THIRD AMENDED AND RESTATED CREDIT AGREEMENT

                          dated as of October 15, 1996

                                      among

                            DAKA INTERNATIONAL, INC.

                              SUBSIDIARY GUARANTORS

                             THE BANKS PARTY HERETO

                                       and

                            THE CHASE MANHATTAN BANK

                                    as Agent













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                                Table of Contents


ARTICLE 1.  DEFINITIONS; ACCOUNTING TERMS .................................    1
         Section 1.01.  Definitions .......................................    1
         Section 1.02.  Accounting Terms ..................................   11

ARTICLE 2.  THE LOANS .....................................................   11
         Section 2.01.  The Loans .........................................   11
         Section 2.02.  The Notes .........................................   12
         Section 2.03.  Purposes ..........................................   12
         Section 2.04.  Borrowing Procedures ..............................   12
         Section 2.05.  Prepayments and Conversions .......................   12
         Section 2.06.  Interest Periods; Renewals ........................   13
         Section 2.07.  Changes of Commitments ............................   13
         Section 2.08.  Certain Notices ...................................   13
         Section 2.09.  Minimum Amounts ...................................   14
         Section 2.10.  Interest ..........................................   14
         Section 2.11.  Fees ..............................................   15
         Section 2.12.  Payments Generally ................................   15
         Section 2.13.  Treatment of Loans ................................   15
         Section 2.14.  Restatement .......................................   16

ARTICLE 3.  THE LETTERS OF CREDIT .........................................   16
         Section 3.01.  Letters of Credit .................................   16
         Section 3.02.  Purposes ..........................................   16
         Section 3.03.  Procedures for Issuance of Letters of Credit ......   16
         Section 3.04.  Participating Interests ...........................   17
         Section 3.05.  Payments ..........................................   17
         Section 3.06.  Further Assurances ................................   18
         Section 3.07.  Obligations Absolute ..............................   18
         Section 3.08.  Cash Collateral Account ...........................   19
         Section 3.09.  Letter of Credit Fees .............................   19

ARTICLE 4.  YIELD PROTECTION; ILLEGALITY; ETC .............................   19
         Section 4.01.  Additional Costs ..................................   19
         Section 4.02.  Limitation on Types of Loans ......................   20
         Section 4.03.  Illegality ........................................   21
         Section 4.04.  Certain Conversions pursuant to Sections 4.01 and
         4.03 .............................................................   21
         Section 4.05.  Certain Compensation ..............................   22

ARTICLE 5.  CONDITIONS PRECEDENT ..........................................   22
         Section 5.01.  Documentary Conditions Precedent ..................   22
         Section 5.02.  Additional Conditions Precedent ...................   24
         Section 5.03.  Deemed Representations ............................   24



                                       (i)

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ARTICLE 6.  REPRESENTATIONS AND WARRANTIES ................................   24
         Section 6.01.  Organization, Good Standing and Due Qualification .   24
         Section 6.02.  Power and Authority; No Conflicts .................   24
         Section 6.03.  Legally Enforceable Agreements ....................   25
         Section 6.04.  Litigation ........................................   25
         Section 6.05.  Financial Statements ..............................   25
         Section 6.06.  Ownership and Liens ...............................   26
         Section 6.07.  Taxes .............................................   26
         Section 6.08.  ERISA .............................................   26
         Section 6.09.  Subsidiaries and Ownership of Stock ...............   27
         Section 6.10.  Credit Arrangements ...............................   27
         Section 6.11.  Operation of Business .............................   27
         Section 6.12.  Hazardous Materials ...............................   27
         Section 6.13.  No Default on Outstanding Judgments or Orders .....   28
         Section 6.14.  No Defaults on Other Agreements ...................   28
         Section 6.15.  Labor Disputes and Acts of God ....................   28
         Section 6.16.  Governmental Regulation ...........................   28
         Section 6.17.  No Forfeiture .....................................   28
         Section 6.18.  Solvency ..........................................   28
         Section 6.19.  Security Documents ................................   29
         Section 6.20.  New Restaurants ...................................   29

ARTICLE 7.  AFFIRMATIVE COVENANTS .........................................   30
         Section 7.01.  Maintenance of Existence ..........................   30
         Section 7.02.  Conduct of Business ...............................   30
         Section 7.03.  Maintenance of Properties .........................   30
         Section 7.04.  Maintenance of Records ............................   30
         Section 7.05.  Maintenance of Insurance ..........................   30
         Section 7.06.  Compliance with Laws ..............................   30
         Section 7.07.  Right of Inspection; Consultant ...................   30
         Section 7.08.  Reporting Requirements ............................   31
         Section 7.09.  Additional Subsidiary Guarantors ..................   35
         Section 7.10.  Interest Rate Protection Agreements ...............   35

ARTICLE 8.  NEGATIVE COVENANTS ............................................   35
         Section 8.01.  Debt ..............................................   35
         Section 8.02.  Guaranties, Etc ...................................   36
         Section 8.03.  Liens .............................................   36
         Section 8.04.  New Restaurants ...................................   38
         Section 8.05.  Investments .......................................   38
         Section 8.06.  Dividends .........................................   38
         Section 8.07.  Sale of Assets ....................................   39
         Section 8.08.  Stock of Subsidiaries, Etc ........................   40
         Section 8.09.  Transactions with Affiliates ......................   40
         Section 8.10.  Mergers, Etc ......................................   40
         Section 8.11.  Acquisitions ......................................   40



                                      (ii)

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         Section 8.12.  No Activities Leading to Forfeiture ...............   40
         Section 8.13.  Amendments or Waivers of Certain Documents ........   40
         Section 8.14.  Restrictions ......................................   41
         Section 8.15.  Capital Expenditures ..............................   41
         Section 8.16.  Rental Expense ....................................   41
         Section 8.17.  Accounting and Tax Changes ........................   41

ARTICLE 9.  FINANCIAL COVENANTS ...........................................   41
         Section 9.01.  Net Income ........................................   41
         Section 9.02.  Leverage Ratio ....................................   42
         Section 9.03.  Minimum Tangible Net Worth ........................   42
         Section 9.04.  Fixed Charge Coverage Ratio .......................   42
         Section 9.05.  Interest Coverage Ratio ...........................   42

ARTICLE 10.  EVENTS OF DEFAULT ............................................   42
         Section 10.01.  Events of Default ................................   42

ARTICLE 11.  UNCONDITIONAL GUARANTY .......................................   45
         Section 11.01.  Guarantied Obligations ...........................   45
         Section 11.02.  Performance Under This Agreement .................   46
         Section 11.03.  Waivers ..........................................   46
         Section 11.04.  Releases .........................................   47
         Section 11.05.  Marshaling .......................................   48
         Section 11.06.  Liability ........................................   48
         Section 11.07.  Primary Obligation ...............................   48
         Section 11.08.  Election to Perform Obligations ..................   48
         Section 11.09.  No Election ......................................   49
         Section 11.10.  Severability .....................................   49
         Section 11.11.  Other Enforcement Rights .........................   49
         Section 11.12.  Delay or Omission; No Waiver .....................   49
         Section 11.13.  Restoration of Rights and Remedies ...............   49
         Section 11.14.  Cumulative Remedies ..............................   50
         Section 11.15.  Survival .........................................   50

ARTICLE 12.  THE AGENT ....................................................   50
         Section 12.01.  Appointment, Powers and Immunities of Agent ......   50
         Section 12.02.  Reliance by Agent ................................   51
         Section 12.03.  Defaults .........................................   51
         Section 12.04.  Rights of Agent as a Bank ........................   51
         Section 12.05.  Indemnification of Agent .........................   52
         Section 12.06.  Documents ........................................   52
         Section 12.07.  Non-Reliance on Agent and Other Banks ............   52
         Section 12.08.  Failure of Agent to Act ..........................   53
         Section 12.09.  Resignation or Removal of Agent ..................   53
         Section 12.10.  Amendments Concerning Agency Function ............   53
         Section 12.11.  Liability of Agent ...............................   53



                                      (iii)

<PAGE>



         Section 12.12.  Transfer of Agency Function ......................   54
         Section 12.13.  Non-Receipt of Funds by the Agent ................   54
         Section 12.14.  Withholding Taxes ................................   54
         Section 12.15.  Several Obligations and Rights of Banks ..........   54
         Section 12.16.  Pro Rata Treatment of Loans, Etc .................   55
         Section 12.17.  Sharing of Payments Among Banks ..................   55

