THIRD AMENDMENT TO CREDIT AGREEMENT


THIS THIRD AMENDMENT TO CREDIT  AGREEMENT (this Amendment) is entered into as of
July 15, 1998,  among LANCER  PARTNERSHIP,  LTD.,  a Texas  limited  partnership
(Operating  Subsidiary),  and LANCER DE MEXICO,  S.A. de C.V., formerly known as
NUEVA DISTRIBUIDORA  LANCERMEX,  S.A. de C.V., a corporation organized under the
laws of Mexico (Mexico Subsidiary)  (Operating  Subsidiary and Mexico Subsidiary
are  hereinafter  referred to  individually  as a Borrower and  collectively  as
Borrowers);   LANCER   CORPORATION,   a  Texas  corporation   (Parent  Company);
LAN-LEASING,  INC.,  a  Delaware  corporation,   (Lan-Leasing),  LANCER  CAPITAL
CORPORATION,  a Delaware  corporation (Lancer Capital) and LANCER  INTERNATIONAL
SALES, INC., a Texas corporation  (Lancer  International)  (Lan-Leasing,  Lancer
Capital,  Lancer  International  and  Operating  Subsidiary,   individually,   a
Guarantor and  collectively,  the  Guarantors);  and THE FROST  NATIONAL BANK, a
national banking association,  individually and as agent for the Banks acting in
the manner  and to the  extent  provided  in  Article 8 (in such  capacity,  the
Agent),  NATIONSBANK,  N.A., a national  banking  association,  successor to THE
BOATMEN'S  NATIONAL  BANK OF ST.  LOUIS,  individually,  and each of the lenders
which becomes a party hereto as provided in Section 10.7  (individually,  a Bank
and collectively, the Banks).

                                    Recitals

I. Borrowers,  the Parent Company, the Agent and the other Banks have heretofore
entered  into  the  Credit  Agreement  dated as of July  15,  1996 (as  amended,
modified, restated and supplemented from time to time, the Credit Agreement).

     II. Borrower has requested that the Banks agree to increase their aggregate
Revolving  Commitments from $30,000,000 to $35,000,000  until July 15, 2001, and
to modify  certain of the  covenants  contained in Section  6.1(g) of the Credit
Agreement.

     III. The Banks are willing to agree to such  requested  change on the terms
and conditions set forth in this Amendment.

                                   Agreements

     In consideration of the foregoing premises, the mutual agreements contained
herein and other  good and  valuable  consideration  and  reasonably  equivalent
value, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:

     A.  Definitions.  Unless  otherwise  defined  herein,  terms defined in the
Credit Agreement and used herein shall have the respective meanings set forth in
the Credit Agreement.

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     B. Amendments. The Credit Agreement is hereby amended as follows:

          1.  Extension  of Increase in  Revolving  Commitments.  To reflect the
     increase  in  the  aggregate  Revolving   Commitments  of  all  Banks  from
     $30,000,000  to  $35,000,000  until July 15, 2001,  Annex A attached to the
     Credit  Agreement is hereby  amended and replaced  with Annex A attached to
     this  Amendment.  All  references  in the Credit  Agreement  and other Loan
     Documents to the Revolving  Commitments of the Banks shall thereafter refer
     to such revised amounts.

          2.  Renewal  Revolving  Notes.  To  evidence  Revolving  Loans made to
     Operating Subsidiary by each Bank up to the amount of such Bank's Revolving
     Commitment,  as revised  hereby,  Operating  Subsidiary  shall  execute and
     deliver to each Bank a Renewal  Revolving Note in the form attached  hereto
     as Exhibit A,  payable to the order of such Bank and in a stated  principal
     amount equal to such Bank's Revolving Commitment, as revised hereby. On the
     date hereof, Borrower shall execute and deliver to each Bank such a Renewal
     Revolving  Note as a renewal,  modification  and  increase of the  existing
     Renewal  Revolving  Note  issued  to  such  Bank  pursuant  to  the  Credit
     Agreement.  All  references  in the  Credit  Agreement  and the other  Loan
     Documents to the Revolving  Notes of the Banks shall hereafter refer to the
     Renewal Revolving Notes executed and delivered  pursuant to this Amendment,
     as further amended, modified,  restated,  supplemented,  renewed, extended,
     increased, refinanced and/or replaced from time to time.

