent
           liability.

11.10  Notices of prepayment and cancellation

(a)  Any notice of prepayment and cancellation delivered under this Agreement is
     irrevocable.

(b)  Subject to the provisions of this Agreement each notice shall specify the
     date upon which such prepayment and cancellation is to be made and the
     amount of such prepayment and cancellation.

11.11  Notification of Bank(s)

The Facility Agent shall notify the relevant Bank(s) promptly upon receipt of
any notice of prepayment and cancellation.

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11.12  Only method

No payment, prepayment or cancellation is permitted other than in accordance
with the provisions of this Agreement.

11.13  European Economic and Monetary Union

(a)  Definitions  In this Clause 11.13 and in each other provision of this
     Agreement to which reference is made in this Clause 11.13 expressly or
     impliedly (including, without limitation, Clause 15), the following terms
     have the meanings given to them is this Clause 11.13:

     "commencement of the third stage of EMU" means 1 January 1999;

     "EMU" means Economic and Monetary Union as contemplated in the Treaty on
     European Union;

     "EMU Legislation" means legislative measures of the European Council for
     the introduction of, changeover to or operation of a single or unified
     European currency (known as the euro ), being in part the implementation of
     the third stage of EMU;

     "euro" means the single currency of participating member states of the
     European Union;

     "euro unit" means the currency unit of the euro;

     "national currency unit" means the unit of currency (other than a euro
     unit) of a participating member state;

     "participating member state" means each state so described in any EMU
     legislation; and

     "Treaty on European Union": means the Treaty of Rome of 25 March 1957, as
     amended by the Single European Act 1986 and the Maastricht Treaty (which
     was signed at Maastricht on 7 February 1992 and came into force on 1
     November 1993), as amended from time to time.

(b)  Coming into Effect of Provisions:  The provisions of Clauses 11.13(c) to
     11.13(j) (inclusive) shall come into effect on and from the commencement of
     the third stage of EMU, provided that, if and to the extent that any such
     provision relates to any state (or the currency of such state) which shall
     not be a participating member state on the commencement of the third stage
     of EMU, such provision shall come into effect in relation to such state
     (and the currency of such state) on and with effect from the date on which
     such state becomes a participating member state.

(c)  Redenomination and Alternative Currencies:  Each obligation under this
     Agreement of a party to this Agreement which has been denominated in a
     national currency unit shall be redenominated into the euro unit in
     accordance with EMU legislation provided that, if and to the extent that
     any EMU legislation provides that following the commencement of the third
     stage of EMU an amount denominated either in the euro or in the national
     currency 

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<PAGE>
 
     unit of a participating member state and payable within that participating
     member state by crediting an account of the creditor can be paid by the
     debtor either in the euro unit or in that national currency unit, each
     party to this Agreement shall be entitled to pay or repay any such amount
     either in the euro unit or in such national currency unit.

(d)  Utilisations:  Any utilisation in the currency of a participating member
     state shall be made in the euro unit.

(e)  Business Days:  In relation to any amount denominated or to be denominated
     in the euro or a national currency unit, any reference to a business day
     shall be construed as a reference to a day (other than a Saturday or
     Sunday) on which bank are generally open for business in:

     (a)  London; and

     (b)  Frankfurt (or such principal financial centre or centres in such
          participating member state or states as the Facility Agent may from
          time to time nominated for this purpose).

(f)  Payments to the Facility Agent:  Clause 13.1 (Payments to the Facility
     Agent) shall be construed so that, in relation to the payment of any amount
     of euro units or national currency units, such amounts shall be made
     available to the Facility Agent in immediately available, freely
     transferable, cleared funds so such account with such bank in Frankfurt (or
     such other principal financial centre in such participating member state as
     the Facility Agent may from time to time nominate for this purpose).

(g)  Payments by the Facility Agent to the Banks:  Any amount payable by the
     Facility Agent to a Bank under this Agreement in the currency of a
     participating member state shall be paid in the euro unit.

(h)  Payments by the Facility Agent:  In relation to the payment of any amount
     denominated in the euro or in a national currency unit, the Facility Agent
     shall not be liable to any Obligor or any Bank in any way whatsoever for
     any delay, or the consequences of any delay, in the crediting to any
     account of any amount required by this Agreement to be paid by the Facility
     Agent if the Facility Agent shall have taken all relevant steps to achieve,
     on the date required by this Agreement, the payment of such amount in
     immediately available, freely transferable, cleared funds (in the euro unit
     or, as the case may be, in a national currency unit) to the account in the
     principal financial centre in the participating member state which the
     relevant Obligor or, as the case may be, any Bank shall have specified for
     such purpose. In this Clause 11.13, "all relevant steps" means all such
     steps as may be prescribed from time to time by the regulations or
     operating procedures of such clearing or settlement system as the Agent may
     from time to time determine for the purpose of clearing or settling
     payments of the euro.

(i)  Basis of Accrual:  If, in relation to the currency of any state which
     becomes a participating member state, the basis of accrual of interest or
     commitment commission expressed in this Agreement in respect of that
     currency shall be inconsistent with any convention or practice 

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<PAGE>
 
     in the London Interbank Market for the basis of accrual of interest or
     commitment commission in respect of the euro, such expressed basis shall be
     replaced by such convention or practice with effect on the date on which
     such state becomes a participating member state provided that, if any
     Advance in the currency of such state is outstanding immediately prior to
     such date, such replacement shall take effect, with respect to such
     Advance, at the end of the then current Term.

(j)  Rounding and Other Consequential Changes:  Without prejudice and in
     addition to any method of conversion or rounding prescribed by any EMU
     legislation and without prejudice to the respective liabilities for
     indebtedness of the Obligors to the Banks and the Banks to the Obligors
     under or pursuant to this Agreement:

     (a)  each reference in this Agreement to a minimum amount (or an integral
          multiple thereof) in a national currency unit to be paid to or by the
          Facility Agent shall be replaced by a reference to such reasonably
          comparable and convenient amount (or an integral multiple thereof) in
          the euro unit as the Facility Agent may from time to time specify; and

     (b)  save as expressly provided in this Clause 11.13(j), each provisions of
          this Agreement shall be subject to such reasonable changes of
          construction as the Facility Agent may from time to time specify to be
          necessary or appropriate to reflect the introduction of or changeover
          to the euro in participating member states.

12.  PARTIAL PAYMENTS

If the Facility Agent receives a payment which is insufficient to discharge all
the amounts due and payable by an Obligor under this Agreement on the day such
payment is received, the Facility Agent shall, subject to the Intercreditor
Agreements, apply that payment in or towards the discharge of such Obligor's
obligations under this Agreement in the following order:

(a)  firstly (and at its discretion), in or towards payment of any unpaid costs
     and expenses of the Agents incurred by it in connection with this
     Agreement;

(b)  secondly, in or towards payment (pro rata) of any unpaid fees under Clause
     26;

(c)  thirdly, in or towards payment (pro rata) of any unpaid interest (including
     default interest) and commission;

(d)  fourthly, in or towards repayment (pro rata) of any unpaid principal; and

(e)  fifthly, in or towards payment of any other amounts due and payable by such
     Obligor under this Agreement.

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13.  PAYMENTS

13.1 To Facility Agent

Subject to the provisions of Clause 13.2, on each date that a Party (other than
the Facility Agent) is obliged to make a payment under any of the Senior Finance
Documents, that Party shall make the same available to the Facility Agent:

(a)  if the amount is denominated in Deutschmarks by payment in Deutschmarks and
     in same day funds (or in such funds as may be customary in Frankfurt for
     the settlement in Frankfurt of international banking transactions in
     Deutschmarks) to the Facility Agent at Chase, Frankfurt Manhattan Bank AG
     Account No. 9080002101 in the name of Derby Cycle Corporation or such other
     account as the Facility Agent may have stipulated for such purpose;

(b)  if the amount is denominated in Dollars, by payment in Dollars and in same
     day funds (or in such funds as may be customary in New York City for the
     settlement in New York City of international banking transactions in
     Dollars) to the Facility Agent at The Chase Manhattan Bank, New York, 270
     Park Avenue New York, NY, 10017 USA, Account No. 544-714108 in the name of
     Derby Cycle Corporation or such other account as the Facility Agent may
     have specified for this purpose;

(c)  if the amount is denominated in Sterling, by payment in Sterling in
     immediately available, freely transferable, cleared funds, by CHAPS Sort
     Code 40-52-06 to the Facility Agent at The Chase Manhattan Bank, 125 London
     Wall, London EC2Y 5AJ or such other account as the Facility Agent may have
     specified for this purpose;

(d)  if the amount is denominated in Dutch Guilders by payment in Dutch Guilders
     and in same day funds (or in such funds as may be customary in Amsterdam
     for the settlement in Amsterdam of international banking transactions in
     Dutch Guilders) to the Facility Agent at ING Barings, Amsterdam Account No.
     0051612607 in the name of Derby Cycle Corporation or such other account as
     the Facility Agent may have stipulated for such purpose; and

(e)  if the amount is denominated in an Optional Currency (other than Sterling,
     Dutch Guilders or Dollars), by payment in such Optional Currency and in
     immediately available, freely transferable, cleared funds to such account
     with such bank in the principal financial centre of the country of such
     Optional Currency as the Facility Agent shall have specified for this
     purpose.

13.2 Distribution by the Agents

(a)  All payments to be made by any Obligor under any Senior Finance Document
     shall be paid to or to the order of the Security Agent, provided that the
     Security Agent hereby consents to all such payments being made to the
     Facility Agent in accordance with the terms of this Agreement until the
     Security Documents shall become enforceable and the Security Agent
     withdraws such consent by notice to the Facility Agent and the Obligors.

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<PAGE>
 
(b)  Each payment received by any Agent for the account of another Person
     pursuant to Clause 13.1 shall:

     (i)  in the case of a payment received for the account of any Borrower, be
          made available by that Agent to that Borrower by application, on the
          date and in the funds of receipt:

          (A)  first, in or towards payment of any amounts then due and payable
               (and unpaid) by that Borrower under any of the Senior Finance
               Documents; and

          (B)  second, in payment to such account as that Borrower shall have
               properly designated for the purpose in the relevant Drawdown
               Request or otherwise in writing; and

     (ii) in the case of any other payment, be made available by the Facility
          Agent to the Person for whose account the payment was received (in the
          case of a Bank, for the account of its Facility Office) on the date
          and in the currency and funds of receipt to such account of the Person
          with the office or bank in the country of the currency concerned as
          that Person shall have previously notified to the Facility Agent for
          the purposes of this Agreement.

(c)  The Facility Agent or the Security Agent (as the case may be) shall
     promptly distribute payments received for the account of the Banks among
     the Banks pro rata to their respective entitlements and in the funds and
     currency of receipt.

13.3 Currency

(a)  Interest and commission accrued under this Agreement shall be payable in
     the currency in which the relevant amount in respect of which it has
     accrued was denominated during the period of accrual.

(b)  The principal of each Advance shall be repaid or prepaid in the currency in
     which it is denominated.

(c)  Amounts payable to the credit of a Standby L/C Account (as defined in
     Clause 31.4) relating to a Standby L/C shall be payable in the currency in
     which the relevant Standby L/C is denominated.

(d)  Any amount (other than of principal and/or interest) calculated on or by
     reference to or payable in respect of another amount shall be payable in
     the currency in which that other amount is denominated at the time of
     payment.

(e)  Any other amount payable under this Agreement, unless otherwise provided,
     shall be payable in Deutschmarks.

(f)  If the Facility Agent receives a payment for the account of another Party
     in connection with

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<PAGE>
 
     this Agreement, the Facility Agent shall make that payment available to
     such Party for value the same day by transfer to such account of such Party
     with such bank in the principal financial centre of the country of the
     currency of such payment as that Party shall have previously notified to
     the Facility Agent in writing for this purpose.

(g)  If a sum is paid under this Agreement to the Facility Agent for the account
     of another Party, the Facility Agent shall not be obliged to pay that
     amount to that Party until the Facility Agent has established, to its
     satisfaction, that it has actually received and retained that sum.

(h)  The Facility Agent may, but shall not be obliged to assume that it has
     received and retained all amounts payable to it under this Agreement on the
     due date and, in reliance on that assumption, make available to the
     relevant Party a corresponding amount. If, however, such a sum has not been
     received and retained by the Facility Agent, the relevant Party shall, on
     demand by the Facility Agent, promptly refund the corresponding amount to
     the Facility Agent together with interest on that amount from (and
     including) the date of payment by the Facility Agent to (but excluding) the
     date such amount is repaid to the Facility Agent in full, at a rate
     calculated by the Facility Agent so as to reflect its cost of funding such
     payment.

13.4 Set-off and counterclaim

(a)  All payments required to be made by the Obligors' under any of the Senior
     Finance Documents shall be made without reference to any set-off or
     counterclaim and shall be made free and clear of and without any deduction
     for or on account of any set-off or counterclaim.

(b)  For so long as an Event of Default has occurred which is still continuing,
     each Obligor authorises each Bank to apply any credit balance to which such
     Obligor under any of the Finance Documents is entitled on any account of
     such Obligor with that Bank in satisfaction of any sum due and payable from
     such Obligor to that Bank under any of the Finance Documents but unpaid.
     Each Bank is, accordingly, authorised to purchase with any credit balance
     of any such account such other currencies as may be necessary to effect
     such application. No Bank shall be obliged to exercise any right given to
     it by this Clause 13.4(b).

                                    PART 5

14.  TAXES

14.1 Payment of Taxes

All payments to be made by any Obligor under or in respect of any of the Senior
Finance Documents shall be made free and clear of and without any deduction or
withholding of Tax unless (but without prejudice to this Clause 14) any such
Obligor is required by law to make such payment subject to the deduction or
withholding of Tax.

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14.2 Gross-up

Subject to prompt compliance by the Finance Parties with the provisions of this
Clause 14.2 and Clauses 14.7, 14.8 and 14.9, if any Taxes or amounts in respect
thereof must be deducted from any payment by an Obligor under any Senior Finance
Document (other than in respect of any Tax imposed or a payment which would not
have been imposed on that payment, if the relevant Finance Party to which or for
whose account that payment was made, had been at the date of the payment a
Qualifying Bank) or must be made from any amounts paid by any Obligor (or from
any corresponding payment by any Finance Party to any other Finance Party under
this Agreement), or any such payment shall otherwise be required to be made
subject to any Tax, such Obligor shall pay such additional amounts as may be
necessary to ensure that the relevant Finance Party receives a net amount equal
to the full amount which it would have received had payment not been made
subject to the relevant Tax.  Each Finance Party shall notify each Obligor
through the Facility Agent of the application of this Clause 14 to any payment
then due or to become due to it under any Senior Finance Document promptly upon
its becoming aware of the same.

14.3 Tax indemnity

Without prejudice to the provisions of Clauses 14.1 and 14.2 if any Finance
Party, or any other Person through which a payment relating to this Agreement or
the Security Documents is made, is required to make any payment on account of
Tax (other than Tax on its overall net income) on or in relation to any sum
received or receivable under this Agreement or, as the case may be, the relevant
Security Document by that Finance Party, or any other Person through which such
a payment is made, the Borrower shall, upon demand by the Facility Agent,
indemnify the relevant Finance Party against such payment, together with any
interest, penalties and expenses payable or incurred in connection therewith.

14.4 Notification of claims

Without prejudice to Clauses 14.2 or 14.3 if the relevant Borrower so requests,
the relevant Finance Party shall notify such Borrower of the reason for making a
claim under Clauses 14.2 or 14.3.  This Clause 14.4 shall not oblige any Finance
Party to disclose any information relating to the organisation of its business
or tax affairs or how the amount requested was calculated if it considers, in
its sole opinion, that such information is confidential.

14.5 Tax receipts

If, as a result of a payment being made by or on behalf of the Borrower under
this Agreement or the Security Documents, the Borrower is required to pay any
Tax, the Borrower shall pay such Tax in full to the relevant authority within
the time allowed for such payment under applicable law. The Borrower shall, as
soon as reasonably practicable after payment falls due to the relevant
authority, deliver to the Facility Agent any original (or a Certified Copy) of a
receipt issued by the relevant authority evidencing that payment in full has
been received by the relevant authority.

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<PAGE>
 
14.6 Tax Saving

(a)  In the event that, following the imposition of any Tax on any payment by
     any Obligor (or any corresponding payment by any Finance Party to any other
     Finance Party under this Agreement) in consequence of which such Obligor is
     required under Clauses 14.2 or 14.3,  to pay such Tax or to pay any
     additional amount in respect of it, any Finance Party shall in its sole
     opinion and based on its own interpretation of any relevant laws or
     regulations (but acting in good faith) receive or be granted a credit
     against or remission for or deduction from or in respect of any Tax payable
     by it, or shall obtain any other relief in respect of Tax on its profits or
     income, which in such Finance Party's opinion in good faith is both
     identifiable and quantifiable by it without requiring such Finance Party or
     its professional advisers to expend a material amount of time or incur a
     material cost in so identifying or quantifying or at the written request of
     the Obligor and if the Finance Party is of the opinion that it will recover
     the cost incurred, after incurring such cost (any of the foregoing, to the
     extent so identifiable and quantifiable, being referred to as a "saving"),
     such Finance Party shall, to the extent that it can do so without prejudice
     to the retention of the relevant saving and subject to deduction for
     reasonable costs and subject further to such Obligor's obligation to repay
     the amount to such Finance Party if the relevant saving is subsequently
     disallowed or cancelled (which repayment shall be made promptly on receipt
     of notice by such Finance Party of such disallowance or cancellation),
     reimburse such Obligor promptly after receipt of such saving by such
     Finance Party with such amount as such Finance Party shall in its sole
     opinion but in good faith have concluded to be the amount or value of the
     relevant saving.

(b)  Nothing contained in this Agreement shall interfere with the right of any
     Finance Party to arrange its Tax and other affairs in whatever manner it
     thinks fit and, in particular, no Finance Party shall be under any
     obligation to claim relief from Tax on its corporate profits, or from any
     similar Tax liability, in respect of the Tax, or to claim relief in
     priority to any other claims, reliefs, credits or deductions available to
     it or to disclose details of its Tax affairs.  No Finance Party shall be
     required to disclose any confidential information relating to the
     organisation of its affairs.

(c)  Each Finance Party will notify the relevant Obligor promptly of the receipt
     by such Finance Party of any saving and of such Finance Party's opinion as
     to the amount or value of that saving.

14.7 U.S Taxation-delivery of forms and statements

(a)  Each Finance Party which is not a U.S. Person shall (as soon as it is
     reasonably practicable for it to do so after the date hereof or upon
     becoming a party to this Agreement (as the case may be)) deliver (through
     the Facility Agent) to each U.S. Obligor which is a Borrower duly completed
     and signed, two copies of such form or forms as may be required to indicate
     that such Finance Party is entitled to receive payments under this
     Agreement without deduction, withholding or payment by the U.S. Obligor of
     any United States federal Taxes, including without limitation, either:-

     (i)  two copies of Form 1001 of the Internal Revenue Service of the United
          States of

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<PAGE>
 
          America (relating to an applicable double revenue tax treaty concluded
          by the United States of America); or

     (ii) two copies of Form 4224 of the Internal Revenue Service of the United
          States of America (relating to income effectively connected with the
          conduct of a trade of business in the United States of America).

     Each such Finance Party , subject as otherwise provided in Clause 14.7(b),
     shall deliver (through the Facility Agent) to each U.S. Obligor additional
     duly completed copies of any of the above forms and/or such additional or
     successor forms as shall be adopted form time to time by the Internal
     Revenue Service of the U.S.A. if it is notified by the U.S. Obligor or the
     Internal Revenue Service of the U.S.A. that any previous such form
     delivered by it pursuant to this Clause 14.7 has expired or that Finance
     Party becomes aware that any such form shall have become incomplete or
     inaccurate in any respect unless prior to that delivery any event occurs
     which renders the relevant form inapplicable.

(b)  Each Finance Party which is a U.S. Person shall deliver (through the
     Facility Agent) to each U.S. Obligor a statement signed by an authorised
     signatory of the Finance Party to the effect that it is a U.S. Person and
     if necessary to avoid United States backup withholding, two a duly
     completed and signed copies of Internal Revenue Service Form W-9 (or
     successor form) establishing that such Finance Party is organised under the
     laws of the United States and is not subject to United States backup
     withholding.

(c)  Each Finance Party that is not a U.S. Person that is entitled to an
     exemption from or reduction of withholding tax under the IRC with respect
     to payments under this Agreement shall deliver to the Company (with a copy
     to the Facility Agent), at the time or times prescribed by applicable laws,
     properly completed and executed documentation prescribed by applicable law
     or reasonably requested by the Company as will permit such payments to be
     made without withholding or at a reduced rate.

(d)  The Facility Agent shall have no responsibility or liability for and no
     obligation to check the accuracy or appropriateness of any form or
     statement delivered by any Finance Party pursuant to Clauses 14.7(a) or
     14.7(b) respectively.

(e)  If any Finance Party determines, as a result of any change in applicable
     law, regulation or treaty, or in any official application or interpretation
     thereof, that it is unable to submit to any U.S. Obligor any form or
     certificate that the Finance party is obliged to submit pursuant to Clauses
     14.7(a) or 14.7(b), or that such Finance Party is required to withdraw or
     cancel any form or certificate previously submitted, the Finance Party
     shall promptly notify the U.S. Obligor of that fact.

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14.8 Double tax-treaties

Each Bank and the Facility Agent or the relevant Obligor (as the case may be)
shall as soon as reasonably practicable after the date hereof or upon becoming a
party to this Agreement or (as the case may be) after the date a Borrower not
incorporated in the United Kingdom accedes to this Agreement submit the form or
forms to the appropriate revenue authorities as may reasonably be necessary in
order to comply with the requirements of any applicable law or relevant double
taxation (if any) in relation to the payment of any interest and commitment
commission hereunder to such Bank or the Facility Agent free (or subject to any
applicable reduced rate) of deduction or withholding of or on account of any Tax
which would otherwise be applicable and, if such Bank or the Facility Agent
fails to comply with this Clause 14.8 the relevant Obligor shall not have any
obligation to pay any increased amount required by Clauses 14.2 or 14.3 if and
to the extent that it would not have been required to make any deduction or
withholding (or would only have been required to make any such deduction or
withholding at any applicable reduced rate) of or on account of any Tax had such
Bank or the Facility Agent complied with this Clause 14.8.

14.9 Qualifying Bank

Each Bank that becomes a party to this Agreement on a date occurring 30 days or
more after the date of this Agreement confirms to each of the Obligors that as
at the date it becomes a party to this Agreement it is a Qualifying Bank and
agrees to notify the Obligors' Agent (through the Facility Agent) promptly if it
becomes aware that it is not a Qualifying Bank.

15.  INCREASED COSTS

15.1 Indemnity for increased costs

If any Bank determines that, as a result of:

(a)  the introduction or variation of any law or any change in the
     administration or interpretation of any law; and/or

(b)  compliance with any request from or requirement of any central bank or
     other fiscal, monetary or other authority (including any request or
     requirement which affects the manner in which a Bank or any Holding Company
     of such Bank is required to, or does, maintain capital resources having
     regard to such Bank's obligations under this Agreement and to amounts which
     are owing to it under this Agreement); and/or

(c)  the introduction, or changeover or operation of the euro in any
     participating member state;

     (i)  such Bank, or any Holding Company of such Bank, incurs a cost (being a
          cost which it would not otherwise have incurred) as a result of it
          having entered into and/or it performing its obligations under this
          Agreement and/or it assuming or maintaining its Revolving Commitment
          or its Standby L/C Commitment under any this Agreement and/or it
          making one or more Advances under this Agreement and/or assuming or
          maintaining a contingent liability under any Standby L/C; or

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     (ii) such Bank, or any Holding Company of such Bank, is unable to obtain
          the rate of return on its overall capital which it would have been
          able to obtain but for it having entered into and/or assuming or
          maintaining its Revolving Commitment or its Standby L/C Commitment
          under this Agreement; or

    (iii) there is any increase in the cost to such Bank, or any Holding
          Company of such Bank, of funding or maintaining all or any of the
          assets or liabilities comprised in a class of assets or liabilities
          formed by, or including, those referable to this Agreement; or

     (iv) such Bank, or any Holding Company of such Bank, becomes liable to make
          any payment on account of Tax (other than Tax on its overall net
          income) or otherwise on or calculated by reference to the amount of
          Advances made or to be made by it under this Agreement and/or any sum
          received or receivable by it under this Agreement,

     then the relevant Obligor shall, from time to time on demand by the
     Facility Agent, pay to the Facility Agent for the account of that Bank,
     amounts sufficient to indemnify that Bank against, as the case may be, (i)
     such costs, (ii) such reduction, (iii) such increased costs (or such
     proportion of such increased costs as is, in the opinion of that Bank,
     attributable to its funding, maintaining or assuming assets or liabilities
     referable to this Agreement) or (iv) such liability.

15.2 Exceptions

No Bank shall be entitled to make any claim under Clause 15.1 which:

(a)  is compensated for by the operation of Clause 14;

(b)  is attributable to any change in the rate of Tax on the overall net income
     of such Bank (or the overall net income of the Bank or its Holding
     Company);

(c)  arises as a result of a breach by such Bank of any regulation, guideline or
     requirement of any central bank or other fiscal, monetary or other
     authority (whether or not having the force of law);

(d)  arises as a result of the implementation by any authority after the date of
     this Agreement of any of the matters set out in the paper prepared by the
     Basle Committee on Banking Regulation and Supervisory Practice dated July
     1988 (as amended in November 1991) entitled "International Convergence of
     Capital Measurement and Capital Standings".

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15.3 Notification by Bank

Any Bank proposing to make a claim pursuant to Clause 15.1 shall promptly upon
becoming aware of its entitlement to make such a claim notify the Obligors'
Agent (through the Facility Agent), setting out, in reasonable detail, the
calculation and cause of the amounts claimed. No Bank shall be required to
disclose any information relating to the organisation of its affairs which it
considers to be confidential.

15.4 Regulation D Compensation

Any Bank which is required by Regulation D issued by the Board of Governors of
the Federal Reserve System of the USA to maintain and does maintain any reserves
against "Eurocurrency liabilities" (as defined in such Regulation) pursuant to
such Regulation may require any U.S. Obligor to pay, contemporaneously with each
payment of interest on any Advance (in respect of which the Eurodollar Reserve
Percentage applies) made to such U.S. Obligor for any Term relative thereto,
additional interest on the participation of such Bank in that Advance at the
rate per annum determined from the formula (i) LIBOR applicable to such Advance
for that Term divided by (ii) one minus the Euro-Dollar Reserve Percentage minus
LIBOR applicable to such Advance for that Term.  Any Bank requiring payment by
any U.S. Obligor of such additional interest shall notify such U.S. Obligor and
the Facility Agent at least five Business Days prior to the last day of each
Term each relevant Advance of the amount due to be paid to it with respect to
such Advance pursuant to this Clause 15.4 (certifying in that notice that the
amount claimed does not exceed such part of the cost to such Bank of maintaining
such reserves as in the opinion of that Bank should fairly and reasonably be
apportioned to such Advance), which notice shall be final and binding in the
absence of manifest error.  No Bank shall be required to disclose in support of
any claim hereunder any information reasonably regarded by such Bank as being
confidential.

16.  ILLEGALITY

16.1 Illegality in relation to Advances

If, as a result of the introduction, imposition or variation of any law,
regulation or regulatory requirement of any authority (including any fiscal or
monetary authority), it is unlawful for any Bank to make, maintain or fund any
Advance, or be a party to this Agreement then, unless such illegality is avoided
in accordance with Clause 17:

(a)  after delivery of a notice to the Facility Agent detailing the unlawful
     circumstances, the relevant Bank shall not be obliged to make any Advances
     or make available any Facilities under any Ancillary Facility to which it
     is a party and its Revolving Commitment (including part thereof that is, at
     such time, being utilised under an Ancillary Facility) shall be cancelled
     and reduced to zero, whereupon its Ancillary Commitment (if any) shall be
     cancelled and reduced to zero);

(b)  on the date specified in the notice delivered under Clause 16 (a) (which
     shall not be earlier than the last date on which the relevant Bank
     determines (acting reasonably) it may legally maintain its participation in
     the Advances and/or its Revolving Commitment), the Borrower shall repay
     such Bank's participation in each outstanding Advance, together with
     accrued

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     interest thereon and any other amounts owing to that Bank under the
     Senior Finance Documents or, if the relevant Bank is party to an Ancillary
     Facility, cash collateralise any contingent obligations owed to such
     Ancillary Bank under such Ancillary Facility.

16.2 Illegality in relation to Standby L/Cs

If, as a result of the introduction, imposition or variation of any law,
regulation or regulatory requirement of any authority (including any fiscal or
monetary authority), it is unlawful for any Bank to participate in or perform
its obligations in respect of all or any of the Standby L/Cs issued or to be
issued hereunder, then unless such illegality is avoided in accordance with
Clause 17:

(a)  after delivering of a notice to the Facility Agent detailing the unlawful
     circumstances, the relevant Bank shall cease to be obliged to participate
     in such Standby L/Cs hereunder; and

(b)  if the Facility Agent on behalf of such Bank so requires, the Borrower that
     requested each Standby L/C in which that Bank has participated shall, on
     such date (which shall not be earlier than the last date on which the
     relevant bank determines (acting reasonably) it may lawfully perform its
     obligations under each Standby L/C in which such Bank has participated
     hereunder) pay to the Facility Agent for credit of that Bank for credit to
     the appropriate Standby L/C Account on such Bank's books relating to that
     Standby L/C, an amount equal to the amount of its participation in that
     Standby L/C.

17.  MITIGATION

17.1 Mitigation

(a)  If, in respect of any Finance Party, circumstances arise which would, or on
     the giving of notice would, result in:

     (i)  the application of Clause 10; or

     (ii) an increase in the amount of any payment to be made to it under Clause
          14.1; or

    (iii) any claim for indemnification being made or any obligation to
          increase the amount any payment under any of Clauses 14.2, 14.3 and
          Clause 15.1; or

     (iv) any prepayment or cancellation under Clause 16,

     then, without limiting the obligations of any Obligor under this Agreement,
     and without prejudice to the terms and conditions of those Clauses, that
     Finance Party will (provided that it considers that it is reasonably
     practicable for it to do so), promptly upon becoming aware of the same,
     notify the Facility Agent and, in consultation with the Facility Agent and
     the Obligors' Agent, take steps to mitigate the effects of such
     circumstances, including, if appropriate, changing its Facility Office
     and/or transferring its rights and obligations under the Senior Finance
     Documents to another branch or financial institution acceptable to the
     Obligors' Agent.

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(b)  No Finance Party shall be obliged to take any steps under this Clause 17 if
     it considers, in its opinion, that to do so might have an adverse effect on
     its business, operation, financial condition, or its return under this
     Agreement or it considers such steps to be unreasonable. This Clause 17.1
     shall not oblige any Finance Party to disclose any information relating to
     the organisation of its business, operations, financial condition or any
     other matters if it considers, in its sole opinion, that such information
     is confidential.

(c)  In the circumstances where the relevant Borrower would otherwise be
     entitled or required to prepay any Bank's participation in the Utilisations
     or make a payment into such Bank's Standby L/C Accounts (or any of them) or
     procure such Bank's release from its obligations under each Standby L/C
     (other than as a result of the application of Clause 16 or Clause 21), such
     Bank will, if requested by the Company, transfer by means of a Novation
     Certificate pursuant to Clause 29.2, such participation (and the related
     Revolving Commitment and Standby L/C Commitment) to any bank or financial
     institution which is a Qualifying Bank and is specified by the Company and
     has confirmed to such Bank its willingness to acquire such participation,
     such Revolving Commitment and such Standby L/C Commitment by means of a
     Novation Certificate, subject to receipt by such Bank from the proposed
     transferee of an amount equal to such Bank's entitlement to all principal,
     accrued interest and other sums payable by the Obligors or any of them
     under the Senior Finance Documents (whether or not then due) and any
     amounts then standing to the credit of its Standby L/C Accounts and
     provided further that any consents required from any Beneficiary in respect
     thereof has been obtained.

17.2 Costs and Expenses of Mitigation

Any costs and expenses reasonably incurred by any Finance Party pursuant to this
Clause 17 shall be paid by the Obligors' Agent within five Business Days after
receipt of a demand specifying the same in reasonable detail.

                                 PART 6

18.   REPRESENTATIONS AND WARRANTIES

18.1  General representations and warranties

The Company acknowledges that the each of the Finance Parties have entered into
the Finance Documents in full reliance on the following statements and
represents and warrants to each of the Finance Parties that :

(a)   Due incorporation and status: each Obligor is a private limited company,
      duly incorporated and validly existing under the place of its
      incorporation, possesses the capacity to sue and be sued in its own name,
      and has the power to carry on its business substantially as now being (or
      will immediately after the Closing be) conducted and to own its property
      and other assets;

(b)   Corporate power: each Obligor has the power to execute, deliver and
      perform its obligations under each of the Transaction Documents to which
      it is a party, and any other

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<PAGE>
 
      document or instrument executed, delivered or to be executed or delivered
      by it under any of the Transaction Documents; all necessary corporate,
      shareholder and other action has been taken or will be taken to authorise
      the execution, delivery and performance of the same and no limitation on
      its powers to borrow, to guarantee and to grant security will be exceeded
      as a result of the performance of the transactions contemplated by such
      documents;

(c)   Binding obligations: the Transaction Documents, and any other document or
      instrument executed or delivered or to be executed or delivered by any
      Group Member thereunder, constitute or, as the case may be, will
      constitute valid and legally binding obligations of each of the Obligors
      which are expressed to be a party thereto and, as far as the Company is
      aware, in the case of the Recapitalisation Documents and the Note
      Documents of the other parties thereto and, without limiting the
      generality of the foregoing (and subject to registration under Section 395
      Companies Act 1985 (as amended), the filing of Uniform Commercial Code
      financing statements and filings with the United States Patent and
      Trademark Office and the United States Copyright Office, in each case as
      contemplated by the Security Documents, the Filing of Forms 47 in the
      Companies Registry Office in Dublin in respect of the Irish Debentures,
      the registration of the Debentures entered into by those Obligors
      incorporated in the United Kingdom at the Land Registry or the Land
      Charges Registry (as appropriate), (to the extent necessary) registration
      in the Land Registry in Ireland in respect of property charges to be
      created by the Irish Debentures, the filing of particulars of the relevant
      trade marks (if any) assigned or charged under such mortgage debenture,
      the registration of the transfers of the shares which are the subject of
      the relevant mortgages and other Encumbrances created by the Security
      Documents and other filings and registrations necessary in connection with
      the Security Documents (including any filings required to be made in
      connection with Sections 155 to 158 of the Companies Act 1985), and
      compliance with and registration under any analogous requirements in any
      other jurisdiction) each of the Security Documents creates the security
      interest which that Security Document purports to create or, as the case
      may be, accurately evidences a security interest which has been validly
      created (except that no warranty is given as to whether any such
      Encumbrance is of a fixed or floating nature);

(d)   No conflict with other obligations: the execution and delivery of each of
      the Transaction Documents, and any other document or instrument executed
      or delivered or to be executed or delivered thereunder by any Obligor
      party thereto, and the performance of each of their respective obligations
      thereunder, and compliance with their respective provisions, will not (i)
      contravene any existing applicable law, statute, rule or regulation or any
      judgment, decree or permit to which any of them are subject, conflict
      with, or result in any breach of any of the terms of, or constitute a
      default under, any agreement or other instrument to which any Group Member
      is expressed to be a party or is subject to or by which it, or any of its
      property is bound in a manner which is reasonably likely to result in any
      liability on the part of the Finance Parties (or any of them) to any third
      party by reason of any such conflict, (ii) nor, so far as the Company is
      aware, will it result in the creation, or requirement to create, any
      Encumbrance on the assets of any Obligor (save for any Encumbrance created
      pursuant to the Security Documents), or (iii) contravene or conflict with
      any provision of the Memorandum and Articles of Association (or similar or
      analogous documents) of any Obligor;

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(e)   Consents: all material, authorisations, approvals, consents, licences,
      exemptions, filings, registrations and other matters required by law for
      or in consequence of (i) the Recapitalisation, and/or (ii) the entry into
      and performance by each Obligor of and/or the validity of any of the
      Transaction Documents to which it/they are expressed to be a party or the
      transactions to be implemented pursuant thereto and/or (iii) the carrying
      on of the business of each Obligor and each Material Group Member in the
      ordinary course have been obtained or effected or will be obtained or
      effected prior to the date required by law, save (in the case of (ii)) for
      the filing in the United Kingdom of the prescribed particulars of the
      Security Documents pursuant to Section 395 of the Companies Act 1985 (as
      amended), the Filing of Forms 47 in the Companies Registry Office in
      Dublin in respect of the Irish Debentures, the registration of the
      Debentures entered into by those Obligors incorporated in the United
      Kingdom at the Land Registry or the Land Charges Registry (as
      appropriate), (to the extent necessary) registration in the Land Registry
      in Ireland in respect of property charges to be created by the Irish
      Debentures, the filing of particulars of the relevant trade marks (if any)
      assigned or charged under the Debentures, the registration of the
      transfers of the shares which are the subject of the relevant mortgages
      and other Encumbrances created by the Security Documents and other filings
      and registrations necessary in connection with the Security Documents, all
      of which filings and registrations will be effected promptly after
      execution;

(f)   No winding-up: no order has been made or petition presented (which has not
      been discharged or stayed within 14 days of it being so presented) or any
      corporate action taken, or any other steps been taken or legal proceedings
      started or resolution passed for the winding-up of any Group Member or for
      an administration order in respect of any Group Member and no distress,
      execution or other process has been levied on any assets of any Group
      Member which has not been discharged or which in the bona fide opinion of
      the Facility Agent is not being contested by the relevant Group Member in
      good faith;

(g)   Insolvency: no order has been made or petition presented or resolution
      passed for an administration order in respect of any Group Member and no
      distress, execution or other process has been levied on any assets of any
      Group Member which has not been discharged, no Group Member has stopped
      payment and is insolvent or unable to pay its debts within the meaning of
      Section 123(1) Insolvency Act 1986 (construed as if the figure stated at
      section 123(1)(a) was $100,000), it has not been determined that any Group
      Member is unable to pay its debts in accordance with Section 123(2)
      Insolvency Act, no administrative receiver or receiver or receiver and
      manager, trustee or similar officer has been appointed by any Person of
      any part of the business or assets of any Group Member;

(h)   No default: (i) no Event of Default has occurred and is continuing which
      has not been waived; (ii) (so far as the Company is aware) save as
      previously notified to the Facility Agent in accordance with Clause
      19.1(e)(vii) no Potential Event of Default has occurred and is continuing
      which has not been waived; and (iii) no Group Member is in breach of or
      default under any agreement to which it is a party or which is binding on
      it or any of its assets which could have a Material Adverse Effect;

(i)   No litigation: no action, litigation, arbitration, alternative dispute
      resolution, or administrative or regulatory proceeding is taking place or
      pending against any Group

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<PAGE>
 
      Member, and, so far as the Company is aware, no such action, litigation or
      administrative proceeding is threatened nor are there any current labour
      disputes involving any Group Member which:

      (i)  in the case of any such action, litigation, alternative dispute
           resolution, arbitration, administrative or regulatory proceedings are
           reasonably likely to be determined adversely to the relevant Group
           Member, and which, if so adversely determined would have a Material
           Adverse Effect; or

      (ii) in the case of any such labour disputes, would have a Material
           Adverse Effect;

(j)   Group Structure:

      (i)  the Structure Memorandum contains descriptions which are true,
           complete and correct, of the corporate and ownership structure of the
           Group and the Intra-Group Loan Memorandum contains descriptions which
           are true, complete and correct of all inter-company loans as they
           will be immediately after the Diamond Back Acquisition and the IGF
           Liquidation;

      (ii) there are no companies, partnerships, Joint Ventures, businesses or
           the like having material assets or indebtedness or trading activities
           (a) which are or will be a Subsidiary of the Company immediately
           after the Diamond Back Acquisition and the IGF Liquidation whose
           intended ownership and corporate structure are not shown in the
           Structure Memorandum or (b) in which it or any of its Subsidiaries
           will have an interest immediately after the Diamond Back Acquisition
           and the IGF Liquidation which are not shown in the Structure
           Memorandum;

    (iii)  there are no re-organisational steps affecting the Company or any of
           its Subsidiaries (including, without limitation, any significant
           transfers of business or assets from one Person to another and
           significant disposals) which are not described in the Structure
           Memorandum; and

      (iv) immediately following the Diamond Back Acquisition and the IGF
           Liquidation there will be no Material Group Members other than those
           companies set out at Schedule 11;

(k)   Accountant's Report:

      (i)  save as fully and fairly disclosed in the Accountant's Report, the
           financial information in relation to the Group contained in the
           Accountant's Report was prepared using generally accepted accounting
           principles in the United Kingdom, and give a true and fair view of
           the state of affairs of the Group as at the date to which they were
           prepared and as at such date there were no material liabilities of
           the Group which were not disclosed by or shown as being provided for
           in the Accountant's Report;

      (ii) there has been no material adverse change in the business,
           operations, assets,

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<PAGE>
 
           prospects, or financial condition of the Group (taken as a whole)
           since the date the Accountant's Report was prepared; and

    (iii)  the Accountant's Report includes or consolidates into such
           financial information the results of each Group Member and does not
           consolidate or include the results of any other company, limited
           partnership or like entity or business other than Derby
           International;

(l)   Initial Information:

      (i)  all information contained in the Information Package was true in all
           material respects (or, in the case of information provided by any
           Person other than the Company or its advisors as far as the board of
           directors of the Company is aware, was true to the best of its
           knowledge and belief in all material respects at the date (if any)
           ascribed thereto in the Information Package) and, in respect of the
           Group's Pre-Closing Accounts was prepared in accordance with
           Applicable Accounting Principles, all expressions of opinion or
           intention and all forecasts and projections contained in the
           Information Package were arrived at after careful consideration, were
           fair and were based on reasonable grounds, and the Information
           Package as of its date was not misleading in any material respect and
           did not omit to disclose any matter, failure to disclose which would
           result in any information contained in the Information Package being
           misleading in any material respect in the context of this Agreement
           and the transactions contemplated hereby; and

      (ii) there has been no material adverse change in the business,
           operations, assets, prospects or financial condition of the Group
           (taken as a whole) since the date of the annual consolidated accounts
           referred to at paragraph (i) above.