ARTICLE 13. MISCELLANEOUS .................................................   56
         Section 13.01.  Amendments and Waivers ...........................   56
         Section 13.02.  Usury ............................................   57
         Section 13.03.  Expenses .........................................   57
         Section 13.04.  Survival .........................................   58
         Section 13.05.  Assignment; Participations .......................   58
         Section 13.06.  Notices ..........................................   58
         Section 13.07.  Setoff ...........................................   59
         Section 13.08.  JURISDICTION; IMMUNITIES .........................   59
         Section 13.09.  Table of Contents; Headings ......................   60
         Section 13.10.  Severability .....................................   60
         Section 13.11.  Counterparts .....................................   60
         Section 13.12.  Integration ......................................   60
         Section 13.13.  GOVERNING LAW ....................................   60
         Section 13.14.  Confidentiality ..................................   60
         Section 13.15.  Treatment of Certain Information .................   61
         Section 13.16.  New Subsidiary Guarantors ........................   61
         Section 13.17.  Reaffirmation ....................................   61
         Section 13.18.  Certain Waivers ..................................   61
         Section 13.19.  Revisions to the Security Documents ..............   61
         Section 13.20.  Permitted Sale-Leasebacks ........................   62





                                          (iv)

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EXHIBITS

         Exhibit A         Promissory Note
         Exhibit B         Compliance Certificate
         Exhibit C         Opinion of Counsel to the Obligors

SCHEDULES

         Schedule I        Commitments
         Schedule II       Subsidiaries
         Schedule III      Credit Arrangements
         Schedule IV       Liens
         Schedule V        New Restaurants
         Schedule VI       Completed Restaurants Subject to Sale-Leaseback




                                       (v)

<PAGE>



                   THIRD AMENDED AND RESTATED CREDIT AGREEMENT


         THIRD  AMENDED AND RESTATED  CREDIT  AGREEMENT  dated as of October 15,
1996 among DAKA INTERNATIONAL,  INC., a corporation  organized under the laws of
Delaware (the  "Borrower");  each of the Subsidiaries of the Borrower which is a
signatory  hereto  or  which  shall  become  a party  hereto  from  time to time
(collectively the "Subsidiary  Guarantors" and, together with the Borrower,  the
"Obligors");  each of the banks which is a party  hereto or which shall become a
party  hereto  from  time to time  (collectively,  the  "Banks");  and THE CHASE
MANHATTAN  BANK,  as agent for the Banks (in such  capacity,  together  with its
successors in such capacity, the "Agent").

         WHEREAS,  the Borrower,  the Subsidiary  Guarantors,  the Banks and the
Agent  have  entered  into that  certain  Second  Amended  and  Restated  Credit
Agreement  dated  as  of  June  25,  1996  (as  amended,  the  "Existing  Credit
Agreement")  pursuant to which the Banks have  extended  credit to the  Obligors
evidenced  by certain  Promissory  Notes (the  "Existing  Notes")  issued by the
Borrower and guarantied by the Subsidiary Guarantors;

         WHEREAS,  the Borrower,  the Subsidiary  Guarantors,  the Banks and the
Agent have agreed to enter this Agreement to provide for, among other things,  a
decrease in the aggregate  Commitments  to  $125,000,000  and  modifications  of
certain covenants and definitions; and

         WHEREAS, the Obligors are and will be operated as separate entities but
are and will be  operated  on an  integrated  basis  in  connection  with  their
respective financial resources;  the Obligors have requested that the Banks make
loans  to the  Borrower,  the  repayment  of  which  will be  guarantied  by the
Subsidiary  Guarantors;  the Subsidiary  Guarantors will receive direct economic
and  financial  benefits  from the Debt  incurred  under this  Agreement  by the
Borrower  and the  incurrence  of  such  Debt is in the  best  interests  of the
Subsidiary  Guarantors;  and the Obligors  acknowledge  that the Banks would not
provide the financing hereunder but for the joint and several obligations of the
Obligors hereunder with respect hereto.

         NOW THEREFORE, the parties hereto agree as follows:

                  ARTICLE 1.  DEFINITIONS; ACCOUNTING TERMS.

         Section  1.01.  Definitions.  As used in this  Agreement  the following
terms have the  following  meanings  (terms  defined in the  singular  to have a
correlative meaning when used in the plural and vice versa):

         "Acquisition" means any transaction  pursuant to which any Consolidated
Entity (a) acquires equity  securities (or warrants,  options or other rights to
acquire such securities) of any Person except in accordance with Section 8.05(d)
or (b) causes any Person to be merged into any Consolidated  Entity, in any case
pursuant to a merger,




<PAGE>



purchase of assets or any reorganization  providing for the delivery or issuance
to the holders of such Person's  then  outstanding  securities,  in exchange for
such  securities,  of  cash  or  securities  of any  Consolidated  Entity,  or a
combination  thereof,  or (c) purchases all or substantially all of the business
or assets of any Person.

         "Affiliate"  means  any  Person  (other  than an  Obligor):  (a)  which
directly or indirectly controls, or is controlled by, or is under common control
with, the Borrower; (b) which directly or indirectly  beneficially owns or holds
10% or more of any class of voting stock of the Borrower; (c) 10% or more of the
voting stock of which is directly or  indirectly  beneficially  owned or held by
the Borrower;  or (d) which is a partnership  in which the Borrower is a general
partner. The term "control" means the possession, directly or indirectly, of the
power to direct or cause the  direction  of the  management  and  policies  of a
Person,  whether  through the ownership of voting  securities,  by contract,  or
otherwise.

         "Agreement" means this Third Amended and Restated Credit Agreement,  as
amended or  supplemented  from time to time.  References to Articles,  Sections,
Exhibits,  Schedules  and the like refer to the  Articles,  Sections,  Exhibits,
Schedules and the like of this Agreement unless otherwise indicated.

         "Assumption  Agreement" means each of the Assumption  Agreements in the
form of Exhibit G to the Existing Credit Agreement  delivered under Section 7.09
hereof.

         "Banking  Day"  means  any  day  on  which  commercial  banks  are  not
authorized  or  required  to  close  in  New  York,   New  York  or  in  Boston,
Massachusetts  and whenever such day relates to a Eurodollar Loan or notice with
respect to any Eurodollar  Loan, a day on which dealings in Dollar  deposits are
also carried out in the London interbank market.

         "Capital   Expenditures"   means,  with  respect  to  any  Person,  any
expenditure  of such Person to acquire or construct  fixed or capital  assets or
additions to equipment or leasehold interests (including renewals, improvements,
capitalized repairs and replacements) which has been or should be capitalized on
the books of such Person in accordance with GAAP.

         "Capital Lease" means any lease which has been or should be capitalized
on the books of the lessee in accordance with GAAP.

         "Chase" means The Chase Manhattan Bank, a bank organized under the laws
of the State of New York, acting in its capacity as a Bank hereunder.

         "Closing  Date" means the date this  Agreement has been executed by the
Borrower, the Subsidiary Guarantors, the Banks and the Agent.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time.



                                        2

<PAGE>




         "Collateral"  means all of each Obligor's right,  title and interest in
and to Property in which such  Obligor has granted a Lien to the Agent under any
Facility Document.

         "Commitment"  means,  with respect to each Bank, the obligation of such
Bank to make its Loans and participate in its Pro Rata Share of Letter of Credit
Obligations under this Agreement in the aggregate  principal amount set forth on
Schedule I, as such  amount may be reduced or  otherwise  modified  from time to
time.

         "Commitment   Percentage"  means,  as  to  any  Bank  at  any  date  of
determination  thereof, the percentage of the aggregate Commitments  constituted
by such Bank's Commitment at such date.

         "Compliance  Certificate" means the compliance  certificate in the form
of Exhibit B to be delivered by the Borrower under the terms of this Agreement.

         "Consolidated  Debt" means, at any date of determination  thereof,  the
aggregate  amount  of Debt of the  Consolidated  Entities,  as  determined  on a
consolidated basis in accordance with GAAP.

         "Consolidated  EBIT"  means,  with  respect to any fiscal  period,  (a)
Consolidated  Net Income for such period,  plus (b) the aggregate  amount of (i)
income taxes and (ii)  Consolidated  Interest  Expense,  to the extent that such
aggregate amount was deducted in the computation of Consolidated Net Income.

         "Consolidated  Entity"  means the  Borrower  or any  Subsidiary  of the
Borrower whose accounts are or are required to be  consolidated or included with
the accounts of the Borrower in accordance with GAAP.