          3.  Section  6.1(g)  is  hereby  amended  to read in its  entirety  as
     follows:

          (g) the ratio of (i)  Total  Funded  Debt as of the end of any  Fiscal
     Quarter to (ii) Consolidated  EBITDA for the four-quarter  period ending as
     of the end of such Fiscal  Quarter,  to be more than set out below opposite
     the period in which such Fiscal Quarter ends;  provided,  however, for each
     Fiscal  Quarter in which an  Acquisition  is  consummated,  and each Fiscal
     Quarter  ending  prior  thereto,  the  financial  information  necessary to
     determine  Consolidated EBITDA shall be adjusted to reflect, on a pro forma
     basis,  such  Acquisition  as if it had occurred as of the beginning of the
     first  of  such  Fiscal  Quarters  included  in the  relevant  four-quarter
     measurement period:

                     Fiscal Quarters Ended On or About Ratio

       Closing Date through 9/30/97                         3.00 to  1.00
       10/1/97 through 6/30/98                              3.25 to  1.00
       7/1/98 through 6/30/99                               3.00 to  1.00
       7/1/99 through 6/30/00                               2.75 to  1.00
       7/1/00 through 7/15/01                               2.50 to  1.00 

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          4.  Exhibit  M  --  Compliance   Certificate   is  hereby  amended  to
     incorporate  the  following  change to the  Maximum  Ratio for  purposes of
     Section 6.1(g) of the Credit  Agreement  (Total Funded Debt to Consolidated
     EBITDA) as set forth therein:

                     Fiscal Quarters Ended On or About Ratio

       Closing Date through 9/30/97                         3.00 to  1.00
       10/1/97 through 6/30/98                              3.25 to  1.00
       7/1/98 through 6/30/99                               3.00 to  1.00
       7/1/99 through 6/30/00                               2.75 to  1.00
       7/1/00 through 7/15/01                               2.50 to  1.00

          C. In order to  induce  the  Agent  and the  Banks to enter  into this
     Amendment,  each Borrower  hereby  represents and warrants to the Agent and
     the Banks that, as of the date of this Amendment,  (a) the  representations
     and  warranties  set forth in the  Credit  Agreement  and each  other  Loan
     Document  are true  and  correct  as if made on and as of the  date  hereof
     (other than those representations and warranties expressly limited by their
     terms to a specific date),  (b) no Default or Event of Default has occurred
     and is continuing, and (c) no event has occurred since the date of the most
     recent financial statements delivered pursuant to Section 5.1 of the Credit
     Agreement that has caused a Material Adverse Effect.

          D. Each Borrower hereby  acknowledges  and agrees that no facts events
     status or conditions  presently exist which, either now or with the passage
     of time or the  giving  of  notice or both,  presently  constitute  or will
     constitute  a basis  for any claim or cause of  action  against  any of the
     Banks, or any defense to the payment of any of the  indebtedness  evidenced
     or to be evidenced by any of the Loan Documents.

          E. Parent Company covenants and agrees that, as to the Parent Guaranty
     executed and  delivered by Parent  Company in favor of the Banks as part of
     the Loan Documents,  (a) the Parent Guaranty is an unconditional  guarantee
     of payment and performance  and not of collection,  (b) the Parent Guaranty
     represents  the primary,  absolute and  unconditional  obligation of Parent
     Company and (c) the Parent  Guaranty is a  continuing  guarantee  and shall
     remain in full force and effect until the termination of the obligations of
     the  Banks  to make  Loans  and  the  indefeasible  payment  in full of the
     Obligations (as defined in the Parent Guaranty).

          F. Each of the undersigned Guarantors covenants and agrees that, as to
     the Affiliate Guaranty executed and delivered by such Guarantor in favor of
     the Banks as part of the Loan Documents,  (a) such Affiliate Guaranty is an
     unconditional  guarantee of payment and  performance and not of collection,
     (b)  such  Affiliate   Guaranty   represents  the  primary,   absolute  and
     unconditional obligation of such Guarantor, and (c) such Affiliate Guaranty
     is a continuing  guarantee  and shall remain in full force and effect until
     the  termination  of the  obligations  of the  Banks to make  Loans and the
     indefeasible  payment in full of the  Obligations  (as defined in each such
     Affiliate Guaranty).

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          G. As to the Stock Pledge  Agreement  executed and delivered by Parent
     Company  in favor of the  Banks  as a part of the  Loan  Documents,  Parent
     Company  hereby  ratifies and confirms the liens and security  interests of
     the Banks in and to all collateral covered by the Stock Pledge Agreement as
     security for the prompt and full payment and performance of the obligations
     secured by the Stock Pledge Agreement. In furtherance of the foregoing, all
     liens and  security  interests  of the Stock  Pledge  Agreement  (which are
     hereby acknowledged to be valid and subsisting) are hereby carried forward,
     continued,  extended,  modified  and  renewed to secure the prompt and full
     payment and  performance  of the  obligations  secured by the Stock  Pledge
     Agreement.