     (iii) The Derby Group Consolidated Budget and the information contained
           in it:

          (a) was prepared by the Company based upon reasonable assumptions for
              each entity included in Derby Cycle Group Consolidated Budget and
              in the case of the Company and the Swedish Obligor such
              assumptions take account of the revenues, income, expenditure,
              assets and liabilities expected to result from the Diamond Back
              Acquisition and the funding thereto;
             
          (b) provided by any Person other than a Group Member is true and
              complete and accurate in all material respects;
             
          (c) has been prepared in accordance with Applicable Accounting
              Principles; and
             
          (d) all expressions of opinion or intention and all forecasts and
              projections contained in the Derby Cycle Group Consolidated Budget
              were arrived at after careful consideration, were fair and were
              based on reasonable grounds, and the Derby Cycle Group
              Consolidated Budget as of its date was not misleading in any
              material respect and did not omit to disclose any matter, failure
              to disclose which would result in any information contained in the
  

                                       85
<PAGE>
 
              Derby Cycle Group Consolidated Budget being misleading in any
              material respect in the context of this Agreement and the
              transactions contemplated hereby; and

      (iv) there has been no material adverse change in the business,
           operations, assets, prospects or financial condition of the Group
           (taken as a whole) since the date of the Financial Accounts ending 29
           November 1998.

(m)   All information is correct: all financial and other information provided
      in writing by, or on behalf of, any Group Member to any Finance Party in
      connection with this Agreement or the Finance Documents after the date of
      this Agreement was true and accurate in all material respects when given
      and (so far as it is aware having made due and proper enquiries) there are
      no other facts or matters, the admission of which would have made any such
      statement or information provided misleading or a materially inaccurate
      representation of the situation described therein and all opinions,
      projections and forecasts given or made have been honestly made and
      based upon reasonable assumptions;

(n)   Financial Accounts: the Business Plan and the Financial Accounts most
      recently delivered to the Facility Agent under this Agreement after the
      Closing (including for the avoidance of doubt the Monthly Accounts for the
      Accounting Period ending 31 November 1998) have been prepared in
      accordance with Applicable Accounting Principles and (in the case of
      audited annual Financial Accounts) give a true and fair view or (in the
      case of unaudited Financial Accounts) fairly present of the state of
      affairs of the such Group Member (consolidated if prepared on that basis
      pursuant to Applicable Accounting Principles or if required to be prepared
      on that basis pursuant to the terms of this Agreement) as at the date to
      which they are made up and as at such date there were no material
      liabilities of any Group Member not disclosed in the Financial Accounts
      which according to Applicable Accounting Principles should have been
      disclosed and since the Financial Accounts most recently delivered to the
      Facility Agent under this Agreement after Closing there has been no
      material adverse change in the financial condition or prospects of the
      Group (as a whole);

(o)   Tax liabilities: no claims in excess of $50,000 (or the equivalent in
      other currencies) in aggregate are being or are reasonably likely to be
      asserted against the Group (as a whole), any Group Member or Group Members
      with respect to Taxes which are reasonably likely to be determined
      adversely to such Group Member and no Group Member is overdue in the
      filing of any Tax returns required to be filed by it and has paid all
      Taxes shown to be due on Tax returns or any assessments made against it
      other than those contested in good faith by appropriate proceedings and
      for which adequate reserves have been established in accordance with
      Applicable Accounting Principles;

(p)   Acquired Assets: all of the Acquired Assets which have been acquired by
      the Company pursuant to the Recapitalisation are beneficially owned by the
      Company which is, or is entitled to become, the legal registered owner of
      the Acquired Assets free from all Encumbrances, claims and competing
      interests whatsoever save as expressly permitted under this Agreement;

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<PAGE>
 
(q)   Ownership of assets:

      (i) (save to the extent that such may be disposed of without breaching the
          terms of any of the Finance Documents) with effect from and after the
          Closing, each Material Group Member will have good title to or valid
          leases or licences of or is otherwise entitled to use and permit other
          Group Members to use all assets necessary to conduct its business
          substantially as conducted by it at the Closing or reflected in the
          Accountant's Report and without limiting the generality of the
          foregoing, save as aforesaid each Obligor has, with effect from and
          after the Closing a good and valid title in its own name of its
          interest in all properties specifically referred to by address or
          title number in the Security Documents; and

     (ii) each Obligor is the absolute legal and beneficial owner of all rights,
          title and interest in and to the assets, free from any right of set-
          off, counterclaim, dispute or Encumbrance (other than a Permitted
          Encumbrance) comprising the Eligible Finished Goods, the Eligible
          Receivables, the Eligible Raw Materials and the Cash Collateral Amount
          that are taken into account when computing such Borrower's Borrowing
          Base;

(r)   Intellectual Property Rights:

      (i) so far as it is aware (after due and careful enquiry) it (and each
          Group Member) owns or has licensed to it all the Intellectual Property
          Rights which are material in the context of its business and which are
          required by it in order for it to carry on its business in accordance
          with the Business Plan and it does not (nor do any of its
          Subsidiaries), in carrying on its business, infringe any Intellectual
          Property Rights of any third party in any way;

     (ii) none of the Material Intellectual Property Rights is, to its
          knowledge, being infringed nor, to its knowledge, is there any
          threatened infringement of the Intellectual Property Rights, by any
          third party; and

   (iii)  all registered material Intellectual Property Rights owned by it
          (or any Subsidiary of it) are subsisting and all actions (including
          payment of all fees) required to maintain the same in full force and
          effect have been taken;

(s)   Representations under Recapitalisation Documents: it has no reason to
      believe that any representation or warranty by any Person party thereto in
      any of the Recapitalisation Documents is untrue or inaccurate in any
      material respect;

(t)   Pari passu:  the obligations of the Obligors under this Agreement and of
      the Group Members under the Senior Finance Documents to which they are
      expressed to be a party (to the extent that any such obligations do not
      acquire enhanced priority by virtue of the security created and/or
      conferred by the Security Documents) rank at least pari passu with all
      other present and future unsecured and unsubordinated obligations of such
      Group Member with the exception of any obligations which are mandatorily
      preferred by law or arise by equity and not only by contract;

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(u)   Constitutional documents: the documents delivered to the Facility Agent
      pursuant to Clause 4 or pursuant to an Accession Agreement are, if such
      documents relate to a Borrower, as at the date the first Advance (if any)
      is made to such Borrower and, in the case of a Guarantor, as at the date
      such documents are delivered, true, up to date and complete copies in all
      material respects, of originals which had not been amended, varied,
      supplemented or superseded in any way which would be likely to affect the
      interest of the Finance Parties under any of the Senior Finance Documents;

(v)   Transaction Documents:

      (i)  the Recapitalisation Documents, as furnished to the Facility Agent
           under this Agreement, contains all the terms of the Recapitalisation;

     (ii)  the Recapitalisation Documents contain all the terms of the
           agreements and arrangements between the Investors and the Company (or
           any Group Member);

     (iii) other than as provided in (iv) below the Service Contracts and the
           Articles of Association of the Company contain all the material terms
           of all the agreements and arrangements between the Executives and the
           Investors and Derby International and between the Executives and the
           Company (or any other Group Member);

      (iv) the Management Agreement (if any) contains all the terms and
           arrangements between Thayer and the Company;

      (v)  the Service Contracts of each of the Executives will be in full force
           and effect in the respective agreed forms at Closing;

      (vi) the Note Documents and any agreements or documents referred to
           therein or contemplated thereby contain all the terms of the
           agreements and arrangements between the Note Issuers, the Note
           Trustee and the Noteholders, and each of the other Persons expressed
           to be a party thereto in connection therewith;

     (vii) the Diamond Back Acquisition Agreement, as furnished to the
           Facility Agent under this Agreement, contains all the terms of the
           Diamond Back Acquisition; and

    (viii) the Diamond Back Acquisition Agreement contains all the terms of the
           agreements and arrangements between the Parties thereto.

      (ix) the GSIC Note Documents contain all the terms of the agreements and
           arrangements between the GSIC Note Issuer, the GSIC Noteholder and
           each other Persons expressed to be a party thereto in connection
           therewith.

(w)   Encumbrances and Financial Indebtedness:

      (i)     immediately following the Closing no Encumbrances (save for
              Permitted Encumbrances (if any)) will exist over any assets of any
              Group Member; and

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      (ii)    immediately following the Closing no Group Member will have any
              Financial Indebtedness outstanding (save for Permitted Financial
              Indebtedness) and no Group Member will have any Financial
              Indebtedness owed to it by another Group Member (other than under
              the Finance Documents) that is not stated in the Intra-Group Loan
              Memorandum; and

      (iii)   the execution of the Transaction Documents by each Obligor
              expressed to be a party thereto will not create any Encumbrances
              except as required by the Security Documents and such Obligor's
              exercise of its rights and performance of its obligations
              thereunder will not result in the existence of, nor oblige it to,
              create, any Encumbrance over all or any of its present of future
              revenues or assets except a Permitted Encumbrance;

(x)   Environmental Matters:

      (i)     so far as the Company is aware, (after due and careful enquiry)
              each Group Member has obtained all requisite Environmental
              Licences required for the carrying on of its business as currently
              conducted and has at all times complied in all material respects
              with (a) the terms and conditions of such Environmental Licences
              and (b) all other applicable Environmental Law;

      (ii)    so far as the Company is aware (after due and careful enquiry) no
              Dangerous Substance has been used, disposed of, generated, stored,
              transported, dumped, released, deposited, owned, leased, occupied
              or controlled by any Group Member (including any offsite waste
              management or disposal location utilised by any Group Member) in
              circumstances where this would be likely to result in the
              imposition of a liability on any Group Member which would have a
              Material Adverse Effect;

      (iii)   so far as the Company is aware (after due and careful enquiry)
              there is no Environmental Claim (whether in respect of any site
              previously or currently owned or occupied by any Group Member or
              otherwise) pending or threatened, and there are no past or present
              acts, omissions, events or circumstances that would be likely to
              form the basis of any Environmental Claim (whether in respect of
              any site previously or currently owned or occupied by any Group
              Member or otherwise), against any Group Member which in each case
              is reasonably likely to be determined against that Group Member
              and which if so decided would have a Material Adverse Effect;

      (iv)    without limiting the generality of Clause 18.1(x)(i), (ii) or
              (iii) above, so far as the Company is aware (after due and careful
              enquiry) as at the Closing (a) there is no Environmental Claim
              (whether in respect of any site previously or threatened which is
              reasonably likely to be determined against any Group Member and
              which if so decided would have a Material Adverse Effect, (b) so
              far as it is aware (after due enquiry) there are no past or
              present acts or omissions, events or circumstances that would be
              likely to form the basis of any material Environmental Claim
              (whether in respect of such site or

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              otherwise) against any Group Member (which is, or will upon the
              Closing be a Group Member which, if adversely determined, would
              have a Material Adverse Effect and, (c) so far as it is aware
              (after due enquiry), since Closing, each Group Member has complied
              in all material respects with the terms and conditions of all
              requisite Environmental Licences and applicable Environmental Laws
              which in each case, if not complied with, would have a Material
              Adverse Effect and neither it nor any Group Member has received
              any notice from any third party of any breach of such
              Environmental Licence or Environmental Law which would have a
              Material Adverse Effect;

(y)   ERISA:

      (i)     no act, omission or transaction has occurred which will result in
              imposition on any U.S. Obligor or any ERISA Affiliate (whether
              directly or indirectly) of:-

              (1)   either a civil penalty assessed pursuant to section 502(i)
                    of ERISA or a tax imposed by section 4975 of the IRC; or

              (2)   breach of fiduciary duty liability damages under section 409
                    of ERISA;

      (ii)    no U.S. Obligor or ERISA Affiliate has maintained or contributed
              to any Plan that is or was subject to Title IV or ERISA or to the
              minimum funding requirements of Section 302 of ERISA or Section
              412 of the IRC;

      (iii)   payment has been made of all amounts which any U.S. Obligor or any
              ERISA Affiliate is required under the terms of each Multiemployer
              Plan or applicable law to have paid as contributions to such
              Multiemployer Plan;

      (iv)    each U.S. Obligor and each ERISA Affiliate are in compliance with
              the presently applicable provisions of ERISA and the IRC with
              respect to each Multiemployer Plan;

      (v)     neither any U.S. Obligor nor any ERISA Affiliate (nor any trade or
              business that was an ERISA Affiliate) has at any time contributed
              to or been obliged to contribute to any Multiemployer Plan which,
              upon the complete or partial withdrawal from such Multiemployer
              Plan, could result in the imposition of complete or partial
              withdrawal liability;

(z)   Investment Company Status: each U.S. Obligor is either not an "investment
      company" within the meaning of the United States Investment Company Act of
      1940, as amended or is exempt from all provisions of such Act, as amended;

(aa)  Solvency of U.S. Obligors: at the date of this Agreement and after giving
      effect to the transactions contemplated by the Transaction Documents and
      after

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      giving effect to each Advance, each U.S. Obligor is, and after
      consummation of this Agreement and after giving effect to all obligations
      incurred and Encumbrances created by such U.S. Obligor in connection
      herewith, will be Solvent. No U.S. Obligor is entering into this Agreement
      or the transactions contemplated hereby with actual intent to hinder,
      delay or defraud either present or future creditors. As used herein,
      "Solvent" means, with respect of any U.S. Obligor on a particular date,
      that on such date (i) the fair saleable value of the property of such U.S.
      Obligor is greater than the total amount of liabilities, including,
      without limitation, contingent liabilities, of such U.S. Obligor, (ii) the
      amount that will be required to pay the probable liabilities of such U.S.
      Obligor on its debts as they become absolute and matured will not be
      greater than the fair saleable value of the assets of such U.S. Obligor at
      such time, (iii) such U.S. Obligor is able to realise upon its assets and
      pay its debts and other liabilities, contingent obligations and other
      commitments as they mature in the normal course of business, (iv) such
      U.S. Obligor does not intend to, and does not believe that it will, incur
      debts or liabilities beyond such U.S. Obligor's ability to pay as such
      debts and liabilities mature, and (v) such U.S. Obligor is not engaged in
      a business or a transaction, and is not about to engage in a business or a
      transaction, for which such U.S. Obligor's property would constitute
      unreasonably small capital after giving due consideration to prevailing
      practices in the industry in which such U.S. Obligor is engaged. In
      computing the amount of any contingent liability at any time, it is
      intended that such liability will be computed at the amount which, in
      light of all the facts and circumstances existing at such time, represents
      the amount that might reasonably be expected to become an actual or
      matured liability. For purposes of determining whether any U.S. Obligor is
      solvent such U.S. Obligor shall take place into account all rights of
      contribution, reimbursement, subrogation and other similar rights that
      such U.S. Obligor may have from any other Obligor by virtue of such U.S.
      Obligor making any payment in its capacity as a Guarantor hereunder.

(bb)  U.S. Reserve Regulations:

      (i)     no Group Member is engaged principally, or as one of its important
              activities, in the business of extending credit for the purpose of
              buying or carrying Margin Stock (as defined herein);

      (ii)    no part of the proceeds of any Advance will be used, whether
              directly or indirectly, and whether immediately, incidentally or
              ultimately, for any purpose that entails a violation of, any of
              Regulation G, T, U or X of the Federal Reserve Board of the U.S.A;

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(cc)  U.S. Security Documents:

      (i)     the U.S. Pledge Agreement is, or when executed will be, effective
              to create in favour of the Security Agent for the ratable benefit
              of the Secured Beneficiaries (as defined in the U.S. Security
              Agreement), a legal, valid and enforceable security interest in
              Collateral (as defined in the U.S. Pledge Agreement) and, when
              such Collateral is the Pledged delivered to the Security Agent,
              the U.S. Pledge Agreement shall constitute a fully perfected first
              priority lien on, and security interest in, all right, title and
              interest of the pledgors thereunder in such Collateral, in each
              case prior and superior in right to any other person, subject to
              Permitted Encumbrances that have a priority as a matter of law;

      (ii)    the U.S. Security Agreement is, or when executed will be,
              effective to create in favour of the Security Agent for the
              ratable benefit of the Secured Beneficiaries (as defined in the
              U.S. Security Agreement) and, when financing statements in
              appropriate form are filed in the offices specified in Schedule 5
              to the Perfection Certificate (as defined in the U.S. Security
              Agreement), the U.S. Security Agreement shall create a fully
              perfected lien on, and security interest in, all right, title and
              interest of the grantors thereunder in such Collateral in which a
              security interest may be perfected by the filing of financing
              statements in each case prior and superior in right to any other
              person, other than with respect to Permitted Encumbrances that
              have a priority as a matter of law;

      (iii)   to the extent that the laws of the United States are applicable
              thereto, when the U.S. Patent and Trademark Security Agreement and
              the U.S. Patent Assignment for Security Purposes (the "US IP
              Security Documents") are recorded in the United States Patent and
              Trademark Office , the U.S. IP Security Documents shall create a
              fully perfected lien on, and security interest in, all right,
              title and interest of the grantors thereunder in the federally
              registered and applied for Patents and Trademark Collateral (as
              defined in the U.S. IP Security Documents), in each case prior and
              superior in right to any other Person (it being understood that
              subsequent recordings in the United States Patent and Trademark
              Office and the United States Copyright Office may be necessary to
              perfect a lien on U.S. registered trademarks, trademark
              applications, U.S. patents and patent applications and copyrights
              acquired by the grantors after the date hereof and the
              registration of any copyright may be required to perfect a lien in
              such copyright), subject to Permitted Encumbrances that have a
              priority as a matter of law;

(dd)  U.S. Obligors:

      (i)     no Obligor has any ownership interest in any capital stock of any
              Person organized under the laws of any State of the United States,
              except for such ownership interests that are Collateral under the
              U.S. Pledge Agreement; and

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      (ii)    No Obligor directly owns any assets located in the United States,
              except for (x) assets constituting real property, (y) assets that
              are subject to the U.S. Pledge Agreement in accordance with clause
              (i) above and (z) assets that are Collateral under the U.S.
              Security Agreement; and


(ee)  Year 2000: in relation to each Obligor which is not a Dormant Company, any
      reprogramming required to permit the proper functioning, in and following
      the year 2000, of (i) each such Obligor's computer systems and (ii)
      equipment containing embedded microchips (including systems and equipment
      supplied by others or with which each such Obligor's systems interface)
      and the testing of all such systems and equipment, as so reprogrammed,
      will be completed by March 31, 1999 in the case of (i) and 30 September
      1999 in the case of (ii).  The cost to each such Obligor of such
      reprogramming and testing and of the reasonably foreseeable consequences
      of year 2000 to each such Obligor (including, without limitation,
      reprogramming errors and the failure of others' systems or equipment) will
      not result in a Default or a Material Adverse Effect.  Except for such of
      the reprogramming referred to in the preceding sentence as may be
      necessary, the computer and management information systems of each such
      Obligor are and, with ordinary course upgrading and maintenance, will
      continue for the term of this Agreement to be, sufficient to permit each
      Obligor to conduct its business without Material Adverse Effect.

(ff)  Diamond Back Acquired Assets:  all the Diamond Back Acquired Assets which
      have been acquired by the Company or, as the case may be, the Swedish
      Obligor (the "Relevant Acquirer") pursuant to the Diamond Back Acquisition
      are beneficially owned by the Relevant Acquirer and the Relevant Acquirer
      is, or is entitled to become the legal registered owner of the Diamond
      Back Acquired Assets free from any Encumbrances, claims and competing
      interests whatsoever save as is expressly permitted under this Agreement.

(gg)  Disqualified Stock: none of the Company's share capital constitutes
      Disqualified Stock as defined in the Senior Notes.

18.2  Repetition of representations and warranties

The representations and warranties contained in Clause 18.1;

(a)   are made by the Company on the date of this Agreement; and

(b)   will be deemed to be repeated by the Company on each date that a Request
      is delivered to the Facility Agent, on each Drawdown Date, each Issue
      Date, each Interest Date and each Expiry Date as if made with reference to
      the facts and circumstances existing at that time,

Provided that the representations and warranties set out in Clause 18.1, (k),
(l), (m) (to the extent that it relates to information delivered prior to
Closing), (n) (to the extent it relates to the Business Plan), (p), and (s) of
Clause 18.1 shall not be repeated after Closing.

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                                     PART 6

19.   UNDERTAKINGS

19.1  Information undertakings

(a)   Financial Accounts

      The Company undertakes it shall furnish or procure that there shall be
      furnished to the Facility Agent in sufficient copies for each of the
      Finance Parties:

      (i)     Audited Financial Accounts:

              (A)   promptly upon the same being available but in any event not
                    later than [120] days from the end of the annual Accounting
                    Period to which the Financial Accounts relate the audited
                    consolidated Financial Accounts of the Group for such
                    Accounting Period ending after the date hereof (comprising
                    at least an audited consolidated balance sheet, profit and
                    loss account and historic cash flow statement (and the notes
                    thereto) for such Accounting Period);

              (B)   (without prejudice to (A) above) promptly after the same
                    have been prepared the audited Financial Accounts of any
                    Group Member to the extent that the same are prepared; and

              (C)   promptly upon the same being available but in any event
                    prior to the date falling 150 days from the end of the
                    Accounting Period to which the Financial Accounts relate or,
                    if later, 150 days from the date the relevant request by the
                    Facility Agent was made, the audited Financial Accounts of
                    any Material Group Member previously requested by the
                    Facility Agent (acting reasonably) for such Accounting
                    Period (comprising at least an audited consolidated (if such
                    Group Member has a Subsidiary or Subsidiaries) balance
                    sheet, profit and loss account and historic cash flow
                    statement (and the notes thereto) for such Accounting
                    Period),

              together, in each case, with the report of the auditors thereon,
              the notes thereto and the directors' report thereon;

      (ii)    Quarterly Financial Accounts: as soon as practicable, and in any
              event within 45 days after the end of each quarterly Accounting
              Period copies of the unaudited consolidated accounts for such
              Accounting Period of the Group, such unaudited consolidated
              accounts to show the detailed financial information provided for
              quarterly financial reporting in the Proforma Financial Accounts
              (comprising at least (A) a consolidated balance sheet and profit
              and loss account for such quarter and cumulatively for the period
              from the beginning of the current annual Accounting Period to the
              end of such

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<PAGE>
 
              quarterly Accounting Period, (B) a year to date consolidated cash
              flow statement for the period from the beginning of the current
              annual Accounting Period to the end of such quarterly Accounting
              Period, (C) details of each item of Capital Expenditure which was
              not included in the budget for such period delivered pursuant to
              Clause 19.1(b) in excess of $100,000 (or the equivalent in other
              currencies) in such quarterly Accounting Period, and (D) with a
              report on the main operational, commercial and financial issues
              arising during such Accounting Period and explaining any variances
              of more than five per cent. (5%) against the budget for such
              quarterly Accounting Period ;

      (iii)   Monthly Management Financial Accounts: as soon as practicable, and
              in any event within 30 days after the end of the monthly
              Accounting Period to which they relate copies of the unaudited
              monthly management accounts of the Group such unaudited monthly
              management accounts split out monthly and on a year to date basis
              to show the detailed information provided for monthly financial
              reporting in the Proforma Financial Accounts, including a written
              report by an Executive Officer on the main operating and financial
              issues (if any) arising during such Accounting Period and
              confirmation that all premiums payable in that monthly Accounting
              Period in respect of all Material Insurances maintained by the
              Group (or any Group Member) have been paid by such time so as to
              ensure that those Material Insurances remain in full force, all
              such Financial Accounts to be approved by an Executive Officer (or
              in their absence one other director of the Company) and one other
              director of the Company (in each case without incurring personal
              liability) as giving an accurate and reasonable view of the
              financial condition and trading performance of the Group;

      (iv)    Borrowing Base Summary: in addition to any Borrowing Base Summary
              required to accompany a Request under Clause 6, the Company shall
              deliver a completed Borrowing Base Summary as soon as practicable,
              and in any event within 15 days after the end of each monthly
              Accounting Period;

      (v)     Auditor's Confirmations:

              (A)   at the same time as the Financial Accounts for the annual
                    Accounting Period in each year are delivered (or, if not
                    delivered, required to be delivered) pursuant to Clause
                    19.1(a)(i); and

              (B)   upon the Facility Agent notifying the Company that it is of
                    the opinion that the process by which one or more of the
                    Borrowing Base Summaries is prepared requires further review
                    and input, as soon as practicable after any such
                    notification, and within 30 days thereafter,

              the Company undertakes that it will procure that the Auditors
              shall deliver a certificate to the Facility Agent confirming
              whether or not each of the Borrowing Base Summaries most recently
              delivered under this Agreement (or

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<PAGE>
 
              such other Borrowing Base Summaries as are identified for such
              purpose by the Facility Agent) were, in all material respects,
              true, complete and accurate and prepared in accordance with the
              provisions of this Agreement and whether or not the Company has in
              place satisfactory methods and procedures for obtaining and
              collating the information required in order for it to be able to
              compile accurate Borrowing Base Summaries for this Agreement
              having regard, where appropriate, to each of the specific
              requirements of this Agreement relating thereto including, without
              limitation, Clause 6.

(b)   Budgets

The Company undertakes it shall furnish, or procure that there shall be
furnished, to the Facility Agent in sufficient copies for each of the Finance
Parties to the Facility Agent:

      (i)     not later than 15 days before the commencement of each annual
              Accounting Period a budgeted consolidated balance sheet, profit
              and loss account, cash flow statement, rolling monthly cash
              forecast of the Group and budgeted monthly Capital Expenditure of
              the Group, for (or in the case of a balance sheet, as at the end
              of) the following annual Accounting Period, together with details
              of the principal assumptions underlying such projections and a
              description of the proposed activities of the Group during such
              annual Accounting Period, all as approved by the board of
              directors of the Company and in each case, the format, heading and
              characterisation shall be consistent with the form of monthly
              management accounts delivered pursuant to Clauses 19.1(a)(ii) and
              19.1(a)(iii);

      (ii)    not later than the date on which the monthly Financial Accounts in
              respect of January in each year are required to be delivered
              pursuant to the terms Clause 19.1(a)(iii) a revision of the
              budgets furnished to the Facility Agent pursuant to Clause
              19.1(b)(i) adjusted so as to reflect the actual opening balance
              sheet of the annual Accounting Period to which they relate;

      (iii)   if, in the course of any annual Accounting Period, the Company
              updates or revises any of the budgets furnished to the Facility
              Agent pursuant to Clause 19.1(b)(i) or Clause 19.1(b)(ii) in any
              material respect, the Borrower shall furnish, or procure that
              there shall be furnished (as soon as possible and in any event
              within fourteen days of such revision), to the Facility Agent,
              sufficient copies for each of the Finance Parties, such updated or
              revised forecasts, together with a statement explaining the
              requirement for such updating or revision; and

      (iv)    at the same time as it is required to deliver to the Facility
              Agent Financial Accounts required by Clauses 19.1(a)(ii) and
              19.1(a)(iii) , the Company shall deliver to the Facility Agent, in
              the agreed form, in sufficient copies for each of the Finance
              Parties a cash flow forecast for the Group to the end of the
              current annual Accounting Period together with the basis of the
              assumptions used in its preparation.

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(c)   Certificates

      The Company undertakes it shall furnish or procure that there shall be
      furnished to the Facility Agent in sufficient copies for each of the
      Finance Parties:

      (i)     at the same time as the Financial Accounts for any annual
              Accounting Period are delivered (or, if not delivered, required to
              be delivered) pursuant to Clause 19.1(a)(i):

              (A)   a report of the Company in a form reasonably satisfactory to
                    the Facility Agent setting out in reasonable detail
                    computations establishing, as at the date of such Financial
                    Accounts, whether each of the financial undertakings set out
                    in Clause 20 were complied with, (B) setting out in
                    reasonable detail computations demonstrating the application
                    of the financial ratios set out in Clause 20 for such
                    Accounting Period such report being confirmed by the
                    Auditors as being true and accurate; and

              (B)   a certificate signed by two Authorised Signatories of the
                    Company (one of whom shall be an Executive Officer (in each
                    case without incurring personal liability)), stating that as
                    the date of such certificate no Event of Default has
                    occurred and is then continuing, and that so far as the
                    Company is aware having made due and diligent enquiry, no
                    Potential Event of Default has occurred and is continuing,
                    or providing details of any such Defaults and of any
                    remedial action proposed to be taken; and

      (ii)    at the same time as the Financial Accounts for any quarterly
              Accounting Period are delivered (or, if not delivered, required to
              be delivered) pursuant to Clause 19.1(a)(ii) above a Compliance
              Certificate, signed by two Authorised Signatories of the Company
              (one of which shall be an Executive Officer (in each case without
              incurring personal liability)):

              (A)   setting out in reasonable detail computations establishing,
                    as at the date of such Financial Accounts, whether each of
                    the financial conditions set out in Clause 20 was complied
                    with; and

              (B)   stating that as at the date of such certificate no Event of
                    Default has occurred and is then continuing and that so far
                    as the Company is aware having made due and diligent
                    enquiry, or providing details of any such Default and of any
                    remedial action proposed to be taken ; and

      (iii)   at the same time as the Financial Accounts for the annual
              Accounting Period in each year are delivered (or, if not
              delivered, required to be delivered) pursuant to Clause 19.1(a)(i)
              above the Company shall procure that the Auditors shall, confirm
              (by reference to the relevant Financial Accounts)

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<PAGE>
 
              whether or not each of the Financial conditions set out in Clause
              20 was complied with.

(d)   Reviews: The Majority Banks shall be entitled to request the Facility
      Agent no more frequently than quarterly to conduct a review of books and
      accounting records of each Borrower to examine the basis of the
      information used by the Company to compile the Borrowing Base Summaries
      delivered to the Facility Agent hereunder provided that:

      (i)     such a review does not take place more than once in any annual
              Accounting Period unless the Facility Agent (acting reasonably) is
              of the opinion that some or all of the information contained in
              any of the Borrowing Base Summaries may be inaccurate:

      (ii)    any Bank may request on reasonable notice a copy of the results of
              any such review carried out by or on behalf of the Facility Agent;

      (iii)   neither the Facility Agent nor any of its employees, directors,
              agents or advisers shall have any responsibility or liability
              whatsoever for the accuracy or completeness of any such review;
              and

      (iv)    the Company shall indemnify the Facility Agent on demand for all
              reasonable costs and expenses incurred in connection with any such
              review;

(e)   Notifications: The Company undertakes it shall furnish, or procure that
      there shall be furnished to the Facility Agent, in sufficient copies for
      each of the Finance Parties:

      (i)     promptly upon their despatch (and in any event within ten Business
              Days), all notices, reports or other documents despatched by or on
              behalf of any Obligor to (a) its shareholders (in their capacity
              as shareholders) generally (or any class of them); (b) to its
              creditors generally (in their capacity as creditors), or any class
              of them; and; (c) (without prejudice to (b) above) the Noteholders
              or, the Note Trustee, or any SEC filings made in connection with
              all or any of the Note Documents or otherwise;

      (ii)    promptly, and in any event within ten Business Days of the same
              being instituted or, to its knowledge, threatened, details of any
              litigation, arbitration or administrative proceedings involving it
              or any of its Subsidiaries which, if adversely determined might,
              have a Material Adverse Effect or which would involve liability or
              potential liability or alleged liability in excess of $250,000 (or
              its equivalent in other currencies);

      (iii)   at the same time as the monthly Financial Accounts in respect of
              the period during which the same becomes known to the Company or
              any other Group Member is delivered under Clause 19.1(a)(ii),
              19.1(a)(iii) (or, if not delivered, the latest date by which they
              are required to be delivered) reasonable details of all warranty
              and indemnity claims in excess of $100,000 made by or against any
              Group Member or any shareholder of the Company

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<PAGE>
 
              pursuant to, or in respect of, the Recapitalisation Documents or
              which could be so made if Clause 9(b) of the Recapitalisation
              Agreement was disregarded;

      (iv)    promptly, and in any event within ten Business Days of the same
              being delivered or received, and in any event by 15 June 1998 the
              Completion Accounts;

      (v)     promptly (and in any event within ten Business Days or such other
              period as the Facility Agent may require) upon being so requested,
              such further information regarding its financial condition,
              business and assets and that of the Group and/or any Group Member
              (including any requested amplification or explanation of any item
              in any Financial Accounts, budgets, projections or other material
              provided by any Group Member under this Agreement) as the Facility
              Agent or any Finance Party through the Facility Agent may
              reasonably request from time to time;

      (vi)    at the same time as the monthly Financial Accounts in respect of
              the period during which the same occurs are delivered under Clause
              19.1(a)(ii) or Clause 19.1(a)(iii) (or, if not delivered, the
              latest date by which they are required to be delivered), details
              of all transfers of shares of any Group Member (which when taken
              together with any other transfer made to Persons connected with or
              associated with the relevant transferee equate to 3 per cent or
              more of the issued share capital of such Group Member) in the
              share capital of any Group Member (including any change in the
              beneficial ownership of any such shares of which any of the
              directors of the Company become aware) and details of the issue
              and allocation of any shares in the capital of the Company;

      (vii)   written details of any Default forthwith upon the Company becoming
              aware of the same, and of any remedial steps being taken and
              proposed to be taken in respect of that Default;

      (viii)  (other than to a transferee or in respect of replacement Senior
              Notes) promptly (and in any event within ten Business Days) upon
              the Company being aware, details of any Additional Securities (as
              defined in the Note Indentures) being issued after Closing under
              or pursuant to the Note Documents;

      (ix)    promptly (and in any event, within ten Business Days) upon the
              Company being aware, details of any Group Member that is not
              listed at Schedule 12 that becomes a "Material Group Member";

      (x)     promptly (and in any event, within ten Business Days) upon the
              Company being aware, details of any Group Member that is a Dormant
              Company, ceasing to be a Dormant Company;

      (xi)    promptly upon the Company being aware (and in any event within ten
              Business Days), details of any change in any applicable
              Environmental Law

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              which is reasonably likely to have a Material Adverse Effect; and
   
      (xii)   promptly (and in any event within ten Business Days) after receipt
              or despatch thereof deliver to the Facility Agent sufficient
              copies for each of the Finance Parties certified copies of all
              notices given by any Group Member under any of the Transaction
              Documents.

(f)   Listings: The Company shall promptly (and in any event within 14 days of
      the relevant proposal) inform the Facility Agent of any Listing of any
      Group Member proposed by the Board of Directors.

(g)   Audit and Accounting Dates: The Company will ensure that:

      (i)     the annual Financial Accounts to be delivered to the Facility
              Agent pursuant to Clause 19.1 are audited by the Auditors;

      (ii)    it shall at all times have duly appointed Auditors;

      (iii)   each Accounting Period of the Group shall end on an Accounting
              Date; and

      (iv)    each annual Accounting Period of each Group Member shall, with the
              exception of Derby Nederland BV and its Subsidiaries (which annual
              Accounting Period shall end on 30 November or, if such annual
              Accounting Period is changed at any time after the date of this
              Agreement, 31 December) no later than 30 June 1998, end on 31
              December, and no Group Member will change its financial year end
              without prior written consent of the Facility Agent other than to
              conform its financial year end to 31 December.

(h)   GSIC Notes:  If at any time the Company elects to make any issuance of
      GSIC Notes (whether in respect of or in lieu of interest on any GSIC Notes
      then outstanding or otherwise), the Company will, at least ten days prior
      to such issuance, furnish to the Facility Agent a report: (i) stating that
      the Company is permitted under the Note Indentures to incur an amount of
      indebtedness not less than the aggregate principal amount of GSIC Notes
      intended to be issued; (ii) setting forth the provision of the Note
      Indentures under which the Company is so permitted and (iii) setting forth
      in reasonable detail calculations demonstrating that the conditions for
      incurring indebtedness set forth therein have been complied with.