         "Consolidated  Interest  Expense"  means,  with  respect  to any fiscal
period,  the amount of interest  accrued on, and with  respect to,  Consolidated
Debt (including,  without limitation,  amortization of debt discount and imputed
interest on Capital Leases) plus all finance  charges,  premiums and other fees,
charges  and  expenses  extracted  in  exchange  for the  forbearance  from  the
collection  of money during such period in all cases as determined in accordance
with GAAP.

         "Consolidated  Liabilities"  means all liabilities of the  Consolidated
Entities, as determined on a consolidated basis in accordance with GAAP.

         "Consolidated  Net Capital  Expenditures"  means,  with  respect to any
fiscal period,  the result of (a) the aggregate  amount of Capital  Expenditures
made by the  Consolidated  Entities  for such period  minus (b) the net proceeds
received by the Consolidated  Entities from the sale and simultaneous  leaseback
of "Fuddruckers" and "Champps"  restaurants during such period, as determined on
a consolidated basis in accordance with GAAP.




                                        3

<PAGE>



         "Consolidated Net Income" means, with respect to any fiscal period, net
income  (or loss) for the  Consolidated  Entities  for such  fiscal  period,  as
determined on a consolidated basis in accordance with GAAP.

         "Consolidated  Net Worth" means, at any date of determination  thereof,
the sum of (a) the amount of any  capital  stock,  paid in capital  and  similar
equity accounts plus (or minus in the case of a deficit) the capital surplus and
retained   earnings  of  the  Consolidated   Entities  at  such  date  plus  (b)
Consolidated Subordinated Debt.

         "Consolidated Rental Expense" means, with respect to any fiscal period,
the aggregate  amount of rental expense of the  Consolidated  Entities  incurred
during such fiscal period,  as determined on a consolidated  basis in accordance
with GAAP.

         "Consolidated  Subordinated  Debt" means, at any date of  determination
thereof,  Debt  of  the  Consolidated  Entities  which  is  subordinated  to all
obligations owed to the Banks in amounts and on terms and conditions  acceptable
to the Banks, as determined on a consolidated basis in accordance with GAAP.

         "Consolidated  Tangible  Assets"  means,  at any date of  determination
thereof,  all  assets  of  the  Consolidated   Entities  except  assets  of  the
Consolidated  Entities  which  would be  classified  as  intangibles  under GAAP
including,  without limitation,  patents,  copyrights,  trademarks, trade names,
franchises, goodwill and other similar intangible assets.

         "Consolidated  Tangible Net Worth" means, at any date of  determination
thereof, the result of (a) Consolidated  Tangible Assets minus (b) the result of
(i) Consolidated Liabilities minus (ii) Consolidated Subordinated Debt.

         "Debt"  means,  with respect to any Person:  (a)  indebtedness  of such
Person for borrowed money; (b)  indebtedness for the deferred  purchase price of
Property or services (except trade payables in the ordinary course of business);
(c)  Unfunded  Benefit  Liabilities  of such  Person (if such  Person is not the
Borrower,  determined  in a manner  analogous  to that of  determining  Unfunded
Benefit  Liabilities  of the Borrower);  (d) the face amount of any  outstanding
letters of credit issued for the account of such Person; (e) obligations arising
under  acceptance  facilities;  (f) Guaranties of such Person;  (g)  obligations
secured by any Lien on Property of such Person;  (h)  obligations of such Person
as lessee under Capital Leases; and (i) all capital stock of such Person subject
to repurchase or redemption during the term of this Agreement, other than at the
sole option of such Person.

         "Default"  means any event  which with the giving of notice or lapse of
time, or both, would become an Event of Default.

         "Default Rate" means, with respect to the principal of any Loan and, to
the extent  permitted by law, any other amount payable by the Borrower or any of
the Subsidiary  Guarantors under this Agreement or any other Facility  Document,
or any  Note  that  is not  paid  when  due  (whether  at  stated  maturity,  by
acceleration or



                                        4

<PAGE>



otherwise),  a rate per annum during the period from and including the due date,
to, but  excluding  the date on which such  amount is paid in full equal to four
percent  (4%) above the Variable  Rate as in effect from time to time;  provided
that,  if the amount so in default is principal of a Fixed Rate Loan and the due
date thereof is a day other than the last day of the Interest  Period  therefor,
the  "Default  Rate"  for such  principal  shall  be,  for the  period  from and
including the due date and to but excluding the last day of the Interest  Period
therefor, four percent (4%) above the interest rate for such Loan as provided in
Section  2.10  hereof  and,  thereafter,  the rate  provided  for  above in this
definition.

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

         "Environmental  Laws"  means  any and all  federal,  state,  local  and
foreign statutes,  laws,  regulations,  ordinances,  rules,  judgments,  orders,
decrees,  permits,  licenses,  agreements  or  other  governmental  restrictions
relating to the environment or to emissions,  discharges, releases or threatened
releases  of  pollutants,  contaminants,  chemicals,  or  industrial,  toxic  or
hazardous  substances  or  wastes  into  the  environment   including,   without
limitation,  ambient air,  surface  water,  ground water,  or land, or otherwise
relating to the manufacture,  processing distribution,  use, treatment, storage,
disposal,  transport,  or handling of pollutants,  contaminants,  chemicals,  or
industrial, toxic or hazardous substances or wastes.

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

         "ERISA Affiliate" means any corporation or trade or business which is a
member of any group of  organizations  (i) described in Section 414(b) or (c) of
the Code of which the  Borrower  is a member,  or (ii)  solely for  purposes  of
potential  liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section  302(f) of ERISA and Section  412(n)
of the  Code,  described  in  Section  414(m)  or (o) of the Code of  which  the
Borrower is a member.

         "Eurodollar  Loan"  means any Loan when and to the extent the  interest
rate therefor is determined on the basis of the definition "Fixed Base Rate."

         "Event of Default" has the meaning given such term in Section 9.01.

         "Facility  Documents"  means this Agreement,  the Notes, the Assumption
Agreements,  the Letters of Credit, the Interest Rate Protection  Agreements and
the Security Documents, as each may be amended from time to time.

         "Federal Funds Rate" means,  for any day, the rate per annum (expressed
on a 365/366 day basis of calculation,  if the rate on Variable Rate Loans is so
calculated)  equal to the  weighted  average of the rates on  overnight  federal
funds transactions as published by the Federal Reserve Bank of New York for such
day (or for any day that is not a Banking  Day,  for the  immediately  preceding
Banking Day).



                                        5

<PAGE>




         "Fiscal Quarter Net Worth Increase  Amounts" means 100% of the proceeds
(net of underwriting commissions and discounts and reasonable fees and expenses)
from the  issuance of capital  stock of the Borrower or from the  incurrence  of
Consolidated Subordinated Debt during such fiscal quarter.

         "Fixed Base Rate" means with respect to any Interest Period for a Fixed
Rate Loan: the rate per annum  (rounded  upwards,  if necessary,  to the nearest
1/16 of one percent (1%)) quoted at approximately  11:00 a.m. London time by the
principal  London  branch of the  Reference  Bank two Banking  Days prior to the
first day of such  Interest  Period for the  offering  to  leading  banks in the
London interbank market of Dollar deposits in immediately available funds, for a
period, and in an amount, comparable to the Interest Period and principal amount
of the Eurodollar Loan which shall be made.

         "Fixed  Charge  Coverage  Ratio"  means,  at any date of  determination
thereof, the ratio of (a) the sum of (i) Consolidated EBIT for the most recently
ended fiscal quarter of the Borrower,  plus (ii) Consolidated Rental Expense for
such  fiscal  quarter  (to the  extent  that such  amount  was  deducted  in the
computation of Consolidated  EBIT for such fiscal quarter) to (b) the sum of (i)
Consolidated  Interest Expense for such fiscal quarter,  plus (ii) all principal
due on, and with respect to, Consolidated Debt during such fiscal quarter,  plus
(iii) Consolidated  Rental Expense for such fiscal quarter,  plus (iv) dividends
paid by the Borrower during such fiscal quarter.

         "Fixed  Rate" means,  for any Fixed Rate Loan for any  Interest  Period
therefor, a rate per annum (rounded upwards, if necessary,  to the nearest 1/100
of one percent (1%))  determined by the Agent to be equal to the quotient of (i)
the Fixed Base Rate for such Loan for such Interest Period,  divided by (ii) one
minus the Reserve Requirement for such Loan for such Interest Period.