          H. Each Loan  Document is hereby  amended  and  modified to the extent
     necessary to give full force and effect to the terms of this Amendment, and
     each such Loan Document shall hereafter be construed and interpreted  after
     giving  full force and effect to the terms of this  Amendment.  As amended,
     modified and supplemented pursuant to this Amendment, each Borrower, Parent
     Company and each  Guarantor  hereby  ratify,  confirm and restate each Loan
     Document  and agrees  that each such Loan  Document  to which it is a party
     shall continue in full force and effect.  Each of the Loan Documents now or
     hereafter  executed and delivered  pursuant to the terms hereof or pursuant
     to the terms of the  Credit  Agreement,  as amended  hereby,  or as further
     evidence of or in connection with the Credit Agreement,  as amended hereby,
     are hereby  amended to the extent  necessary  so that any  reference in any
     such documents,  instruments or agreements to the Credit Agreement shall be
     a reference to the Credit Agreement as amended hereby.

          I. In the event that any one or more of the  provisions  contained  in
     this Amendment shall be determined invalid, illegal or unenforceable in any
     respect for any reason,  the validity,  legality and  enforceability of any
     such  provision  or  provisions  in every other  respect and the  remaining
     provisions of this Amendment shall not be impaired in any way.

          J. When  required or implied by the context  used,  defined terms used
     herein shall include the plural as well as the singular, and vice versa.

          K This Amendment shall be governed by and construed in accordance with
     the internal laws of the State of Texas and applicable  federal laws of the
     United  States of America.  This  Amendment  has been entered into in Bexar
     County,  Texas and shall be  performable  for all purposes in Bexar County,
     Texas.  The courts within the State of Texas shall have  jurisdiction  over
     any and all disputes arising under or pertaining to this Amendment; and any
     such  dispute  shall be heard in the  county or  judicial  district  of the
     principal place of business of The Frost National Bank.

          L. This  Amendment  shall be binding  upon and inure to the benefit of
     all parties hereto and their respective  successors and assigns;  provided,
     however,  that  neither  of  the  Borrowers  nor  any of  their  respective
     successors or assigns may,  without the prior written consent of all of the
     Banks, assign any rights, powers, duties or obligations hereunder.

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

          N. This Amendment constitutes a Loan Document.

          O. Upon  execution  of this  Amendment  by the Banks,  each  Borrower,
     Parent  Company and each of the Guarantors  shall deliver to the Agent,  in
     form  and  substance  satisfactory  to  the  Agent,  the  certificates  and
     documents described on Annex B.

          IN WITNESS  WHEREOF,  the parties hereto have caused this Amendment to
     be duly executed by their respective  authorized  signatories as of the day
     and year first above written.

                                    OPERATING SUBSIDIARY:

                                    LANCER PARTNERSHIP, LTD., a Texas
                                    limited partnership

                                    By:  Lancer Capital Corporation, a Delaware
                                    corporation, general partner

                                    By:/s/ Scott Adams
                                    Name:  Scott Adams
                                    Title: Secretary

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                                    MEXICO SUBSIDIARY:

                                    LANCER  DE  MEXICO,  S.A.  de  C.V., 
                                    formerly  known  as NUEVA
                                    DISTRIBUIDORA LANCERMEX, S.A. de C.V.

                                    By:/s/ Scott Adams
                                    Name:  Scott Adams
                                    Title: Secretary 
                                  

                                    PARENT COMPANY:

                                    LANCER CORPORATION

                                    By:/s/ Scott Adams
                                    Name:  Scott Adams
                                    Title: Secretary  

                                    GUARANTORS:

                                    LAN-LEASING, INC.

                                    By:/s/ Scott Adams
                                    Name:  Scott Adams
                                    Title: Secretary 

                                    LANCER CAPITAL CORPORATION

                                    By:/s/ Scott Adams
                                    Name:  Scott Adams
                                    Title: Secretary   

                                    LANCER INTERNATIONAL SALES, INC.

                                    By:/s/ Scott Adams
                                    Name:  Scott Adams
                                    Title: Secretary  

                                    LANCER PARTNERSHIP, LTD., a Texas
                                    limited partnership

                                    By:  Lancer Capital Corporation, a Delaware
                                    corporation, general partner

                                    By:/s/ Scott Adams
                                    Name:  Scott Adams
                                    Title: Secretary

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                                    AGENT/BANKS:

                                    THE FROST NATIONAL BANK,
                                    Individually and as the Agent

                                    By:/s/ Steven A. Linton
                                    Name:  Steven A. Linton
                                    Title: Asst. Vice President


                                    NATIONSBANK, N.A., successor to THE
                                    BOATMEN'S NATIONAL BANK OF ST.  LOUIS

                                    By:/s/ Suzanne Peterson
                                    Name:  Suzanne Peterson
                                    Title: Vice President


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