19.2  Form of financial statements

Each set of consolidated financial statements delivered by or on behalf of the
Company in connection with this Agreement shall, subject to Clause 19.3 and the
proviso stated below be prepared (and if appropriate, audited) on the same basis
as the Pre-Closing Accounts and in accordance with Applicable Accounting
Principles provided that if the Auditors have confirmed in writing to the
Facility Agent that a change in the basis on which the Financial Accounts are
prepared is:

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(a)   necessary so as to take into account changes in applicable laws since the 
      date the above mentioned Financial Accounts were prepared;

(b)   necessary so that the Financial Accounts to which such proposed change
      relates are not qualified by the Auditors in a manner which they would
      otherwise have been qualified; or

(c)   in their opinion, appropriate;

and, in the case of a proposed change to which paragraph (b) or (c) above 
applies the Facility Agent, acting on the instructions of the Majority Banks has
approved the proposed change (such approval not to be unreasonably withheld or 
delayed), from such date each set of financial statements delivered by or on 
behalf of any Group Member in connection with this Agreement shall be prepared 
as aforesaid, but subject to such change.

19.3  Variation of financial undertakings

In the case of any change in Applicable Accounting Principles, any change to be 
made in accordance with Clause 19.2 or any proposed change in accounting 
reference date of the Company the Company shall, promptly upon becoming aware, 
notify the Facility Agent of such change or such proposed change, and as soon as
practicable after receipt of such notice, the Company and the Facility Agent 
shall (for a period of up to 7 days) negotiate with a view to agreeing such 
varied financial undertakings as would provided the Finance Parties with no less
protection as the financial undertakings set out in Clause 20 as at the date of 
the Agreement to the extent that any revised financial undertakings will, as 
nearly as practicable, be based on a similar differential as that between the 
financial projections in the Business Plan and the financial undertakings as at 
the date of this Agreement). If, after any negotiations conducted between the
Facility Agent and the Company, an agreement is not able to be reached as to
what adjustments (if any) are required to be made to the financial undertakings
contained in this Agreement, within the said 7 day period (or such negotiations
are not commenced within 7 days of the receipt of the Facility Agent of the
relevant notice (or such longer period as the Facility Agent may agree)) the
matter shall be referred to the Auditors to determine, as experts and not as
arbitrators. The costs of the Auditors shall be for the account of the Company.
For the avoidance of doubt, during any such period of consultation, the
financial undertakings set out in Clause 20 shall be calculated in accordance
with Applicable Accounting Principles prevailing before the relative
determination, introduction or implementation.

19.4  Positive undertakings

(a)   Taxes: The Company shall, and shall procure that each other Group Member
      shall, pay and discharge all Taxes and governmental charges prior to the
      date on which the same become overdue other than in respect of Taxes and
      governmental charges which, in aggregate, are less than $10,000 (or the
      equivalent in other currencies) and overdue by no more than 30 days,
      unless, and only to the extent that such Taxes, shall be contested in good
      faith by appropriate proceedings, pending determination of which payment
      may lawfully be withheld, and there shall be set aside adequate reserves
      with respect to any such Taxes or charges so contested in accordance with
      Applicable Accounting Principles.

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(b)   Insurances:

      (i)  The Company shall, and shall procure that each other Group Member
           shall, maintain in full force and effect prudent insurances on and in
           relation to its business and assets and in particular and without
           limitation:

           (A) maintain in full force and effect insurances covering the risks
               covered by the insurances set out in Schedule 15 or replacements
               therefor as the case may be, and in each case: to the same level
               of sums insured as detailed in Schedule 15 and if the Security
               Agent shall so stipulate in an insurance office with underwriters
               approved by the Security Agent or if and to the extent that the
               Security Agent does not so stipulate, in such insurance office of
               repute as shall have been selected by the Company or with Lloyd's
               underwriters and in the joint names of the relevant insured Group
               Member or Group Members (as the case may be) or, to the extent
               that the Facility Agent has confirmed to the Company that,
               in its opinion (acting reasonably) it is not practicable or
               possible for any such insurance to be in the joint names of the
               relevant Group Member or Group Members (as the case may be) and
               the Security Agent, the Security Agent shall be named thereon as
               "Loss Payee";

           (B) without prejudice to Clause 19.4(b)(i)(A), cause all Inventory,
               Receivables, buildings, trade and other fixtures, fixed and other
               plants and machinery forming part of the Secured Property to be
               insured and to be kept insured:

               (1)  (if the Security Agent shall so stipulate) in an insurance
                    office with underwriters approved by the Security Agent
                    against loss or damage by fire, explosion, aircraft and all
                    such other risks as the Security Agent shall direct to the
                    full reinstatement value thereof adequate provision also
                    being made for the cost of clearing the site and architects
                    engineers, surveyors and other professional fees incidental
                    thereto and the loss of rents or prospective rents (for a
                    period of not less than three years) in the joint names of
                    the Group Member that occupies or owns the relevant Secured
                    Property and the Security Agent; or

               (2)  (if and to the extent that the Security Agent does not so
                    stipulate) in such insurance office of repute as shall have
                    been selected by the Company or with Lloyd's underwriters on
                    the same basis as insurances are maintained by prudent
                    companies carrying on businesses comparable with that of the
                    relevant Group Member and on a comparable scale as regards
                    the property and assets insured the insured risks and the
                    classes of risk to be covered;

           (C) without prejudice to Clauses 19.4(b)(i)(A) and 19.4(b)(i)(B),
               maintain such other insurances (including, but without
               limitation, product liability insurance with a deductible of not
               more than $250,000 in respect of any one claim) are

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<PAGE>
 
               as normally made by prudent companies carrying on similar
               businesses including business interruption insurances, public
               liability insurances and employers liability insurance;

           (D) promptly and in any event within 20 days following any request to
               do so, provide the Facility Agent with such information in
               relation to insurances maintained or previously maintained by any
               Group Member as the Facility Agent may (acting reasonably)
               request from time to time;

           (E) duly and punctually pay all other premiums and other monies
               payable under such insurances as aforesaid and promptly upon
               request by the Security Agent produce the premium receipts or
               other evidence of the payments thereof;

           (F) (if so required by the Security Agent but subject to the
               provisions of any lease of the Secured Property) deposit all
               policies and other contracts of insurance relating to the Secured
               Property or any part thereof with the Security Agent or produce
               to the Security Agent for inspection; and

           (G) if default shall be made by any Group Member in complying with
               paragraphs (A), (B) (C), (D) , (E) and F above it shall be lawful
               for the Security Agent but not obligatory on the Security Agent
               to effect or renew any such insurance as is mentioned in that
               paragraph either in its own name or in its name and that of the
               relevant Group Member or in the name of the Company with an
               endorsement of the Security Agent's interest, the monies expended
               by the Security Agent in so effecting or renewing any such
               insurance shall be reimbursed by the Company to the Security
               Agent on demand and shall until so reimbursed shall carry
               interest at the rate (as well after as before any judgment) as
               provided for in Clause 9 of this Agreement mutatis mutandis from
               the date of payment to the date of reimbursement.

      (ii) The Company undertakes that:

           (A) if an Event of Default has occurred and is continuing (and has
               not been waived in writing by the Facility Agent on behalf of the
               Banks); or

           (B) (otherwise) to the extent not applied in repair, replacement or
               reinstatement of physical loss or damage;

           (and without prejudice to the provisions of any Security Document) it
           will procure that the proceeds of any policy of insurance (other than
           any such policy in respect of third party liabilities) maintained by
           any Group Member shall:

           (C) if such proceeds relate to an asset or assets which, in the
               opinion of the Facility agent were utilised by the relevant Group
               Member in or towards the generation of income and are more than
               $250,000 (or the equivalent in other currencies), be applied in
               or towards prepayment of the whole or such part 

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<PAGE>
 
               of the Facilities as the Facility Agent (acting on the
               instructions of the Majority Banks) shall direct whereupon the
               Total Commitments shall be cancelled by an amount equal to such
               proceeds and the Standby L/C Commitment of each Bank shall be
               reduced by a proportionate amount pro rata and the Revolving
               Commitment of each Bank (including, for the avoidance of doubt,
               the Revolving Commitment of each Ancillary Bank disregarding, for
               this purpose, its Ancillary Commitment) shall be reduced by a
               proportionate amount and pro rata to their respective Revolving
               Commitments at such time.

(c)   Hedging Arrangements: The Company shall put or cause there to be put into
      effect as soon as possible and in any event within 30 days from the first
      Drawdown Date in form and substance satisfactory to the Facility Agent
      with such counterparty as is (or counterparties as are) acceptable to the
      Facility Agent (acting reasonably) and then maintain in full force and
      effect, exercisable by and for its benefit interest rate hedging or
      protection arrangements and currency rate protection arrangements in
      accordance with the Approved Hedging Programme.
 
(d)   Security - UK Obligors If requested to do so by the Facility Agent, the
      Company shall procure that in respect of any Group Member incorporated in
      England and Wales, Scotland or Northern Ireland (that is not a Dormant
      Company) to which such request relates there is delivered to the Facility
      Agent within 45 days (or such longer period as the Majority Banks may
      agree) a Guarantor's Accession Agreement and/or a Guarantee together with
      a notice of accession under such Intercreditor Agreements as advised by
      the Facility Agent duly executed by such company and the Company and a
      Security Document, together with each of the conditions precedent
      documents required to be provided in connection therewith, all in a form
      and substance reasonably satisfactory to the Facility Agent.
      Notwithstanding anything to the contrary in this Agreement, only the
      Company shall be liable for its obligations under this Agreement and
      nothing herein shall oblige an Obligor to guarantee or act as a guarantor
      for any obligation of the Company under this Agreement.

(e)   Security - Non-UK Obligors If requested to do so in writing by the
      Facility Agent, the Company shall procure that in respect of a Group
      Member not incorporated in England and Wales (that is not a Dormant
      Company) to which such request relates there is delivered to the Facility
      Agent within 45 days (or such longer period as the Majority Banks may
      agree) of any such request a Guarantor's Accession Agreement and/or a
      Guarantee duly executed by such Non-UK Obligor, a Security Document
      together with a notice of accession under such Intercreditor Agreements as
      advised by the Facility Agent and each of the conditions precedent
      documents required to be provided in connection therewith, all in a form
      and substance reasonably satisfactory to the Facility Agent save that,
      notwithstanding the foregoing, (x) only the Company shall be liable for
      its obligations under this Agreement and nothing herein shall oblige an
      Obligor to guarantee or act as a guarantor for any obligation of the
      Company under this Agreement and (y) nothing herein shall oblige the
      Company to pledge (as determined by applicable law) more than 65%  of its
      interest in the voting share capital in any of its Immediate Subsidiaries
      and the Company shall not be obliged to procure that a Non-UK Obligor (the
      "Relevant Company") becomes an Obligor:

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<PAGE>
 
      (i)  if it is unlawful in the Relevant Company's jurisdiction of
           incorporation for it to support the obligations of the Company under
           the Finance Documents and, for the purposes of this Clause 19.4 it
           shall not be unlawful if an amendment to the Relevant Company's
           constitutive documents may be made which would enable it lawfully to
           become an Obligor; or

      (ii) if, as a result of the Relevant Company becoming an Obligor, the
           directors of the Relevant Company in their capacity as directors of
           an Obligor otherwise than solely as a result of any such director
           failing to properly discharge all of his obligations and duties in
           his capacity as a director of such Relevant Company would be liable
           to criminal prosecution solely as a result of the Relevant Company
           becoming an Obligor,

      and, in each case, the maximum level of support provided by an Obligor
      shall not exceed the maximum amount able to be provided by such Relevant
      Company having regard to generally applicable laws in its country of
      incorporation.

(f)   Security Threshold:  Without prejudice to Clauses 19.4(d), 19.4(e) and
      19.4(g) the Company shall procure that if:

      (i)  the consolidated earnings before interest, tax depreciation and
           amortisation of the Obligors as at the last day of the quarterly
           Accounting Period of the Group last ended is less than 85 per cent of
           the Consolidated Adjusted EBITDA in respect of such quarterly
           Accounting Period (as determined by reference to the Compliance
           Certificate delivered pursuant to Clause 19 in respect of such
           Accounting Period); and
 
      (ii) at any time the total assets of the Obligors is less than 85 per cent
           of the sum of the Total Assets less the value of pre-paid pension
           assets shown in the latest annual Financial Accounts of the Company
           at such time,

      then promptly after service of a notice to that effect on the Company by
      the Facility Agent and in any event within forty five days (or such longer
      period as the Facility Agent acting on the instructions of the Majority
      Banks may agree) thereafter, in the event that the shortfall was with
      respect to paragraph (i) above, a Group Member or Group Members whose
      earnings before interest, tax depreciation and amortisation in aggregate
      in respect of the financial year to which such shortfall relates was equal
      to or greater than such shortfall and/or in the event that the shortfall
      was with respect to paragraph (ii) above a Group Member or Group Members
      whose total assets at such time in aggregate is equal to or greater than
      such shortfall shall each execute a Guarantor's Accession Agreement or
      enter into a Guarantee and in each case execute a Security Document over
      all of its assets (both present and future) and an Intercreditor Agreement
      Accession Notice and deliver them to the Facility Agent together with the
      conditions precedent documents required to be provided in connection
      therewith, all in a form and substance satisfactory to the Facility Agent,

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<PAGE>
 
      Provided that for the purposes of this Clause 19.4(f) the terms "adjusted
      earnings before interest, tax, depreciation and amortisation" and "total
      assets" of a company shall be determined in accordance with the
      capitalised defined terms contained in Clauses 1.1 and 1.2 (namely
      "Consolidated Adjusted EBITDA" and "Total Assets" respectively), but as if
      references therein to the Company were references to such company,
      references therein to the Group were references to such company,
      references to the relevant period were references to the annual Accounting
      Period of such company, and references therein to the consolidated
      financial statements were references to the latest audited financial
      statements of such company and on the basis that all intra-Group items and
      investments shall be excluded.

(g)   Additional Security

      (i)   The Company shall procure that (a) on acquiring (and in any event
            within 45 days of such acquisition) any asset of material value, or
            material to the operation of the business of any Obligor or to the
            value of any other asset over which the Banks have security, the
            Obligor acquiring such asset shall (if such asset is not, in the
            reasonable opinion of the Security Agent, subject to any existing
            Security Document giving equivalent security to that provided by the
            Security Documents over similar assets held by any Obligor at
            Closing and (subject to sub-paragraph (iii) below) it is legal,
            practical and (in the opinion of the Facility Agent, acting
            reasonably and having regard to the value of the asset or its
            materiality to the operation of the business of such Obligor) cost
            effective to do so) execute and deliver to the Security Agent such
            further or additional Security Documents in relation to such assets
            as the Majority Banks may require in substantially the same terms as
            the Security Documents charging similar assets entered into at
            Closing, and (b) if there has, in the reasonable opinion of the
            Majority Banks, been a material and adverse change in the business,
            assets or financial condition of any Obligor, such Obligor shall
            execute and deliver to the Security Agent such further or additional
            Security Documents in such form and in relation to such of its
            assets as the Majority Banks shall require, subject in each case to
            any provisions of law prohibiting such person from entering into
            such Security Documents provided that notwithstanding the foregoing
            (y) only the Company shall be liable for its obligations under this
            Agreement and nothing herein shall oblige an Obligor to guarantee or
            act as a guarantor for any obligation of the Company under this
            Agreement and (z) nothing herein shall oblige the Company to pledge
            (as determined by applicable law) more than 66.6% of its interest in
            the voting share capital in any of its Immediate Subsidiaries.

      (ii)  The Company shall procure that any entity which becomes a Material
            Group Member after Closing shall (within 45 days of becoming a
            Material Group Member) execute and deliver to the Security Agent
            such further or additional Security Documents in such form and in
            relation to such of its assets as the Majority Banks shall require
            subject to any provision of law prohibiting such person from
            entering into such Security Documents.

                                      106
<PAGE>
 
      (iii) Where any such prohibition as is referred to above exists, the
            Obligors shall use their reasonable endeavours lawfully to overcome
            the prohibition, and the Security Agent may (but shall not be
            obliged to) agree with the relevant Obligor limitations on the
            extent of the security granted by it to the extent that in its
            opinion, based on the advice of independent legal counsel acceptable
            to the Security Agent in the relevant jurisdiction, it is necessary
            to do so in order to overcome the prohibition.

      (iv)  The Obligors shall at their own expense execute and do all such
            assurances, acts and things as the Security Agent or the Majority
            Banks may reasonably require for perfecting or protecting the
            security intended to be afforded by the Security Documents or for
            facilitating the realisation of all or any part of the assets which
            are subject to the Security Documents and the exercise of all
            powers, authorities and discretion's vested in the Security Agent or
            in any receiver of all or any part of those assets and in particular
            shall execute all transfers, conveyances, assignments and releases
            of that property whether to the Security Agent or to its nominees
            and give all notices, orders and directions which the Security Agent
            may reasonably think expedient.

      (v)   The Company shall procure that in relation to each further or
            additional Security Document the relevant Borrower or Guarantor
            shall do all things necessary duly to perfect in the jurisdiction of
            its incorporation and in the jurisdiction wherein the assets which
            are the subject of the further or additional Security Documents are
            located, the security to be afforded to the Finance Parties under
            such further or additional Security Documents and shall deliver to
            the Security Agent such directors and shareholders resolutions,
            legal opinions, notices, certificates or documents of title or other
            items as the Facility Agent shall require.

(h)   New Auditors: Other than in circumstances where the outgoing auditor has
      resigned the Company may appoint any one or more of Coopers Lybrand, Ernst
      & Young, KPMG, Deloitte & Touche, Arthur Andersen, or Price Waterhouse (or
      such other firm or firms as the Facility Agent may agree from time to
      time) without the prior approval of the Facility Agent and in all other
      cases the Company may only change its auditors with the prior approval of
      the Facility Agent.  If the Company wishes to change its auditors it will
      notify the Facility Agent as to the reasons for any such proposed change
      and if the Facility Agent so requests, will instruct the audit partner of
      each of the outgoing firm of auditors and the replacement firm of auditors
      to discuss the financial position of the Group with the Facility Agent.
      The Company shall procure that, within ten Business Days of the date of
      their appointment as Auditors, the accountants shall deliver to the
      Facility Agent a letter from such newly appointed Auditors confirming that
      they are aware of the provisions of this Agreement, including Clauses 6.3,
      6.10, 19.1 and 20.

(i)   Pari passu ranking: The Company shall ensure that the obligations of each
      Group Member under the Senior Finance Documents to which they are
      expressed to be a party rank, and will at all times rank, at least pari
      passu in right and priority of payment and in point of security (save by
      reason of and to the extent of the security afforded thereto by the
      Security Documents) with all its other present and future unsecured and
      unsubordinated obligations, other than obligations applicable generally to
      companies incorporated in its jurisdiction of incorporation which have
      priority by operation of law 

                                      107
<PAGE>
 
      (including, without prejudice to the generality of the foregoing, in
      respect of employees' remuneration, Taxes and like obligations).

(j)   Compliance with laws: The Company shall, and shall procure that each
      Obligor and other Material Group Member shall procure that each other
      Group Member shall, comply with all applicable laws, rules, regulations
      and orders of any governmental authority, whether domestic or foreign,
      having jurisdiction over it or any of its assets, failure to comply with
      which might have a Material Adverse Effect.

(k)   Consents: The Company shall, and shall procure that each Obligor and each
      Material Group Member (that is not an Obligor) shall, obtain, promptly
      renew from time to time and maintain in full force and effect, and if so,
      requested promptly furnish certified copies thereof to the Facility Agent,
      all such material authorisations, approvals, consents, licences and
      exemptions as may be required under any applicable law or regulation:

      (i)   to enable each Obligor to perform its respective material
            obligations under the Finance Documents to which it is a party or
            required for the validity or enforceability of such Finance
            Documents or of any Encumbrances provided for thereby; and/or

      (ii)  to carry on its business as it is being conducted from time to time.

(l)   The Payment of Existing Financial Indebtedness:  The Company shall pay
      (or, as the case may be, procure that each other Group Member shall pay)
      all amounts payable to Derby International and any other Persons to whom
      the Existing Financial Indebtedness is owed and will otherwise perform its
      material obligations in accordance with the terms of each of the
      Recapitalisation Documents, and the Company will ensure that appropriate
      action is taken to ensure receipt by the Company (or the relevant Group
      Member) of any sums payable by any Person to any Group Member under any of
      the Recapitalisation Documents.

(m)   Books and Records: The Company shall, and shall procure that each other
      Group Member shall, keep or cause or procure to be kept proper books of
      account and records relating to the business.

(n)   Group Activity:  The Company shall, and shall procure that each Group
      Member shall, conduct any trading business it has with any other Group
      Member on an arm's length basis and on terms and conditions similar to
      those such Group Member offers (or, if it does not so offer, might
      reasonably be expected to offer) to Persons that are not a Group Member or
      consistent with practice applicable at the date hereof.

(o)   Access:  Upon reasonable notice being given by the Facility Agent , the
      Company will procure that any one or more representatives of the Facility
      Agent and/or accountants or other professional advisers appointed by the
      Facility Agent shall be entitled to have access during normal business
      hours (i) to the Persons involved in the management of the Group as the
      Facility Agent may reasonably request), and (ii) to the assets, books and
      records of each Group Member that is not a Dormant Company, and are able
      to inspect and copy the same at reasonable times.

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(p)   Pension schemes:  The Company will, if requested by the Facility Agent
      deliver to the Facility Agent (i) at such time as those reports are
      prepared in order to comply with then current statutory or auditing
      requirements and (ii) not more than once in any period of three years, if
      the Facility Agent reasonably believes that the requirements of this
      Clause 19.4(p) are not being complied with, actuarial reports in relation
      to each of the pension schemes with an actuarial valuation of liabilities
      of more than $1,000,000 (or the equivalent thereof in other currencies)
      for the time being operated by the Group Members (in sufficient copies for
      each of the Finance Parties), and will, save as fully and fairly disclosed
      in the Accountant's Report, ensure that all such pension schemes are fully
      funded in accordance with reasonable actuarial assumptions applicable in
      the jurisdiction in which the relevant pension scheme is maintained and in
      accordance with Applicable Accounting Principles or, to the extent that
      any such pension scheme is not fully funded, promptly upon being aware
      thereof, take such action as is required to ensure that such pension
      scheme is fully funded in accordance with the recommendations made or
      instructions given in such respect of the relevant actuaries.

(q)   Syndication:  The Company shall ensure that all Group Members will provide
      assistance to the Facility Agent and the Arranger in the preparation of
      the information memorandum for syndication of the Facilities, make the
      Executives available, comply with all reasonable requests for information
      from potential syndicate members and provide reasonable opportunities for
      potential syndicate members to have access to their respective managers
      and other personnel and to any sites operated by any Group Member.

(r)   Registered Office: The Company shall, and shall procure that each Obligor
      (that is not a Material Group Member) and each Material Group Member
      shall, promptly (and in any event within 4 days) notify the Facility Agent
      in writing of any change in its name or in the address of its registered
      or principal office.

(s)   Executives:  The Company undertakes that if (i) either the Chief Financial
      Officer, or the Chief Executive Officer ceases or (ii) more than one
      Executive together cease (whether by reason of death, retirement at normal
      retiring age, ill health or otherwise) to perform the functions for which
      he was or they were (as the case may be) employed it will within 6 months
      of such Executive ceasing to perform such functions have offered to a
      Person or Persons (as the case may be) having the appropriate
      qualifications, background and experience, the position of the relevant
      Executive or Executives (as the case may be) and such Person or Persons
      (as the case may be) shall have accepted such offer in writing and the
      Company will procure that each such Person shall have taken up his duties
      as the relevant Executive of the Company within 6 months of each such
      Executive ceasing to perform such functions.

(t)   Dormant Companies:  Each Obligor will procure that, save as permitted by
      the Facility Agent or unless it becomes an Obligor and a party to the
      Debenture or such other Security Document satisfactory to the Facility
      Agent and provides to the Facility Agent each of the condition precedent
      documents required to be provided in connection therewith, no Dormant
      Company shall commence to trade (whether for its own account or for that
      of 

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<PAGE>
 
      another) after Closing or the date it became a Group Member (if later)
      or incur any further liabilities or hold or acquire (whether legally or
      beneficially) any material assets or property after such date.

(u)   ERISA: Each U.S. Obligor will not, and will procure that no ERISA
      Affiliate will engage in any transaction in connection with which any U.S.
      Obligor or any ERISA Affiliate could be subjected to either a civil
      penalty assessed pursuant to section 502(i) of ERISA, a tax imposed by
      section 4975 of the IRC or breach of fiduciary duty liability damages
      (whether directly or indirectly);

(v)   Compliance with Margin Stock Regulation: Each U.S. Obligor shall not, and
      shall procure that its Subsidiaries shall not:

      (i)  (A) sell, carry, pledge or otherwise dispose of any margin stock
           ("Margin Stock") within the meaning of Regulation U of the Board of
           Governors of the Federal Reserve System of the U.S.A. as in effect
           from time to time ("Regulation U"), now owned or acquired after the
           date of this Agreement; or

           (B) incur any Financial Indebtedness directly or indirectly secured
           (within the meaning of Regulation U) by any Margin Stock;

      if such transaction would cause any of the Advances or any part thereof to
      be in violation of Regulation U, or Regulation X of the Board of Governors
      of the Federal Reserve System of the U.S.A., as in effect from time to
      time ("Regulation X");

      (ii) use the proceeds of any Advance, directly or indirectly, for the
           purpose, whether immediate, incidental or ultimate, of purchasing or
           carrying any Margin Stock or for the purpose of maintaining, reducing
           or retiring any indebtedness which was originally incurred to
           purchase or carry any stock that is currently a Margin Stock or for
           any other purpose which might constitute any of the Facilities or
           this Agreement a "purpose credit" within the meaning of Regulation U
           or Regulation X.  No Obligor and no agent acting on its behalf will
           take or has taken any action which might cause this Agreement or the
           Advances to violate Regulation U or Regulation X or any other
           regulation of the Board of Governors of the Federal Reserve System.

(w)   UCC filings: Each U.S. Obligor at its own expense will make and renew
      promptly or request the Facility Agent to instruct appropriate United
      States counsel to make and renew, and, in any event, in the case of
      renewal such that the renewal is made before any UCC filing relating to
      any Senior Finance Document expires, all UCC filings relating to any
      Senior Finance Document reasonably required by the Facility Agent and will
      pay all applicable fees.

(x)   Intellectual Property Rights: The Company shall and shall procure that
      each Group Member shall:

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<PAGE>
 
      (i)   make such registrations and pay such fees, registration Taxes and
            similar amounts as are necessary to keep those Intellectual Property
            Rights which are material in the context of the business of any
            Group Member and which are required by it in order for it to carry
            on its business in accordance with the Business Plan in force and to
            record its interest in those Intellectual Property Rights;

      (ii)  take such steps as are necessary and commercially reasonable
            (including, without limitation, the institution of appropriate legal
            proceedings) to prevent third parties infringing the Material
            Intellectual Property Rights and (without prejudice to paragraph (i)
            above) take such other steps as are reasonably practicable to
            maintain and preserve its interests in those rights;

      (iii) promptly upon being required to so by the Security Agent, comply
            with all proper instructions of the Security Agent which the
            Security Agent is entitled to give under the Security Documents in
            respect of the Intellectual Property Rights referred to in paragraph
            (i) above; and

      (iv)  own or have licensed to it all Intellectual Property Rights which
            are material in the context of its business and which are required
            by it in order for it to carry on its business in accordance with
            the Business Plan and that in carrying on its business it does not
            infringe any Intellectual Property Rights of any third party in any
            way.

(y)   Clean Down: The Company shall ensure that for a continuous period of at
      least 30 days during the period of 1 July to 31 October (inclusive) during
      each annual Accounting Period the aggregate Deutschmark Equivalent of all
      Financial Indebtedness of the Group (excluding any Financial Indebtedness
      owed by a Group Member to another Group Member) other than under the GSIC
      Notes or in respect of the Note Documents and foreign exchange
      transactions (and without double-counting) outstanding at any time during
      such period does not exceed DM 80,000,000 (or the equivalent thereof in
      other currencies).

(z)   Distributions:  The Company shall ensure that:

      (i)  no agreement, instrument, Articles of Association or any other
           arrangement (other than the Senior Finance Documents) shall restrict
           or prevent any Group Member (excluding the Company) from declaring or
           making payment of any dividend or make any other distributions of
           capital or income profits (any such payment being a "Group Company
           Distribution") to the maximum amount permitted by generally
           applicable laws in the jurisdiction in which such Group Member is
           incorporated provided that no Group Company Distribution shall be
           paid to any Person in breach of Clause 19.5(o); and

      (ii) each Group Member (that is not an Obligor) makes Group Company
           Distributions in each annual Accounting Period to the maximum extent
           permitted by generally applicable laws in the jurisdiction in which
           such Group Member is incorporated, to the extent not restricted by
           the terms and conditions of any of the Senior Finance Documents
           (including without limitation Clause 19.5(o)).

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<PAGE>
 
(aa)  Note Exchange: Notwithstanding any other provision of this Agreement
      nothing herein shall be construed as prohibiting any Note Issuer, from
      time to time, agreeing to the exchange of one type of Senior Note for
      another type of Senior Note or the refinancing of a Senior Note from the
      proceeds of the issuance of new Senior Notes in accordance with the
      provisions of the Note Documents and taking such action as is required to
      facilitate the same.

19.5  Negative undertakings

(a)   Negative pledge:  The Company shall not, and shall procure that no other
      Group Member shall, create or permit to subsist any Encumbrances on the
      whole or any part of its respective present or future business, assets or
      undertaking (including its Intellectual Property Rights) other than
      Permitted Encumbrances.

(b)   Disposals: The Company shall not, and shall procure that no other Group
      Member shall, sell, transfer, lease, lend or otherwise dispose of or enter
      into any agreement under which it may be or become obliged to sell,
      transfer, lease, lend or otherwise dispose of any of its shares in any
      Group Member or undertaking and assets from time to time either in a
      single transaction or a series of transactions otherwise than:

      (i)    (in the case of any Group Member which is a trading company)
             disposals of trading assets in the ordinary course of trading on
             arm's-length terms;

      (ii)   disposals of assets on arm's length terms not otherwise permitted
             under this Clause 19.5(b) provided that the aggregate fair market
             value of the assets disposed of during any annual Accounting Period
             does not exceed $500,000 (or the equivalent thereof in other
             currencies);

      (iii)  disposal of assets in exchange for other assets comparable or
             superior as to type, value and quality;

      (iv)   disposals of surplus, obsolete or redundant plant and equipment, or
             of land or buildings not required for the efficient operation of
             its business, on arm's length terms and at fair market value;

      (v)    the expenditure of Cash in payment for assets or services acquired
             at market value in the course of its business carried on in
             compliance with the terms of the Senior Finance Documents;

      (vi)   the lending of Cash and payment or repayment of Cash lent in
             compliance with the terms of the Senior Finance Documents;

      (vii)  the disposal of assets by one UK Obligor to another UK Obligor on
             an arm's length basis on normal commercial terms;

      (viii) (to the extent that paragraph (vii) does not apply) the disposal of
             assets by one Obligor (the "disposing Obligor") to another Obligor
             (the "recipient Obligor") 

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<PAGE>
 
             on an arm's length basis on normal commercial terms provided that
             the recipient Obligor has received prior confirmation from the
             Facility Agent that it is satisfied that the Encumbrance that the
             recipient Obligor has given (or, as the case may be, will give
             promptly after the proposed disposal pursuant to a Security
             Document) is such that the Encumbrance granted thereby, should the
             proposed disposal be permitted pursuant to this paragraph (viii),
             over the relevant asset or assets is, or will be, at least as
             favourable to the Finance Parties as the Encumbrance that the
             disposing Obligor provided to the Finance Parties over such assets
             or assets immediately before the proposed disposal;

      (ix)   the payment of dividends in compliance with the terms of the Senior
             Finance Documents;

      (x)    the payment of amounts payable under or in respect of or in the
             performance of obligations under the Note Documents to the extent
             that such payment does not breach the provisions of Clause 19.5(p);

      (xi)   the transfer of the legal title to the property situated on the
             west side of Triumph Road, Nottingham, England (Postcode WE7 2EL)
             by Raleigh Industries Limited (together, in respect of one part of
             the said property, with Derby Holdings Limited to Sturmey-Archer
             Limited of Triumph Road, Nottingham, England and the transfer of
             the legal title to the property at the corner of Downing Street and
             Cornwall Road, Nottingham from British Cycle Limited to Sturmey-
             Archer Limited;

      (xii)  the disposal of assets as contemplated by Exhibit 8.10A of the
             Recapitalisation Agreement, provided that the aggregate book value
             of such assets does not exceed South African Rand 1,300,000; and

      (xii)  disposals of assets which were acquired after the date of this
             Agreement in accordance with, and as permitted by, the terms of
             this Agreement the future disposal of which was in the opinion of
             the Facility Agent contemplated at the time of their acquisition.

      All such sales, transfers, leases or other disposals shall (other than
      intra-Group transfers to which the Facility Agent has previously consented
      (such consent not to be unreasonably withheld), be made only for a cash
      consideration payment of which may not be deferred for more than three
      months from the date of such sale, transfer, lease or other disposal.

      Provided that, without prejudice to the foregoing, no Group Member (other
      than the Company or a Group Member that is an Immediate Subsidiary ) may
      sell, transfer, lease, lend or otherwise dispose of or enter into any
      agreement under which it may be or become obliged to sell, transfer,
      lease, lend or otherwise dispose of any of its shares in any Group Member
      or undertaking and assets, either in a single transaction or a series of
      transactions to the Company or an Immediate Subsidiary other than
      as specifically contemplated, at Clause 19.5(c) or, as the case may be,
      Clause 19.5(o).

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<PAGE>
 
(c)   Loans out:  The Company shall not and shall procure that no other Group
      Member shall, grant or make available to another Person any Financial
      Indebtedness, save for:

      (i)  any Financial Indebtedness where trade credit is extended by any
           Group Member on normal commercial terms and in the ordinary course of
           its business on substantially the same terms (or terms more
           favourable to it) and in similar circumstances as for trade credit
           extended prior to the Closing;

      (ii) loans made by one Group Member to another Group Member where:

           (A) the loan is specified in the Intra-Group Loan Memorandum;

           (B) (subject to paragraph (D) below) the recipient of the loan, if
               made by a Group Member is an Obligor that is not a Note Issuer;


           (C) the recipient of the loan, if made by a Note Issuer, is an
               Obligor;

           (D) the recipient of the loan is the Company or, as the case may be,
               Lyon Investments B.V. provided that:

               (i)  such loan is required to be made to the Company or, as the
                    case may be, Lyon Investments B.V. (having regard to the
                    available assets of the Company or, as the case may be, Lyon
                    Investments B.V. at such time) so as to enable the Company
                    or, as the case may be, Lyon Investments B.V. to make
                    payment of interest or liquidated damages as defined in the
                    Note Documents when due under the Note Documents (provided
                    that such payment would not be in breach of any of the
                    Senior Finance Documents and such loan is promptly, and in
                    any event within 7 days of it being made, so applied); or

               (ii) the loan is made to the Company to enable it to pay:

                    (AA) fees of an amount which is, in the context, reasonable,
                         payable to any of its non-executive directors pursuant
                         to the terms of the contracts or other formal
                         arrangements entered into by the Company with such non-
                         executives;

                    (BB) management fees payable to Thayer by the Company at any
                         time after 31 December 1998 pursuant to the Management
                         Agreement (if any) not exceeding $400,000 in aggregate
                         in any Financial Year provided that payment of the same
                         could not reasonably be expected to (were
                         such payment made) result in a breach of any provision
                         of this Agreement;

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<PAGE>
 
                    the loan is made to the Company by each other Group Member
                    to enable the Company to pay amounts due to the Internal
                    Revenue Service in the United States on account of tax due
                    in respect of such Group Member's operations or the
                    Company's operations and payable by the Company on behalf of
                    such Group Member or by the Company;


           (E) the recipient of the loan (made by an Obligor) is a Group Member
               that is not an Obligor provided that the aggregate amount of any
               such loans does not exceed in aggregate $1,000,000 (or the
               equivalent in other currencies); and

      (iii)  (in addition to paragraphs (i) and (ii) Financial Indebtedness in
           an aggregate principal amount (for the Group as a whole) not
           exceeding $250,000 (or the equivalent in other currencies) at any
           time.

(d)   Acquisitions:  The Company shall not, and shall procure that no other
      Group Member shall acquire any asset otherwise than:

      (i)   in the ordinary course and for the purposes of its business;

      (ii)  Cash Equivalent Investments;

      (iii) the acquisition of shares in a wholly-owned Subsidiary acquired or
            established solely for the purpose of holding the assets of and/or
            administering the pensions of employees of Group Members;

      (iv)  in accordance with the disposal provisions in Clause 19.5(b); or

      (v)   in addition to Clauses 19.5(d)(i) to (d)(iv) above, acquisitions
            made pursuant to this paragraph (v) (each a "Permitted Acquisition")
            the aggregate consideration (whether in cash or otherwise, and
            whether actual or contingent) paid or payable by a Group Member in
            respect thereof, or exposure thereto or in respect thereof (when
            taken together with all other Permitted Acquisitions and Investments
            made during the relevant annual Accounting Period) does not and will
            not, in such annual Accounting Period, exceed the Permitted Amount
            for such period and, in any event (when taken together with all
            other Permitted Acquisitions and Investments made after the date of
            this Agreement), does not and will not exceed $72,800,000 (or the
            equivalent in other currencies).

(e)   Sales with recourse: Without prejudice to Clause 19.5(b) and Clause
      19.5(h) the Company shall not, and shall procure that no other Group
      Member shall:

      (i)  sell or otherwise dispose of any of their respective assets on terms
           whereby such asset or assets are or may be leased to, or re-acquired
           or acquired by, any Group Member; or

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<PAGE>
 
      (ii) sell or dispose of any of its receivables (including, without
           limitation to the Financial Accounts, as defined at Clause 6) on
           recourse terms or enter into any factoring (or similar) arrangement
           without respect thereto,

      unless the aggregate book value of the assets and receivables so sold or
      disposed does not exceeds $500,000 per annum (or the equivalent in other
      currencies).

(f)   Change of business: The Company shall not, and shall procure that no other
      Group Member shall, make or threaten to make any change in its business as
      presently conducted, which would result in a change in the general nature
      of business carried on by the Group as a whole (other than where this is
      due to acquisitions permitted under Clause 19.5(d) above or disposals made
      consistent with the Business Plan), or carry on any other business which
      is substantial in relation to the business of the Group as conducted at
      the date of this Agreement.

(g)   Mergers: The Company shall not, and shall procure that no other Group
      Member shall enter into any merger or consolidation or make any
      acquisition of any other company, Person or business save as otherwise
      specifically permitted pursuant to this Agreement.