         "Fixed Rate Loan" means any Eurodollar Loan.

         "Forfeiture  Proceeding" means any action,  proceeding or investigation
affecting the Borrower,  any of its Subsidiaries or any of its Affiliates before
any  court,  governmental  department,  commission,  board,  bureau,  agency  or
instrumentality, domestic or foreign, or the receipt of notice by any such party
that any of them is a suspect  in or a target  of any  governmental  inquiry  or
investigation,  which may result in an  indictment of any of them or the seizure
or  forfeiture  of any of their  Property  which  would have a Material  Adverse
Effect.

         "GAAP" means  generally  accepted  accounting  principles in the United
States of America as in effect from time to time,  applied on a basis consistent
with those used in the  preparation of the financial  statements  referred to in
Section 6.05  (except for changes  concurred  in by the  Borrower's  independent
public accountants).

         "Guaranty" means, with respect to any Person, guaranties,  endorsements
(other  than for  collection  in the  ordinary  course  of  business)  and other
contingent  obligations  of such Person with respect to the  obligations  of any
other Person (including, but not



                                        6

<PAGE>



limited to, an agreement to purchase any  obligation,  stock,  assets,  goods or
services or to supply or advance any funds,  assets,  goods or  services,  or an
agreement to maintain or cause such Person to maintain a minimum working capital
or net worth or  otherwise  to assure the  creditors  of any such  other  Person
against  loss) other than  guaranties of  obligations,  or investment in certain
assets,  under  food  service  contracts  incurred  in the  ordinary  course  of
business.

         "Hazardous Materials" means any and all pollutants, contaminants, toxic
or hazardous wastes or any other substances, the removal of which is required or
the  generation,   manufacture,  refining,  production,  processing,  treatment,
storage, handling, transportation,  transfer, use, disposal, release, discharge,
spillage, seepage, or filtration of which is restricted, prohibited or penalized
by any applicable law.

         "Interest Coverage Ratio" means, at any date of determination  thereof,
the ratio of (a)  Consolidated  EBIT for the four (4) most recently ended fiscal
quarters of the Borrower to (b) Consolidated  Interest Expense for such four (4)
most recently ended fiscal quarters.

         "Interest  Period"  means,  with  respect to any Fixed  Rate Loan,  the
period commencing on the date such Loan is made,  converted from another type of
Loan or renewed,  as the case may be, and  ending,  as the  Borrower  may select
pursuant to Section 2.06:  on the  numerically  corresponding  day in the first,
second,  third,  or sixth  calendar  month  thereafter,  provided that each such
Interest  Period which commences on the last Banking Day of a calendar month (or
on  any  day  for  which  there  is no  numerically  corresponding  day  in  the
appropriate  subsequent calendar month) shall end on the last Banking Day of the
appropriate calendar month.

         "Interest Rate Protection  Agreement"  means an interest rate swap, cap
or collar  agreement  or similar  arrangement  between  one or more Banks and an
Obligor  providing  for the  transfer or  mitigation  of interest  risks  either
generally or under specific contingencies.

         "Lending  Office"  means,  for each Bank and for each type of Loan, the
lending office of such Bank (or of an affiliate of such Bank) designated as such
for such type of Loan on its signature  page hereof or such other office of such
Bank  (or of an  affiliate  of such  Bank) as such  Bank  may from  time to time
specify to the Agent and the  Borrower  as the office by which its Loans of such
type are to be made and maintained.

         "Letter of Credit  Availability"  means,  at any date of  determination
thereof,  the  amount  by  which  (a) the  lower  of (i) the  result  of (A) the
aggregate  amount  of the  Commitments  as of such  date  minus  (B) the  unpaid
aggregate  principal amount of the Loans then  outstanding  (including all Loans
not then made as to which  notice has been given by the Borrower  under  Section
2.08) and (ii)  $5,000,000  exceeds  (b) the  aggregate  amount of the Letter of
Credit  Obligations  at such date  (including  all Letter of Credit  Obligations
under  Letters  of Credit  not then  issued as to which a request  has been made
under Section 3.02).



                                        7

<PAGE>




         "Letter  of Credit  Obligations"  means,  at any date of  determination
thereof, all liabilities of the Consolidated Entities with respect to Letters of
Credit,  whether  or  not  any  liability  is  contingent,   including  (without
limitation) the sum of (a) the aggregate  amount available to be drawn under the
Letters of Credit then  outstanding  plus (b) the aggregate amount of all unpaid
Reimbursement Obligations.

         "Leverage Ratio" means, at any time, the ratio of (a) the result of (i)
Consolidated  Liabilities  minus  (ii)  Consolidated  Subordinated  Debt  to (b)
Consolidated Net Worth, in each case determined at such time.

         "Lien" means any lien  (statutory  or  otherwise),  security  interest,
mortgage,  deed of trust,  priority,  pledge,  charge,  conditional  sale, title
retention  agreement,  financing lease or other  encumbrance or similar right of
others, or any agreement to give any of the foregoing.

         "Loan" means any loan made by a Bank pursuant to Section 2.01.

         "Margin"  means,  for each type of Loan, (a) if such Loan is a Variable
Rate Loan,  1.75% per annum or (b) if such Loan is a Fixed Rate Loan,  3.00% per
annum.

         "Material  Adverse  Effect"  means any material  adverse  effect on the
financial  condition,  operations,  properties  or business of the  Consolidated
Entities,  taken as a whole,  or on the  ability  of the  Borrower  to repay the
principal,  interest and all other  amounts  owing under the Notes and the other
Facility Documents.

         "Multiemployer  Plan" means a Plan defined as such in Section  3(37) of
ERISA to  which  contributions  have  been  made by the  Borrower  or any  ERISA
Affiliate and which is covered by Title IV of ERISA.

         "Notes"  means  the  promissory  notes of the  Borrower  in the form of
Exhibit  A  hereto  evidencing  the  Loans  made  by a Bank  hereunder  and  all
promissory notes delivered in substitution or exchange  therefor,  as amended or
supplemented from time to time.

         "Obligations"  means the unpaid principal of and interest on (including
interest  accruing on or after the filing of any petition in bankruptcy,  or the
commencement of any insolvency,  reorganization  or like proceeding,  whether or
not a claim  for  post-filing  or  post-petition  interest  is  allowed  in such
proceeding)  the Notes and all other  obligations and liabilities of any obligor
to the Agent or any Bank,  whether  direct or indirect,  absolute or contingent,
due or to become due, or now  existing or  hereafter  incurred,  which may arise
under,  out of, or in connection  with,  this  Agreement,  the Notes,  any other
Facility Document and any other document made,  delivered or given in connection
therewith or herewith,  whether on account of principal,  interest,  Guaranties,
reimbursement  obligations,  fees,  indemnities,   costs,  expenses  (including,
without  limitation,  all fees and  disbursements of counsel to the Agent or any
Bank) or otherwise.




                                        8

<PAGE>



         "Participating Bank" means, any Bank (other than Chase) with respect to
its Participating Interest in each Letter of Credit.

         "Participating  Interest" means, with respect to each Letter of Credit,
(a) in the case of Chase,  its  interest in such Letter of Credit  after  giving
effect to the granting of any participating interest therein pursuant hereto and
(b) in the case of each Participating Bank, its undivided participating interest
in such Letter of Credit.

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

         "Person" means an individual, partnership, corporation, business trust,
joint  stock  company,  trust,   unincorporated   association,   joint  venture,
governmental authority or other entity of whatever nature.

         "Plan"  means  any  employee  benefit  or  other  plan  established  or
maintained,  or to which  contributions  have been made,  by the Borrower or any
ERISA  Affiliate  and  which  is  covered  by Title IV of  ERISA,  other  than a
Multiemployer Plan.

         "Pledge   Agreement"  means  the  Third  Amended  and  Restated  Pledge
Agreement dated as of June 25, 1996 among certain of the Obligors and the Agent,
as amended or supplemented from time to time.

         "Prime Rate" means that rate of interest from time to time announced by
the Reference Bank at its principal office as its prime commercial lending rate.

         "Principal  Office" means the principal office of the Agent,  presently
located at 1 Chase Manhattan Plaza, New York, New York 10081.

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

         "Pro Rata Share" means, with respect to each Bank, a share proportional
to such Bank's Commitment Percentage.

         "Reference  Bank"  means  The  Chase  Manhattan  Bank (or if The  Chase
Manhattan Bank no longer quotes on the London interbank  market,  such successor
leading bank in the London interbank market which shall be reasonably  appointed
by the Agent).