(h)   Financial Indebtedness: The Company shall not, and shall procure that no
      other Group Member shall incur or permit to subsist any Financial
      Indebtedness other than Permitted Financial Indebtedness and, without
      prejudice to the foregoing the Company shall procure that:

      (i)  no Person including any Group Member, other than a Note Issuer shall
           guarantee or offer any financial accommodation or financial
           assistance of any nature whatsoever in respect of the Note Issuers'
           obligations under the Note Documents or any of them or of any other
           Financial Indebtedness incurred by them in any capacity and further,
           no Group Member shall incur any Financial Indebtedness which has the
           economic effect of being Financial Indebtedness but which is an "off
           balance sheet" arrangement; and

      (ii) no Person including any Group Member, other than the GSIC Note Issuer
           shall guarantee or offer any financial accommodation or financial
           assistance of any nature whatsoever in respect of the GSIC Note
           Issuer's obligations under the GSIC Note Documents or of any other
           Financial Indebtedness incurred by it in any capacity.

(i)   Third party guarantees: The Company shall not, and will procure that no
      other Group Member shall, incur or permit to be outstanding, any Financial
      Indebtedness falling within the provisions of paragraph (g) of the
      definition of that term in Clause 1.2 other than any such Financial
      Indebtedness:

      (i)  arising under the Senior Finance Documents;

      (ii) arising out of the endorsement of negotiable instruments for the
           purpose and in the ordinary course of carrying on the relevant
           entity's trade; or

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<PAGE>
 
      (iii) arising out of guarantees in favour of a Bank to facilitate the
            operation of bank accounts of such Group Members (other than the
            Note Issuers) maintained with such Bank on a net balance basis for
            the purposes of cash management.

      Provided that, notwithstanding the foregoing, no Obligor may incur or
      permit to be outstanding any Financial Indebtedness falling within
      paragraph (g) of the definition of that term in Clause 1.2 to the extent
      that it relates to any Financial Indebtedness incurred by or on behalf of
      a Note Issuer (in any capacity), or a Group Member that is not an Obligor
      which for the avoidance of doubt includes any Group Member incorporated in
      South Africa.

(j)   Options: Other than the exercise of an option entered into in accordance
      with, and not prohibited by the Approved Hedging Programme or in respect
      of the MS Group Option the Company shall not, and will procure that no
      other Group Member shall, enter into or permit to subsist any arrangement
      whereby any Person:

      (i)  has the right (whether or not exercisable only in a contingency) to
           require any Group Member to purchase or otherwise acquire any
           property or any interest in any property; or

      (ii) has the right (whether or not exercisable only in a contingency) to
           require any Group Member to sell or otherwise dispose of any property
           or interest in any property.

(k)   Treasury Transactions: The Company shall not, and will procure that no
      other Group Member shall, enter into any interest rate, swap, cap,
      ceiling, collar or floor or any currency swap, futures, foreign exchange
      or commodity contract or option (whether over the counter or exchange
      traded) or any similar treasury transaction, other than the Hedging
      Protection Arrangements, spot foreign exchange contracts entered into in
      the ordinary course of business and transactions entered into for the
      hedging of actual or projected exposures arising in the ordinary course of
      ordinary trading activities of the Group and in accordance with the
      Approved Hedging Programme carried on, in each case, in compliance with
      the terms of the Senior Finance Documents and which in any such case are
      entered into with an Approved Bank.

(l)   Investments: Save to the extent permitted by Clause 19.5(d) the Company
      shall not, and will procure that no other Group Member shall acquire (by
      subscription or otherwise) any business or any shares or other securities
      (or any interest therein) or otherwise establish other than the Acquired
      Assets and Cash Equivalent Investments save as disclosed in the Structure
      Memorandum.

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<PAGE>
 
(m)   Subsidiaries:

      (i)   Save to the extent permitted by Clause 19.5(d) the Company shall not
            acquire any Subsidiaries which are not Subsidiaries immediately
            following the Closing or acquire any businesses after the Closing or
            enter into any agreement which it may be or become bound to acquire
            any Subsidiary or business unless such Subsidiary is incorporated in
            the United Kingdom and each of the other provisions of this
            Agreement and the Finance Documents are complied with.

      (ii)  The Company shall not incorporate any Subsidiaries without the prior
            consent of the Facility Agent (acting on the instructions of the
            Majority Banks).

(n)   Joint Ventures: The Company shall not, and will procure that no other
      Group Member shall, without the consent of the Majority Banks, acquire any
      shares, stock, securities or other interest in, or transfer any assets,
      to, or lend to or guarantee the obligations of any Joint Venture, or
      commit to any third party or enter into any Joint Venture or become party
      to any joint venture agreement or arrangement where it has any obligation
      (whether to such Joint Venture or to any other Person, and whether actual
      or contingent) to lend to or guarantee or transfer assets to or otherwise
      fund or incur any liability in respect of such Joint Venture or any other
      Person (each such acquisition, transfer, loan, guarantee, commitment,
      agreement and arrangement being an "Investment"), save that Group Members
      may make, or agree to make any Investment, provided that as a result
      thereof the aggregate consideration (whether in cash or otherwise, and
      whether actual or contingent) paid or payable by a Group Member in respect
      thereof, or exposure thereto or in respect thereof (when taken together
      with all other Investments made during the relevant annual Accounting
      Period and Permitted Acquisitions in such annual Accounting Period) does
      not and will not, in such annual Accounting Period, exceed the Permitted
      Amount for such period and, in any event (when taken together with all
      other Investments made and Permitted Acquisitions after the date of this
      Agreement), does not and will not exceed $72,800,000 (or the equivalent in
      other currencies).

(o)   Distributions:  the Company shall not, and shall procure that Lyon
      Investments B.V. and each of the Company's and Lyon Investments B.V.'s
      respective immediate Subsidiaries shall not, at any time declare or make
      payment of any dividend or make any other distribution of capital or
      income or profits or payment of any fees, management charges or other
      amounts whatsoever to any of its members, make any other redemption or
      purchase of its own shares or create or issue or reissue any loan or
      debenture stock (any such payment being a "Distribution") to its members
      or, as the case may be, the Company or Lyon Investments B.V. other than:

      (i)   to the extent required (having regard to the available assets of the
            Company or as the case may be, Lyon Investments B.V. at such time)
            so as to enable the Company or, as the case may be, Lyon Investments
            B.V. to make payment of interest (including liquidated damages (as
            defined in the Note Documents) when due under the Note Documents or,
            in the case of the Company only, this Agreement (provided that each
            such payment would not be in breach of any of the Senior Finance
            Documents);

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<PAGE>
 
      (ii) to enable the Company to pay fees of an amount which is, in the
           context, reasonable, payable to any of its non-executive directors
           pursuant to the terms of the contracts or other formal arrangements
           entered into by the Company with such non-executive directors;

      (iii) to enable the Company to pay management fees payable to Thayer by
            the Company pursuant to the Management Agreement (if any) not
            exceeding $400,000 in aggregate in any Financial Year after 31
            December 1998 provided that payment of the same could not reasonably
            (were such payment made) result in a breach of any provision of this
            Agreement;

      (iv)  payments required to be made to the Company by each other Group
            Member to enable the Company to pay amounts due to the Internal
            Revenue Service in the United States on account of tax due in
            respect of such Group Member's operations or the Company's
            operations and payable by the Company on behalf of such Group Member
            or by the Company; and

      (v)   so as to enable the Company to remit monies to Group Members
            incorporated in The Republic of South Africa in order to enable
            those companies to purchase all of the minority shareholdings in
            such Group Member as at the date of this Agreement for an amount not
            exceeding $2,000,000 less any amounts loaned to Group Members
            incorporated in South Africa for such purpose as contemplated by
            Clause 19.5(c)(ii)(C) at Closing (or within 30 days thereof).

      The Company shall procure that no Group Member may make any payment or
      take any action on behalf of the Company or any other Group Member or
      enter into any arrangement on behalf of the Company or any other Group
      Member if the Company or any other Group Member, is restricted from making
      such payment, taking such action or entering into such arrangement
      pursuant to the provisions hereof.

(p)   Payments - Note Documents:

      (i)  None of the Note Issuers shall:

           (A) repay, prepay, redeem or repurchase all or any (or any part) of
               the Senior Notes (other than to the extent the same is required
               in order to effect an exchange or refinancing of the Senior Notes
               as permitted by Clause 19.4(aa)); or

           (B) make any deposits pursuant to the "Defeasance" provisions
               contained in the Note Documents.
 
      (ii) Save to the extent prohibited under paragraph (i) above, the Note
           Issuers shall be entitled to make payments they are obligated to make
           under the Note Documents in the manner and at the time any such
           payment is required to be made thereunder.

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<PAGE>
 
      The Company shall procure that no Group Member may make any payment or
      take any action on behalf of any of the Note Issuers or enter into any
      arrangement on behalf of any of the Note Issuers if such Note Issuer
      itself, is restricted from making such payment, taking such action or
      entering into such arrangement pursuant to the provisions hereof.

(q)   Amendments: The Company shall not, and shall procure that no other Group
      Member shall, permit or effect any variations, novations or amendments or
      waive any conditions to any of:

      (i)   the objects clause of the Memorandum of Association (or, if the
            country of incorporation of the relevant Group Member is not England
            and Wales, the applicable similar or analogous documents) of any
            Obligor or Material Group Member (that is not an Obligor) (as at the
            date of this Agreement);

      (ii)  the Articles of Association of any Group Member (or, if the country
            of incorporation of the relevant Group Member is not England and
            Wales, the applicable similar or analogous documents) (as at the
            date of this Agreement);

      (iii) the Recapitalisation Documents (as at the date of this Agreement);

      (iv)  the Finance Documents (as at the date of this Agreement or, in
            respect of any Finance Document entered into post Closing as at the
            date of the completion of the Diamond Back Acquisition),

      unless such variation, novation, amendment or waiver (when taken together
      with any other variation, novation, amendment or waiver) is of a purely
      technical or administrative nature or has previously been agreed to in
      writing by the Facility Agent in respect of the Senior Finance Documents,
      in accordance with the provisions of this Agreement).

(r)   Administration and winding-up orders etc.:  The Company shall not, and
      shall procure that no other Group Member shall, make or join in making any
      application to any court for an administration, winding-up, receivership
      or other similar order to be made in relation to any Group Member, other
      than in respect of a solvent winding-up or dissolution of a Group Member
      which is not an Obligor.

(s)   Arm's-length terms:  The Company shall not, and shall procure that no
      other Group Member shall, enter into any material transaction with any
      Person otherwise than on arms-length terms and for full market value save
      for inter-company loans permitted pursuant to this Clause 19.5.

(t)   Bank Accounts:  The Company shall not, and shall procure that no other
      Group Member shall, open or maintain any account with any branch of any
      bank or other financial institution providing like services (other than an
      account maintained pursuant to the requirements of the Senior Finance
      Documents) unless:-

      (i)  such branch and bank or financial institution shall be an Approved
           Bank save that to the extent not otherwise prohibited under this
           Agreement, a Group Member that 

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<PAGE>
 
           is not an Obligor or a Material Group Member may be entitled to open
           or maintain an account with a bank or branch or financial institution
           which is not an Approved Bank (an "Alternative Bank" ) provided that
           the Alternative Bank does not have an Encumbrance (other than a
           Permitted Encumbrance) over such account or any other assets of any
           Group Member in respect of such account and any liabilities of the
           relevant Group Member relating thereto; or

      (ii) such account was maintained by such Obligor or, as the case may be,
           such Material Group Member prior to the date of this Agreement and
           (within 30 days of the date of this Agreement) such Obligor or, as
           the case may be, such Material Group Member has put in place
           arrangements satisfactory to the Facility Agent whereby the amount
           standing to the credit of such account is transferred (without any
           specific instructions being given in respect thereof on a regular
           basis) to an account held by an Approved Bank at the end of each
           Business Day.

(u)   Capital Expenditure: The Company may request the Facility Agent to approve
      and the Facility Agent (acting on the instructions of the Majority Banks)
      may approve in writing prior to the commencement of any annual Accounting
      Period the figure for Capital Expenditure (the "Revised Capex Level")
      shown in the budget for any annual Accounting Period delivered to the
      Facility Agent pursuant to Clause 19.1.  If the Facility Agent so approves
      the Revised Capex Level for any annual Accounting Period then the Group
      taken as a whole may make Capital Expenditure on assets in an amount up to
      (but not in excess of) the amount of the Revised Capex Level for such
      Annual Accounting Period, and the Company will procure that the Group
      taken as a whole will not make Capital Expenditure on assets during such
      annual Accounting Period in an amount in excess of the Revised Capex
      Level.  In respect of the period from the Closing to the date set out in
      the first line of column (1) below and, in the absence of any such written
      approval by the Facility Agent of a Revised Capex Level for any following
      annual Accounting Period, the Company undertakes that in respect of each
      of the annual Accounting Periods ending on the dates set out in column (1)
      below, it will procure that the Group, taken as a whole, will not make
      Capital Expenditure on assets in an amount for each such Accounting Period
      or period in excess of the amount set out in column (2) below against the
      relevant date (the Capital Expenditure in respect of any period listed
      below, or, as the case may be, the Revised Capex Level relating thereto
      being the "Original Capital Expenditure Level").

====================================================================  
(1)                                (2) $ (or the equivalent thereof
                                   in other currencies
====================================================================   
31 December 1998                              9,000,000
--------------------------------------------------------------------
31 December 1999                             10,000,000             
--------------------------------------------------------------------
31 December 2000                              8,500,000             
--------------------------------------------------------------------
31 December 2001                              8,500,000             
--------------------------------------------------------------------
31 December 2002                              8,500,000             
--------------------------------------------------------------------
31 December 2003                              8,500,000             
--------------------------------------------------------------------
31 December 2004                              8,500,000             
--------------------------------------------------------------------
31 December 2005                              8,500,000
====================================================================   

                                      121
<PAGE>
 
      provided that:

      (i)   the amount of any such Original Capital Expenditure Level not
            utilised in any annual Accounting Period may be carried forward for
            twelve months only and added (otherwise than for the purposes of the
            further application of this proviso) to the Original Capital
            Expenditure Level for the next annual Accounting Period and, for the
            purpose of this Clause 19.5(u), to the extent that any Capital
            Expenditure limit is carried forward pursuant to the provisions
            herewith, to the next annual Accounting Period, Capital Expenditure
            made in such annual Accounting Period shall be deemed to relate
            first to such Capital Expenditure limit so carried forward to such
            annual Accounting Period;

      (ii)  in addition to the Original Capital Expenditure Level applicable to
            any period set out in column (1) above, the Group may make
            additional Capital Expenditure on assets during such period equal to
            50% of the amount by which Consolidated Adjusted EBITDA for the
            immediately preceding period exceeded the amount of Consolidated
            Adjusted EBITDA shown in the Model for such period less amounts paid
            by the Company in respect of the management fee, under the
            Management Agreement (if any) or otherwise in such immediately
            preceding period(in each case the "Excess Amount") having regard to
            the financial statements delivered pursuant to Clause 19, Provided
            that the application of an amount equal to such Excess Amount in
            making such additional Capital Expenditure, ought not, on a balance
            of probabilities, having regard to the relevant budget or budgets
            provided pursuant to Clause 19.1(b) or any other financial
            information provided under Clause 19 or otherwise give rise to the
            breach of any of the said financial conditions, as the same is
            determined by the Facility Agent (acting reasonably); and

      (iii) the Original Capital Expenditure Level in respect of any period set
            out in column (1) above ending on or prior to 31 December 1999,
            shall be reduced by an amount equal to the amount by which Year 2000
            Expenditure was expensed by the Group through its income statement
            during such period.

(v)   Real Property: Save to the extent that the aggregate amount applied by the
      Group for such purpose in any annual Accounting Period does not exceed
      $250,000 (or the equivalent thereof in other currencies) the Company shall
      not, and shall procure that no other Group Member shall develop or
      redevelop all or any part of any real property owned by it or in which it
      has a freehold or leasehold (or any other) interest, save for its own
      occupation and use and in each case where the cost of so doing is within
      the Capital Expenditure limits set out in Clause 19.5(u) above.

                                      122
<PAGE>
 
(w)   Share Capital: The Company will not:

      (i)   redeem, repurchase, retire, return or repay any of its share 
            capital, or resolve to do so save that the Company shall be entitled
            to redeem C Common Stock for an amount not exceeding
            (Pounds)2,100,000 of its share capital provided by DC Cycle LLC in
            connection with the Diamond Back Acquisition provided that an amount
            equal to the amount of its share capital to be redeemed has been
            irrevocably credited to the Company's account in cash by or on
            behalf of Perseus Cycle LLC so as to enable Perseus Cycle LLC to
            subscribe for an identical number of shares of C Common Stock of the
            Company within 30 days of the completion of the Diamond Back
            Acquisition and that no Event of Default has occurred and is
            outstanding or would result from such redemption; or

      (ii)  redeem, repurchase, retire, return or repay any of its share 
            capital, or resolve to do so save that the Company shall be entitled
            to redeem Class C Common Stock for an amount not exceeding
            (Pounds)8,400,000 of its share capital provided by DC Cycle LLC in
            connection with the Diamond Back Acquisition provided that an amount
            equal to the amount of its share capital to be redeemed has been
            irrevocably credited to the Company's account in cash by or on
            behalf of Derby Finance Sarl so as to enable Derby Finance Sarl to
            subscribe for an identical number of shares of Class C Common Stock
            of the Company within 180 days of the completion of the Diamond Back
            Acquisition and that no Event of Default has occurred and is
            outstanding or would result from such redemption;

      (iii) save as contemplated by the Recapitalisation Documents (as at the
            date of this Agreement) issue any new share capital or grant any
            option to any Person to subscribe for any shares in its capital
            other than another Group Member (provided that if the Security Agent
            already has security over the shares of the issuer of any such new
            shares then the Company will procure that the Group Member to whom
            such new shares are issued promptly provides security over such
            shares to the Security Agent to the reasonable satisfaction of the
            Security Agent),

      Provided that, notwithstanding the foregoing, the Company may provided
      that no Event of Default has occurred and is outstanding or would result
      as a consequence of the following:

      (a)   issue (x) ordinary share capital of a type similar to any class of
            its shares in issue as at completion of the Diamond Back Acquisition
            which is subscribed for in full in cash, or as contemplated in the
            GSIC Note Documents including, for the avoidance of doubt, Clause 4
            of the Stockholders' Agreement (as at the date of the completion of
            the Diamond Back Acquisition) provided such issuance does not give
            rise to any breach of the Senior Notes and is not Disqualified Stock
            as defined in the Senior Notes in respect of which no dividend or
            distribution may be declared, made or paid unless to do so would not
            result in a breach of this Agreement and where such issue would not
            result in a breach of Clause 21.1(y) or any other provision of this
            Agreement and (y) classes of shares other than ordinary shares
            provided that at the time of their issue and subsequently, their

                                      123
<PAGE>
 
            issue would not (or could not, if any rights attached thereto were
            to be exercised) breach Clause 21.1(y) hereof or any other provision
            of this Agreement. For the avoidance of doubt, the Company shall not
            issue and shall procure that no other Group Member shall issue
            Excluded Share Capital or share capital which constitutes or may be
            converted into Financial Indebtedness;

      (b)   issue shares to employees pursuant to the employee share ownership
            scheme in existence as at the date of this Agreement or, if later,
            as at the date of the completion of the Diamond Back Acquisition
            (details of which have been provided to the Facility Agent pursuant
            to paragraph 15 of Schedule 6 or have been provided to the Facility
            Agent prior to the date of the completion of the Diamond Back
            Acquisition and provided that the exercise of any rights under such
            a scheme does not give rise to an Event of Default) and any other
            similar or replacement scheme to which the Facility Agent has given
            its prior written approval;

      (c)   as contemplated in connection with the MS Group Option; and

      (d)   take all such actions as are permitted pursuant to 19.5(aa).

(x)   Prepayment of other Financial Indebtedness: The Company will not, and will
      procure that no Group Member will prepay any Financial Indebtedness
      earlier than its original scheduled maturity which, in the case of the
      Senior Notes' is approximately May 2008 (i) other than to the Banks under
      the Senior Finance Documents in accordance with the provisions of this
      Agreement; (ii) to an Obligor; or (iii) to another Group Member not
      exceeding $100,000 in aggregate in any Financial Year.

(y)   Surplus Cash:  Neither the Company nor any of the Immediate Subsidiaries
      will, at any time, hold any Cash or Cash Equivalent Investments greater
      than required for its projected cashflow requirements for the next 30 days
      (the amount of any such excess being the "Cash Balance") and the Company
      shall, promptly upon being aware of such a situation procure that such
      Cash Balance shall be lent by itself or, as the case may be, the relevant
      Immediate Subsidiary to an account situated in England, Wales or Ireland,
      provided that such account and any credit balance standing to the credit
      thereof is subject to a Debenture or, as the case may be, an Irish
      Debenture.  save that, notwithstanding the foregoing, the Company may hold
      Cash that has been remitted to it in accordance with Clause 19.5(o) and
      apply the same in accordance therewith.

(z)   Redemption: RIC shall not redeem or agree to redeem all or any of its
      shares, including, without limitation any of the RIC Preferred Shares nor
      permit the holder of any of the RIC Preferred Shares to redeem or attempt
      to redeem all or any of the RIC Preferred Shares without, in each case,
      having obtained the Facility Agent's prior approval (acting on the
      instructions of each of the Banks).

(aa)  Payment - GSIC Notes:  The Company shall not repay, redeem, cancel or
      repurchase the GSIC Notes or make any other payment or distribution in
      cash whatsoever in respect of the GSIC Notes and the Company shall procure
      that no other Group Member shall make any payment or take any action on
      behalf of the Company to or enter into any such 

                                      124
<PAGE>
 
      arrangement on behalf of the Company save that the Company shall be
      entitled to redeem or, as the case may be, cancel GSIC Notes (the
      "Transferred GSIC Notes") purchased by a Relevant Purchaser either;

      (1)  pursuant to Clause 2 of the Stockholders' Agreement (as at the date
           of the completion of the Diamond Back Acquisition); or

      (2)  pursuant to Clause 3 of the Stockholders' Agreement (as at the date
           of the completion of the Diamond Back Acquisition); and

      (3)  pursuant to Clause 4 of the Stockholders' Agreement (as at the date
           of the completion of the Diamond Back Acquisition to a Relevant
           Purchaser.

           Provided that in each case:

           (A) the Transferred GSIC Notes are delivered to the Company by the
               holder of the Transferred GSIC Notes for and on behalf of the
               Relevant Purchaser for cancellation whereupon the Company shall
               immediately cancel such Transferred GSIC Notes and issue to the
               Relevant Purchaser, shares in the Company in an aggregate amount
               equal to the aggregate principal amount (together with accrued
               but unpaid interest thereon) of such Transferred GSIC Notes; or

           (B) an amount in cash equal to the aggregate principal amount
               (together with accrued but unpaid interest thereon) of the
               Transferred GSIC

               Notes has been irrevocably credited to the Company's account by
               or on behalf of the Relevant Purchaser so as to enable the
               Relevant Purchaser to subscribe, simultaneously with such
               redemption, for shares in the Company in an aggregate amount
               equal to the aggregate principal amount (together with accrued
               but unpaid interest thereon) of the Transferred GSIC Notes;

               And further provided in each case that all the following
               conditions are met or fulfilled:

               (i)   no Event of Default has occurred which is still outstanding
                     or arises as a consequence of the foregoing;

               (ii)  the holder of the Transferred GSIC Notes has confirmed to
                     the Relevant Purchaser and the Company that any liability
                     of the GSIC Note Issuer to the holder of the GSIC Notes
                     under, or in respect of, the GSIC Note Documents in respect
                     of the Transferred GSIC Notes has been extinguished;

               (iii) none of the shares issued by the Company pursuant to the
                     foregoing shall constitute Excluded Share Capital or
                     Disqualification Stock (as the latter term is defined in
                     the Note Documents), or which constitute or may be
                     converted into Financial Indebtedness.

                                      125
<PAGE>
 
               (iv) that as a consequence of the steps set out in (A) and (B)
                    above, the aggregate amount of subordinated debt pursuant to
                    the GSIC Note Documents and equity shall not be for an
                    aggregate amount less than the aggregate amount of
                    subordinated debt pursuant to the GSIC Note Documents and
                    equity immediately prior to the transactions referred to at
                    (A) and (B) above.

      For the avoidance of doubt, no other payment nor distribution of any kind
      or character may be made in respect of the GSIC Notes other than the
      issuance of further GSIC Notes in accordance with clause 2.3.2 of the GSIC
      Loan (as at the date of the completion of the Diamond Back Acquisition)
      (provided that no Event of Default is outstanding or occurs as a
      consequence thereof) or, as the case may be, PIK C Preferred Shares in
      accordance with the terms of the Side Letter (as at the same date).

(ab)  GSIC Notes: the Company shall not make any issuance of GSIC Notes (whether
      in respect of or in lieu of interest on any GSIC Notes then outstanding or
      otherwise) that results in or would, upon the passage of time or giving of
      notice, result in an Event of Default under the Note Indentures.


                                    PART 7
20.  FINANCIAL UNDERTAKINGS

20.1

(a)   The Company shall ensure that in calculating Consolidated Adjusted EBITDA
      and Consolidated Net Interest Payable, for any Accounting Period (other
      than in respect of in the case of Consolidated Net Interest Payable, to
      the extent that the calculation relates to the periods ending on 27
      September 1998, 31 December 1998 and 28 March 1999 respectively) an
      adjustment shall be made so as to ensure that such calculations are made
      on a fully annualised basis in accordance with the following formula:

      A x 365
      -      
      B
Where:

      A =  The amount (being Consolidated Adjusted EBITDA or, as the case may
           be, Consolidated Net Interest Payable, in each case, having been
           determined on a Rolling 4 Quarterly basis in accordance with Clause
           20.2 (including, for the avoidance of doubt, any such amount
           determined in accordance with Clause 20.2(a)(i)) to which the
           calculation relates.

      B =  the number of actual days comprising the four consecutive quarterly
           Accounting Periods to which the relevant determination relates.

20.2  The Company shall ensure that, the consolidated financial condition of the
      Group shall be such that:

                                      126
<PAGE>
 
(a)   the ratio of Consolidated Adjusted EBITDA to Consolidated Net Interest
      Payable;

      (i)  in respect of each of the periods ending on the Accounting Dates 27
           September 1998, 31 December 1998 and 28 March 1999 respectively,
           where Consolidated Adjusted EBITDA is calculated on a Rolling 4
           Quarterly basis and Consolidated Net Interest Payable is, for the
           purposes of this sub-paragraph (i), calculated on a fully annualised
           basis as per the formula:

           A x 365
               ---
               B

           where:

           A = the Consolidated Net Interest Payable for the period from 1 July
           1998 to the Accounting Date at the end of the relevant quarterly
           Accounting Period; and

           B = the number of days elapsed from the Closing to (and including)
           the last day of the relevant quarterly Accounting Period Date
           relates;

      and

      (ii) in respect of each of the subsequent Accounting Dates, calculated on
           a Rolling 4 Quarterly basis for any period ending on an Accounting
           Date specified in the table below,

      shall, in each case, not be less than the ratio set opposite such
      Accounting Date in the table below:


================================================ 
Accounting Date      Ratio
------------------------------------------------
27 September 1998    1.70:1
------------------------------------------------ 
31 December 1998     1.25:1
------------------------------------------------ 
28 March 1999        1.20:1
------------------------------------------------ 
27 June 1999         1.25:1
------------------------------------------------ 
26 September 1999    1.50:1
------------------------------------------------ 
31 December 1999     1.75:1
------------------------------------------------ 
2 April 2000         1.85:1
------------------------------------------------ 
2 July 2000          1.90:1
------------------------------------------------ 
1 October 2000       1.90:1
------------------------------------------------ 
31 December 2000     2.00:1
------------------------------------------------ 

                                      127
<PAGE>
 
================================================ 
Accounting Date      Ratio
------------------------------------------------ 
1 April 2001         2.00:1
------------------------------------------------  
1 July 2001          2.05:1
------------------------------------------------  
30 September 2001    2.05:1
------------------------------------------------  
31 December 2001     2.10:1
------------------------------------------------  
31 March 2002        2.15:1
------------------------------------------------  
30 June 2002         2.20:1
------------------------------------------------  
29 September 2002    2.25:1
------------------------------------------------  
31 December 2002     2.25:1
------------------------------------------------  
30 March 2003        2.35:1
------------------------------------------------  
29 June 2003         2.35:1
------------------------------------------------  
28 September 2003    2.40:1
------------------------------------------------  
31 December 2003     2.40:1
------------------------------------------------  
28 March 2004        2.50:1
------------------------------------------------  
27 June 2004         2.50:1
------------------------------------------------  
26 September 2004    2.55:1
------------------------------------------------  
31 December 2004     2.55:1
------------------------------------------------ 
3 April 2005         2.60:1
================================================ 

  (b) the Consolidated Net Worth, during each of the periods specified in the
table below shall be more than the amount set opposite to such period in the
table below:

===============================================================
Period                               Consolidated Net Worth ($)
---------------------------------------------------------------
Closing - 27 September 1998                         100,000,000
--------------------------------------------------------------- 
1 October 1998 - 31 December 1998                   100,000,000
 ---------------------------------------------------------------
1 January 1999 - 28 March 1999                      105,000,000
--------------------------------------------------------------- 
29 March 1999 - 27 June 1999                        110,000,000
--------------------------------------------------------------- 
28 June 1999 - 26 September 1999                    110,000,000
--------------------------------------------------------------- 
27 September 1999 - 31 December                     110,000,000
1999
--------------------------------------------------------------- 
1 January 2000 - 2 April 2000                       110,000,000
--------------------------------------------------------------- 

                                      128
<PAGE>
 
===============================================================
Period                               Consolidated Net Worth ($)
---------------------------------------------------------------
3 April 2000 - 2 July 2000                          120,000,000
---------------------------------------------------------------  
3 July 2000 - 1 October 2000                        120,000,000
---------------------------------------------------------------  
2 October 2000 - 31 December 2000                   120,000,000
---------------------------------------------------------------  
1 January 2001 - 1 April 2001                       120,000,000
---------------------------------------------------------------  
2 April 2001 - 1 July 2001                          127,500,000
---------------------------------------------------------------  
2 July 2001 - 30 September 2001                     127,500,000
---------------------------------------------------------------  
1 October 2001 - 31 December 2001                   130,000,000
---------------------------------------------------------------  
1 January 2002 - 31 March 2002                      130,000,000
---------------------------------------------------------------  
1 April 2002 - 30 June 2002                         140,000,000
---------------------------------------------------------------  
1 July 2002 - 29 September 2002                     140,000,000
---------------------------------------------------------------  
30 October 2002 - 31 December                       140,000,000
 2002
---------------------------------------------------------------  
1 January 2003 - 30 March 2003                      150,000,000
---------------------------------------------------------------  
31 March 2003 - 29 June 2003                        150,000,000
---------------------------------------------------------------  
30 June 2003 - 28 September 2003                    155,000,000
---------------------------------------------------------------  
29 September 2003 - 31 December                     155,000,000
 2003
---------------------------------------------------------------  
1 January 2004 - 28 March 2004                      162,500,000
---------------------------------------------------------------  
29 March 2004 - 27 June 2004                        162,500,000
---------------------------------------------------------------  
28 June 2004 - 26 September 2004                    170,000,000
---------------------------------------------------------------  
27 September 2004 - 31 December                     170,000,000
 2004
--------------------------------------------------------------- 
1 January 2005 - 3 April 2005                       175,000,000
===============================================================

(c)   the ratio of Net Average Financial Indebtedness (excluding, for the
      avoidance of doubt, the GSIC Notes) to Consolidated Adjusted EBITDA,
      calculated on a Rolling 4 Quarterly basis for any period ending on an
      Accounting Date specified in the table below shall be less than the ratio
      set opposite such Accounting Date in the table below:

                                      129
<PAGE>
 
=================================================                 
Accounting Date                            Ratio                  
-------------------------------------------------                  
                                                                  
7 April 2000                               5.45:1                  
------------------------------------------------- 
2 July 2000                                5.30:1
------------------------------------------------- 
1 October 2000                             5.15:1
------------------------------------------------- 
1 April 2001                               5.00:1
------------------------------------------------- 
1 July 2001                                4.80:1
------------------------------------------------- 
30 September 2001                          4.75:1
------------------------------------------------- 
31 December 2001                           4.70:1
------------------------------------------------- 
31 March 2002                              4.60:1
------------------------------------------------- 
30 June 2002                               4.50:1
------------------------------------------------- 
29 September 2002                          4.40:1
------------------------------------------------- 
31 December 2002                           4.40:1
------------------------------------------------- 
30 March 2003                              4.30:1
------------------------------------------------- 
29 June 2003                               4.20:1
------------------------------------------------- 
28 September 2003                          4.00:1
------------------------------------------------- 
31 December 2003                           4.00:1
------------------------------------------------- 
28 March 2004                              3.90:1
------------------------------------------------- 
27 June 2004                               3.75:1
------------------------------------------------- 
26 September 2004                          3.75:1
------------------------------------------------- 
31 December 2004                           3.60:1
------------------------------------------------- 
3 April 2004                               3.60:1
================================================= 

(d)   the Consolidated Adjusted EBITDA calculated on a Rolling 4 Quarterly basis
      for any period ending on an Accounting Date specified in the table below
      shall not be less than the amount set opposite such Accounting Date in the
      table below:

                                      130
<PAGE>
 
================================================== 
Accounting Date                        Amount ($)
--------------------------------------------------    
27 September 1998                      35,000,000
--------------------------------------------------    
31 December 1998                       25,000,000
--------------------------------------------------    
28 March 1999                          25,000,000
--------------------------------------------------    
27 June 1999                           26,000,000
--------------------------------------------------    
26 September 1999                      31,000,000
--------------------------------------------------    
31 December 1999                       36,000,000
--------------------------------------------------    
2 April 2000                           38,000,000
--------------------------------------------------    
2 July 2000                            39,000,000
--------------------------------------------------    
1 October 2000                         40,000,000
--------------------------------------------------    
31 December 2000                       41,000,000
--------------------------------------------------    
1 April 2001                           41,000,000
--------------------------------------------------    
1 July 2001                            42,000,000
--------------------------------------------------    
30 September 2001                      42,000,000
--------------------------------------------------    
31 December 2001                       42,500,000
--------------------------------------------------    
31 March 2002                          43,000,000
--------------------------------------------------    
30 June 2002                           44,000,000
--------------------------------------------------    
29 September 2002                      44,000,000
--------------------------------------------------    
31 December 2002                       44,000,000
--------------------------------------------------    
30 March 2003                          44,000,000
--------------------------------------------------    
29 June 2003                           44,000,000
--------------------------------------------------    
28 September 2003                      45,000,000
--------------------------------------------------    
31 December 2003                       45,000,000
--------------------------------------------------    
28 March 2004                          46,000,000
--------------------------------------------------    
27 June 2004                           46,000,000
--------------------------------------------------    
26 September 2004                      47,000,000
--------------------------------------------------    
31 December 2004                       47,000,000
--------------------------------------------------    
3 April 2005                           48,000,000
==================================================

                                      131
<PAGE>
 
(e) Debtor Days shall at all times be less than 80 days as the same is
  determined, as at the end of each relevant monthly Accounting Period, by
  reference to the relevant financial statements delivered pursuant to Clauses
  19.1(a)(i), 19.1(a)(ii) and 19.1(a)(iii):

  Debtor Days =   A x 365
                  -      
                  B

      A =  The aggregate of the Dollar Equivalent of trade receivables payable
           by non-Group Members to Group Members as at the end of  the twelve
           immediately preceding and consecutive monthly Accounting Periods
           ending on the last day of the monthly Accounting Period for which the
           calculation is to be determined, divided by 12; and

      B =  The Dollar Equivalent of sales in the twelve immediately preceding
           and consecutive monthly Accounting Periods ending on the last day of
           the monthly Accounting Period for which the calculation is to be
           determined.

     "Dollar Equivalent" means, in respect of any currency other than Dollars,
     the amount of Dollars able to be purchased with such other currency at the
     rate of exchange applied by the Company or, as the case may be, the
     Auditors, in compiling the financial statements to which the calculation
     relates.

(f)   Inventory Days shall at all times during the period in Column 1 below be
      less than the number specified opposite such period in Column 2 below:

 
=====================================================     
Column 1                                     Column 2
----------------------------------------------------- 
From the date of this Agreement until             110
(and including) 30 June 1999
-----------------------------------------------------  
From 1 July 1999 until (and including) 26         105
September 1999
----------------------------------------------------- 
From 27 September 1999 and at all times           100
thereafter
===================================================== 

and in all instances, the determination of Inventory Days shall be by reference
to the relevant financial statements delivered pursuant to Clauses 19.1(a)(i),
19.1(a)(ii) and 19.1(a)(iii):

      Inventory Days  =  A x 365
                         -      
                         B
 
      A =  The aggregate of the Dollar Equivalent of the value of Inventory held
           by Group Members as at the end of each of the twelve immediately
           proceeding and consecutive monthly Accounting Periods ending on the
           last day of the monthly Accounting Period for which the calculation
           is to be determined, divided by 12; and

                                      132
<PAGE>
 
      B =  the Dollar Equivalent of the cost of sales for the twelve
           immediately and preceding and consecutive monthly Accounting Periods
           ending on the last day of the monthly Accounting Period for which the
           calculation is to be determined less depreciation relating thereto.

      "Dollar Equivalent" means, in respect of any currency other than Dollars,
      the amount of Dollars able to be purchased with such other currency at the
      rate of exchange applied by the Company or, as the case may be, the
      Auditors, in compiling the financial statements to which the calculation
      relates; and

(g)   the aggregate amount of Financial Indebtedness of the Group (excluding,
      the GSIC Notes, any amounts due under the Note Documents and any Financial
      Indebtedness described at paragraph (h) of the definition "Financial
      Indebtedness" (and without double-counting)) shall not, during any period
      listed in Column 1 below exceed the amount specified opposite such period
      in Column 2 below and, for the purposes of any such determination, any
      Financial Indebtedness not denominated in Dollars shall be converted to
      Dollars by reference to the Facility Agent's spot rate of exchange for
      such currency and Dollars at or about 10.00 a.m. on the date such
      determination is made:

 
======================================================  
Column 1                                  Column 2 ($)  
------------------------------------------------------  
1 December 1998 to (and                    70,000,000
including) 31 December 1998             
------------------------------------------------------ 
1 January 1999 to (and                    100,000,000
including) 31 January 1999              
------------------------------------------------------ 
1 February 1999 to (and                   115,000,000
including) 28 February 1999             
------------------------------------------------------ 
1 March 1999 to (and                      115,000,000
including) 28 March 1999                
------------------------------------------------------ 
29 March 1999 to (and                     110,000,000
including) 2 May 1999                   
------------------------------------------------------ 
3 May 1999 to (and including)              95,000,000
30 May 1999                             
------------------------------------------------------ 
31 May 1999 to (and                        70,000,000
including) 27 June 1999                 
------------------------------------------------------ 
28 June 1999 to (and                       50,000,000
including) 1 August 1999                
------------------------------------------------------ 
2 August 1999 to (and                      50,000,000
including) 29 August 1999               
------------------------------------------------------ 
30 August 1999 to (and                     45,000,000
including) 26 September 1999            
------------------------------------------------------ 

                                      133
<PAGE>
 
======================================================  
Column 1                                  Column 2 ($) 
------------------------------------------------------  
27 September 1999 to (and                  55,000,000
including) 31 October 1999              
------------------------------------------------------ 
1 November 1999 to (and                    65,000,000
including) 28 November 1999             
------------------------------------------------------ 
29 November 1999 to (and                   60,000,000
including) 31 December 1999
======================================================  

All calculations in this Clause 20.1 shall be made on a 365 day year basis.

                                     PART 8

21.   EVENTS OF DEFAULT

21.1  The Events of Default

Each of the events listed in this Clause 21, provided the same is continuing, is
an Event of Default, irrespective of whether it occurs as a result of any action
taken, or not taken, by any Person, including the Company or any other Group
Member.

(a)   Failure to pay:  The Company or any other Group Member fails to pay when
      due any amount payable by it under any Finance Document in the currency in
      which the same is expressed to be payable (other than where such failure
      to pay results solely from an error in relation to the transmission of the
      relevant payment and such payment is actually received within 3 Business
      Days of its due date).

(b)   Breach of undertaking:  The Company or any Group Member fails to comply
      with any of the provisions of Clauses 19 or 20.

(c)   Breach of other undertakings:  Other than the provisions referred to in
      paragraphs (a) and (b) above, any of the Obligors fails to comply with any
      provision of this Agreement and/or any provision of any other Finance
      Document (irrespective of whether or not such provision is valid and
      enforceable against such Person) and, (other than the provisions referred
      to in paragraphs (a) and (b) above) if such failure is in the reasonable
      opinion of the Majority Banks capable of remedy within such period, such
      Obligor shall have failed to remedy such failure within 21 days after the
      earlier of the relevant Obligor becoming aware of such default and receipt
      by the relevant Obligor of written notice from the Facility Agent to the
      Company requiring the failure to be remedied.

(d)   Representations and warranties:  Any representation or warranty or
      statement made, or deemed to be made, or repeated by or on behalf of the
      Company or any Group Member in, or in connection with, any Finance
      Document or any notice, certificate, statement delivered by it in
      connection with any Finance Document is, or proves to have been, untrue or
      misleading in any material way or material respect when made
      or deemed to be 

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<PAGE>
 
      repeated or supplied in accordance with or in respect of any Finance
      Document by reference to the facts and circumstances then subsisting and,
      if the circumstances causing such misrepresentation are, in the reasonable
      opinion of the Majority Banks, capable of remedy within such period, such
      Group Member shall have failed to remedy such circumstances within 14 days
      after the earlier of the relevant Group Member becoming aware of such
      misrepresentation and receipt by the Company of written notice from the
      Facility Agent to such Group Member requiring the circumstances causing
      such misrepresentation to be remedied such that if the relevant
      representation was repeated by each such Group Member at the end of such
      14 day period, such representation would, at such time, be true and
      correct in all material respects.

(e)   Cross-default:

      (i)   Any Financial Indebtedness under any of the Senior Notes, any other
            Note Document or the GSIC Notes or other GSIC Note Documents is not
            paid when due, or becomes (or becomes capable of being declared) due
            and payable or due for redemption before its originally scheduled
            maturity date or are placed on demand, in each such case by reason
            of the occurrence of an event of default (howsoever characterised)
            or any event having the same effect, or any such Financial
            Indebtedness which is payable on demand shall have been demanded; or

      (ii)  any Financial Indebtedness of one or more Group Members (taken
            together if more than one) aggregating $1,000,000 (or the equivalent
            in other currencies) or more at any one time outstanding is not paid
            when due, becomes (or becomes capable of being declared) due and
            payable or due for redemption before its originally scheduled
            maturity date or are placed on demand, in each such case by reason
            of the occurrence of an event of default (howsoever characterised)
            or any event having the same effect, or any such Financial
            Indebtedness which is payable on demand shall have been demanded; or

      (iii) any Encumbrances over assets of any one or more Group Members
            (taken together if more than one) securing an aggregate of $100,000
            (or its equivalent in other currencies) or more become enforceable
            and steps are taken to enforce the same.

(f)   Repudiation:  The Company or any Group Member rescinds or repudiates (or
      purports to rescind or repudiate) any Transaction Document (excluding the
      Service Contracts) to which it is expressed to be a party.

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(g)   Distress:  Any distress, execution, attachment, registration or other
      process affects any assets of the Group or any of the Group Members having
      an aggregate value of $100,000 (or the equivalent thereof in other
      currencies) save where (i) the relevant Group Member is, in good faith,
      contesting the distress, execution, attachment, sequestration or other
      process by appropriate proceedings diligently pursued and (ii) the
      Majority Banks acting reasonably are satisfied that the ability of any
      Obligor to comply with its obligations under the Finance Documents to
      which it is a party will not be materially and adversely affected whilst
      such distress, execution, attachment, diligence or other process is being
      so contested.

(h)   Invalidity: Any of the Finance Documents shall cease to be in full force
      and effect (except as a result of a specific release in writing by the
      Banks) or shall cease to constitute the legal, valid and binding
      obligation of any Obligor party to it or, in the case of any Security
      Document, fail to provide effective perfected security in favour of the of
      the Security Agent and the Banks over the assets over which the
      Encumbrance is intended to be given by that Security Document, in any such
      case concerning the Company or an Obligor in a manner and to an extent
      reasonably considered by the Majority Banks to be materially adverse to
      their interests under the Senior Finance Documents or in any such case
      concerning any Obligor in a manner and to an extent reasonably considered
      by the Majority Banks to have a Material Adverse Effect or it shall be
      unlawful for any Obligor to perform any of its material obligations under
      any of the Finance Documents.

(i) Unable to pay debts: The Company or any Group Member:

  (i)     suspends payment of its debt or is unable or admits its inability to
          pay its debts as they fall due or is deemed unable to pay its debts
          within the meanings contained in Section 123(1) of the Insolvency Act
          1986 (construed as if the figure stated at Section 123(1)(a) was
          $100,000 or is determined pursuant to Section 123(2) Insolvency Act
          that it is unable to pay its debts (as that Section may be amended);
          or

      (ii) commences negotiations with its creditors generally with a view to
           the general readjustment or rescheduling of all or part of its
           indebtedness which it would otherwise not be able to pay as it falls
           due; or

      (iii)  proposes or enters into any composition or other arrangement for
           the benefit of its creditors generally or any class of creditors.

(j)   Insolvency: Any Group Member is declared or deemed pursuant to any
      applicable legislation to be insolvent or is or is deemed pursuant to any
      applicable legislation to be unable, or admits in writing its inability,
      to pay its debts as they fall due or stops or threatens to stop payment of
      its debts as they fall due or stops or threatens to stop payment of its
      debts generally or becomes insolvent within the terms of any applicable
      law Provided that, for the purposes of this paragraph (j) in determining
      whether a Group Member is to be deemed to be insolvent or unable to pay
      its debts as they fall due under Section 123 Insolvency Act (i) the figure
      stated at Section 123(1)(a) shall be deemed to be $100,000 and (ii)
      Section 123(2) shall only apply if such a determination has been made in
      accordance with the terms of that Section.

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<PAGE>
 
(k)   Liquidation:  Any order is made or resolution passed or any steps are
      initiated or are consented to by any Group Member or otherwise commenced
      by any Person or any petition shall be presented (and not, where that
      Person is unconnected with that Group Member save for being a creditor of
      such Group Member, discharged or stayed within fourteen days in the case
      of both legal proceedings and such petition) for the suspension of
      payments generally or for any process giving protection against creditors
      or for the dissolution, termination of existence, liquidation, winding up,
      bankruptcy or other like process of any Group Member (other than a solvent
      liquidation, dissolution or winding up of a Group Member (not being an
      Obligor) that has been previously approved by the Facility Agent in
      writing).

(l)   Administration: An application is made to the Court for an administration
      order under the Insolvency Act 1986 with respect of the Company or any
      other Group Member or an effective resolution is passed by the directors
      or shareholders of the Company or any other Group Member for such an
      application to be made or an administrator or administrative receiver is
      appointed in respect of any Group Member.

(m)   U.S. Bankruptcy:  Any Group Member shall commence a voluntary case under
      the U.S. Bankruptcy Code, or an involuntary case is commenced under the
      U.S. Bankruptcy Code against that Group Member and the petition is not
      controverted within 10 days and is not dismissed within 30 days, after
      commencement of the case, or a custodian, receiver, trustee or similar
      officer is appointed for, or takes charge of, all or substantially all of
      the property of that Group Member.

(n)   Receiver: A liquidator or provisional liquidator (save as excepted by the
      proviso to paragraph (k) above) or, trustee, receiver, administrative
      receiver, manager (being a Person acting on behalf of all or any
      creditors) or similar officer is appointed in respect of any Group Member
      or in respect of (or takes possession of) all or any part of its assets
      with an aggregate value in excess of $100,000 or more (or the equivalent
      in other currencies).

(o)   Analogous Acts: Any event occurs or proceeding is taken with respect to
      the Company or any other Group Member in any jurisdiction to which it is
      subject which has an effect equivalent or substantially similar to any of
      the events mentioned in paragraphs (k) to (n) inclusive above.

(p)   Unlawfulness:  It becomes unlawful at any time for any Group Member to
      perform all or any of its obligations under any Finance Document to which
      it is a party.

(q)   Qualification of Financial Accounts: The Auditors qualify their report on
      the audited consolidated accounts of the Group (taken as a whole) in a
      manner which is material in the context of the Finance Documents and the
      transactions contemplated thereby.

(r)  Cessation: Any Group Member ceases to carry on all or any material part of
     its business (save in consequence of any reorganisation, reconstruction or
     amalgamation permitted 

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<PAGE>
 
     under this Agreement and save as may result from any disposal of assets
     permitted by the terms of this Agreement or any solvent liquidation,
     dissolution or winding-up of any Group Member (not being an Obligor)).

(s)   Ownership of Obligors: Any Group Member shall cease to own, directly or
      indirectly, at least the percentage ownership interest in any Group Member
      owned by it immediately following the Closing or immediately following
      implementation of the steps recorded in the Structure Memorandum contained
      in the Reports or (if later) the date on which the relevant entity became
      a Group Member unless such Group Member was a Dormant Subsidiary at the
      Closing and has remained a Dormant Subsidiary until such time as it is
      wound-up on a solvent basis in accordance with paragraph (k) above.

(t)   Proceedings:  There is current or pending at the Closing or there shall
      occur thereafter any litigation, arbitration, administrative, regulatory
      or other proceedings or enquiry (including, without limitation, any such
      by the Office of Fair Trading, the Monopolies and Mergers Commission, the
      Department of Trade and Industry, or any equivalent body in any other
      jurisdiction or the European Commission or any division of any thereof or
      authority deriving power from any thereof) concerning or arising in
      consequence of any of the Transaction Documents and/or the implementation
      of any matter or transaction provided for in the Transaction Documents
      (excluding, in each case, the Service Contracts) or otherwise.

(u)   Recapitalisation Warranties: Any warranty made by any Person in any of the
      Recapitalisation Documents is incorrect in a material respect, any breach
      by any Person of its obligations under any of the Recapitalisation
      Documents occurs or any other claim is made by any Group Member against
      any Person under any of the Recapitalisation Documents in each case, which
      (in aggregate) results in or might reasonably be expected to result in
      breach of Clause 20.

(v)   Intercreditor Agreements, and Other Documents:

      (i)   Any Group Member, fails to comply with any of the material
            provisions of, or its obligations under, the Intercreditor
            Agreements; or

      (ii)  the Intercreditor Agreements are not, or cease to be, binding on or
            enforceable against any Group Member expressed to be a party
            thereto, the Note Trustee, the Noteholders, the GSIC Noteholders or
            any permitted successors, transferees or assignees agreed by the
            Facility Agent (as the case may be) or shall otherwise not be
            effective;

      (iii) any event, howsoever described, constituting default under the
            Recapitalisation Documents shall occur thereunder and be continuing
            unwaived; or

      (iv) any event, however described, constituting default under the Diamond
           Back Acquisition Agreement shall occur thereunder and be continuing;

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<PAGE>
 
(w)   ERISA: Any U.S. Obligor or any Subsidiary or any ERISA Affiliate has
      incurred or is likely to incur a material liability to or on account of a
      Multiemployer Plan or employee pension benefit plan (as defined in Section
      3(2) of ERISA) under Section 409, 502(i), 502(1), 4062, 4063, 4064, 4201
      or 4204 of ERISA or Section 4971 or 4975 of the Code, or any U.S. Obligor
      or any Subsidiary has incurred or is likely to incur material liabilities
      pursuant to one or more employee welfare benefit plans (as defined in
      Section 3(1) of ERISA) which provide benefits to retired employees (other
      than as required by Section 601 of ERISA).

(x)   Expropriation:  The authority or ability of any Material Group Member or
      Obligor to conduct its business is wholly or substantially curtailed by
      any seizure, expropriation, intervention or other action by or on behalf
      of any governmental, regulatory or other authority.

(y)   Control:

      (i)   Without the prior written consent of all the Banks, any single 
            Person or group of Persons acting in concert (as defined in the City
            Code on Takeovers and Mergers) acquires control (as defined in
            Section 416 of the Income and Corporation Taxes Act 1988) of the
            Company; or

      (ii)  Thayer and Perseus cease collectively to hold or either or both of
            them (or DC Cycle LLC and/or Perseus Cycle LLC) enters into any
            arrangement or agreement, the effect of which is that Thayer and
            Perseus will cease to hold (in aggregate) the beneficial interest in
            at least 51 per cent of the voting rights of shares in the Company,
            or cease colletively to hold the largest economic interest in the
            Company of all the shareholders in the Company, or cease together to
            be able nominate the majority of the Board of Directors of the
            Company; or

      (iii) Thayer Capital Partners ceases to be the General Partner of Thayer
            and/or to manage Thayer or Perseus Management L.L.C. ceases to be
            the managing member of Perseus; or

      (iv)  The Persons holding the majority of the voting share capital of the
            Company at the date of this Agreement cease to hold the majority of
            its voting share capital and one or more other Persons (if more than
            one acting in concert) own the majority of the voting share capital
            of the Company, and for the purposes of this paragraph (iv) "acting
            in concert" means acting together by agreement.

      (v)   Without the prior written consent of all the Banks, there is a
            Change of Control as such expression is defined in the GSIC Note
            Documents and the Note Documents.

(z)   Auditor's Confirmations:  Any confirmation required to be delivered
      pursuant to Clause 19.1(a)(v) is not delivered in accordance therewith or
      it is delivered but does not confirm that the Borrower Base Summary
      referred to therein is, in all material respects accurate or does not
      confirm that the Company has in place satisfactory methods and procedures
      for obtaining and collating the information required in order for it to be
      able to compile

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<PAGE>
 
      accurate Borrowing Base Summaries for the purposes of this Agreement
      having regard, where appropriate, to each of the specific requirements of
      this Agreement relating thereto including, without limitation, Clause 6.

(aa)  Adjusted Borrowing Base: If at any time, the aggregate Adjusted Borrowing
      Base of the Borrowers exceeds the aggregate Deutschmark Amount of the
      Ancillary Facilities, Advances and Outstanding Standby L/C's at such time
      and such breach is not remedied within ten Business Days of the Borrowing
      Base Summary which identified such breach being delivered hereunder.

(ab)  Material Adverse Effect: Any event or series of events whether related or
      not occurs which has a Material Adverse Effect.

(ac)  GSIC Notes.  The Company makes any issuance of GSIC Notes (whether in
      respect or in lieu of interest on any GSIC Notes then outstanding or
      otherwise) that results in or would, upon the passage of time or giving of
      notice, result in an Event of Default under the Note Indentures.

21.2  Acceleration

Upon the occurrence of an Event of Default and at any time thereafter while the
same is continuing unremedied or unwaived in accordance with this Agreement, the
Facility Agent may, and shall if so directed by the Majority Banks, by notice to
the Company:

(a)   declare that an Event of Default has occurred; and/or

(b)   declare that the Revolving Commitments and the Standby L/C Commitments
      shall be cancelled forthwith, whereupon the same shall be so cancelled and
      all fees payable in relation to the Revolving Commitments and the Standby
      L/C Commitments shall become immediately due and payable; and/or

(c)   declare that the Advances to some or all of the Borrowers (as specified in
      such notice), together with all interest accrued on those Advances and all
      other amounts payable by some or all of the Obligors (as specified in such
      notice) or any of them under the Senior Finance Documents from time to
      time, shall thenceforth be repayable on demand being made by the Facility
      Agent (and in the event of any such demand those Advances, such interest
      and such other amounts shall be immediately due and payable); and/or

(d)   declare some or all of the Advances to some or all of the Borrowers (as
      specified in such notice) immediately due and payable, whereupon they
      shall become immediately due and payable together with all interest
      accrued on those Advances and all other amounts payable by those Borrowers
      under the Senior Finance Document; and/or

(e)   require some or all of the Borrowers to pay in cash (whereupon each such
      Borrower shall be obliged to pay) to the Facility Agent for the account of
      each Bank for credit to the Standby L/C Account on its books relating to
      each Standby L/C issued at the request of any such Borrower and which is
      then outstanding an amount equal to the portion of that Standby L/C for
      which that Bank is liable.

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<PAGE>
 
(f)   Notwithstanding anything in this Clause 21.2 to the contrary, if an Event
      of Default arising from filing by or against the Company or any proceeding
      in respect of the Company under the United States Bankruptcy Code, all
      sums owing under the Senior Finance Documents whether for principal,
      interest or otherwise shall become immediately due without further demand,
      and the Revolving Commitments, the Standby L/C Commitments and any other
      obligations under the Senior Finance Documents to make credit available
      shall immediately terminate, all without notice of any kind whatsoever.

                                     PART 9

22.   ADDITIONAL BORROWERS

(a)   If any Subsidiary of the Company wishes to become a Borrower under this
      Agreement, it and the Obligors' Agent shall each so notify the Facility
      Agent (which shall in turn notify the Banks and the Security Agent).

(b)   If all the Banks confirm to the Facility Agent in writing that they are
      prepared to accept that Subsidiary as a Borrower hereunder (subject to
      such limitations as they may advise) and an Obligor under the relevant
      Intercreditor Agreement(s) the Facility Agent shall so notify the Banks
      and shall prepare and deliver to the Obligor's Agent a Borrower Accession
      Agreement (appropriately completed and subject to such limitations as are
      imposed).

(c)   Upon receipt by the Facility Agent of the Borrower Accession Agreement,
      signed on behalf of the Obligors' Agent (for itself and the existing
      Borrowers, Guarantors and the Obligors) and by the proposed Additional
      Borrower, the Facility Agent shall execute the same (for itself and on
      behalf of the Finance Parties) and shall as promptly as practicable give
      notice of such execution to all of the parties to the Borrower Accession
      Agreement.

(d)   Upon execution of any Borrower Accession Agreement as aforesaid, it shall
      take effect in accordance with, but subject to, the terms hereof and
      thereof.

(e)   The obligations of each Finance Party to each Additional Borrower under
      this Agreement with respect to the making of the first Utilisation by it
      under this Agreement are subject to the condition precedent that the
      Facility Agent shall have received in respect of the Additional Borrower
      and the Borrower Accession Agreement all of the documents listed in
      Schedule 5 and such other reports, opinions and documents (if any) as the
      Facility Agent may reasonably require, each in form and substance
      satisfactory to the Facility Agent and that the Facility Agent has
      confirmed to the Obligors' Agent that it is satisfied that such Additional
      Borrower has effectively become party to the relevant Intercreditor
      Agreement(s) as an Obligor.

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<PAGE>
 
23.   GUARANTEES

23.1  Guarantee

In consideration of the Finance Parties entering into this Agreement and/or
becoming party to this Agreement pursuant to a Novation Certificate and/or (in
the case of the Banks) participating in any Utilisation, each Guarantor hereby
irrevocably and unconditionally and jointly and severally but only to the extent
permitted under applicable law (which, in the case of any Guarantor incorporated
in the Netherlands shall be determined by reference to the fair market value
determined, on a going concern basis, between a willing buyer and a willing
seller, of its net assets (determined in accordance with Applicable Accounting
Principles):

(a)   guarantees to each Finance Party, as principal obligor and not merely as
      surety (or similar in any applicable jurisdiction), prompt performance by
      each other Obligor (other than the Company and Lyon Cycle Investments
      B.V.) of all its obligations under the Senior Finance Documents and the
      payment of all sums payable now or in the future to each Finance Party by
      each other Obligor (other than the Company and Lyon Cycle Investments
      B.V.) under or in connection with the Senior Finance Documents when and as
      the same shall become due;

(b)   undertakes with each Finance Party that, if and whenever any other Obligor
      (other than the Company and Lyon Cycle Investments B.V.) shall be in
      default in the payment of any sum whatsoever due from it under or in
      connection with any Senior Finance Document, such Guarantor will on demand
      pay such sum as if such Guarantor instead of such other Obligor were
      expressed to be the primary Obligor, together with interest on that sum at
      the rate per annum from time to time payable by such other Obligor on that
      sum from the date when that sum becomes payable by such Guarantor under
      this Agreement until payment of that sum in full; and

(c)   agrees to indemnify each Finance Party on demand against any loss or
      liability suffered by it under any Senior Finance Document as a result of
      any obligation guaranteed by any Guarantor (other than the Company and
      Lyon Investments B.V.) being or becoming unenforceable, invalid or
      illegal.

Provided that, in respect of the Swedish Obligor, the undertakings given by the
Swedish Obligor in this Clause 23 and any security undertaking hereunder by the
Swedish Obligor shall be conditional upon:

(i)   receipt by the Swedish Obligor of a decision from the Swedish local tax
      authority or from the Swedish Government which has gained legal force
      (lagakraftvunnet beslut) holding that Chapter 12 Section 7 of the Swedish
      Companies Act (aktiebolagslagen) is not applicable to such undertakings;
      or

(ii)  receipt by the Swedish Obligor of a decision from the Swedish local
      tax authority or from the Swedish Government which has gained legal
      force (lagakraftvunnet beslut) granting, pursuant to Chapter 12
      Section 8 of the Swedish Companies Act, an exemption from Chapter 12
      Section 7 of the Swedish Companies Act for such undertakings.

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<PAGE>
 
      The Swedish Obligor shall draft the application to the Swedish tax
      authority, but shall make such amendments or additions, as the Banks'
      local Swedish counsel shall reasonably require. The Swedish Obligor
      undertakes to file the application to the Swedish tax authority promptly
      following the Diamond Back Acquisition.

      If the Swedish local tax authority fails to hold that Chapter 12 Section 7
      of the Swedish Companies Act (aktiebolagslagen) is not applicable to such
      undertakings, or fails to grant the appropriate exemptions, the Swedish
      Obligor shall lodge an appeal with the Swedish Government if in the
      reasonable opinion of the Bank's Swedish counsel (and after taking into
      account any representations made by the Swedish Obligor's Swedish counsel)
      such appeal is likely to be successful on the balance of probabilities.

Anything contained in this Agreement to the contrary notwithstanding:

(i)   the obligations of each U.S. Obligor hereunder shall be limited to a
      maximum aggregate amount equal to the greatest amount that would not
      render such U.S. Obligor's obligations hereunder subject to avoidance as a
      fraudulent transfer or conveyance under Section 548 of Title 11 of the
      United States Bankruptcy Code or any provisions of applicable state law
      (collectively, the "Fraudulent Transfer Laws"), in each case after giving
      effect to all other liabilities of such U.S. Obligor, contingent or
      otherwise, that are relevant under the Fraudulent Transfer Laws
      (specifically excluding, however, any liabilities of such U.S. Obligor (a)
      in respect of intercompany indebtedness to the extent that such
      indebtedness would be discharged in an amount equal to the amount paid by
      such U.S. Obligor hereunder and (b) under any guarantee of senior
      unsecured indebtedness or indebtedness subordinated in right of payment to
      the obligations hereunder which guarantee contains a limitation as to
      maximum amount similar to that set forth in this paragraph, pursuant to
      which the liability of such U.S. Obligor hereunder is included in the
      liabilities taken into account in determining such maximum amount) and
      after giving effect as assets to the value (as determined under the
      applicable provisions of the Fraudulent Transfer Laws) of any rights to
      similar rights of such U.S. Obligor pursuant to (A) applicable law or (B)
      any agreement providing for an equitable allocation among such U.S.
      Obligor and other Group Members of obligations arising under guarantees by
      such parties;


(ii)  only the Company shall be liable for its obligations under this Agreement,
      and in no event shall any other Obligor guarantee or act as a Guarantor
      for any obligation of the Company under this Agreement; and

(iii) the Company shall pledge its assets, provided that it shall not pledge
      more than or an amount equal to 66 2/3% of the voting stock in any
      Subsidiary.

(iv)  the obligations of Raleigh Industries of Canada hereunder in its capacity
      as a Guarantor shall be limited to a maximum aggregate amount of
      C$13,000,000.

(v)   the obligations of the Swedish Obligors hereunder shall be limited to the
      greater of:

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<PAGE>
 
      (a)  an amount equal to seven times the Consolidated EBITDA of such
           Swedish Subsidiary; and

      (b)  the Total Assets of such Swedish Subsidiary;

      and in each case, determined by reference to the Swedish Obligor's most
      recently published audited financial statements and, for the purposes of
      this paragraph only:

      "Consolidated EBITDA" shall be determined in accordance with the
      definition "Consolidated EBITDA" at Clause 1.2. but as if references
      therein to the Company were references to the Swedish Obligor, references
      therein to the Group were references to the Swedish Obligor and its
      Subsidiaries (if any) and references therein to the audited annual
      financial statements were references to the latest audited annual
      financial statements of such Swedish Obligor as the same is determined in
      accordance with Applicable Accounting Principles; and

      "Total Assets" means, in respect of a Swedish Obligor, the sum of fixed,
      intangible and current assets (including, for the avoidance of doubt,
      amounts falling due after more than one year) of such Swedish Obligor and
      its Subsidiaries (if any).

23.2  Continuing Guarantee

This guarantee is a continuing guarantee and shall extend to the ultimate
balance of all sums payable by the Obligors (other than the Company and Lyon
Cycle Investments B.V.) or any of them under the Senior Finance Documents.

23.3  Reinstatement

Where any discharge (whether in respect of the obligations of any Obligor, any
security for such obligations or otherwise) is made in whole or in part or any
arrangement is made on the faith of any payment, security or other disposition
which is avoided or must be repaid on insolvency, administration, liquidation or
otherwise without limitation, the liability of the Guarantors under this
guarantee shall continue as if there had been no such discharge or arrangement.
Each Finance Party shall be entitled to concede or compromise any claim that any
such payment, security or other disposition is liable to avoidance or repayment.


23.4  Waiver of Defences

Except to the extent that any Guarantor is specifically released in writing and
except to the extent that its obligations are specifically waived in writing the
obligations of each Guarantor under this Agreement shall not be affected by any
circumstance, act, omission, matter or thing which but for this provision might
operate to release or otherwise exonerate such Guarantor from its obligations
hereunder in whole or in part, including without limitation and whether or not
known to any Obligor or any Finance Party:

(a)   any time, indulgence or waiver granted to or composition with any other
      Obligor or any other Person; or

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<PAGE>
 
(b)   the taking, variation, compromise, exchange, renewal or release of or
      refusal or neglect to perfect, take up or enforce any rights or remedies
      against, or any security over any assets of, any other Obligor or any
      other Person or any non-presentment or non-observance of any formality or
      other requirements in respect of any instruments or any failure to obtain
      the full value of any security; or

(c)   any legal limitation, disability, incapacity, lack of power, authority or
      legal personality of, or dissolution or change in the members or status
      of, or other circumstances relating to any other Obligor or any other
      Person and including, without limiting the generality of the foregoing,
      any limitation on the amount guaranteed by any other Guarantor hereunder
      or provided for in any Guarantor Accession Agreement or any Guarantee; or

(d)   any variation (however fundamental and whether or not involving any
      increase in the liability of any Obligor thereunder) or replacement of any
      Senior Finance Document or any other document or security (including
      without limitation any substitute basis agreed pursuant to Clause 10 and
      any agreement contemplated by this Agreement) so that references to such
      Senior Finance Document or other document or security in this guarantee
      shall include each such variation or replacement; or

(e)   any unenforceability, illegality, invalidity or frustration of any
      obligations of any other Obligor or any other Person under any Senior
      Finance Document or any other document or security, or any failure of any
      other Obligor or proposed Additional Borrower or Additional Guarantor to
      become bound by the terms of any other Senior Finance Document, in each
      case whether through any want of power or authority or otherwise; or

(f)   any postponement, discharge, reduction, non-provability or other similar
      circumstance affecting any obligation of any Obligor under a Senior
      Finance Document resulting from any insolvency, liquidation or dissolution
      proceedings or from any law, regulation or order,

to the intent that such Guarantor's obligations under this Agreement shall
remain in full force and this guarantee be construed accordingly as if there
were no such circumstance, act, variation, limitation, omission, matter or
thing.


23.5  Immediate Recourse

Each Guarantor waives any right it may have of first requiring any Finance Party
to proceed against or enforce any other rights or security of or claim payment
from or file any proof or claim in any insolvency, administration, winding up,
bankruptcy or liquidation proceedings relating to, any other Obligor or any
other Person before claiming from such Guarantor under this Agreement.

23.6  Preservation of Rights

Until all amounts which may be or become payable by any and all Obligors under
or in connection with the Senior Finance Documents have been irrevocably paid
and discharged in full (whether by any Borrower or by one or more Guarantors or
otherwise), after a claim has been made pursuant to this guarantee each Finance
Party may:

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(a)   refrain from applying or enforcing any other security, monies or rights
      held or received by that Finance Party in respect of (or capable of being
      applied in respect of) such amounts or apply and enforce the same in such
      manner and order as that Finance Party sees fit (whether against such
      amounts or otherwise) and the Guarantors shall not be entitled to the
      benefit of the same; and

(b)   hold in a suspense account (with liability to pay interest on the monies
      held therein at the rate payable to its corporate customers for deposits
      in the same currency on like terms and in like amounts) any monies
      received from any Guarantee or on account of any Guarantor's liability
      under this Agreement.

23.7  Non-competition

Until all amounts which may be or become payable by any and all Obligors under
or in connection with the Senior Finance Documents have been irrevocably paid in
full (whether by any Borrower or by one or more Guarantors or otherwise), no
Guarantor shall, after a claim has been made pursuant to this guarantee:

(a)   be subrogated to any rights, security or monies held, received or
      receivable by any Finance Party or be entitled to any right of
      contribution or indemnity in respect of any payment made or monies
      received on account of any Obligor's liability under any Senior Finance
      Document and, to the extent that any Guarantor is so subrogated or
      entitled by law, that Guarantor hereby (to the fullest extent permitted by
      law) waives and agrees not to exercise those rights or security or that
      right of contribution or indemnity;

(b)   be entitled or claim to rank as a creditor in the insolvency,
      administration, winding-up, bankruptcy or liquidation of any other Obligor
      in competition with any Finance Party unless otherwise required by the
      Facility Agent or by law (in which case the proceeds, if any, of any claim
      in respect of any rights, security or monies of any Finance Party to which
      such Guarantor was subrogated, filed by the Guarantor with a receiver or
      other similar official, will be paid by such Guarantor to the Facility

      Agent to be applied in accordance with the provisions of the Senior
      Finance Documents); or

(c)   be entitled to receive, claim or have the benefit of any payment,
      distribution or security from or on account of any other Obligor or
      exercise any right of set-off as against any other Obligor (and, without
      prejudice to the foregoing, each Guarantor shall forthwith pay to the
      Facility Agent for the Finance Parties an amount equal to any such set-off
      in fact exercised by it and forthwith pay or transfer, as the case may be,
      to the Facility Agent for the Finance Parties any such payment or
      distribution or benefit of security in fact received by it).

23.8  Additional Security

This guarantee shall be in addition to and shall not in any way be prejudiced by
any other security (including, without limitation, the Security Documents) now
or hereafter held by any Finance Party as security for or capable of being
applied against the obligations of any Obligor.

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23.9  Certificate

A certificate of the Facility Agent as to any amount due from any Borrower under
this Agreement shall, in the absence of manifest error, be prima facie evidence
of such amount as against each Guarantor.

23.10 Guarantee Fees

(a)   The Company undertakes to pay, or procure the payment of, a guarantee fee
      to the Swedish Obligor.  Such guarantee fee shall be payable yearly in
      advance within 60 days of the end of each annual Accounting Period save
      that the payment of the guarantee fee for the Accounting Period ending 31
      December 1999 (the "First Guarantee Fee Payment") shall be paid to the
      Swedish Obligor on the date on which the Swedish Obligor executes an
      Accession Agreement.

(b)   Each such guarantee fee shall be for an amount equal to 1.75% of the
      Maximum Amount save that the First Guarantee Fee Payment shall be for an
      amount equal to 1.75% of the value of assets acquired by the Swedish
      Obligor pursuant to the Diamond Back Acquisition Agreement.

24.   RELEASE OF GUARANTORS AND SECURITY

24.1  Guarantors

Subject to Clause 24.3, at the time of completion of any sale or other disposal
to a Person or Persons outside (and which will remain outside) the Group of all
of the shares in the capital of any Guarantor (or of all of the shares in any
other Group Member such that any Guarantor ceases as a result thereof to be a
Group Member) and in such other circumstances

(if any) as all the Banks may from time to time agree in writing, such Guarantor
shall be released from all past, present and future liabilities (both actual and
contingent) hereunder and under the Security Documents to which it is a party
(other than liabilities which it has in its capacity as a Borrower), and the
security provided over its assets under such Security Documents shall be
released.

24.2  Assets

Subject to Clause 24.3, at the time of completion of any sale or other disposal
to a Person or Persons outside (and which will remain outside) the Group of any
assets owned by an Obligor over which security has been created by the Security
Documents to which that Obligor is expressed to be a party, those assets shall
be released from such Security.

24.3  Conditions for Release

The release of the guarantees and security referred to in Clause 24.1 and 24.2
above shall only occur if:

(a)   either (i) such disposal will not result directly or indirectly in any
      breach of any of the

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      terms of this Agreement, or (ii) such disposal is being effected at the
      request of the Majority Banks in circumstances where any of the security
      created by the Security Documents has become enforceable, or (iii) such
      disposal is being effected by enforcement of the Security Documents;

(b)   any assets to be transferred to another Group Member before completion of
      such disposal shall have been so transferred and (if so required by the
      Majority Banks) security over such assets shall have been granted to the
      Security Agent to its satisfaction; and

(c)   the Security Agent shall have executed such documents effecting such
      release as shall be reasonably required to achieve such release as
      aforesaid (and the Security Agent shall execute such documents at the
      expense of the relevant Obligor promptly upon (and only upon) it being
      satisfied that the conditions in (a), (b) and (c) above are satisfied).

24.4  Release of Group Members

If any Person which is a Group Member shall cease to be such a member in
consequence of the enforcement of any of the Security Documents or in
consequence of a disposal of the shares therein effected at the request of the
Majority Banks in circumstances where any of the security created by the
Security Documents has become enforceable, any claim which any Obligor may have
against such Person or any of its Subsidiaries or which that Person or any of
its Subsidiaries may have against any Obligor in or arising out of this
Agreement or any of the Security Documents (including, without limitation, any
claim by way of subrogation to the rights of the Finance Parties against such
Person under the Senior Finance Documents and any claim by way of contribution
or indemnity) shall be released automatically and immediately upon such Person
ceasing to be a Group Member.

PART 10

25.   INDEMNITIES

25.1  Indemnifiable events

Each Obligor agrees to indemnify each Finance Party on demand against any loss
or expense, including legal fees, and any applicable VAT, which any of them may
sustain or incur as a result or a consequence of any of the events referred to
in this Clause 25.1 having occurred:

(a)   Advance not made: the funding of an Advance following delivery of a
      Drawdown Request but not borrowed because of the application of one or
      more of the provisions of this Agreement (but not, for the avoidance of
      doubt because of any default by such Finance Party);

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(b)   Broken funding: receiving or recovering all or any part of any Advance
      other than on the last day of the Term relating thereto or at the end of
      any period selected by the Facility Agent under Clause 9, including any
      amount required to compensate that Finance Party in respect of any loss,
      premium, penalty or other compensating payment sustained or incurred by it
      in liquidating, employing or redeploying deposits acquired or arranged or
      entered into in order to make, fund or maintain such Advance;

(c)   Occurrence of an Event of Default: the occurrence of an Event of Default
      or any other breach of an Obligor's obligations expressed to be assumed by
      it under this Agreement or under the Security Documents; or

(d)   Currency indemnity: if any amount paid or received in respect of this
      Agreement or any of the Security Documents, whether as a result of any
      order, judgment or otherwise, is not received or recovered by or on behalf
      of that Finance Party in the currency in which the same is expressed to be
      payable hereunder or thereunder.

25.2  Stamp duty

(a)   The Company will pay all stamp, documentary, registration and other
      similar duties or Taxes, including any penalties, additions, surcharges or
      interest relating to such amounts, which are imposed or chargeable on or
      in connection with this Agreement and the Security Documents or any
      judgment given in connection herewith and therewith.

(b)   The Facility Agent may, but shall not be obliged to, pay any amounts which
      are referred to at 25.2(a). If the Facility Agent does so, the Company
      shall, on demand, indemnify the Facility Agent against any such payment,
      together with any costs and expenses, including legal fees, and any
      applicable VAT, incurred by or on behalf of the Facility Agent in
      connection with such payment.


26.   FEES

26.1  Commitment fee

(a)   The Company will pay (or will procure that there is paid) to the Facility
      Agent for distribution among the Banks pro rata to the aggregate of their
      respective Revolving Commitments, a commitment fee computed at the rate of
      one half of one per cent. (0.5%) per annum on the daily unutilised balance
      of the Revolving Commitments (for the avoidance of doubt, taking into
      account the undrawn balance of any Standby L/C outstanding during such
      period) during the period from and including the date hereof until the
      expiry of the Revolving Availability Period.  Accrued commitment fees
      shall be payable quarterly in arrears on the last day of each quarterly
      Accounting Period of the Group (provided that the first such payment shall
      be due on the last day of the first complete quarterly Accounting Period
      of the Group after the Closing) and also on the date on which the
      Revolving Commitments shall be terminated.

(b)   Commitment fees are payable three monthly in arrears commencing on the
      date falling three months from the date of this Agreement and ending on
      the date on which the Total Commitments are cancelled and reduced to zero.

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(c)   If any Bank's Revolving Commitment is cancelled and reduced to zero, any
      commitment fee which had accrued at such time in relation to that Bank and
      which has not been paid, shall be payable by the Company on the date the
      cancellation is effective.

26.2  Utilisation Fee

The Company will pay (or will procure that there is paid) to the Facility Agent
for distribution among the Banks pro rata to the aggregate of their respective
Revolving Commitments in respect of each Utilisation Period (as defined below) a
utilisation fee calculated at the rate per annum determined pursuant to Clause
26.3 on an amount equal to the sum of the average daily Deutschmark Amount of
the Ancillary Facilities during such Utilisation Period and the average daily
utilisation of the Revolving Facility and the Standby L/C Facility during such
Utilisation Period (without double counting).