         "Regulation  D" means  Regulation  D of the Board of  Governors  of the
Federal Reserve System as the same may be amended or  supplemented  from time to
time.

         "Regulation  U" means  Regulation  U of the Board of  Governors  of the
Federal Reserve System as the same may be amended or  supplemented  from time to
time.




                                        9

<PAGE>



         "Regulatory Change" means, with respect to any bank or national banking
association,  any  change  after the date of this  Agreement  in  United  States
federal,  state,  municipal or foreign laws or  regulations  (including  without
limitation  Regulation  D) or the  adoption  or  making  after  such date of any
interpretations,  directives or requests  applying to a class of banks including
such  bank or  national  banking  association,  of or under any  United  States,
federal,  state, municipal or foreign laws or regulations (whether or not having
the force of law) by any court or  governmental  or monetary  authority  charged
with the interpretation or administration thereof.

         "Reimbursement  Obligation"  means the  obligation  of the  Borrower to
reimburse  Chase in accordance  with the terms of this Agreement for the payment
made by Chase under any Letter of Credit.

         "Required Banks" means, at any time while no Loans or Letters of Credit
are  outstanding,  Banks  having  at least  60% of the  aggregate  amount of the
Commitments  and, at any time while Loans or Letters of Credit are  outstanding,
Banks  holding at least 60% of the aggregate  principal  amount of the Loans and
the Letter of Credit Obligations.

         "Reserve Requirement" means, for any Interest Period for any Fixed Rate
Loan  for any  Interest  Period  therefor,  the  average  maximum  rate at which
reserves  (including  any  marginal,  supplemental  or emergency  reserves)  are
required to be  maintained  during such  Interest  Period under  Regulation D by
member  banks of the  Federal  Reserve  System in New York  City  with  deposits
exceeding $1,000,000,000 against in the case of Eurodollar Loans,  "Eurocurrency
liabilities" (as such term is used in Regulation D). Without limiting the effect
of the  foregoing,  the Reserve  Requirement  shall  reflect any other  reserves
required  to be  maintained  by such  member  banks by reason of any  Regulatory
Change  against  (i) any  category of  liabilities  which  includes  deposits by
reference to which the Fixed Base Rate for Eurodollar  Loans is to be determined
as provided in the  definition of "Fixed Base Rate" in this Section 1.01 or (ii)
any category of extensions  of credit or other assets which  include  Eurodollar
Loans.

         "Security  Agreement" means the Amended and Restated Security Agreement
dated as of June 25,  1996  among the  Obligors  and the  Agent,  as  amended or
supplemented from time to time.

         "Security   Documents"  means  the  Security   Agreement,   the  Pledge
Agreement,  the Trademark  Security  Agreement and each other security  document
that may from time to time be delivered to the Agent in  connection  herewith or
therewith.

         "Subsidiary"  means,  with respect to any Person,  any  corporation  or
other entity of which at least a majority of the  securities or other  ownership
interest  having  ordinary  voting power  (absolutely or  contingently)  for the
election of directors or other persons  performing  similar functions are at the
time owned directly or indirectly by such Person.




                                       10

<PAGE>



         "Termination Date" means October 1, 1997; provided that if such date is
not a Banking Day, the Termination Date shall be the next succeeding Banking Day
(or, if such next succeeding  Banking Day falls in the next calendar month,  the
next preceding Banking Day).

         "Trademark Security Agreement" means the Amended and Restated Trademark
Security  Agreement  dated as of June 25, 1996 among the Obligors and the Agent,
as amended or supplemented from time to time.

         "UCP" means the Uniform Customs and Practice for Documentary Credits
(1993 Revision), International Chamber of Commerce Publication No. 500, as the
same may be amended from time to time.

         "Unfunded  Benefit  Liabilities"  means,  with respect to any Plan, the
amount (if any) by which the present  value of all benefit  liabilities  (within
the meaning of Section  4001(a)(16)  of ERISA)  under the Plan  exceeds the fair
market  value of all Plan  assets  allocable  to such  benefit  liabilities,  as
determined on the most recent  valuation date of the Plan and in accordance with
the provisions of ERISA for calculating the potential  liability of the Borrower
or any ERISA Affiliate under Title IV of ERISA.

         "Variable Rate" means, for any day, the higher of (a) the Federal Funds
Rate for such day plus 1/4 of one percent and (b) the Prime Rate for such day.

         "Variable Rate Loan" means any Loan when and to the extent the interest
rate for such Loan is determined in relation to the Variable Rate.

         Section 1.02.  Accounting  Terms. All accounting terms not specifically
defined  herein shall be construed in  accordance  with GAAP,  and all financial
data required to be delivered  hereunder  shall be prepared in  accordance  with
GAAP.

                              ARTICLE 2. THE LOANS.

         Section  2.01.  The Loans.  (a) Subject to the terms and  conditions of
this Agreement,  each of the Banks severally  agrees to make loans (the "Loans")
to the  Borrower  from time to time from and  including  the date  hereof to and
including  the  Termination  Date,  up to but  not  exceeding  in the  aggregate
principal  amount at any one time  outstanding,  the result of (i) the amount of
its  Commitment  minus  (ii) the  amount of its Pro Rata  Share of the Letter of
Credit Obligations. On June 30, 1997, the aggregate Commitments shall be reduced
by  $20,000,000,  such  reduction to be  apportioned  ratably among the Banks in
accordance  with its Pro Rata Share.  The Loans may be  outstanding  as Variable
Rate Loans or Eurodollar  Loans (each a "type" of Loans).  Each type of Loans of
each Bank shall be made and  maintained at such Bank's  Lending  Office for such
type of Loans.

                   (b) The Loans  shall be due and  payable  on the  Termination
Date.




                                       11

<PAGE>



         Section 2.02. The Notes. The Loans of each Bank shall be evidenced by a
single promissory note in favor of such Bank in the form of Exhibit A, dated the
date of this Agreement, duly completed and executed by the Borrower.

         Section  2.03.  Purposes.  The  Borrower  shall use the proceeds of the
Loans for general corporate purposes  (including,  without  limitation,  working
capital and to finance  Capital  Expenditures  permitted under Section 8.15) and
advances to Subsidiary Guarantors for their respective corporate purposes.  Such
proceeds  shall not be used for the purpose,  whether  immediate,  incidental or
ultimate,  of buying or carrying "margin stock" within the meaning of Regulation
U.

         Section  2.04.  Borrowing  Procedures.  The Borrower  which  intends to
effect a  borrowing  shall give the Agent  notice of each  borrowing  to be made
hereunder as provided in Section  2.08.  Not later than 1:00 p.m. New York,  New
York time on the date of such  borrowing,  each Bank shall,  through its Lending
Office and subject to the conditions of this  Agreement,  make the amount of the
Loan to be made by it on such day available to the Agent at the Principal Office
and in immediately  available funds for the account of the Agent.  The amount so
received by the Agent shall,  subject to the  conditions of this  Agreement,  be
made available to the Borrower,  in immediately  available  funds,  by the Agent
crediting an account of the Borrower  designated by the Borrower and  maintained
with the Agent at the Principal Office.

         Section 2.05. Prepayments and Conversions.  (a) The Borrower shall have
the right to make prepayments of principal, or to convert one type of Loans into
another type of Loans, at any time or from time to time;  provided that: (i) the
Borrower  shall give the Agent notice of each such  prepayment  or conversion as
provided in Section 2.08;  and (ii) Fixed Rate Loans may be prepaid or converted
only on the last day of an Interest  Period for such Loans  unless the  Borrower
agrees to provide  to the Agent for the  account  of each Bank  compensation  in
accordance with Section 4.05.

                  (b) If,  at any time,  the  aggregate  amount  of Loans  shall
exceed the result of (i) the aggregate amount of the Commitments  minus (ii) the
aggregate amount of the Letter of Credit  Obligations,  the Borrower shall repay
the Banks forthwith such amounts as may be necessary to eliminate such excess.

                  (c) On the date on which  (i) any  Consolidated  Entity  shall
receive cash proceeds (net of taxes,  claims  securing  purchase  money Liens on
such Property and transaction costs) from the sale, lease, assignment,  transfer
or other  disposition of any Property (A) permitted under Section 8.07(b) or (B)
not permitted under the other clauses of Section 8.07 but otherwise consented to
by the Required  Banks or (ii) the Borrower shall receive the cash proceeds (net
of taxes and transactions  costs) from the issuance of capital stock or from the
incurrence of Consolidated Subordinated Debt, in each case the Commitments shall
be automatically  reduced ratably among the Banks in accordance with each Bank's
Pro Rata Share by an amount equal to 100% of such cash proceeds  received  (and,
to the  extent  that,  after  giving  effect to such  reduction,  the  aggregate
principal amount of the Loans and the aggregate amount of



                                       12

<PAGE>



the Letter of Credit  Obligations  would  exceed the  Commitments,  the Borrower
shall prepay the Loans in an aggregate amount equal to such excess).

         Section 2.06. Interest Periods; Renewals. (a) In the case of each Fixed
Rate Loan,  the  Borrower  shall  select an Interest  Period of any  duration in
accordance  with the definition of Interest  Period in Section 1.01,  subject to
the  following  limitations:  (i) no  Interest  Period  may  extend  beyond  the
Termination  Date;  (ii)  notwithstanding  clause (i) above,  no Interest Period
shall have a duration  less than one month,  and if any such  proposed  Interest
Period would otherwise be for a shorter  period,  such Interest Period shall not
be  available;  (iii) if an  Interest  Period  would end on a day which is not a
Banking  Day,  such  Interest  Period shall be extended to the next Banking Day,
unless  such  Banking Day would fall in the next  calendar  month in which event
such Interest  Period shall end on the  immediately  preceding  Banking Day; and
(iv) no more than ten Interest  Periods of each Bank may be  outstanding  at any
one time.

                  (b) Upon notice to the Agent as provided in Section 2.08,  the
Borrower  may renew any Fixed Rate Loan on the last day of the  Interest  Period
therefor  as the  same  type of Loans  with an  Interest  Period  of the same or
different  duration in accordance  with the  limitations  provided above. If the
Borrower  shall fail to give  notice to the Agent of such a renewal,  such Fixed
Rate Loan shall automatically become a Variable Rate Loan on the last day of the
current  Interest  Period;  provided  that the  foregoing  shall not prevent the
conversion  of any  type  of  Fixed  Rate  Loan  into  another  type  of Loan in
accordance with Section 2.05.

         Section 2.07. Changes of Commitments. The Borrower shall have the right
to reduce or terminate the amount of unused Commitments at any time or from time
to time,  provided  that:  (a) the  Borrower  shall  give  notice  of each  such
reduction or  termination to the Agent as provided in Section 2.08; and (b) each
partial  reduction shall be in an aggregate amount at least equal to $1,000,000.
The Commitments once reduced or terminated may not be reinstated.

         Section 2.08. Certain Notices.  Notices by the Borrower to the Agent of
each  borrowing  pursuant to Section  2.04,  and each  prepayment  or conversion
pursuant to Section 2.05 and each renewal pursuant to Section 2.06(b),  and each
reduction or  termination of the  Commitments  pursuant to Section 2.07 shall be
irrevocable  and shall be effective only if received by the Agent not later than
12:00  noon New  York,  New York  time,  and (a) in the case of  borrowings  and
prepayments of,  conversions into and (in the case of Fixed Rate Loans) renewals
of (i) Variable  Rate Loans,  given the same  Banking  Day; and (ii)  Eurodollar
Loans, given three Banking Days prior thereto;  (b) in the case of reductions or
termination of the  Commitments,  given three Banking Days prior  thereto.  Each
such  notice  shall  specify the Loans to be  borrowed,  prepaid,  converted  or
renewed  and the amount  (subject  to Section  2.09) and type of the Loans to be
borrowed, or converted, or prepaid or renewed (and, in the case of a conversion,
the type of Loans to result  from such  conversion  and,  in the case of a Fixed
Rate Loan,  the  Interest  Period  therefor)  and the date of the  borrowing  or
prepayment, or conversion or renewal (which shall be a Banking Day). Each such



                                       13

<PAGE>



notice of reduction or termination  shall specify the amount of the  Commitments
to be reduced or terminated.  The Agent shall  promptly  notify the Banks of the
contents of each such notice.

         Section 2.09. Minimum Amounts.  Except for borrowings which exhaust the
full remaining  amount of the  Commitments,  prepayments  or  conversions  which
result in the  prepayment  or  conversion  of all Loans of a particular  type or
conversions   made  pursuant  to  Section  4.04,  each  borrowing,   prepayment,
conversion and renewal of principal of Loans of a particular type shall be in an
amount not less than (i) $100,000 in the  aggregate for all Banks in the case of
Variable Rate Loans and (ii) $500,000 in the aggregate in the case of Fixed Rate
Loans unless such minimum  amount is waived by the Required  Banks  (borrowings,
prepayments,  conversions or renewals of or into Loans of different types or, in
the case of Fixed Rate Loans, having different Interest Periods at the same time
hereunder  to  be  deemed  separate  borrowings,  prepayments,  conversions  and
renewals  for the  purposes  of the  foregoing,  one for each  type of  Interest
Period).  Anything  in  this  Agreement  to the  contrary  notwithstanding,  the
aggregate  principal  amount of Fixed Rate Loans of each type having  concurrent
Interest Periods shall be at least equal to $500,000.

         Section 2.10.  Interest.  (a) Interest shall accrue on the  outstanding
and unpaid  principal  amount of each Loan for the period from and including the
date of such Loan to but  excluding  the date such Loan is due at the  following
rates per annum:  (i) for a Variable  Rate  Loan,  at a variable  rate per annum
equal to the Variable  Rate plus the Margin and (ii) for a Fixed Rate Loan, at a
fixed rate equal to the Fixed Rate plus the Margin.  If the principal  amount of
any Loan and any other  amount  payable by the  Borrower  hereunder or under the
Notes  shall  not be paid  when due (at  stated  maturity,  by  acceleration  or
otherwise), interest shall accrue on such amount to the fullest extent permitted
by law from and including such due date to but excluding the date such amount is
paid in full at the Default Rate.

                  (b) The interest  rate on each Variable Rate Loan shall change
when  the  Variable  Rate  changes  and  interest  on each  such  Loan  shall be
calculated  on the  basis of a year of 360 days for the  actual  number  of days
elapsed.  Interest on each Fixed Rate Loan shall be calculated on the basis of a
year of 360 days for the  actual  number  of days  elapsed.  Promptly  after the
determination  of any interest rate  provided for herein or any change  therein,
the Agent shall notify the Borrower and the Banks.

                  (c) Accrued  interest shall be due and payable in arrears upon
any full payment of principal or conversion and (i) for each Variable Rate Loan,
on the last day of each  month  commencing  the first such date after such Loan;
and (ii) for each Fixed Rate Loan,  on the last day of the Interest  Period with
respect thereto and, in the case of an Interest Period greater than three months
or 90 days,  at  three-month  intervals  after the  first  day of such  Interest
Period;  provided  that  interest  accruing at the Default Rate shall be due and
payable from time to time on demand of the Agent.




                                       14

<PAGE>



         Section  2.11.  Fees.  (a) The Borrower  shall pay to the Agent for the
account of each Bank a commitment  fee on the daily average of the result of (x)
the  unused  Commitment  of such Bank  minus (y) such  Bank's  Pro Rata Share of
Letter of Credit Obligations,  for the period from and including the date hereof
to the earlier of the date the  Commitments  are  terminated or the  Termination
Date at a rate per annum  equal to one-half of one  percent,  calculated  on the
basis of a year of 360 days for the actual number of days  elapsed.  The accrued
commitment  fee  shall be due and  payable  in  arrears  upon any  reduction  or
termination of the Commitments and on the last day of each calendar month.

                  (b) The  Borrower  shall pay to the Agent for its own  account
the fees set forth in the fee letter  dated of even date  herewith  between  the
Borrower and the Agent and, to the extent not already  paid,  the fees set forth
in the fee letter  dated as of June 25, 1996  between the Borrower and the Agent
and shall also pay to the Agent for the account of the Banks a closing fee equal
to  $312,500  to be split  among the  Banks in  accordance  with  their Pro Rata
Shares.