26.3  Applicable Rate

The applicable rate of utilisation fee for any Utilisation Period shall be
determined by reference to the average daily Deutschmark Amount of the Ancillary
Facilities, Advances and Standby L/Cs during such Utilisation Period and in
accordance with the following scale:

(a)   if the average daily Deutschmark Amount of the Ancillary Facilities,
      Advances and Standby L/Cs expressed as a percentage of the average daily
      Total Commitments during such Utilisation Period less than 50 per cent.,
      zero per cent. per annum; and

(b)   if the average daily Deutschmark Amount of the Ancillary Facilities,
      Advances and Standby L/Cs expressed as a percentage of the average daily
      Total Commitments during such Utilisation Period is equal to or greater
      than 50 per cent. 0.25 per cent. per annum.


26.4  Calculation

For the purposes of Clause 26.2:

(i)   "Utilisation Period" means each successive period of three months during
      the period from the date hereof and ending on the Final Repayment Date
      (except that if the last such period would otherwise extend beyond the
      Final Repayment Date, it shall be shortened so as to end on that date),
      the first of which shall commence on the date hereof;

(ii)  a year shall have 360 days; and

(iii) the average daily Total Commitments during a Utilisation Period shall
      equal the aggregate of the Total Commitments (less any portion thereof
      which in accordance with the provisions hereof may not be utilised at any
      time after the day in question) on each day during such Utilisation Period
      divided by the number of days in such Utilisation Period.

26.5  Payment of Utilisation Fee

The Facility Agent shall promptly after the end of each Utilisation Period,
notify the Company and the Banks of the amounts payable by (or on behalf of) the
Company under Clause 26.2 in respect of such

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Utilisation Period and the Company shall pay such amount to the Facility Agent
for account of the Banks in proportion to their respective participation in the
Facility during the applicable Utilisation Period within 5 Business Days of such
notification.

26.6  Agency fees

The Company shall pay to the Facility Agent, for its own account and the account
of the Security Agent agency fees in the amounts and at the times specified in
the letter relating to the Agents' fees.

26.7  Arrangement fee

The Company shall pay to the Facility Agent, an arrangement fee in the amount
and at the time specified in the letter relating to the arrangement fee.

27.   COSTS AND EXPENSES

27.1  Initial Costs

The Company shall pay to the Facility Agent an amount equal to all reasonable
costs and expenses, including reasonable legal fees and any applicable VAT
incurred by the Agents and/or the Arranger in connection with the negotiation,
preparation and execution of this Agreement and the Security Documents, subject
to agreed limits.

27.2  Amendments


The Company shall pay to the Facility Agent an amount equal to all reasonable
costs and expenses, including reasonable legal fees, and any VAT payable
thereon, incurred by the Agents and/or the Arranger in connection with the
negotiation, preparation and execution of any amendment, waiver, release or
consent (each such event being on "Approval") which any of the Finance Parties
is requested to give in connection with the Senior Finance Documents and the
transactions contemplated by it and them to the extent that the Facility Agent
(acting reasonably) determines that such Approval (either taken in isolation, or
aggregated with any other Approval requested in the annual Accounting Period to
which such Approval relates), is in excess of the time and resource the Facility
Agent could reasonably have been expected to expend on such matters in the
ordinary course of events having regard to its annual agency fee and, for the
avoidance of doubt, the said annual agency fees does not contemplate any work
that the Facility Agent may be required to undertake in that capacity following
the occurrence of a Default or a restructuring or refinancing of the Facilities.

27.3  Protection, enforcement, etc.

The Company shall pay, through the Facility Agent, an amount equal to all proper
costs and expenses, including, reasonable legal fees, and any applicable VAT
incurred by any Finance Party in connection with protecting, preserving or
enforcing (or attempting to do so) any of their rights under or arising out of
any of the Senior Finance Documents.

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                                    PART 11

28.   THE AGENTS AND THE ARRANGER

28.1  Appointment of the Agents

(a)   Each Bank and the Arranger irrevocably appoints the Facility Agent and the
      Security Agent to act as its agent in connection with this Agreement and
      with respect to the Senior Finance Documents and the transactions
      contemplated hereby and thereby.

(b)   The Agents are authorised to take such action and to exercise and carry
      out all the discretions, authorisations, rights, powers and duties as are
      specifically delegated to it in this Agreement and the other Senior
      Finance Documents, together with such discretions, rights and powers as
      such Facility Agent reasonably considers to be incidental and each of the
      Finance Parties irrevocably authorises the Facility Agent and the Security
      Agent on such Finance Party's behalf to enter into any Accession Agreement
      or Security Document (whereupon and by which act such Finance Party shall
      become bound thereby).

(c)   The Agents are not, nor will they be considered to be, acting as trustee
      or in a fiduciary capacity under or in connection with this Agreement or
      any of the other Senior Finance Documents other than the Security Agent in
      its capacity as such, under and in respect of the Security Documents. The
      duties of the Agents are restricted to those expressly stated in this
      Agreement.

(d)   Each Bank and the Agents agree (or shall be deemed to have agreed) that,
      where

      Security Documents are to be granted, or have been granted, in favour of
      the Security Agent, inter alia, for the benefit of the Banks, then the
      Security Agent may enter into such Security Documents on behalf of the
      Banks and shall hold the benefit of such Security Documents on trust for
      the Banks and the Facility Agent to the extent of their respective
      interests for the time being and that the terms and conditions of this
      paragraph (d) shall apply to the Security Agent in its capacity as trustee
      for the Banks and the Facility Agent under such Security Documents.  The
      Security Agent agrees with the Banks and the Facility Agent that it shall
      hold on trust for each of them the assets secured by the Security
      Documents. The perpetuity period applicable to the trusts created hereby
      and pursuant hereto shall be eighty years.

(e)   Unless expressly excluded in the Security Documents the Security Agent may
      rely on, exercise and be protected by the discretions, protections, powers
      and rights conferred on trustees, mortgagees or receivers under the Law of
      Property Act 1925, the Trustee Act 1925, the Trustee Investments Act 1961
      and the Insolvency Act 1986 and if there is any ambiguity or conflict
      between the same and any of the Security Documents or where the terms of
      the same are less extensive or more restricted than those of the Security
      Documents, the terms of the Security Documents shall prevail to the extent
      permitted by the applicable laws.

(f)   The Security Agent in its capacity as trustee or otherwise shall not be
      liable for any failure, omission, or defect in perfecting the security
      constituted by any Security Document or any security created thereby
      including, without limitation, any failure to (i) register the same in
      accordance with the provisions of any of the documents of title of the
      relevant Obligor to any

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<PAGE>
 
      of the property thereby charged, or (ii) effect or procure registration of
      or otherwise protect the floating charge or any other such security
      created or pursuant to the Security Documents under the Land Registration
      Act 1925 or any other registration laws in any jurisdiction.

(g)   The Security Agent in its capacity as trustee or otherwise may accept
      without enquiry such title as any Obligor may have to the property over
      which security is intended to be created by any Security Document.

(h)   Save where the Security Agent holds a legal mortgage over or over an
      interest in, real property or shares, the Security Agent in its capacity
      as trustee or otherwise shall not be under any obligation to hold any
      title deeds. Security Documents or any other documents in connection with
      the property charged by any Security Document or any other such security
      in its own possession or to take any steps to protect or preserve the
      same.  The Security Agent may permit the relevant Obligor to retain all
      such title deeds and other documents in its possession.

(i)   Save as otherwise provided in the Security Documents, all moneys which
      under the trusts herein or therein contained are received by the Security
      Agent in its capacity as trustee or otherwise may be invested in the name
      of or under the control of the Security Agent in any investment for the
      time being authorised by English law for the investment by trustees of
      trust money or in any other investments which may be selected by the
      Security Agent with the consent of the Majority Banks.  Additionally, the
      same may be placed on

      deposit in the name of or under the control of the Security Agent at such
      bank or institution (including any Agent) and upon such terms as the
      Security Agent may think fit.  Any and all such monies and all interest
      thereon shall be paid over the Facility Agent forthwith upon demand by the
      Facility Agent.

(j)   Each Bank hereby confirms its approval of the Senior Finance Documents and
      any security created or to be created pursuant thereto and hereby
      authorises, empowers and directs the Security Agent (by itself or by such
      Person(s) as it may nominate) to execute and enforce the same as trustee
      or as otherwise provided (and whether or not expressly in the Banks'
      names) on its behalf.

28.2  Duties of the Agents

(a)   The Agents will promptly forward to the relevant Party the original or a
      copy of any notice or document received by it in its capacity as Facility
      Agent or, as relevant, Security Agent for such Party.

(b)   The Facility Agent and, where applicable, the Security Agent will promptly
      notify the Banks if it receives notice from any Party of the occurrence of
      a Default or any other breach of this Agreement or any of the other Senior
      Finance Documents by an Obligor and that notice states the Default or
      breach and makes reference to the specific Event of Default and/or the
      Clause that has been breached.

(c)   Except as otherwise stated in this Agreement and the Security Documents,
      the Facility Agent and the Security Agent will act in accordance with any
      instructions given to it by the Majority Banks, such instructions being
      binding on all the Banks whether or not they form part of the Majority
      Banks.

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28.3  Exculpatory provisions

Except where this Agreement or the Security Documents specifically provides
otherwise, the Facility Agent or, as the case may be, the Security Agent is not
obliged:

(a)   to review or check the accuracy or completeness of any document, notice or
      other communication it receives or forwards to another Party;

(b)   to monitor or enquire if a Default has occurred, or if the representations
      made by any Obligor under or in connection with any of the Senior Finance
      Documents and the Security Documents are true, correct or accurate, or
      whether any Obligor has performed each of the obligations expressed to be
      assumed by it under any of the Senior Finance Documents;

(c)   to disclose to any Party any information (whether in a documentary form or
      otherwise) if such disclosure would or might, in its opinion, constitute a
      breach of law, regulation, its duty of confidentiality or otherwise be
      actionable at the suit of any Person;

(d)   to take any action or exercise any right, power or discretion under any of
      the Senior

      Finance Documents, unless specifically instructed to do so by the Majority
      Banks, the Banks or any other Finance Party which is entitled to instruct
      it under any of the Senior Finance Documents and the manner in which such
      right, power or discretion should be exercised; or

(e)   to begin any legal action or proceeding under or in connection with any of
      the Senior Finance Documents, unless it is satisfied that it has received
      such security as it may require in respect of any costs, claims, liability
      or loss, including legal fees, and any applicable VAT, which it will or
      may incur in respect of, or in connection with, such actions or
      proceedings.

28.4  Assumptions

The Agents may assume that:

(a)   no Default has occurred and that no Obligor is not in breach of its
      obligations any of the Senior Finance Documents; and

(b)   each representation made by the Obligors under or in connection with any
      of the Senior Finance Documents is correct,

unless it has, in its capacity as an Agent received notice to the contrary from
any Party; and

(c)   that the Facility Office of any Bank is that office which has been
      notified to it by that Bank for such purpose by ten Business Days' notice,
      until such Bank informs the Facility Agent that it has designated another
      office as its Facility Office.

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28.5  Agents and Arranger not responsible to other Parties

None of the Agents nor the Arranger are responsible to any other Party for:

(a)   the execution, validity or enforceability of any of the Finance Documents
      or any documentation or communication delivered or made in connection
      therewith;

(b)   the accuracy and/or completeness of any information supplied by or on
      behalf of an Obligor, including the Information Package;

(c)   taking, or omitting to take, any action in connection any of the Senior
      Finance Documents, unless such Party suffers loss directly as a result of
      such Agent's or as the case may be, the Arranger's gross negligence or
      wilful misconduct; or

(d)   any breach by any other Party of this Agreement or any of the other Senior
      Finance Documents.

28.6  Delegation and advisers

Each of the Agents may:

(a)  engage, pay for and rely on the advice or services of any expert or
     professional (whether a lawyer, accountant, surveyor or otherwise); and

(b)   act through any of its, or its Affiliates', personnel and agents.

28.7  Indemnity

Upon demand by an Agent, each Bank shall, in its pro rata share, indemnify such
Agent, from and against any liabilities, costs, claims, losses and expenses,
including legal fees, and any applicable VAT which it may incur in any way
relating to or arising out of it acting in its capacity as an Agent, save to the
extent that such liability, cost, claim, loss or expense was incurred as a
result of such Agent's gross negligence or wilful misconduct.

28.8  Resignation of the Agents

(a)   Each Agent may resign its appointment under this Agreement by giving not
      less than thirty days' prior written notice to that effect to each of the
      other Parties stating whether or not it has appointed its Affiliate as its
      successor. No Agent's resignation shall become effective until a successor
      has been appointed pursuant to this Clause 28.8, and in respect of the
      resignation of a retiring Security Agent, shall not become effective until
      the Facility Agent is satisfied that all things required to be done in
      order that the Security Documents or replacements therefor shall provide
      for effective and perfected security in favour of the replacement Security
      Agent have been done.  The Obligors shall take such action as may be
      necessary in order that the Security Documents or replacements therefor
      shall provide for effective and perfected security in favour of any
      replacement Security Agent.

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<PAGE>
 
(b)   Without prejudice to the provisions of Clause 28.8(a), the Majority Banks
      may require the Agents to retire from their respective appointments under
      this Agreement at any time without assigning any reason therefor by giving
      not less than thirty days' prior written notice to that effect to the
      Facility Agent, provided that no such retirement shall become effective
      until a successor for the Agents is appointed pursuant to this Clause
      28.8.

(c)   If the successor to the Agents or is to be:

      (i)  one of its Affiliates, such Affiliate shall become the Agent under
           this Agreement upon notice to that effect being given by the
           resigning Agent and its successor to each of the other Parties; or

      (ii) other than one of its Affiliates, its successor shall be appointed by
           the Majority Banks following consultation with the Company. If the
           Majority Banks have not appointed a successor within 30 days of the
           Agents' notice given under (a) above, the Agents may appoint their
           successor, such appointment becoming effective upon notice to that
           effect being given by the resigning Agents and their successor to
           each of the other Parties.


(d)   After a successor to the Agents has been appointed, the retiring Agents
      shall continue to be entitled to the benefits of this Clause 28 but solely
      in respect of any actions taken or omitted to be taken by it while it was
      acting as an Agent under this Agreement and its successor and each of the
      Parties shall have the same rights and obligations amongst themselves as
      if the successor had been a Party to this Agreement instead of the
      retiring Agents.

(e)   The retiring Agents will make available to its successor any documents,
      records and advice which their successor reasonably requires in order to
      enable it to perform its functions as an Agent.

28.9  Separate entity

Each of the Agents' agency divisions shall be treated as a separate entity from
any of its other departments or divisions. Therefore, unless an Agent receives
any information concerning an Obligor in connection with this Agreement or the
facilities contemplated by any of the Senior Finance Documents in its capacity
as an Agent it shall be entitled to treat that information as confidential.

28.10 Reliance

Each Agent may rely on any communication or document reasonably believed by it
to be genuine and correct and, without limiting the generality of the foregoing,
may rely on any statement made by a director or employee or any Person regarding
any matters which may reasonably be assumed to be within his knowledge or within
his power to verify.  Each Agent may engage, pay for and rely on legal or other
professional advisers selected by it and shall be protected in so relying.

28.11 Credit approval

Each of the Banks severally represents and warrants to the Agents and the
Arranger that it has made its

                                      156
<PAGE>
 
own independent investigation and assessment of the financial condition and
affairs of each Obligor and their related entities and other parties considered
by it to be relevant in connection with its participation in this Agreement and
has not relied exclusively on any information, including the Information
Package, the Reports and any information distributed on behalf of any Obligor
during syndication, provided to such Bank by any Agent or any Arranger in
connection therewith. Each Bank represents, warrants and undertakes to each
Agent and the Arranger that it shall continue to make its own independent
appraisal of the creditworthiness of the Obligors and other parties considered
by it to be relevant in connection with the Senior Finance Documents and their
related entities while any amount is or may be outstanding under the Senior
Finance Documents.

28.12 Tax Confirmation

Each Bank confirms in favour of the Facility Agent (on the date of this
Agreement, or in the case of a Bank which becomes a party hereto pursuant to a
transfer or assignment, on the date on which the relevant transfer or assignment
becomes effective) that either:


(a)   it is not resident for tax purposes in the United Kingdom and is
      beneficially entitled to its share of the Advances and the interest
      thereon; or

(b)   it is a bank as defined for the purposes of Section 349 of the Income and

28.13 Miscellaneous provisions

(a)   Each of the Agents, and the Arranger shall, if they are also a Bank, have
      the same rights and obligations under this Agreement as if they were not
      an Agent, or an Arranger and exercise those rights and perform those
      obligations accordingly.

(b)   Each of the Agents and the Arranger may contract any banking or other
      business with any of the Obligors.

(c)   None of the Banks will assert against any individual any claim which it
      may have against any of the Agents or the Arranger.

(d)   Each Agent may refrain from doing anything which would or might in its
      reasonable opinion (a) be contrary to the law of any applicable
      jurisdiction or any applicable official directive or (b) render it liable
      to any Person, and may do anything which in its reasonable opinion (acting
      on legal advice) is necessary to comply with any such law or directive.

29.   TRANSFERS

29.1  Obligors

Save as expressly provided in this Agreement, no Obligor may without the prior
written consent of the

                                      157
<PAGE>
 
Banks, assign, transfer, novate or dispose of all or any of its rights or
obligations under this Agreement.

29.2  Banks

(a)   Subject to Clause 29.5, any Bank (the "Existing Bank") may, at any time,
      assign transfer or novate all or any part of its rights, benefits and
      obligations under this Agreement (including its Revolving Commitment and
      its Standby L/C Commitment) in a minimum amount of DM 5,000,000 (or, if
      less, equal to its Revolving Commitment and its Standby L/C Commitment)
      and each of the other Senior Finance Documents to another financial
      institution (the "New Bank") with the consent of the Company, such consent
      not to be unreasonably withheld or delayed and to have been deemed to have
      been given if not refused within 14 days of the relevant request by
      delivering, or causing to be delivered, to the Facility Agent, in the case
      of a transfer or a novation, a Novation Certificate duly

      completed and executed by the Existing Bank and the New Bank and to be
      executed upon receipt by the Facility Agent and upon details of such
      transfer or novation having been reflected in the control account referred
      to at Clause 31.3.

(b)   Unless otherwise expressly provided in any Security Document or otherwise
      expressly agreed between the Existing Bank and the New Bank and notified
      by the Existing Bank to the Trustee at the time at which the relevant
      transfer or novation takes effect under Clause 29.3 there shall
      automatically be transferred with any transfer or novated with any
      novation of the Existing Bank's rights and/or obligations under this
      Agreement, the Existing Bank's rights under or in respect of each of the
      other Senior Finance Documents which relate to that portion of the
      Existing Bank's rights and/or obligations under this Agreement and each of
      the other Senior Finance Documents which are the subject matter of such
      transfer or novation.

(c)   A Bank shall only be entitled to transfer or novate all or part of its
      rights, benefits and obligations under this Agreement to the extent that
      it transfers its rights, benefits and obligations under the Revolving
      Facility and the Standby L/C Facility in the same proportion that the
      Revolving Commitments of each of the Banks bears to the Standby L/C
      Commitments of each of the Banks at such time and, for the purposes of
      this paragraph (c), any Ancillary Commitment of any Ancillary Bank shall
      be ignored and treated as if such Bank's Revolving Commitment had not been
      reduced in accordance with Clause 7.

29.3  Time of transfer

Upon execution of an Intercreditor Agreement, Accession Memorandum and a
Novation Certificate by the New Bank, the Existing Bank and the Facility Agent
(or if later, the date specified for this purpose in the Novation Certificate)
and to the extent that they are expressed to be subject to the transfer or
novation stated therein:

(a)   the Existing Bank shall be released from its obligations to each other
      Party (the "released obligations") and each other Party shall be released
      from its obligations to the Existing Bank;

(b)   the New Bank will assume obligations towards each other Party which differ
      from the released obligations only in so far as they are owed to or
      assumed by the New Bank and not the Existing Bank;

                                      158
<PAGE>
 
(c)   the rights of the Existing Bank against the other Parties and vice versa
      (the "cancelled rights") will be cancelled; and

(d)   the New Bank and the other Parties will acquire rights against each other
      which differ from the cancelled rights only insofar as they are
      exercisable by or against the New Bank and not the Existing Bank.

Each Party (other than the Existing Bank and the New Bank) irrevocably
authorises the Facility Agent to execute each Novation Certificate on its
behalf.

29.4  Administration fee

Not later than on the date a transfer becomes effective in accordance with
Clause 29.3, the New Bank will pay to the Facility Agent, for its own account,
an administration fee of $1,000.

29.5  Additional amounts payable to transferee

No Bank may effect a transfer pursuant to this Clause 29 if, at the time of the
transfer, or immediately after, or if a payment of interest, principal or
otherwise was to be made by an Obligor under this Agreement at such time to or
for the account of the proposed transferee, such Obligor would be liable to pay
an additional amount, including an indemnity payment (the "additional amount")
under Clause 14 and/or Clause 15 which would not have been payable to the
proposed transferor, unless the proposed transferee has confirmed to the
Facility Agent and the Obligors' Agent that it will promptly reimburse the
relevant Obligor an amount equal to the additional amount.

29.6  Disclosure of information

(a)   Any Finance Party may provide to a Permitted Recipient, which has entered
      into a Confidentiality Undertaking, a copy of this Agreement; each of the
      Transaction Documents and such information concerning the Group or any
      Group Member, including without limitation, the Recapitalisation as it
      considers appropriate.

(b)   A "Permitted Recipient" means, in respect of any Finance Party:

      (i)  its Affiliates;

      (ii) any Person with which that Finance Party is considering entering into
           contractual relations in connection with this or any of the Senior
           Finance Documents;

      (iii)  its advisers;

      (iv) the courts, regulatory and other bodies in accordance with whose
           orders or regulations it is required or is accustomed to comply; and


      (v)  any other Person who that Finance Party reasonably considers
           appropriate to receive such information in order to protect or
           preserve that Finance Party's position.

                                      159
<PAGE>
 
30.   REDISTRIBUTION PROVISIONS

30.1  Redistributions

(a)   Subject to Clause 30.3, if all or any part of an Obligor's obligations
      under this Agreement and each of the other Senior Finance Documents owed
      to any Finance Party are discharged, whether by way of set-off, payment,
      combination of accounts or otherwise,

      other than as a result of an Agent receiving payment and distributing such
      payment in accordance with Clause 13, that Finance Party (the "Recovering
      Party") shall promptly pay to the Facility Agent an amount equal to the
      amount so discharged (the "Discharged Amount").

(b)   The Facility Agent shall treat each Discharged Amount received by it from
      a Recovering Party as if it had received the Discharged Amount from the
      relevant Obligor and distribute it amongst the Finance Parties (including
      the Recovering Party) in accordance with Clause 13.2 .

(c)   Upon a Discharged Amount being distributed by the Facility Agent, the
      relevant Recovering Party shall be subrogated to the rights of each of the
      other Finance Parties which received such a distribution to the extent of
      such distribution and relevant Obligor will owe the Recovering Party a
      debt which is equal to the amount so distributed to each of the other
      Finance Parties.

30.2  Repayment of a Discharged Amount

If a Recovering Party is required to return or repay an amount which it
determines relates to a Discharged Amount made by it under Clause 30.1, it shall
promptly inform the Facility Agent. Each of the Finance Parties (other than the
Recovering Party which received a payment as a result of the Discharged Amount
being distributed) shall pay to the Facility Agent (for the account of the
Recovering Party) all that it has received of the Discharged Amount. Upon such
payment being made, the rights of subrogation provided in Clause 30.1(c) above
shall be operated in reverse to the extent of the reimbursement.

30.3  Exceptions

(a)   A Recovering Party is not obliged to pay any amount under Clause 30.1 if,
      in its opinion (acting reasonably), after such payment it would not have a
      valid claim against the relevant Obligor by way of subrogation or
      otherwise in respect of such payment.

(b)   A Finance Party shall not be obliged to make any payment under Clause 30.1
      if the obligations owed to that Finance Party are discharged as a result
      of it receiving payment from a New Bank in respect of a Novation
      Certificate.

(c)   A Recovering Party which has commenced or joined in an action or
      proceeding in any court to recover any amount due to it under this
      Agreement or any of the other Senior Finance Documents and pursuant to a
      judgment obtained in such court or a settlement or compromise of that
      action or proceeding shall have received any amount, shall not be obliged
      to share all or any proportion of that amount with any Finance Party which
      has the legal right to, but does not, join in such action or proceeding or
      commence and diligently prosecute a separate action
     

                                      160
<PAGE>
 
      or proceeding to enforce its rights under this Agreement or, as the case
      may be, such other Senior Finance Document in the same or another court.

(d)   If a notice is served under Clause 21.2 each Bank and each Ancillary Bank
      shall adjust

      by corresponding transfers (to the extent necessary) their claims in
      respect of amounts outstanding to them under the Revolving Facility, the
      Standby L/C Facility and Ancillary Facilities so that after such transfers
      each such Bank shall have the same amount of outstandings under the
      Revolving Facility and Ancillary Facilities and the same liabilities under
      the Standby L/C Facility pro rata corresponding to the proportion of each
      Bank's Revolving Commitment to the aggregate Revolving Commitments, each
      as at the date the notice is served under Clause 21.2.

                                    PART 12


31.   CALCULATIONS AND EVIDENCE OF DEBT

31.1  Calculations

Interest and commitment commission shall accrue from day to day and shall be
calculated on the basis of a year of 360 days (or, if market practice differs,
in accordance with market practice) and the actual number of days elapsed.

31.2  Financial Accounts

Each of the Banks shall, in accordance with its usual practices, maintain on its
books an account reflecting the amount which it has lent and the amount owing to
it under this Agreement and the each of the other Senior Finance Documents from
time to time.

31.3  Control account

(a)   The Facility Agent shall, in accordance with its usual practices, maintain
      on its books a control account reflecting any amounts received or
      recovered by it in connection with this Agreement and each of the other
      Senior Finance Documents and any amounts which are payable by any Party in
      connection with this Agreement and each of the other Senior Finance
      Documents and the Parties' respective interests in such amounts.

(b)   With respect to any Bank, the assignment, transfer or novation of all or a
      part of such Bank's interests under the Senior Finance Documents shall not
      be effective until such assignment, transfer or novation is reflected in
      the control account maintained by the Facility Agent with respect to such
      interests, and prior to such reflection in the control account, all
      amounts owing to the transferor with respect to such interests shall
      remain owing to such transferor.  In addition to its capacity as agent for
      the Banks, solely for purposes of this Clause 31.3, the Facility Agent's
      maintenance of the control account shall also be as the Company's agent
      without incurring any liability to the Company in such capacity
      whatsoever.

31.4  Standby L/C Accounts

                                      161
<PAGE>
 
(a)   On the Issue Date of each Standby L/C each Bank participating in such
      Standby L/C shall open its books at its Facility Office in accordance with
      its usual practices an account

      (a "Standby L/C Account") each in the name of the Borrower on whose behalf
      the same was issued and entitled "Raleigh Standby L/C" (together with a
      reference to such Standby L/C) and denominated in the currency of payment
      of sums payable under that Standby L/C.

(b)   The Borrowers shall make such payments to each Bank for credit to each
      Standby L/C Account on the books of such Bank as are provided for in this
      Agreement.


(c)   The amount from time to time standing to the credit of each Standby L/C
      Account on the books of a Bank shall bear interest at its overnight rate
      for call deposits in the relevant currency from time to time, such
      interest to be compounded daily and to be credited to such Standby L/C
      Account quarterly in arrear on the last Business Day of each calendar
      quarter and on the date on which such Standby L/C Account is closed.

(d)   Each Bank shall be entitled to pay out of the amount standing to the
      credit of the Standby L/C Account relating to any Standby L/C any amount
      which it is obliged to pay out under such Standby L/C.  However, subject
      to the provisions of paragraph (e) below, no withdrawals may be made by
      any Borrower from a Standby L/C Account (subject to the Senior Finance
      Documents) until such time as all actual and contingent liabilities of
      such Borrower hereunder in respect of the Standby L/C to which that
      Standby L/C Account relates have been satisfied in full.

(e)   If the amount of the Standby L/C is reduced, the Bank that issued that
      Standby L/C shall, if so requested by the Borrower on whose behalf that
      Standby L/C was issued by not later than 12 noon on any Business Day after
      such reduction, pay out of the amount standing to the credit of the
      Standby L/C Account relating to such Standby L/C on such business day:

      (i)  a sum equal to the excess (if any) of the amount standing to the
           credit of such Standby L/C Account over the amount of such Bank's
           participation in the Standby L/C; and

      (ii) a sum which bears to the amount (if any) standing to the credit of
           such Standby L/C Account as a result of payments made to the Facility
           Agent for credit thereof pursuant to Clause 16.2 the proportion borne
           by the amount of the reduction in such Banks' participation in that
           Standby L/C to the amount thereof immediately before that reduction.

31.5  Actual amount received

The amount owed by an Obligor to any Finance Party under this Agreement and each
of the other Senior Finance Documents shall be reduced by the amount actually
received or recovered by such Finance Party and not by reference to any rate of
exchange applied by any court or other body in calculating how much is payable
by such Obligor under any judgment or order given in connection with this
Agreement or any of the Senior Finance Documents.

                                      162
<PAGE>
 
31.6  Prima facie evidence

The accounts referred to in Clauses 31.2, 31.3 and 31.4 are prima facie evidence
of the amount and details recorded in those accounts.

31.7  Certificates and determinations

Any certificate delivered or determination made by a Finance Party, whether in
relation to an amount payable to it under this Agreement or the any other Senior
Finance Documents or, in respect of an indemnity given by an Obligor or
otherwise shall, in the absence of manifest error, be conclusive evidence of the
matters to which such certificate or determination relates.

31.8  Reference Banks

(a)   If any Reference Bank fails to provide the Facility Agent with a quotation
      when required for the purposes of this Agreement, the rate for which such
      quotation was required shall (provided that, if there are, at the relevant
      time, four or more Banks, there are at least two) be determined by
      reference to the quotations that are received by the Facility Agent.

(b)   Additional or replacement banks may, by agreement between the Obligors'
      Agent and the Majority Banks, be appointed as a Reference Bank.


32.   AMENDMENTS AND WAIVERS

32.1  Majority Banks

Unless prohibited by Clause 32.2, Clause 32.3 or Clause 32.4 , any provision of
this Agreement or the other Senior Finance Documents may be amended, waived or
supplemented or any consent given by written agreement made between the Company
and the Majority Banks or, if the Facility Agent has received the Majority
Banks' prior approval, the Facility Agent on their behalf.

32.2  All Banks

The provisions contained in this Agreement and which relate to the following
shall not be amended, supplemented or modified or any consent given without the
prior consent of all Banks:

(a)   the definitions of "Availability Period", "Margin", "LIBOR",
      "Encumbrance", "Event of Default", "Repayment Date", "Final Repayment
      Date", "Financial Indebtedness", "Majority Banks", "Potential Event of
      Default" and Reduction Date;

(b)   Clauses 6 (other than Clause 6.15), 19.4(y), 19.5 (a), (f), (g), (h), (i),
      (o), (p), (r), (t), (u), (v), (w), (x), (y) or (z), (aa), and 30 and the
      definitions contained or referred to therein;

(c)   any provision of this Agreement which expressly requires the consent of
      each Bank; and

(d)   the amount of either of the Facilities, a Bank's Revolving Commitment,
      Standby L/C

                                      163
<PAGE>
 
      Commitment, the amount (including both principal and interest) or currency
      or due date for payment of any amount payable under any of the Senior
      Finance Documents or the Expiry Date of a Standby L/C;

32.3  Super Majority Banks

Without the prior consent of a Super Majority:

(a)   the Security Agent shall not (other than in accordance with Clause 24)
      release any asset which is subject to a fixed Encumbrance granted in
      favour of the Security Agent (unless such consent is given so as to
      facilitate a disposal permitted to be made, or not prohibited from being
      made, under this Agreement);

(b)   the provisions contained in this Agreement and which relate to Clauses
      19.5(b), (c), (d), (e), (j), (k), (l),(m)(i),(n),(q) or (s) and Clause 20
      shall not be amended, supplemented or modified or any consent given in
      respect thereof;
(c)   each of the Intercreditor Agreements shall not be amended, supplemented or
      modified.

      "Super Majority Banks" means a Bank or group of Banks whose aggregate
      Revolving Commitments amount to more than eighty-five per cent of the
      Total Commitments or if each Banks' Commitment has been reduced to zero,
      would have amounted in aggregate to eighty-five per cent of the Total
      Commitments immediately prior to such reduction to zero and, for the
      purposes of this definition, the provisions of Clause 7 and the Ancillary
      Commitment of any Ancillary Bank shall be ignored and be treated as if
      such Bank's Revolving Commitment had not been reduced in accordance with
      Clause 7.

32.4  All Parties

Without the prior consent of all Parties, this Clause 32 may not be amended,
waived or supplemented.

32.5  The Agents

Without the prior consent of the relevant Agent, none of such Agent's rights or
obligations under any of the Senior Finance Documents may be amended, waived or
supplemented.

33.   NOTICES

33.1  Method of delivery

All notices or other communications made or given in connection with this
Agreement and each of the other Senior Finance Documents shall be made in
writing by facsimile, letter or tested telex (unless such notice or
communication relates to the making or advice of any payment, in which case it
shall be made by tested telex only).

                                      164
<PAGE>
 
33.2  Addresses

Each communication or document to be made or delivered in connection with this
Agreement and each of the other Senior Finance Documents to a Party shall be
delivered or sent to the address or facsimile number that has been:

(a)   notified to the Facility Agent by that Party before it became a Party; or

(b)   notified to the Facility Agent by at least five Business Days' notice.

33.3  Agents' details

Unless the relevant Agent has given the other Parties five Business Days' notice
to that effect, its address and facsimile number are:

<TABLE>
<CAPTION>
Facility Agent:
<S>     <C>        <C>
 
(a)     Address:   Trinity Tower
                   9 Thomas More Street
                   London EC1 9YT
 
(b)     Fax:              0171 777 2360
</TABLE>
(c)   Officer/Department: Stephen Clarke, Agency Loans Department
<TABLE>
<CAPTION>
 
Security Agent:
<S>     <C>        <C>
 
(a)     Address:   Trinity Tower
                   9 Thomas More Street
                   London EC1 9YT
 
(b)     Fax:              0171 777 2360
</TABLE>
(c)  Officer/Department: Stephen Clarke, Agency Loans Department

33.4  Receipt of notices

(a)   Any notice or communication will be deemed to have been given, if sent by
      post, when delivered and, if sent by facsimile, when received and, if sent
      by telex, when an appropriate answer back is received by the sender.
      However, if the notice or communication is for an Agent, it shall only be
      effective when the same is received by the department or the officer
      referred to at, Clause 33.3 or as otherwise notified by the relevant Agent
      under that Clause.

(b)   The Company shall forthwith on demand indemnify each Finance Party against
      any direct loss or liability which that Finance Party incurs (and that
      Finance Party shall not be liable to an Obligor in any respect) as a
      consequence of:

                                      165
<PAGE>
 
      (i) any Person to whom any notice or communication under or in connection
          with this Agreement is sent by facsimile failing to receive that
          notice orcommunication (unless such loss or liability is directly
          caused by that Person's negligence or wilful default); or

      (ii) any facsimile communication which appears to that Finance Party
           (acting reasonably) to have been sent by an Obligor having in fact
           been sent by a Person other than an Obligor.

33.5  Language

Each notice, communication and document given under or in connection with this
Agreement and each of the other Senior Finance Documents shall be in English or,
if not, accompanied by an accurate translation thereof which has been confirmed
by an Authorised Signatory of the Party giving the same as being a true and
accurate translation.

34.   PARTIAL INVALIDITY

If any provision of this Agreement or any of the other Senior Finance Documents
is or becomes illegal, invalid or unenforceable in any respect under the law of
any jurisdiction, it shall not affect or impair the legality, validity or
enforceability of:

(a)   any other provision of this Agreement or any of the other Senior Finance
      Documents; or

(b)   that provision, under the law of any other jurisdiction.

35.   REMEDIES AND WAIVERS

(a)   If any of the Finance Parties do not exercise, or delay in exercising, any
      of their respective rights or remedies under or in connection with this
      Agreement, it shall not operate as a waiver of any such right or remedy.

(b)   The single or partial exercise of any right or remedy shall not prevent
      any further or other exercise of that right or remedy.

(c)   The rights and remedies provided in this Agreement or each of the other
      Senior Finance Documents are additional to any rights or remedies provided
      by law.

36.   COUNTERPARTS

This Agreement may be executed in any number of counterparts and by different
Parties on separate counterparts each of which, when executed and delivered,
shall constitute an original and all the counterparts shall together constitute
but one and the same instrument.

                                      166
<PAGE>
 
37.   SECURITY

The obligations and liabilities of the Obligors to the Security Agent under the
Security Documents shall be secured by the interests and rights granted in
favour of the Security Agent under the Security Documents.

38.   JURISDICTION

38.1  Courts of England

For the benefit of each Finance Party, each of the Obligors agree that the
courts of England have jurisdiction to hear and settle any action, suit,
proceeding or dispute in connection with this Agreement or any of the other
Senior Finance Documents and therefore irrevocably submits to the jurisdiction
of those courts.

38.2  Non-exclusivity

The submission to the jurisdiction of the English courts does not restrict the
right of a Finance Party to take proceedings against an Obligor in connection
with this Agreement or any of the other Senior Finance Documents in any other
court of competent jurisdiction, whether concurrently or not.

38.3  Service of process agent

(a)   In addition to any other appropriate method of service, Non-UK Obligors
      irrevocably agrees that any suit, action or proceeding may be served on it
      by being delivered to Derby Holding Limited at 62 Triumph Road,
      Nottingham, NG7 2DD, England or its registered office and confirms that it
      has appointed the Derby Holding Limited as its agent for such purpose.

(b)   Each of the Non-UK Obligors confirms that failure by its process agent to
      notify it of receipt of any process will not invalidate the proceedings to
      which it relates.

(c)   If the appointment of a process agent ceases to be effective, the relevant
      Non-UK Obligor shall immediately appoint a further Person in England as
      its process agent in respect of this Agreement and each of the other
      Senior Finance Documents and notify the Facility Agent of such
      appointment. If such a Person is not appointed within 15 days the Facility
      Agent shall be entitled to appoint such a Person.

38.4  Non-convenience of forum

Each of the Non-UK Obligors confirms that the English courts are not an
inconvenient forum and irrevocably waives any right it may have to object to
them on the grounds of inconvenience or otherwise.


39.   GOVERNING LAW

This Agreement is governed by and shall be construed in accordance with English
law.

                                      167
<PAGE>
 
This Agreement has been entered into by the Parties on the date stated at the
beginning of this Agreement.