         Section 2.12. Payments Generally.  All payments under this Agreement or
the Notes shall be made in Dollars in immediately available funds not later than
1:00 p.m. New York,  New York time on the relevant dates  specified  above (each
such  payment  made  after  such time on such due date to be deemed to have been
made  on the  next  succeeding  Banking  Day)  to  the  Agent's  account  number
910-2-696094  maintained  at  the  Principal  Office  for  the  account  of  the
applicable Lending Office of each Bank. The Agent, or any Bank for whose account
any such payment is to be made,  may (but shall not be  obligated  to) debit the
amount  of any  such  payment  which is not  made by such  time to any  ordinary
deposit account of the Borrower with the Agent or such Bank, as the case may be,
and any Bank so doing shall promptly  notify the Agent.  The Borrower  shall, at
the time of making each payment  under this  Agreement or the Notes,  specify to
the Agent the  principal  or other  amount  payable by the  Borrower  under this
Agreement  or the Notes to which such payment is to be applied (and in the event
that it fails to so specify,  or if a Default or Event of Default  has  occurred
and is continuing,  the Agent may apply such payment as it may elect in its sole
discretion  (subject to Section  12.16)).  If the due date of any payment  under
this Agreement or the Notes would otherwise fall on a day which is not a Banking
Day, such date shall be extended to the next succeeding Banking Day and interest
shall be payable for any principal so extended for the period of such extension.
Each payment  received by the Agent  hereunder or under any Note for the account
of a Bank shall be paid promptly to such Bank, in immediately  available  funds,
for the account of such Bank's Lending Office.

         Section  2.13.  Treatment  of Loans.  All  "Loans"  (as  defined in the
Existing  Credit  Agreement)  which are  outstanding  under the Existing  Credit
Agreement immediately prior to the Closing Date shall be deemed to be Loans made
hereunder  at the Closing  Date the type and  Interest  Period of which shall be
determined  by the  mutual  agreement  of the  Borrower  and the  Banks  and the
Borrower  agrees  to  provide  to  the  Agent  for  the  account  of  each  Bank
compensation in accordance with Section 3.05.



                                       15

<PAGE>




         Section  2.14.  Restatement.  The  terms  and  conditions  of,  and the
agreements,  representations  and  warranties  set forth in the Existing  Credit
Agreement are hereby  replaced and  superseded  in their  entirety by the terms,
conditions,  agreements,  representations  and  warranties  set  forth  in  this
Agreement and the other  Facility  Documents and the Existing  Credit  Agreement
shall be of no further force and effect.  Nothing  contained herein or in any of
the other Facility  Documents shall impair,  limit or affect the continuation of
the liability of each Obligor for the  Obligations  heretofore  incurred and the
security  interests,  Liens and other collateral  interests  heretofore granted,
pledged and assigned to the Agent by such Obligor. All loans, advances and other
financial  accommodations  under the  Existing  Credit  Agreement  and all other
Obligations of the Obligors to the Banks  outstanding  and unpaid as of the date
hereof  pursuant  to  the  Existing  Credit  Agreement  shall  be  deemed  to be
Obligations  pursuant to the terms hereof and shall  constitute  and be deemed a
Loan by the Banks to the Borrower and shall be repayable in accordance  with the
terms of this Agreement.

                        ARTICLE 3. THE LETTERS OF CREDIT.

         Section  3.01.  Letters  of  Credit.  (a)  Subject  to  the  terms  and
conditions of this Agreement,  Chase, on behalf of the Banks, and in reliance on
the  agreement  of the Banks set forth in Section  3.04,  agrees to issue on any
Banking  Day  prior to the  Termination  Date for the  account  of the  Borrower
irrevocable  standby  letters of credit in such form as may from time to time be
approved by Chase acting  reasonably  (together with the applications  therefor,
the  "Letters  of  Credit");  provided  that on the date of the  issuance of any
Letter of Credit, and after giving effect to such issuance, the Letter of Credit
Obligations shall not exceed the Letter of Credit Availability.

                  (b) Each  Letter  of Credit  shall (i) have an expiry  date no
later than the Termination  Date, (ii) be denominated in Dollars,  (iii) be in a
minimum face amount of $100,000 and (iv) provide for the payment of sight drafts
when  presented for honor  thereunder  in accordance  with the terms thereof and
when  accompanied  by  the  documents  described  or  when  such  documents  are
presented, as the case may be.

         Section 3.02.  Purposes.  The Borrower shall use the Letters of Credit
for the purpose of securing obligations incurred in connection with insurance
programs of the Obligors.

         Section  3.03.  Procedures  for  Issuance  of Letters  of  Credit.  The
Borrower  may from time to time  request  that Chase issue a Letter of Credit by
delivering to Chase at its address for notices  specified  herein an application
therefor  in such  form as may from  time to time be  approved  by Chase  acting
reasonably, completed to the satisfaction of Chase, and such other certificates,
documents and other papers and information as Chase may reasonably request. Upon
receipt  of any  application,  Chase  will  process  such  application  and  the
certificates,  documents  and other  papers and  information  delivered to it in
connection  therewith in  accordance  with its  customary  procedures  and shall
promptly issue the Letter of Credit in such customized form as may reasonably be
requested  by the  Borrower  (but in no event  shall  Chase  issue any Letter of
Credit later than five Banking Days after receipt of the application therefor



                                       16

<PAGE>



and all such other  certificates,  documents  and other  papers and  information
relating  thereto)  by  issuing  the  original  of such  Letter of Credit to the
beneficiary  thereof or as  otherwise  may be agreed by Chase and the  Borrower.
Chase  shall  furnish a copy of such Letter of Credit to the  Borrower  promptly
following the issuance thereof.

         Section 3.04.  Participating  Interests.  In the case of each Letter of
Credit,  effective as of the date of the issuance thereof, Chase agrees to allot
and does allot to each other Bank, and each such Bank severally and  irrevocably
agrees to take and does take a  Participating  Interest in such Letter of Credit
in a  percentage  equal to such  Bank's  Pro Rata  Share of the Letter of Credit
Obligations.  On the date  that any Bank  becomes a party to this  Agreement  in
accordance with Section 13.05, Participating Interests in any outstanding Letter
of Credit held by the transferor  Bank from which such  transferee Bank acquired
its  interest  hereunder  shall  be  proportionately   reallotted  between  such
transferee Bank and such transferor Bank. Each  Participating Bank hereby agrees
that its obligation to  participate  in each Letter of Credit,  and to pay or to
reimburse Chase for its participating  share of the drafts drawn thereunder,  is
absolute,  irrevocable  and  unconditional  and  shall  not be  affected  by any
circumstances whatsoever (unless Chase's actions with respect thereto constitute
gross  negligence or wilful  misconduct),  including,  without  limitation,  the
occurrence  and  continuance  of any Default or Event of Default,  and that each
such payment shall be made without any offset,  abatement,  withholding or other
reduction whatsoever.

         Section  3.05.  Payments.  (a) In order to  induce  Chase to issue  the
Letters of Credit,  the Borrower hereby agrees to reimburse  Chase,  unless such
Reimbursement Obligation has been accelerated pursuant to Section 10.02, on each
date that the Borrower has been notified by Chase that any draft presented under
any  Letter of Credit is paid by Chase,  for (i) the amount of the draft paid by
Chase and (ii) the amount of any taxes,  reasonable fees,  reasonable charges or
other  reasonable costs or expenses  whatsoever  incurred by Chase in connection
with any payment made by Chase under, or with respect to, such Letter of Credit.
Each such  payment  shall be made to Chase at its  office  specified  in Section
13.06,  in lawful money of the United States and in immediately  available funds
on the day  that  payment  is made by  Chase.  Interest  on any and all  amounts
remaining  unpaid by the  Borrower  under this Section 3.05 at any time from the
date such amounts become payable (whether at stated maturity, by acceleration or
otherwise)  until  payment  in full  shall be  payable  to Chase on  demand at a
fluctuating rate per annum equal to the Variable Rate plus 4%.

                  (b) In the event  that  Chase  makes a payment  (a  "Letter of
Credit  Funding")  under  any  Letter of Credit  and is not  reimbursed  in full
therefor on the date of such Letter of Credit  Funding,  in accordance  with the
terms hereof,  Chase will promptly  through the Agent notify each  Participating
Bank that  acquired  its  Participating  Interest  in such Letter of Credit from
Chase.  No later than the close of  business on the date such notice is given if
such notice is given, each such  Participating  Bank will transfer to the Agent,
for the account of Chase,  in immediately  available  funds,  an amount equal to
such  Participating  Bank's Pro Rata Share of the  unreimbursed  portion of such
Letter of Credit Funding,  together with interest,  if any, accrued thereon from
and including the date of such transfer at a rate per annum



                                       17

<PAGE>



equal to the Federal Funds Rate. Upon its receipt from such  Participating  Bank
of  such  amount,  Chase  will,  if so  requested  by such  Participating  Bank,
complete,  execute  and  deliver to such  Participating  Bank a Letter of Credit
Participation Certificate dated the date of such receipt and in such amount.