                                      168
<PAGE>
 
                                   SCHEDULE 1

                                THE BORROWERS

Name                                   Jurisdiction of Incorporation
 
Raleigh Industries                     England and Wales
 Limited
Sturmey-Archer Limited                 England and Wales
Derby Holding                                    Germany
 (Deutschland) GmbH
Koninklijke Gazelle BV                       Netherlands
The Derby Cycle             The United States of America
 Corporation
Raleigh Industries of                             Canada
 Canada Limited
Raleigh Europe B.V.                          Netherlands
Raleigh B.V.                                 Netherlands
Englebert Wiener Bike                            Germany
 Parts GmbH
Winora-Staiger GmbH                              Germany
Derby Holdings Limited                 England and Wales
Raleigh Fahrrader                                Germany
 GmbH
Derby Cycle Werke                                Germany
 GmbH
Raleigh International                  England and Wales
 Limited
Curragh Finance                                  Ireland
 Company
Raleigh Ireland Limited                          Ireland

                                      169
<PAGE>
 
                                  SCHEDULE 2

                                THE GUARANTORS

Name                             Jurisdiction of Incorporation

Derby Holding Limited            England and Wales
Raleigh Industries Limited       England and Wales
Raleigh International Limited    England and Wales
Sturmey-Archer Limited           England and Wales
Raleigh Industries of Canada     Canada
 Limited
The Derby Cycle Corporation      The United States of America
Raleigh BV                       Netherlands
Raleigh Europe BV                Netherlands
Koninklijke Gazelle BV           Netherlands
Derby Nederland BV               Netherlands
Derby Holding BV                 Netherlands
Sturmey-Archer Europa B.V        Netherlands
Lyon Investments BV              Netherlands
Derby Holding (Deutschland)      Germany
 GmbH
Raleigh Fahrrader GmbH           Germany
NW Sportgerate GmbH              Germany
Derby Cycle Werke GmbH           Germany
Englebert Wiener Bike Parts      Germany
 GmbH
Univega Worldwide Licence        Germany
 GmbH
Univega Beteiligungen GmbH       Germany
 
Univega Bikes & Sports Europe    Germany
 GmbH (formerly MS Sport
 Vertriebs GmbH)
Derby Fahrrader GmbH             Germany
Derby WS Vermogenswerwaltungs    Germany
 GmbH

                                      170
<PAGE>
 
Name                             Jurisdiction of Incorporation

Winora-Staiger GmbH              Germany
Curragh Finance Company          Ireland
Raleigh Ireland Limited          Ireland
InterDerby Group Finance N.V.    Netherlands Antilles
The British Cycle Corporation    England and Wales
 Limited
BSA Cycles Limited               England and Wales
Triumph Cycle Co. Limited        England and Wales
Raleigh (Services) Limited       England and Wales

                                      171
<PAGE>
 
                                SCHEDULE 3

                                THE BANKS


<TABLE>
<CAPTION>
Name                                      Revolving     Standby L/C
                                          Commitment    Commitment
                                            (DM)            (DM)
<S>                                    <C>               <C>
The Chase Manhattan Bank                  16,500,000     1,156,542
ABN Amro Bank N.V.                        16,250,000     1,139,019
Bank of Scotland                          16,250,000     1,139,019
BHF - Bank AG                             16,250,000     1,139,019
Dresdner Bank AG, Grand Cayman            16,250,000     1,139,019
 branch                                
Lloyds Bank Plc                           16,250,000     1,139,019
Midland Bank Plc                          16,250,000     1,139,019
Scotiabank Europe Plc)                    16,250,000     1,139,019
                                       
The Bank of Nova Scotia)               
The Sumitomo Bank, Limited                16,250,000     1,139,019
Banque Nationale de Paris                 11,250,000       788,551
San Paolo IMI SPA                         11,250,000       788,551
Kredietbank (Nederland) N.V.              11,250,000       788,551
Oldenburgische Landesbank AG              11,250,000       788,551
The Governor and Company of the           11,250,000       788,551
 Bank of Ireland                       
The Industrial Bank of Japan,             11,250,000       788,551
Limited                                
                                       DM214,000,000  DM15,000,000
</TABLE>

NB: The Standby L/C Commitment of each Bank is a sub-set of the Revolving
Commitment of such Bank and not additional to its Revolving Commitment.

                                      172
<PAGE>
 
                                  SCHEDULE 4

                              ACCESSION AGREEMENT

THIS ACCESSION AGREEMENT is dated the         day of                         199
and made BETWEEN [                                 ] (the "Additional
[Borrower/Guarantor]") (1), [                  ] (the "Company" and an "Existing
Borrower" and an "Existing Guarantor") on behalf of itself and each of the other
Borrowers and Guarantors [                                 ] (each an "Existing
Guarantor" and together with the Company the "Existing Guarantors") (2), and
Chase Manhattan International Limited in its capacities as Facility Agent and
Security Agent under the Facility Agreement referred to in Recital (A) hereof
and on behalf of the Arranger and the Banks parties to and defined as such in
such Facility Agreement and on behalf of each of the parties to the
Intercreditor Agreement[s] dated [                              ] (3).

WHEREAS:

(A)    By and upon and subject to the terms of a facility agreement (the
       "Facility Agreement"), which term includes any supplements and amendments
       thereto which may at any time be made in relation thereto and also any
       Novation Certificates and Accession Agreements) dated [
       ], 1998 made between, inter alios, the Company, the Borrowers and the
       Guarantors as therein defined, Chase Manhattan plc as Arranger, Chase
       Manhattan International Limited as Facility Agent and Security Agent and
       the financial institutions named therein as banks, a multicurrency
       revolving credit facility was made available to the Company and/or
       certain of the Borrowers (as defined in the Facility Agreement).

(B)    Each of the entities expressed to be party hereto, whether directly or
       through signature hereof by the Facility Agent or the Company on its
       behalf, is a party to the Facility Agreement either by having been an
       original party thereto or pursuant to an Accession Agreement or a
       Novation Certificate to which it is party or otherwise.

(C)    The Additional [Borrower/Guarantor] wishes to become party to the
       Facility Agreement as a [Borrower/Guarantor] pursuant to the procedure
       established in Clause [22/19.4] of the Facility Agreement and a party to
       the Intercreditor Agreement[s] dated [               ] as an Obligor
       pursuant to the procedure established in Clause [9[1]] of the
       Intercreditor Agreements by the execution of this Accession Agreement.

(D)    It is the intention of the parties that this Accession Agreement shall
       take effect as a deed.

NOW IT IS HEREBY AGREED as follows:

1.    Definitions

       Terms used herein (including the Recitals hereto) which are defined in or
       to which a meaning or construction is assigned by or in the Facility
       Agreement shall, unless otherwise defined herein, have the same meaning
       and construction herein as therein.

2.    Agreements, Confirmations and Representations

                                      173
<PAGE>
 
(a)    The Additional [Borrower/Guarantor] hereby:

      (i)     confirms that it has received a copy of the Facility Agreement and
              the Intercreditor Agreement[s], together with such other documents
              and information as it has required in connection herewith and
              therewith;

      (ii)    agrees to become, with effect from the date of this Accession
              Agreement, a [Borrower/Guarantor] under the Facility Agreement,
              and an Obligor under the Intercreditor Agreement[s], agrees to be
              bound in that capacity with effect from such date by the terms of
              the Facility Agreement and the Intercreditor Agreement[s] and
              undertakes accordingly to perform its obligations as a
              [Borrower/Guarantor] (or, as the case may be, Obligor) thereunder;

      (iii)   confirms the accuracy of the information set out under its name at
              the end of this Accession Agreement;

      (iv)    represents and warrants as a [Borrower/Guarantor] to the Arranger,
              the Banks and the Facility Agent in the terms of Clause 18 of the
              Facility Agreement by reference to the facts and circumstances
              existing at the date hereof;

      (v)     confirms it encloses herewith in respect of itself the documents
              and evidence listed in Schedule 5;

      (vi)    confirms it has not relied on the Arranger, the Banks, the
              Facility Agent or the Security Agent to assess or inform it as to
              the legality, validity, effect or enforceability of the Facility
              Agreement or the Intercreditor Agreement[s] or any other document
              referred to therein or the accuracy or completeness of any such
              information as is referred to in paragraph (i) above or the
              creditworthiness, affairs, condition or status of any of the
              parties to the Facility Agreement, the Intercreditor Agreement[s]
              or any such other document.

(b)    The Borrower(s), the Guarantor(s), the Arranger, the Facility Agent, the
       Security Agent, the Banks and the parties to the Intercreditor
       Agreement[s] hereby agree amongst themselves and with the Additional
       [Borrower/Guarantor] that the Additional [Borrower/Guarantor] shall
       become party to the Facility Agreement and the Intercreditor Agreement[s]
       with effect from the date of this Accession Agreement.

3.    Law

(a)    This Accession Agreement shall be governed by and construed in accordance
       with English law.

(b)    [The Additional [Borrower/Guarantor] hereby irrevocably designates,
       appoints and empowers the Company to receive, for and on behalf of
       itself, service of process out of the English Courts in any proceedings
       with respect to the Facility Agreement and/or the Intercreditor
       Agreement[s] and/or this Accession Agreement or any judgment in
       connection therewith and agrees that failure by such process agent to
       give notice of such service of process to the

                                      174
<PAGE>
 
       Additional [Borrower/Guarantor] shall not impair or affect the validity
       of such service or of any judgment based thereon.]


IN WITNESS WHEREOF the parties hereto have caused this Accession Agreement to be
duly executed on the date first written above.


SIGNATURES

Additional [Borrower/Guarantor]:

[                                     ]

Company:

[                                     ]
for itself and as agent for and on
behalf of the Borrowers and
Guarantors

By:


Facility Agent:
CHASE MANHATTAN INTERNATIONAL LIMITED
for itself and as Facility Agent and
Security Agent for and on behalf of the
Arranger and the Banks

By:

                                      175
<PAGE>
 
                                   SCHEDULE 5

                       DOCUMENTS TO ACCOMPANY ADDITIONAL
                     BORROWER/GUARANTOR ACCESSION AGREEMENT

1.     The proposed Additional [Guarantor/Borrower] shall deliver each in a form
       and substance satisfactory to the Facility Agent:

(a)    A Certified Copy of its constitutive documents.

(b)    A Certified Copy of its board resolution approving the execution,
       delivery and performance by the proposed Additional [Borrower/Guarantor]
       of an Accession Agreement in the form set out in Schedule 4 and each of
       the Senior Finance Documents to which it is expressed to be a party and
       other documents to be delivered pursuant thereto and the terms and
       conditions thereof and authorising a Person or Persons (by name, or to
       the extent that the same is permitted so as to bind the relevant Group
       Member by applicable laws, by title) to sign the [Borrower's/Guarantor's]
       Accession Agreement, the Senior Finance Documents and such other
       documents and to give any notices on behalf of the proposed Additional
       [Borrower/Guarantor] in connection with such Senior Finance Documents, or
       to give such notices, to another Person or Persons;

(c)    A list of its Authorised Signatories.

(d)    A certificate of an Authorised Signatory of the proposed Additional
       [Borrower/Guarantor] confirming that neither the execution and delivery
       of the Additional [Borrower/Guarantor Accession Agreement and the Finance
       Documents to which the proposed Additional [Borrower/Guarantor] is
       expressed to be a party nor the exercise of the proposed Additional
       [Borrower'/Guarantor's] rights, and the performance of the proposed
       Additional [Borrower/Guarantor's] obligations, under such
       [Borrower/Guarantor] Accession Agreement and other Senior Finance
       Documents would result in any breach of the proposed Additional
       [Borrower/Guarantor] constitutive documents.

(e)    An opinion of the proposed Additional [Borrower/Guarantor's] local
       counsel addressed to the Facility Agent and Security Agent for themselves
       and for and on behalf of the Banks and acceptable to the Banks.

(f)    A Security Document and an Intercreditor Agreement Accession Memorandum.

(g)    If applicable, an Exchange Control Approval.

(h)    Such other documents as the Facility Agent may on the advice of local
       counsel to the Banks require.

[2.    In relation to any proposed Additional [Borrower/Guarantor] incorporated
       in the United Kingdom certified copies of the statutory declaration made
       in the prescribed form (and in the agreed form) by all the directors of
       such Companies as required by Section 155 of the Companies Act 1985
       together with a Certified Copy of the statutory report by its Auditors

                                      176
<PAGE>
 
       required under Section 156(4) of the 1985 Act and confirmation by the
       Auditors in a form acceptable to the Facility Agent that such company has
       net assets (as defined in Section 152(2) of the Companies Act 1985) and
       that the net assets are not reduced by the giving of the financial
       assistance or any reduction in net assets does not exceed distributable
       profits.]

3.     In relation to any proposed Additional [Borrower/Guarantor] not
       incorporated in any part of the United Kingdom evidence that Derby
       Holding Limited has agreed to act as the proposed Additional
       [Borrower/Guarantor's] service of process agent.

                                      177
<PAGE>
 
                                   SCHEDULE 6

                              CONDITIONS PRECEDENT


CONSTITUTIONAL DOCUMENTS

1.   In respect of each Obligor:

     (a)  a Certified Copy of its Certificate of Incorporation and Memorandum
          and Articles of Association or of its statutes, by-laws or other
          constitutional or governing documents together with certified copies
          of the minutes of the meetings of its shareholders (if necessary) or
          written resolutions of its directors or officers adopting such changes
          to the Memorandum and Articles of Association or its statutes, by-laws
          or other constitutional or governing documents as the Facility Agent
          shall have required, and a certificate of a duly authorised officer of
          each such company confirming that such resolutions were duly and
          properly passed at duly convened and constituted meetings of that
          Obligor;

     (b)  a Certified Copy of the resolutions of the board of directors of the
          company certifying that such board resolutions have been duly and
          properly passed at a duly convened and constituted meeting of that
          company and confirming that such resolutions are still in effect and
          have not been varied or rescinded;

          (i)  authorising the execution, delivery and performance on behalf of
               that company of those of the Finance Documents to which that
               company is a party; and

          (ii) authorising a Person or Persons (by name, or to the extent that
               the same is permitted so as to bind the relevant Group Member by
               applicable laws, by title) (each an "Authorised Signatory")
               specified therein to execute on behalf of that company those of
               the Finance Documents to which that company is expressed to be a
               party and to give any notices or certificates required in
               connection therewith;

     (c)  (which is also a Guarantor incorporated in England and Wales) a
          Certified Copy of a resolution of the members of that company
          approving the execution delivery and performance of those Finance
          Documents to which such company is a party and confirming that such
          action is in the commercial interests of the company in accordance
          with the terms thereof;

     (d)  a certificate of an Authorised Signatory of that company confirming
          that at Closing the aggregate Financial Indebtedness of that company
          (including any Financial Indebtedness which may be incurred under any
          of the Finance Documents) does not or, as the case may be, would not,
          if fully drawn, exceed any borrowing limit contained in that company's
          constitutional documents or in any trust deed or other agreement or
          instrument to which that company is a party or which is binding on its
          assets; and

     (e)  a certificate of an Authorised Signatory of that company in the agreed
          terms to the effect

                                      178
<PAGE>
 
          that the execution of the Finance Documents by that company is lawful
          and complies with its constitution.

2.   A specimen of the signature of each Person (each being an Authorised
     Signatory) authorised to execute any of the Finance Documents on behalf of
     any Obligor and/or to sign all notices, certificates and other documents or
     communications to be delivered by such Obligor thereunder.

3.   If the initial Drawdown Date is not the same date as the date of receipt by
     the Facility Agent of the Memorandum and Articles of Association of the
     Obligors (or their equivalent constitutive documents), a certificate from a
     duly authorised officer of the Obligors confirming that as at the initial
     Drawdown Date the Memorandum and Articles of Association of the Obligors
     (or their constitutive documents) as provided to the Facility Agent
     continue in full force and effect without amendment.

CONSENTS

4.   A Certified Copy of (or, to the extent that the Banks have agreed that such
     documents may be delivered to the Facility Agent after the date of this
     Agreement, of all applications for) such approvals, consents, licences,
     exemptions and other requirements of governmental and other authorities
     required, for the entering into or performance of the Finance Documents and
     any other Transaction Document for.

TRANSACTION DOCUMENTS

5.   Evidence that each of the Transaction Documents has been entered into by
     all parties thereto, that each such agreement is in full force and effect,
     that the conditions precedent to such agreements have been, or will,
     simultaneously with the initial Utilisation be satisfied, that no
     conditions or obligations contained therein have been waived or modified
     except with the consent of the Facility Agent , that each of the
     Transaction Documents is in a form satisfactory to the Facility Agent and
     that no Group Member, at the Closing, has the right to rescind any such
     agreements save for material breach by Derby International or, as the case
     may be, DFS under any of the Recapitalisation Documents.

6.   An original or a Certified Copy of each of the Transaction Documents.

SECURITY DOCUMENTS

7.   At least three copies each of the Security Documents duly executed by all
     the parties thereto other than the Facility Agent and/or the Security Agent
     together with:

     (i)  share certificates in respect of any and all shares the subject matter
          of the created by the Security Documents and (if applicable) executed
          transfer forms in respect thereof and undated letters of resignation
          from each of the relevant directors together with irrevocable
          authority for the Facility Agent to date the same or where shares are
          not evidenced by certificates that notification of security over such
          shares has been entered in the Share Register, and all title documents
          relating to any land or buildings mortgaged or otherwise charged by
          the Security Documents or confirmation that such documents

                                      179
<PAGE>
 
          are held to the order of the Security Agent or are in course of being
          lodged with the appropriate registration authority and will thereafter
          be delivered to the order of the Security Agent;

     (ii) copies of all notices required to be despatched pursuant to the
          Security Documents duly completed by an Authorised Signatory.

INFORMATION

8.   A Certified Copy of each of the Disclosure Exhibits.

9.   A Certified Copy of the Information Package.

10.  A Certified Copy of the Financial Accounts prepared by the management of
     each of the Borrowers and the Guarantors in respect of the Group for the
     monthly and, quarterly Accounting Periods since the latest annual audited
     Financial Accounts of each Borrower and Guarantor in each case in the form
     required by respectively Clause 19.1(a)iii) and Clause 19.1(a)(ii).

11.  A Certified Copy of the audited consolidated Financial Accounts in respect
     of the annual Accounting Period to 31st December 1997 in the form required
     by Clause 19.1(a).

12.  A Certified Copy of the Reports together with a Certified Copy of each the
     Letters of Engagement relating thereto.

     Each of such Reports which, if not addressed to the Facility Agent on
     behalf of itself and the Banks, to be accompanied by written confirmation
     from the company or firm which produced such Report that it can be relied
     upon by the Arranger, Security Agent and Facility Agent on behalf of itself
     and by the Facility Agent and Security Agent on behalf of the Banks.

13.  A Certified Copy of the final forms of each of the Recapitalisation
     Documents.

14.  A Certified Copy of the Transaction Costs Letter.

15.  A Certified Copy of the, Company's employee share ownership scheme and
     management incentive scheme.

16.  Evidence that each Group Member will, contemporaneously with completion of
     the Recapitalisation, be released from:

     (a)  all guarantees and indemnities and similar documents granted by any of
          them in respect of the obligations of any third party other than any
          other Group Member or third party providers of Financial Indebtedness
          of each South African Borrower existing as at Closing which Financial
          Indebtedness has been disclosed to the Facility Agent in accordance
          with paragraph 18 below;

     (b)  all Encumbrances (other than Permitted Encumbrances) existing
          immediately prior to the Closing including without limitation all
          mortgages or charges appearing as undischarged

                                      180
<PAGE>
 
          in the mortgages register of each Group Member at the Companies
          Registration Office; and

     (c)  all the Existing Financial Indebtedness will be fully repaid upon the
          making of the initial Advances under this Agreement.

17.  A Certified Copy of details of all insurance policies in existence in
     respect of the Group as at Closing and copies of all policies of Material
     Insurance and evidence as that the Security Agent's interest has been noted
     thereon in accordance with the requirements of Clause 19.1(b) together with
     evidence that such policies are in full force and effect with premiums paid
     to date in full.

18.  A certificate of the Chief Financial Officer of the Company summarising all
     Existing Financial Indebtedness and all Financial Indebtedness of Group
     Members as at immediately prior to the Closing and immediately following
     Closing.

19.  Certified Copies of the Service Contracts of each of the Executives and the
     Directors on terms satisfactory to the Facility Agent.

20.  Confirmation from an Authorised Signatory of the Company that Clause
     18.1(v) is complete, true and accurate.

21.  Requests in relation to the Utilisations to be made at Closing.

22.  Payment instructions in respect of all funds at Closing in accordance with
     the Funds Flow Memorandum.

23.  Evidence that:

     (i)  the Investors have subscribed or contemporaneously with the making of
          the initial Advances will subscribe in full in cash an aggregate
          amount of not less than $63,000,000 (the "Investors' Equity
          Subscription") for shares in the capital of the Company issued to them
          pursuant to the Recapitalisation Agreement at Closing;
     (ii) the Note Issuers shall have received or contemporaneously with the
          making of the initial Advances will receive in aggregate not less than
          $160,000,000 pursuant to the Note Purchase Agreement in respect of the
          issuance and sale of the Notes (the "Note Proceeds") on terms
          satisfactory to the Facility Agent; and

     (iii)the maximum aggregate amount payable to Derby International and DFS in
          cash at Closing will not exceed US$147,000,000 (or the equivalent in
          other currencies);

     and that the Investors Equity Subscription and the Note Proceeds have been
     or will contemporaneously with the making of the initial Advances will be
     paid into and be standing to the credit of a Blocked Account;

24.  The Facility Agent shall be satisfied, and shall have received such
     evidence as it may reasonably require, that the aggregate monies payable in
     respect of the Investors Equity Subscription the

                                      181
<PAGE>
 
     Note Proceeds and the proceeds of each of the initial Utilisations that may
     be drawn down or make on the date of Closing in accordance with the
     provisions of this Agreement are at least equal to the amount required to
     refinance all of the Existing Financial Indebtedness owed to third parties
     at Closing, and (when considered together with any relevant Hedging
     Protection Agreements) in the same currency(ies) thereof (together with
     accrued interest and all other charges thereon) which are required to be
     repaid and discharged in order that it may comply with Clause 18.1(w) and
     to pay all of the Transaction Costs;

25.  Receipt by the Facility Agent of each of the Pre-Closing Accounts.

26.  Proforma Financial Accounts.

27.  A Certified Copy of the Approved Hedging Programme.

28.  Details of any Encumbrances existing over all or any of the Group's assets
     (including, for the avoidance of doubt, any Encumbrances existing over all
     or any of the Group's assets) as at Closing (other than pursuant to the
     Security Documents).

29.  A certified copy of the Structure Memorandum.

30.  A Certified Copy of the Funds Flow Memorandum.

31.  A Certified Copy of the Intra-Group Loan Memorandum.

32.  Details of any bank accounts held by Obligors other than with any Approved
     Bank together with evidence that, in respect of each such account Clause
     19.5(t)(ii) would be satisfied.

33.  The bank mandates relating to the blocked accounts, duly completed.

34.  A duly executed copy of each of the Fee Letters.

35.  Evidence that at Closing the Company or its Subsidiaries will be the
     beneficial and (subject only to the payment of the relevant stamp and
     documentary Taxes in respect thereof by no later than the date on which the
     same are required to be paid by applicable law or regulation and to the
     making of the necessary entries in the shareholders' registers of the
     relevant members of the Subsidiaries that comprise the Acquired Assets)
     legal owner of all the Acquired Assets (save, in the case of legal
     ownership, to the extent that the Security Agent shall be the legal owner
     thereof pursuant to the Security Documents), free from all Encumbrances
     other than Permitted Encumbrances and that the Obligors will be in
     compliance with their obligations under Clause 19.5(a) in all other
     respects immediately after Closing.

36.  A Certified Copy of the Approved Provisioning Procedure.

                                      182
<PAGE>
 
OPINIONS

37.  An opinion of Dibb Lupton Alsop, addressed to the Facility Agent, the
     Security Agent and the Banks, the English legal advisers to the Facility
     Agent, the Security Facility Agent and the Banks as to such matters
     relating to the Obligors and their obligations under the Senior Finance
     Documents as the Facility Agent may reasonably require.

38.  An opinion, addressed to the Facility Agent, the Security Agent and the
     Banks of Bogel & Gates, United States of America legal advisors to the
     Facility Agent and the Security Agent as to such matters relating to the
     United States of America, the obligations of the Obligors under the Senior
     Finance Documents to which they are a party as the Facility Agent may
     reasonably require.

39.  An opinion addressed to the Facility Agent, the Security Agent and the
     Banks of Kirkland & Ellis, United States of America legal advisors to the
     Company as to such matters relating to due authorisation and execution of
     Senior Finance Documents by Obligors incorporated in the United States of
     America as the Facility Agent may reasonably require.

40.  An opinion, addressed to the Facility Agent, the Security Agent and the
     Banks of Boekel de Neree Dutch legal advisors to the Facility Agent, the
     Security Agent and the Banks as to such matters relating to the
     Netherlands, the Obligors and their obligations under the Senior Finance
     Documents to which they are a party as the Facility Agent may reasonably
     require.

41.  An opinion, addressed to the Facility Agent, the Security Agent and the
     Banks of Aird & Berlis Canadian legal advisors to the Facility Agent, the
     Security Agent and the Banks as to such matters relating to Canada, the
     Obligors and their obligations under the Senior Finance Documents to which
     they are a party as the Facility Agent may reasonably require.

42.  An opinion, addressed to the Facility Agent, the Security Agent and the
     Banks of Lapointe Rosenstein Canadian legal advisors to the Company as to
     such matters relating to Canada, the Obligors and their obligations under
     the Senior Finance Documents to which they are a party as the Facility
     Agent may reasonably require.

43.  An opinion, addressed to the Facility Agent, the Security Agent and the
     Banks of Sander Steinberg Canadian legal advisors to the Facility Agent,
     the Security Agent and the Banks as to such matters relating to Canada, the
     Obligors and their obligations under the Senior Finance Documents to which
     they are a party as the Facility Agent may reasonably require.

44.  An opinion, addressed to the Facility Agent, the Security Agent and the
     Banks of Promes Trente van Doorne Netherland Antilles legal advisors to the
     Facility Agent, the Security Agent and the Banks as to such matters
     relating to the Netherlands Antilles, the Obligors and their obligations
     under the Senior Finance Documents to which they are a party as the
     Facility Agent may reasonably require.

45.  An opinion, addressed to the Facility Agent, the Security Agent and the
     Banks of A & L Goodbody Irish legal advisors to the Facility Agent, the
     Security Agent and the Banks as to such matters relating to Ireland, the
     Obligors and their obligations under the Senior Finance

                                      183
<PAGE>
 
     Documents to which they are a party as the Facility Agent may reasonably
     require.

46.  An opinion, addressed to the Facility Agent, the Security Agent and the
     Banks of Johnston Stokes Master Hong Kong legal advisors to the Facility
     Agent, the Security Agent and the Banks as to such matters relating to Hong
     Kong, the Obligors and their obligations under the Senior Finance Documents
     to which they are a party as the Facility Agent may reasonably require.

47.  An opinion, addressed to the Facility Agent, the Security Agent and the
     Banks of Feddersen, Laule, Scherzberg & Ohle Lansen Gwerwahn German legal
     advisors to the Company as to such matters relating to Germany, the
     Obligors and their obligations under the Senior Finance Documents to which
     they are a party as the Facility Agent may reasonably require.

48.  An opinion, addressed to the Facility Agent, the Security Agent and the
     Banks of Woedtke Reszel & Partner German legal advisors to the Facility
     Agent, the Security Agent and the Banks, as to such matters relating to
     Germany, the Obligors and their obligations under the Senior Finance
     Documents to which they are a party as the Facility Agent may reasonably
     require.

49.  Memoranda of Satisfaction in respect of charges registered against each of
     Sturmey-Archer, Derby Holdings Limited, Raleigh International Limited and
     The British Cycle Corporation Limited.

                                      184
<PAGE>
 
                                   SCHEDULE 7

                                     Part 1

                            FORM OF DRAWDOWN REQUEST

To:  Chase Manhattan International Limited as Facility Agent.

From:  [            ] as Obligors' Agent


                                                         Date: [               ]
Dear Sirs,

Re DM 214,000,000 Multicurrency Credit Facility dated [           ] (the
"Facility Agreement")

1.     We request that the Banks, in accordance with the terms of the Facility
       Agreement and upon the terms and conditions contained therein, make [an]
       Advance(s) as follows:

(a)    Requested Amount [DM[         ]; and

(b)    Currency;

(c)    Drawdown Date: [               ].

(d)    Term: [             ].

(e)    Borrower:      [               ].

2.     The Advance(s) should be credited to [insert account details].

3.     We confirm that, at the date hereof, the representations set out in
       Clause 18 that are to be repeated in accordance with Clause 18.2 are true
       and correct and no Default has occurred and is continuing.

4.     Terms used in this Drawdown Request and not otherwise defined shall bear
       the same meaning as in the Facility Agreement.

5.     This Advance is to be applied solely for the purpose of [           ].

6.     This Drawdown Request is governed by and shall be construed in accordance
       with and subject to English law.

Yours faithfully

Obligors' Agent
Authorised Signatory

                                      185
<PAGE>
 
                                    PART 2

                          FORM OF STANDBY L/C REQUEST

To:    Chase Manhattan International Limited as Facility Agent.

From:  [            ] as Obligors' Agent

       On behalf of [             ] ("ACCOUNT PARTY")

                                                         Date: [               ]
Dear Sirs,

RE DM214,000,000 MULTICURRENCY REVOLVING CREDIT AGREEMENT DATED [            ] 
(the "FACILITY AGREEMENT")

1.     We request that the Banks, in accordance with the terms of the Facility
       Agreement and upon the terms and conditions contained therein,
       participate in a Standby L/C in the form annexed hereto as follows:

       (a)    Amount of Standby L/C [eg DM       ];

       (b)    Currency of Standby L/C;

       (c)    Issue Date: [           ];

       (d)    Expiry Date of Standby L/C: [         ];

       (e)    Account Party:  [                  ];

       (f)    Beneficiary:   [               ];

       (g)    Beneficiary's Account details: [              ].

2.     We confirm that, as at the date of this Standby L/C Request, no Default
       has occurred and is continuing, and the representations contained in
       Clause 18 of the Agreement that are repeated in accordance with Clause
       18.2 are true and correct.

3.     Terms used in this Standby L/C Request and not otherwise defined shall
       bear the same meaning as in the Agreement.

                                      186
<PAGE>
 
4.     This Standby L/C Request is governed by and shall be construed in
       accordance with and subject to English law.

Yours faithfully



OBLIGORS' AGENT
Authorised Signatory

                                      187
<PAGE>
 
                                    PART 3

                              FORM OF STANDBY L/C


TO:  [                    ]



For the attention of:


[Date]



Dear Sirs

IRREVOCABLE NON-TRANSFERABLE LETTER OF CREDIT NO. [      ]

The Banks (as defined below) in their several Participation Percentages (as
defined below) hereby issue this Irrevocable Non-Transferable Letter of Credit
No. [    ] )the "CREDIT"), details of which are as follows:-
<TABLE> 
<S>                        <C> 
Account Party:             [Borrower under Facility Agreement]

Facility Agent:            [Chase Manhattan International Limited] as Facility
                           Agent for the Banks or any other person notified from
                           time to time by the Facility Agent to the Beneficiary
                           as being the Facility Agent for the purposes of the
                           Credit.

Facility Agent's Office:   [                ] or such other office from time to
                           time notified by the Facility Agent to the 
                           Beneficiary.

Availability:              By payment against delivery of Required Documents:

Bank:                      NAME          PARTICIPATION PERCENTAGE

                           [     ]                     [       %]
                           [     ]                     [       %]
                           [     ]                     [       %]

</TABLE> 
                                      188
<PAGE>
 
<TABLE> 
<S>                        <C> 
Beneficiary:               [Approved Bank details]

Charges:                   Any banking or other charges and commissions (other
                           than our own) are for the Beneficiary's account.

Maximum Amount:            [                     ]

Payment Currency:          [                     ]

Expiry Date:               [                     ]

Partial Payment:           Partial payments are permitted, provided that the
                           Payment Amounts shall not in the aggregate exceed the
                           Maximum Amount.

Participation Percentage:  In relation to a Bank, the percentage set out
                           opposite its name above, as varied by any novation 
                           referred to below.

Payment Amount:            An amount in the Payment Currency certified in a
                           Certificate of Beneficiary to be a Payment Amount.

Required Document:         A Certificate of Beneficiary in the form set out in
                           Appendix A hereto (duly completed in a manner
                           consistent with the requirements of this credit and
                           signed on behalf of the Beneficiary).

</TABLE> 
Each Bank engages with the Beneficiary that within five working days in London
and the principal financial centre of the Payment Currency (each a "BUSINESS
DAY") after receipt by the Facility Agent at the Agent's Office of the related
Required Document conforming to the terms of this Credit, such Bank will pay to
or to the order of the Beneficiary, in the Payment Currency in funds providing
same day value, by credit to the account specified in the related Certificate of
Beneficiary, its Participation Percentage of the lesser of:

(i)  each Payment Amount, as stated in the Required Documents; and

(ii) the balance of the Maximum Amount after deducting the amount of any and all
     previous payments by the Banks under this Credit.

This Credit shall be non-transferable and shall be payable only against
presentation of the Required Document.  This Credit shall expire on, and no
payment shall be made pursuant hereto after, the Expiry Date.

The obligations of the Banks under this Credit are several according to their
respective participation Percentages and not joint and several and neither the
Facility Agent nor any Bank shall be liable for the failure of any other Bank to
perform its obligations hereunder.  The aggregate amount payable by each Bank
hereunder shall not exceed its Participation Percentage of the Maximum Amount.

The Facility Agent shall have no liability hereunder except in its capacity as a
Bank.

                                      189
<PAGE>
 
A Bank (the "EXISTING BANK") may with the prior written consent of the
Beneficiary, such consent not to be unreasonably withheld or delayed, novate all
or part of its rights and/or obligations under this Credit to another bank or
financial institution (the "NEW BANK").  Such consent of the Beneficiary shall
not be withheld where an Existing Bank wishes to novate all or part of its
obligations to a New Bank which is at the time of such novation rated BBB or
above by Standard & Poor's Corporation or Baa2 by Moody's Investor Services Inc.
A novation of rights and/or obligations will only be effected if the Existing
Bank and the New Bank deliver to the Facility Agent a duly completed
certificate, substantially in the form of Annex B hereto (an "LC TRANSFER
CERTIFICATE") duly executed by each of them and the Beneficiary (which shall be
obliged to execute the same where not entitled to withhold consent to the
transaction) and then countersigned by the Facility Agent on behalf of the other
Banks.

Upon the novation becoming effective in the manner referred to in the previous
paragraph, the Existing Bank shall be relieved of its obligations under this
Credit to the extent that they are novated to the new Bank and any reference in
this Credit to a Bank shall include the New Bank.  Each Bank (other than the
Existing Bank and the New Bank) irrevocably authorises the Facility Agent to
execute a duly completed LC Transfer Certificate on its behalf.

Failure by the Beneficiary (within ten Business Days or receiving a written
request therefore) to give consent to any novation pursuant to and to execute an
LC Transfer Certificate, which by the terms of this Credit it is not entitled to
withhold or fail to execute will result in all obligations of the Existing Bank
which were to have been novated being cancelled at the expiry of such ten
Business Day period, such cancellation to result in non-payment by that Existing
Bank of its Participation Percentage of any further Payment Amount without
affecting the payments to be made by the other Banks in respect thereof.

On the date of execution of the Transfer Certificate by the Facility Agent and
(if the Beneficiary's consent is required but not deemed give) the Beneficiary
of, if later, the date specified in the LC Transfer Certificate:

i.   the Facility Agent, the other Banks and the Beneficiary (the "EXISTING
     PARTIES") and the Existing Bank will be released from their obligations to
     each other under this Credit (the "DISCHARGED OBLIGATIONS");

ii.  the New Bank and the Existing Parties will assume obligations towards each
     other which differ from the Discharged Obligations only insofar as they are
     owed to or assumed by the New Bank instead of the Existing Bank;

iii. the rights of the Existing Bank against the Existing Parties and vice
     versa (the "DISCHARGED RIGHTS") will be cancelled; and

iv.  the New Bank and the Existing Parties will acquire rights against each
     other which differ from the Discharged Rights only insofar as they are
     exercisable by or against the New Bank instead of the Existing Bank.

In each case to the extent only that the same relate to or arise out of the
amount of the Existing Bank's Participation Percentage specified in the LC
Transfer Certificate.

                                      190
<PAGE>
 
Save insofar as such provisions may be inconsistent with the express terms of
this Credit, this Credit is subject to the provisions of the Uniform Customs and
Practice for Documentary Credits (1993 Revision) ICC Publication No. 500.

This Letter of Credit and the Credit established hereby shall be governed by
English law.  For the avoidance of doubt, it is confirmed that demand may be
made hereunder by tested telex.

Yours faithfully



-----------------------------------
[Facility Agent to sign
on behalf of each Bank]

                                      191
<PAGE>
 
                                   EXHIBIT A

                           CERTIFICATE OF BENEFICIARY

To: [             ] as Facility Agent


Dear Sirs,

IRREVOCABLE NON-TRANSFERABLE LETTER OF CREDIT NO. [            ] (THE "CREDIT")

With reference to the above Credit, we hereby certify that:

(a) we have provided general banking facilities to [                ] [and its
    subsidiaries] incorporated in [                     ];

(b) an aggregate amount (the "PAYMENT AMOUNT") of [                ] (comprising
    [                  ] of principal and [              ] of interest and/or
    other charges) fell due for payment in [                ] by [         ] 
    on [           ] and remains due and unpaid at the date of this Certificate;

(c) save for the Credit, there is no security (whether in the nature of a
    mortgage, charge, pledge, lien or other security interest), guarantee,
    indemnity or other like arrangements securing payment to us of the Payment
    Amount granted or provided by any other member of the Group.

Accordingly, we hereby request payment pursuant to the Credit of the Payment
Amount.  Payment is to be made to our account (A/c No. [            ]) with 
[       ] at [                    ].

Yours faithfully,




-------------------------------------
for and on behalf of
[                       ]

                                      192
<PAGE>
 
                                   EXHIBIT B



To: Chase Manhattan International Limited (the "FACILITY AGENT")
    for itself and on behalf of
    the other parties to the Facility
    Agreement and the Intercreditor Agreement
    referred to below.

This Certificate ("NOVATION CERTIFICATE") relates to a facility agreement
(together with and as supplemented and amended by all Accession Agreements,
Novation Certificates and other agreements from time to time entered into in
relation to it, the "FACILITY AGREEMENT") dated [         ], 1998 made between,
amongst others, The Derby Cycle Corporation and various of its Subsidiaries as
Borrowers and Guarantors, Chase Manhattan plc as Arranger, the financial
institutions named therein as Banks, Chase Manhattan International Limited as
Facility Agent and as Security Agent for the Banks in respect of a revolving
credit facility of up to DM214,000,000 and to the Intercreditor Agreement
referred to in the Facility Agreement.  Terms defined in the Facility Agreement
shall unless defined herein, have the same meanings herein as in the Facility
Agreement.

1.  [Existing Bank] (the "EXISTING BANK"):

    (a)       confirms that the details appearing in the Schedule hereto under
              the headings "Existing Bank's Commitments (Portion Substituted)",
              "Existing Bank's Participations in Advances (Portion Novated)" and
              "Outstanding Standby L/Cs of Credit" are accurate; and

    (b)       requests [      ] (the "NEW BANK") to accept and procure the
              substitution pursuant to Clause 29 of the Facility Agreement [and
              Clause [       ] of the Intercreditor Agreement] of the Existing
              Bank by the New Bank in respect of the portion of its relevant
              Commitment(s) specified under the heading "Existing Bank's
              Revolving Commitment (Portion Novated)" and "Existing Bank's
              Standby L/C Commitment (Portion Novated)" in the Schedule hereto
              and/or in respect of the Advance(s) referred to under the heading
              "Existing Bank's portion of Outstanding Advances (Portion
              Novated)" and/or in respect of the Standby L/Cs referred to under
              the heading "Existing Bank's participation in Outstanding Standby
              L/Cs (Portion Novated)" by counter-signing the copy of this
              Novation Certificate executed by the Existing Bank and delivering
              the same to the Facility Agent.

2.  The New Bank hereby requests the Obligors, the Arranger, the Banks, and the
    Agents and the other parties to the Intercreditor Agreement to accept this
    duly executed Novation Certificate as being delivered pursuant to and for
    the purposes of Clause 29 of the Facility Agreement and Clauses [  ], [  ]
    and [  ] of each of the Intercreditor Agreements so as to take effect in
    accordance with its terms under such Clauses on [date of novation].

3.  The New Bank hereby (a) confirms receipt of a copy of the Finance Documents
    as at the date hereof and all such other documents and information as it has

                                      193
<PAGE>
 
    required in connection herewith, (b) accepts and confirms the application of
    the provisions of Clause 29 of the Facility Agreement and Clauses [  ], [  ]
    and [  ] of each of the Intercreditor Agreements as they apply in connection
    herewith and the transactions and matters to occur in consequence hereof,
    and (c) confirms the correctness of the details specified in respect to it
    in the Schedule hereto.

4.  The New Bank confirms that:

    (a)       it has received a copy of the Finance Document together with such
              other documents and information as it has required in connection
              with this transaction;

    (b)       it has not relied and will not hereafter rely on the Existing Bank
              to check or enquire on its behalf into the legality, validity,
              effectiveness, adequacy, accuracy or completeness of any such
              documents or information;

    (c)       it has made its own independent investigation and assessment of
              the financial affairs of each Obligor and their related entities
              and the other parties considered by it to be relevant in
              connection with this transaction and agrees that it has not relied
              and will not rely on the Existing Bank, the Arranger, the Facility
              Agent, the Security Agent or the Banks to assess or keep under
              review on its behalf the financial condition, creditworthiness,
              condition, affairs, status or nature of any member of the Group or
              any other party to the Finance Documents (save as otherwise
              expressly provided therein);

    (d)       it has power and authority to become a party to the Finance
              Documents and has taken all necessary action to authorise
              execution of this Novation Certificate and has obtained all
              necessary approvals and consents to the assumption of its
              obligations under the Facility Agreement and the Intercreditor
              Agreements; and

    (e)       it is a Qualifying Bank;

5.  The New Bank hereby undertakes with the Existing Bank and each of the other
    parties to the Facility Agreement and each of the Intercreditor Agreements
    that it will perform in accordance with its terms all those obligations
    which by the terms of the Senior Facility Agreement and the Intercreditor
    Agreements will be assumed by it under the Senior Finance Documents after
    delivery of the executed copies of this Novation Certificate to the Facility
    Agent and countersignature thereof by the Facility Agent, and the New Bank
    hereby undertakes to be bound by the provisions of the Senior Finance
    Documents.

6.  The Existing Bank hereby gives notice that nothing herein or any Senior
    Finance Document (or any other document relating thereto) shall oblige the
    Existing Bank (i) to accept a re-transfer from or novation by the New Bank
    of the whole or any part of its rights, benefits and/or obligations under
    the Finance Documents or (ii) to support any losses directly or indirectly 
    sustained or incurred by the New Bank for any reason whatsoever including, 
    without limitation, the non-performance by any Obligor or any other party 
    to the Finance Documents (or any document relating thereto) of their 
    obligations under any such document.  The New Bank hereby acknowledges the
    absence of any such obligation as is referred to in paragraphs (i) and 
    (ii) above.

                                      194
<PAGE>
 
7.  This Novation Certificate shall be governed by and construed in accordance
    with English law.

8.  This Novation Certificate may be executed in any number of counterparts and
    all of such counterparts taken together shall be deemed to constitute one
    and the same instrument.




                                      195
<PAGE>
 
                                   SCHEDULE 8

                          FORM OF NOVATION CERTIFICATE


To: Chase Manhattan International Limited (the "FACILITY AGENT")
    for itself and on behalf of
    the other parties to the Facility
    Agreement and the Intercreditor Agreements
    referred to below.

This Certificate ("NOVATION CERTIFICATE") relates to a facility agreement
(together with and as supplemented and amended by all Accession Agreements,
Novation Certificates and other agreements from time to time entered into in
relation to it, the "FACILITY AGREEMENT") dated [         ], 1998 made between,
amongst others, The Derby Cycle Corporation and various of its Subsidiaries as
Borrowers and Guarantors, Chase Manhattan plc as Arranger, the financial
institutions named therein as Banks, Chase Manhattan International Limited as
Facility Agent and as Security Agent for the Banks in respect of a revolving
credit facility of up to DM214,000,000 and to the Intercreditor Agreements
referred to in the Facility Agreement.  Terms defined in the Facility Agreement
shall unless defined herein, have the same meanings herein as in the Facility
Agreement.

1.  [Existing Bank] (the "EXISTING BANK"):

    (a)       confirms that the details appearing in the Schedule hereto under
              the headings "Existing Bank's Commitments (Portion Substituted)",
              "Existing Bank's Participations in Advances (Portion Novated)" and
              "Outstanding Standby L/Cs of Credit" are accurate; and

    (b)       requests [      ] (the "NEW BANK") to accept and procure the
              substitution pursuant to Clause 29 of the Facility Agreement [and
              Clause 9 of the Intercreditor Agreement] of the Existing Bank by
              the New Bank in respect of the portion of its relevant
              Commitment(s) specified under the heading "Existing Bank's
              Revolving Commitment (Portion Novated)" and "Existing Bank's
              Standby L/C Commitment (Portion Novated)" in the Schedule hereto
              and/or in respect of the Advance(s) referred to under the heading
              "Existing Bank's portion of Outstanding Advances (Portion
              Novated)" and/or in respect of the Standby L/Cs referred to under
              the heading "Existing Bank's participation in Outstanding Standby
              L/Cs (Portion Novated)" by counter-signing the copy of this
              Novation Certificate executed by the Existing Bank and delivering
              the same to the Facility Agent.

2.  The New Bank hereby requests the Obligors, the Arranger, the Banks, and the
    Agents and the other parties to the Intercreditor Agreements to accept this
    duly executed Novation Certificate as being delivered pursuant to and for
    the purposes of Clause 29 of the Facility Agreement and Clauses 9, [  ] and
    [  ] of the Intercreditor Agreements so as to take effect in accordance with
    its terms under such Clauses on [date of novation].

                                      196
<PAGE>
 
3.  The New Bank hereby (a) confirms receipt of a copy of the Finance Documents
    as at the date hereof and all such other documents and information as it has
    required in connection herewith, (b) accepts and confirms the application of
    the provisions of Clause 29 of the Facility Agreement and Clauses 9, [  ], [
    ] and [  ] of the Intercreditor Agreements as they apply in connection
    herewith and the transactions and matters to occur in consequence hereof,
    and (c) confirms the correctness of the details specified in respect to it
    in the Schedule hereto.

4.  The New Bank confirms that:

    (a)       it has received a copy of the Finance Document together with such
              other documents and information as it has required in connection
              with this transaction;

    (b)       it has not relied and will not hereafter rely on the Existing Bank
              to check or enquire on its behalf into the legality, validity,
              effectiveness, adequacy, accuracy or completeness of any such
              documents or information;

    (c)       it has made its own independent investigation and assessment of
              the financial affairs of each Obligor and their related entities
              and the other parties considered by it to be relevant in
              connection with this transaction and agrees that it has not relied
              and will not rely on the Existing Bank, the Arranger, the Facility
              Agent, the Security Agent or the Banks to assess or keep under
              review on its behalf the financial condition, creditworthiness,
              condition, affairs, status or nature of any member of the Group or
              any other party to the Finance Documents (save as otherwise
              expressly provided therein);

    (d)       it has power and authority to become a party to the Finance
              Documents and has taken all necessary action to authorise
              execution of this Novation Certificate and has obtained all
              necessary approvals and consents to the assumption of its
              obligations under each of the Facility Agreement and the
              Intercreditor Agreements; and

    (e)       it is a Qualifying Bank;

5.  The New Bank hereby undertakes with the Existing Bank and each of the other
    parties to the Facility Agreement and the Intercreditor Agreements that it
    will perform in accordance with its terms all those obligations which by the
    terms of the Senior Facility Agreement and the Intercreditor Agreements will
    be assumed by it under the Senior Finance Documents after delivery of the
    executed copies of this Novation Certificate to the Facility Agent and
    countersignature thereof by the Facility Agent, and the New Bank hereby
    undertakes to be bound by the provisions of the Senior Finance Documents.

6.  The Existing Bank hereby gives notice that nothing herein or any Senior
    Finance Document (or any other document relating thereto) shall oblige the
    Existing Bank (i) to accept a re-transfer from or novation by the New Bank
    of the whole or any part of its rights, benefits and/or obligations under 
    the Finance Documents or (ii) to support any losses directly or indirectly 
    sustained or incurred by the New Bank for any reason whatsoever including, 
    without limitation, the non-performance by any Obligor or any other party 
    
                                      197
<PAGE>
 
    to the Finance Documents (or any document relating thereto) of their
    obligations under any such document. The New Bank hereby acknowledges the
    absence of any such obligation as is referred to in paragraphs (i) and 
    (ii) above.

7.  This Novation Certificate shall be governed by and construed in accordance
    with English law.

8.  This Novation Certificate may be executed in any number of counterparts and
    all of such counterparts taken together shall be deemed to constitute one
    and the same instrument.

                                      198
<PAGE>
 
                                  THE SCHEDULE

1.  Existing Bank's Revolving Commitment: (Portion Novated)

2.  Existing Bank's portion of Outstanding Advances: (Portion Novated)
<TABLE> 
<CAPTION> 
    DRAWDOWN DATE    AMOUNT          REPAYMENT DATE
    <S>              <C>             <C> 

    [            ]   [           ]   [            ]

<CAPTION> 
3.  Existing Bank's Standby L/C Commitment: (Portion Novated)

4.  Existing Bank's participation in Outstanding Standby L/Cs: (Portion Novated)
    <S>              <C>             <C> 
    Issue Date       Amount          Expiry Date

    [            ]   [           ]   [            ]
<CAPTION> 
NB. PLEASE NOTE CLAUSE 29.2(C) REGARDING THE PROPORTION OF REVOLVING COMMITMENT
    AND STANDBY L/C COMMITMENT THAT ARE REQUIRED TO BE TRANSFERRED.
</TABLE> 
<TABLE> 
<S>                                  <C> 
[Name of Existing Bank]              [Name of New Bank]

By:                                  By:
Date:                                Date:

[Name of Facility Agent]

By:
Date:

</TABLE> 
CHASE MANHATTAN INTERNATIONAL LIMITED
for itself and as the Facility Agent, Security
Agent, and for and on behalf of the Obligors,
the Arranger, the Banks and for and on behalf
of the parties to the Intercreditor Agreements

By:


Date:

                                      199
<PAGE>
 
                                   SCHEDULE 9

                                ADDITIONAL COSTS


1.  For the purpose of this Agreement, the cost of compliance with existing
    requirements of the Bank of England and/or the Financial Services Authority
    (or any other authority which replaces all or any of their functions) in
    respect of Advances will be calculated by the Facility Agent in relation to
    each of the first day of each in respect of such Advance and, if the
    Interest Period of such Advance exceeds three months, at three calendar
    monthly intervals from the first day of such Term during its duration in
    accordance with the following formula:

                     AB+C(B-D) + E x 0.01 per cent. per annum
                     --------------------                    
                        100 - (A+C)

    Where:

    A         is the percentage of eligible liabilities (assuming these to be in
              excess of any stated minimum) which the Facility Agent is from
              time to time required to maintain as an interest free cash ratio
              deposit with the Bank of England to comply with cash ratio
              requirements;

    B         is the percentage rate per annum at which sterling deposits are
              offered by the Facility Agent in accordance with its normal
              practice, for a period equal to (a) the relevant Term (or, as the
              case may be, remainder of such Term in respect of the relevant
              Advance) or (b) three months, whichever is the shorter, to a
              leading bank in the London Interbank Market at about 11.00 a.m. in
              a sum approximately equal to the amount of such Advance;

    C         is the percentage of eligible liabilities which the Facility Agent
              is required from time to time to maintain as interest bearing
              special deposits with the Bank of England;

    D         is the percentage rate per annum payable by the Bank of England to
              the Facility Agent on interest bearing special deposits; and

    E         is the rate payable by the Facility Agent to the Financial
              Services Authority pursuant to the Fees Regulations (but, for this
              purpose, the figure at paragraph 2.03b of the Fees Regulations
              shall be deemed to be zero) and expressed in pounds per
              (Pounds)1,000,000 of the Fee Base of the Agent.

2.  For the Purpose of this Schedule:

    (a)       "eligible liabilities" and "special deposits" shall bear the
              meanings as ascribed to them from time to time under or pursuant
              to the Bank of England Act 1988 or (as appropriate) by the Bank of
              England;

                                      200
<PAGE>
 
    (b)       "Fee Regulations" means the Banking Supervision (Fees) Regulations
              1998 or such other regulations as may be in force from time to
              time in respect of the payment of fees for banking supervision;
              and

    (c)       "Fee Base" shall bear the meaning ascribed to it, and shall be
              calculated in accordance with, the Fees Regulations.

3.  The percentage used in A and C above shall be those required to be
    maintained on the first day of the relevant period as determined in
    accordance with B above.

4.  In application of the above formula, A, B, C and D will be included in the
    formula as figures and not as percentages e.g. if A is 0.5 per cent. and B
    is 12 per cent., AB will be calculated as 0.5 x 12 and not as 0.5 per cent.
    x 12 per cent.

5.  Calculations will be made on the basis of a 365 day year (or, if market
    practice differs, in accordance with market practice).

6.  A negative result obtained by subtracting D from B shall be taken as zero.

7.  The resulting figures shall be rounded upwards, if not already such a
    multiple, to the nearest whole multiple of one-thirty-second of one per
    cent. per annum.

8.  Additional amounts calculated in accordance with this Schedule are payable
    on the last day of the Term to which they relate.

9.  The determination of the Additional Costs by the Facility Agent in relation
    to any period shall, in the absence of manifest error, be conclusive and
    binding on all of the parties hereto.

10. The Facility Agent may from time to time, after consultation with the
    Borrower and the Banks, determine and notify to all parties any amendments
    or variations which are required to be made to the formula set out above in
    order to comply with any requirements from time to time imposed by the Bank
    of England or the Financial Services Authority (or any other authority which
    replaces all or any of their functions) in relation to Advances (including
    any requirements relating to sterling primary liquidity) and, any such
    determination shall, in the absence of manifest error, be conclusive and
    binding on all the parties hereto.

                                      201
<PAGE>
 
                                  SCHEDULE 10

                             COMPLIANCE CERTIFICATE



To: The Facility Agent and each of the Banks
    (as defined in the Facility Agreement)



                                                                          [Date]

The undersigned hereby certifies that to the best of their information,
knowledge and belief after all due enquiry but without personal liability:

1.  This certificate is given pursuant to Clause 19.1 (Compliance Certificate)
    of an agreement dated [                ] (the "FACILITY AGREEMENT") made
    between inter alios, The Derby Cycle Corporation and certain of its
    Subsidiaries as Borrowers and Guarantors and the parties defined therein as
    the Facility Agent, the Arranger, the Security Agent and the Banks. Terms
    defined in the Facility Agreement shall, unless otherwise defined herein,
    bear the same meaning when used herein.

2.  Terms defined in the Facility Agreement shall bear the same meaning herein.

3.  We confirm that as at [insert appropriate Accounting Date]:

    (a)       The ratio of Consolidated Adjusted EBITDA to Consolidated Net
              Interest Payable, was [    ];

    (b)       Consolidated Net Worth was [        ];

    (c)       [NB. ONLY INCLUDE IF THE CERTIFICATE RELATES TO PERIOD OCCURRING
              AFTER 31 DECEMBER 1999]  The ratio of Net Average Financial
              Indebtedness to Consolidated Adjusted EBITDA was [       ];

    (d)       Consolidated Adjusted EBITDA was [            ];

    (e)       Debtor Days was [    ]; [and]

    (f)       Inventory Days was [       ]; [and]

    (g)       [NB. ONLY INCLUDE IF THE CERTIFICATE IS IN RESPECT OF A PERIOD
              PRIOR TO OR INCLUSIVE OF 31 DECEMBER 1999]  The aggregate
              Financial Indebtedness of the Group was [                ].

                                      202
<PAGE>
 
4.  We set out below the computations giving rise to the above ratios and
figures, each of which has been made in accordance with the provisions of the
Facility Agreement;

5.  We therefore confirm, that as at [insert relevant Accounting Date] each of
    the financial conditions specified at Clause 20 of the Facility Agreement
    [was/was not] satisfied.

6.  No Default has occurred and is continuing as of the date hereof.



---------------------------------------
for and on behalf of
THE DERBY CYCLE CORPORATION

                                      203
<PAGE>
 
                                  SCHEDULE 11

                             MATERIAL GROUP MEMBERS



Derby Holding Limited
Raleigh Industries Limited
Raleigh International Limited
Sturmey-Archer Limited
Raleigh Industries of Canada Limited
The Derby Cycle Corporation
Raleigh BV
Raleigh Europe BV
Koninklijke Gazelle BV
Derby Nederland BV
Derby Holding BV
Sturmey-Archer Limited B.V
Lyon Investments BV
Derby Holding (Deutschland) GmbH
Raleigh Fahrrader GmbH
NW Sportgerate GmbH
Derby Cycle Werke GmbH
Englebert Wiener Bike Parts GmbH
Univega Worldwide GmbH
Univega Beteiligungen GmbH
Univega Bikes & Sports Europe GmbH (formerly MS Sport Vertiebs GmbH)
Derby Farrader GmbH
Derby WS
Vermogenswerwaltungs GmbH
Winora Staiger GmbH
Curragh Finance Company
Raleigh Ireland Limited
InterDerby Group Finance N.V.

The British Cycle Corporation Limited
Derby Investment Holding (Pty) Limited
Pro Bike South Africa (Pty) Limited

                                      204
<PAGE>
 
                                  SCHEDULE 12

                               DESCRIPTION OF ECU


The ECU is from time to time used as the unit of account of the European
Communities.  Changes to the ECU may be made by the European Communities, in
which event the ECU will change accordingly.  However, under Article 109G of the
Treaty establishing the European Communities, as amended by the Treaty on
European Union (the "Treaty"), the currency composition of the ECU may not be
changed.  The Treaty contemplates that European monetary union will occur in
three stages, the second of which began on 1 January 1994 (following the entry
into force of the Treaty on European Union).  The Treaty provides that, at the
start of the third stage of European monetary union, the value of the ECU as
against the currencies of the member states participating in the third stage
(and the conversion rates at which such currencies shall be substituted by the
ECU) will be irrevocably fixed, and the ECU will become a currency in its own
right.  In contemplation of that third stage, the European Council meeting in
Madrid on 16 December 1995 decided that the name of that currency will be the
euro and that, in accordance with the Treaty, substitution of the euro for the
ECU (and of references to the euro for references to the ECU) will be at the
rate of one euro for one ECU.  From the start of the third stage of European
monetary union, all payments expressed to be payable in ECU, or sums to be
calculated by reference to ECU, will be payable in, or calculated by reference
to, euro at the rate then established in accordance with the Treaty.

                                      205
<PAGE>
 
PREVIOUS SCHEDULE 13 (FORM OF BANK ACCESSION NOTICE) DELETED AS IT RELATED
SOLELY TO THE POTENTIAL INCREASE IN THE FACILITY AMOUNT.





                                      206
<PAGE>
 
                                  SCHEDULE 13

                                 NOMINEE NOTICE


To:  Chase Manhattan International Limited (the "FACILITY AGENT")
     for itself and on behalf of the other parties to the
     Facility Agreement and the Intercreditor Agreement
     referred to below


THIS NOTICE ("NOMINEE NOTICE") relates to a facility agreement as amended by an
Amendment Agreement dated [    ] (together with and as supplemented and amended
by all Accession Agreements, Novation Certificates and other agreements from
time to time entered into in relation to it (the "FACILITY AGREEMENT") dated 12
May 1998 made between, amongst others, The Derby Cycle Corporation and various
of its Subsidiaries as Borrowers and Guarantors, Chase Manhattan plc as
Arranger, the financial institutions named therein as Banks, Chase Manhattan
International Limited as Facility Agent and as Security Agent for the Banks in
respect of a revolving credit facility of up to DM214,000,000 and to the
Intercreditor Agreements referred to in the Facility Agreement.  Terms defined
in the Facility Agreement shall unless defined herein, have the same meanings
herein as in the Facility Agreement.

1.     The Nominated Affiliate hereby requests the Obligors, the Arranger, the
       Banks and the Agents and the other parties to the Intercreditor Agreement
       to accept this duly executed Nominee Notice as being delivered pursuant
       to Clause 7.3 of the Facility Agreement for the purposes of permitting it
       to discharge the Nominating Banks' obligations under the Facility
       Agreement to provide an Ancillary Facility.

2.     AGREEMENTS, CONFIRMATIONS AND REPRESENTATIONS

       2.1  The Nominated Affiliate hereby:

              2.1.1  confirms that it has received a copy of the Facility
                     Agreement and the Intercreditor Agreements, together with
                     such other documents and information as it has required in
                     connection herewith and therewith;

              2.1.2  agrees to become, with effect from the date of delivery of
                     this Nominee Notice, an Ancillary Bank under the Facility
                     Agreement, and a Bank under the Intercreditor Agreements,
                     agrees to be bound in that capacity with effect from such
                     date by the terms of the Facility Agreement and the
                     Intercreditor Agreements and undertakes accordingly to
                     perform its obligations as a Bank thereunder;

              2.1.3  confirms the accuracy of the information set out under its
                     name at the end of this Nominee Notice;

                                      207
<PAGE>
 
              2.1.4  confirms that it has not relied on the Arranger, the Banks,
                     the Facility Agent or the Security Agent to assess or
                     inform it as to the legality, validity, effect or
                     enforceability of the Facility Agreement or the
                     Intercreditor Agreements or any other document referred to
                     therein or the accuracy or completeness of any such
                     information as is referred to in paragraph 2.1.1 above or
                     the creditworthiness, affairs, condition or status of any
                     of the parties to the Facility Agreement, the Intercreditor
                     Agreements or any such other document.

       2.2  The Borrower(s), the Guarantor(s), the Arranger, the Facility Agent,
            the Security Agent, the Banks and the parties to the Intercreditor
            Agreements hereby agree amongst themselves and with the Ancillary
            Bank that the Ancillary Bank shall become party to the Facility
            Agreement and the Intercreditor Agreements with effect from the
            date of this Accession Agreement.

3.     LAW

       This Nominee Notice shall be governed by and construed in accordance with
       English law.

IN WITNESS WHEREOF the parties hereto have caused this Nominee Notice to be duly
executed on the date first written above.

SIGNATURES

NOMINATED AFFILIATE:

[                    ]

<TABLE> 
<CAPTION> 
FACILITY AGENT:
<S>                                       <C> 
CHASE MANHATTAN INTERNATIONAL               )
LIMITED for itself and as the Facility      )
Agent and Security Agent for and on         )
behalf of the Arranger and the Banks        )
<CAPTION> 
By:


OBLIGORS' AGENT
<S>                                       <C> 
DERBY CYCLE CORPORATION                     )
for itself as the Company                   )
and for and on behalf of each of the        )
Borrowers and Guarantors                    )
</TABLE> 
                                      208
<PAGE>
 
                                  SCHEDULE 14

                               SECURITY DOCUMENTS


THE SECURITY AGENT WILL BE A PARTY TO THE FOLLOWING SECURITY DOCUMENTS WHICH
WILL BE GOVERNED BY AND SUBJECT TO THE APPLICABLE LAWS OF THE COUNTRIES AS
INDICATED BELOW:
<TABLE> 
<CAPTION> 
    DOCUMENT                                    OBLIGOR GIVING SECURITY
    --------                                    -----------------------

<S>                                             <C>
1.     NETHERLANDS
       -------------------------------
 
(a)    FIRST PLEDGE OF INTELLECTUAL             Koninklijke Gazelle BV
       PROPERTY RIGHTS
 
(b)    FIRST PLEDGE OF RECEIVABLES              Lyon Investments BV
       (each Obligor will enter into a          Derby Nederland BV
       separate pledge)                         Sturmey-Archer Europa BV
                                                Raleigh BV
                                                Raleigh Europe BV
                                                Derby Holding BV
                                                Koninklijke Gazelle BV
(c)    FIRST PLEDGE OF TANGIBLES                Raleigh BV
       (each Obligor will                       Koninklijke Gazelle BV
       enter into a separate pledge)
 
(d)    MORTGAGE OF REAL PROPERTY                Koninklijke Gazelle BV

(e)    DUTCH LAW SHARE PLEDGES: over the
       following shares:

       (i)  Lyon Investments BV (66_%)          The Derby Cycle Corporation
       (ii) Derby Holding BV (66_%)

       Derby Nederland BV                       Lyon Investments BV

       (i) Sturmey-Archer Europa BV             Derby Nederland BV
       (ii) Raleigh BV
       (iii) Koninklijke Gazelle BV
 
       NV Dierense Maatschapij Tot              Koninklijke Gazelle BV
       Exploitatie van Woningen en Asuranien   

       Raleigh Europe BV                        Derby Holding BV
</TABLE> 
                                      209
<PAGE>
 
<TABLE> 
<CAPTION> 
2.  CANADA
    ------
<S>                                             <C>
 
(a)  GENERAL SECURITY AGREEMENT                 Raleigh Industries of Canada Limited

 
(b)  CHARGE/MORTGAGE OF LAND                    Raleigh Industries of Canada Limited
 
(c)  HYPOTHEC ON MOVEABLE PROPERTY              Raleigh Industries of Canada Limited (Les Industries
                                                Raleigh du Canada Limitee)
 
(d)  HYPOTHEC ON IMMOVEABLE PROPERTY            Raleigh Industries of Canada Limited (Les Industries
                                                Raleigh du Canada Limitee)

(e)  CANADIAN LAW PLEDGE over shares
     in the following:

     Century Cycle Manufacturing                Raleigh Industries of Canada Limited
     Corporation

3.   UNITED STATES OF AMERICA
     ------------------------

(a)  SECURITY AGREEMENT                         The Derby Cycle Corporation

(b)  US LAW SHARE PLEDGE over shares
     in the following:

     (i)   Derby Trading Co. Inc.                The Derby Cycle Corporation
     (ii)  Lyon Investments BV (66 2/3%)
     (iii) Sturmey-Archer Limited (66 2/3%)
     (iv)  Derby Holding BV (66 2/3%)
     (v)   Raleigh Industries of Canada Limited
           (66 2/3%)
     (vi)  Derby Holding (Deutschland) GmbH
           (5%)

(c)  US PATENT ASSIGNMENT FOR SECURITY          The Derby Cycle Corporation 
     PURPOSES                                                               
                                                                            
(d)  US PATENT AND TRADEMARK SECURITY           The Derby Cycle Corporation  
     AGREEMENT                                  
 
(e)  US AMENDMENT TO SECURITY AGREEMENT         The Derby Cycle Corporation

(f)  US AMENDMENT TO PATENT AND TRADEMARK       The Derby Cycle Corporation 
     SECURITY AGREEMENT                         
 
(g)  US PATENT ASSIGNMENT FOR SECURITY          The Derby Cycle Corporation
     PURPOSES
</TABLE>
                                      210
<PAGE>
 
<TABLE> 
<S>                                             <C>
(h) Leasehold Deed of Trust                     The Derby Cycle Corporation
                                              
4.  DUTCH ANTILLES                             
    --------------                             
                                              
(a) SECURITY AGREEMENT                          InterDerby Group Finance NV
                                              
(b) DUTCH ANTILLES LAW PLEDGE over shares in   
    the following:                             
                                              
    InterDerby Group NV                         Derby Holding (Deutschland) GmbH
    in respect of its shares in:               
                                              
5.  HONG KONG                                  
    ---------                                  
                                              
(a) HONG KONG LAW CHARGE Over Shares in        
    the following:                             
                                              
    Derby (HK) Trading Company Limited          Derby Trading Co. Inc.
                                              
6.  IRELAND                                    
    -------                                    
                                              
(a) DEBENTURE                                  
    (each Obligor will enter into a             Raleigh Ireland Limited
    separate Debenture)                         Curragh Finance Company
                                              
(b) IRISH LAW PLEDGES over the share           
    in the following:                          
                                              
    Curragh Finance Company Limited             N.W. Sportgerate GmbH
    (49%)                                      
                                              
    (i)  Raleigh Ireland Limited                Derby Holding BV
    (ii) Curragh Finance Company Limited       
         (50%)                                 

(c) IRISH SUPPLEMENTAL DEED                     Raleigh Ireland Limited
                                                Curragh Finance Company

7.  GERMANY
    -------

(a) SECURITY AGREEMENTS WITH FOLLOW UP          Derby Cycle Werke GmbH
    ASSIGNMENTS                                 Englebert Wiener Bike-Parts GmbH
    (each Obligor will enter into a             Raleigh Fahrrader GmbH
    separate document):                         Winora Staiger GmbH
                                                Univega Bikes & Sports Europe GmbH
                                                (formerly MS Sport Vertriebs GmbH)
                                                Derby Fahrrader GmbH 
</TABLE> 
                                      211
<PAGE>
 
<TABLE> 
<S>                                             <C>

(b) DEEDS OF ASSIGNMENT IN RESPECT OF           Derby Cycle Werke GmbH
    TANGIBLE MOVEABLE PROPERTY:                 Englebert Wiener Bike-Parts GmbH
    (each Obligor will enter into a             Derby Fahrrader GmbH
    separate document):                         Winora-Staiger GmbH

 
(c) ASSIGNMENTS OF OWNER'S LAND CHARGES:        Derby Cycle Werke GmbH
    (each Obligor will enter into a             Englebert Wiener Bike-Parts GmbH
    separate document):
 
(d) INSURANCE ASSIGNMENT AGREEMENTS:            Derby Cycle Werke GmbH
    (each Obligor will enter into a             Raleigh Fahrrader GmbH
    separate document):                         Winora-Staiger GmbH
                                                Englebert Wiener Bike Parts GmbH
                                                Univega Bikes & Sports Europe GmbH
                                                (formerly MS Sport Vertriebs GmbH)
                                                Derby Fahrrader GmbH
 
(e) INTELLECTUAL PROPERTY PLEDGE:               Derby Cycle Werke GmbH
    (each Obligor will enter into a             Univega Bikes & Sports Europe GmbH
    separate document):                         (formerly MS Sport Vertriebs GmbH)
                                                Univega Worldwide Licence GmbH
                                                Winora-Staiger GmbH
 
(f) ASSIGNMENT OF INTER-COMPANY                 Raleigh Fahrrader GmbH
    INDEBTEDNESS:                               Derby Cycle Werke GmbH
    (each Obligor will enter into a             Univega Worldwide Licence GmbH
    separate document):                         Winora-Staiger GmbH
                                                Derby Holding (Deutschland) GmbH
                                                Englebert Wiener Bike Parts GmbH
                                                Univega Bikes & Sports Europe GmbH
                                                (formerly MS Sport Vertriebs GmbH)

(g) SECURITISATION PLAN                         Derby Cycle Werke GmbH
                                                Derby Holding (Deutschland) GmbH
                                                Derby Fahrrader GmbH
                                                Derby WS Vermogensverwaltungs GmbH
                                                NW Sportgerate GmbH
                                                Univega Beteiligungen GmbH
                                                Univega Worldwide Licence GmbH
                                                Raleigh Fahrrader GmbH
                                                Englebert Wiener Bike Parts GmbH
                                                Univega Bikes & Sports Europe GmbH
                                                (formerly MS Sport Vertriebs GmbH)
                                                Winora-Staiger GmbH
</TABLE> 
                                      212
<PAGE>
 
<TABLE> 
<S>                                             <C>
(h) GERMAN AMENDMENT AGREEMENT:                 Univega Worldwide Licence GmbH
                                                Winora-Staiger GmbH
                                                Derby Holding (Deutschland) GmbH
                                                Englebert Wiener Bike Parts GmbH
                                                Univega Bikes & Sports Europe GmbH
                                                (formerly MS Sport Vertriebs GmbH)
                                              
(i) BLANKET ASSIGNMENTS                         Univega Worldwide Licence GmbH
                                                NW Sportgerate Vertriebs GmbH

(j) GERMAN LAW PLEDGES over the following
    shares:

    Derby Holding (Deutschland) GmbH            The Derby Cycle Corporation

    (i)   Derby Fahrrader GmbH                  Derby Holding (Deutschland) GmbH
    (ii)  Raleigh Fahrrader GmbH
    (iii) Derby WS Vermogensverwaltungs
          GmbH
    (iv)  Univega Beteilingungen GmbH
    (v)   Univega Worldwide Licence GmbH

    Derby Cycle Werke GmbH                      Raleigh Fahrrader GmbH

    Winora-Staiger GmbH                         Derby Vermogensverwaltungs
                                                Gesellschaft GmbH
    (i)   Univega Bike & Sports Europe GmbH
          (formerly MS Sport Vertriebs GmbH)    Univega Beteiligungen GmbH
    (ii)  MS Sport AG

    Engelbert Wiener Bike-Parts GmbH            Lyon Investments BV
    NW Sportgerate GmbH                         Derby Cycle Werke GmbH

    NW Sportgerate GmbH                         Derby Cycle Werke GmbH

    Curragh Finance Company (49%)               NW Sportgerate GmbH

    Derby Holding (Deutschland) GmbH            Derby Holding BV

8.  ENGLAND
    -------

(a) English Debenture                           Derby Holding Limited
    (global debenture for all English           Raleigh Industries Limited
    Obligors)                                   Raleigh International Limited
                                                Sturmey-Archer Limited
</TABLE> 
                                      213
<PAGE>
 
<TABLE> 
<S>                                             <C>  
                                                The British Cycle Corporation Limited
                                                BSA Cycles Limited
                                                The Triumph Cycle Company Corporation

(b) English Law Charge over Shares in
    the following Company:

    Sturmey-Archer Limited (66 2/3)             The Derby Cycle Corporation

    Various                                     Raleigh (Services) Limited

9.  SWEDEN
    ------

(a) Swedish Law Pledge over Shares in
    the following Company:

    Derby Sweden AB                             The Derby Cycle Corporation

(b) Derby Sweden AB
    Floating Charge

(c) Pledge over Patents and                     Derby Sweden AB
    Trademarks
</TABLE> 
                                      214
<PAGE>
 
THE DERBY CYCLE CORPORATION

By:



THE OTHER BORROWERS


RALEIGH INDUSTRIES LIMITED

By:



STURMEY-ARCHER LIMITED

By:



DERBY HOLDING (DEUTSCHLAND) GMBH

By:



KONINKLIJKE GAZELLE BV

By:



RALEIGH INDUSTRIES OF CANADA LIMITED

By:



RALEIGH EUROPE B.V.

By:

                                      215
<PAGE>
 
RALEIGH B.V.

By:



ENGLEBERT WIENER BIKE PARTS GMBH

By:



WINORA-STAIGER GMBH

By:



DERBY HOLDING LIMITED

By:



RALEIGH FAHRRADER GMBH

By:



DERBY CYCLE WERKE GMBH

By:



RALEIGH INTERNATIONAL LIMITED

By:



CURRAGH FINANCE COMPANY

By:

                                      216
<PAGE>
 
RALEIGH IRELAND LIMITED

By:



THE GUARANTORS


DERBY HOLDING LIMITED

By:



RALEIGH INDUSTRIES LIMITED

By:



RALEIGH INTERNATIONAL LIMITED

By:



STURMEY ARCHER LIMITED

By:



RALEIGH INDUSTRIES OF CANADA LIMITED

By:



THE DERBY CYCLE CORPORATION

By:

                                      217
<PAGE>
 
RALEIGH BV

By:



RALEIGH EUROPE BV

By:



KONINKLIJKE GAZELLE BV

By:



DERBY NEDERLAND BV

By:



DERBY HOLDING BV

By:



STURMEY ARCHER EUROPA B.V.

By:



LYON INVESTMENTS BV

By:



DERBY HOLDING (DEUTSCHLAND) GMBH

By:

                                      218
<PAGE>
 
RALEIGH FAHRRADER GMBH

By:



NW SPORTGERATE GMBH

By:



DERBY CYCLE WERKE GMBH

By:



ENGLEBERT WIENER BIKE PARTS GMBH

By:



UNIVEGA WORLDWIDE LICENCE GMBH

By:



UNIVEGA BETEILIGUNGEN GMBH

By:



UNIVEGA BIKER & SPORTS EUROPE GmbH
(formerly MS SPORT VERTRIEBS GMBH)

By:

                                      219
<PAGE>
 
DERBY FAHRRADER GMBH

By:



DERBY WS VERMOGENSWERWALTUNGS GMBH

By:



WINORA-STAIGER GMBH

By:



CURRAGH FINANCE COMPANY

By:



RALEIGH IRELAND LIMITED

By:



INTER-DERBY GROUP FINANCE B.V.

By:



THE BRITISH CYCLE CORPORATION LIMITED

By:



BSA CYCLES LIMITED

By:

                                      220
<PAGE>
 
TRIUMPH CYCLE CO. LIMITED

By:



RALEIGH (SERVICES) LIMITED

By:



The Banks

THE CHASE MANHATTAN BANK

By:



ABN AMRO BANK N.V.

By:



SCOTIABANK EUROPE PLC

By:



DRESDNER BANK AG, GRAND CAYMAN BRANCH

By:

                                      221
<PAGE>
 
BANK OF SCOTLAND

By:



MIDLAND BANK PLC

By:



LLOYDS BANK PLC

By:



THE SUMITOMO BANK, LIMITED

By:



BHF - BANK AG

By:



THE INDUSTRIAL BANK OF JAPAN, LIMITED

By:



SAO PAOLO IMI SPA

By:

                                      222
<PAGE>
 
KREDIETBANK (NEDERLAND) N.V.

By:



BANQUE NATIONALE DE PARIS

By:



THE GOVERNOR AND COMPANY OF
THE BANK OF IRELAND

By:



OLDENBURGISCHE LANDESBANK AG

By:



THE BANK OF NOVA SCOTIA

By:



THE FACILITY AGENT

CHASE MANHATTAN INTERNATIONAL LIMITED

By:



THE SECURITY AGENT

CHASE MANHATTAN INTERNATIONAL LIMITED

By:

                                      223
<PAGE>
 
The Arranger

CHASE MANHATTAN plc

By:

                                      224