                  (c) Whenever, at any time after Chase has made payment under a
Letter of Credit and has received from any Participating Bank such Participating
Bank's  Pro Rata  Share  of the  unreimbursed  portion  of such  payment,  Chase
receives  any  reimbursement  on  account  of such  unreimbursed  portion or any
payment of interest on account thereof,  Chase will distribute to the Agent, for
the account of such  Participating  Bank, its Pro Rata Share thereof;  provided,
however,  that in the event that the receipt by Chase of such  reimbursement  or
such payment of interest  (as the case may be) is required to be returned,  such
Participating  Bank will promptly return to the Agent, for the account of Chase,
any portion thereof previously distributed by Chase to it.

         Section 3.06. Further Assurances.  The Borrower hereby agrees to do and
perform  any and all acts and to execute any and all  further  instruments  from
time to time reasonably  requested by Chase more fully to effect the purposes of
this Agreement and the issuance of the Letters of Credit opened hereunder.

         Section 3.07.  Obligations Absolute.  Provided that Chase has fulfilled
its  obligations  under the UCP, the payment  obligations  of the Borrower under
Section 3.05 shall be  unconditional  and irrevocable and shall be paid strictly
in  accordance  with  the  terms  of this  Agreement  under  all  circumstances,
including, without limitation, the following circumstances:

                  (a) the  existence  of any  claim,  set-off,  defense or other
right which the Borrower may have at any time  against any  beneficiary,  or any
transferee,  of any  Letter  of  Credit  (or  any  Persons  for  whom  any  such
beneficiary or any such  transferee may be acting),  Chase or any  Participating
Bank, or any other Person, whether in connection with this Agreement,  any other
Loan  Document,   the  transactions   contemplated   herein,  or  any  unrelated
transaction;

                  (b) any statement or any other  document  presented  under any
Letter of Credit proving to be forged,  fraudulent,  invalid or  insufficient in
any respect or any  statement  therein being untrue or inaccurate in any respect
unless Chase's  actions with respect  thereto  constituted  gross  negligence or
willful misconduct;

                  (c)  payment  by Chase  under any  Letter  of  Credit  against
presentation  of a draft or certificate  which does not comply with the terms of
such Letter of Credit, except payment resulting solely from the gross negligence
or willful misconduct of Chase; or

                  (d) any other circumstances or happening  whatsoever,  whether
or not  similar to any of the  foregoing,  except  circumstances  or  happenings
resulting solely from the gross negligence or willful misconduct of Chase.



                                       18

<PAGE>




         Section  3.08.  Cash  Collateral   Account.   If  the  Commitments  are
terminated and all amounts owing under this Agreement, the Notes and the Letters
of Credit  become due and payable  pursuant to Section  10, the  Borrower  shall
deposit with the Agent, on the date such obligations become due and payable,  an
amount in cash equal to the Letter of Credit Obligations as of such date and the
Letter of Credit fees in  accordance  with  Section  3.09.  Such amount shall be
deposited in a cash collateral  account to be established by the Agent,  for the
benefit of the Banks, and shall constitute collateral security for the Letter of
Credit  Obligations and other amounts owing hereunder.  All amounts in such cash
collateral  account shall be maintained  pursuant to a cash  collateral  account
agreement  which  shall  grant  to the  Agent  exclusive  dominion  and  control
(including  exclusive  rights of withdrawal)  over all such amounts and shall be
otherwise satisfactory in form and substance to the Agent.

         Section 3.09. Letter of Credit Fees. (a) The Borrower agrees to pay the
Agent,  for the account of Chase and the  Participating  Banks, a non-refundable
letter of credit fee with respect to each Letter of Credit,  payable in the same
currency as that in which such Letter of Credit is denominated,  computed at the
rate per annum equal to one  percent,  calculated  on the basis of a year of 360
days for the actual days  elapsed,  of the aggregate  undrawn  amount under such
Letter of Credit on the date on which such fee is calculated. Such fees shall be
payable  quarterly  in advance on the date of  issuance of such Letter of Credit
and each three month anniversary thereof and shall be nonrefundable.

                  (b) The Borrower agrees to pay Chase, for its own account, its
normal  and  customary   administration,   amendment,   transfer,   payment  and
negotiation fees charged in connection with its issuance and  administration  of
letters of credit.

                  ARTICLE 4. YIELD PROTECTION; ILLEGALITY; ETC.

         Section 4.01.  Additional Costs. (a) The Borrower shall pay directly to
each Bank from time to time on demand such amounts as such Bank may determine to
be  necessary  to  compensate  it for any costs which such Bank  determines  are
attributable  to its  making or  maintaining  any Fixed  Rate  Loans  under this
Agreement or its Note or its obligation to make any such Loans hereunder, or any
reduction in any amount receivable by such Bank hereunder in respect of any such
Loans or such  obligation  (such  increases in costs and  reductions  in amounts
receivable  being  herein  called  "Additional   Costs"),   resulting  from  any
Regulatory  Change  which:  (i)  changes  the basis of  taxation  of any amounts
payable to such Bank under this  Agreement or its Note in respect of any of such
Loans (other than taxes imposed on the overall net income of such Bank or of its
Lending Office for any of such Loans by the  jurisdiction in which such Bank has
its principal  office or such Lending  Office);  or (ii) imposes or modifies any
reserve,  special  deposit,  deposit  insurance or assessment,  minimum capital,
capital ratio or similar  requirements  relating to any  extensions of credit or
other  assets  of,  or any  deposits  with or other  liabilities  of,  such Bank
(including  any of such Loans or any deposits  referred to in the  definition of
"Fixed  Base  Rate" in  Section  1.01);  or (iii)  imposes  any other  condition
affecting  this  Agreement or its Note (or any of such  extensions  of credit or
liabilities). Each Bank will notify the Borrower



                                       19

<PAGE>



of any event  occurring after the date of this Agreement which will entitle such
Bank to compensation pursuant to this Section 4.01(a) as promptly as practicable
after it obtains knowledge thereof and determines to request such  compensation.
If any Bank requests  compensation from the Borrower under this Section 4.01(a),
the  Borrower  may, by notice to such Bank (with a copy to the  Agent),  require
that such Bank's  Loans of the type with respect to which such  compensation  is
requested be converted in accordance with Section 4.04.

                  (b) Without limiting the effect of the foregoing provisions of
this Section 4.01, in the event that, by reason of any  Regulatory  Change,  any
Bank either (i) incurs Additional Costs based on or measured by the excess above
a specified  level of the amount of a category of deposits or other  liabilities
of such Bank which includes  deposits by reference to which the interest rate on
Eurodollar  Loans is determined  as provided in this  Agreement or a category of
extensions  of credit or other  assets of such Bank  which  includes  Eurodollar
Loans or (ii) becomes  subject to  restrictions on the amount of such a category
of  liabilities  or assets  which it may hold,  then,  if such Bank so elects by
notice to the Borrower  (with a copy to the Agent),  the obligation of such Bank
to make or renew,  and to convert  Loans of any other  type into,  Loans of such
type hereunder shall be suspended  until the date such Regulatory  Change ceases
to be in effect  (and all Loans of such type held by such Bank then  outstanding
shall be converted in accordance with Section 4.04).

                  (c)  Determinations  and allocations by a Bank for purposes of
this Section 4.01 of the effect of any Regulatory Change pursuant to subsections
(a) or (b) on its costs of making or maintaining Loans or its obligation to make
Loans,  or on amounts  receivable by, or the rate of return to, it in respect of
Loans or such obligation,  and of the additional  amounts required to compensate
such Bank under this  Section  4.01,  shall be  conclusive,  provided  that such
determinations and allocations are made in good faith on a reasonable basis.

         Section  4.02.  Limitation  on Types of Loans.  Anything  herein to the
contrary notwithstanding, if:

                  (a)  the  Agent  determines  (which   determination  shall  be
conclusive) that quotations of interest rates for the relevant deposits referred
to in the definition of "Fixed Base Rate" in Section 1.01 are not being provided
in  the  relevant  amounts  or for  the  relevant  maturities  for  purposes  of
determining the rate of interest for any type of Fixed Rate Loans as provided in
this Agreement; or

                  (b) the Required Banks determine (which determination shall be
conclusive) and notify the Agent that the relevant rates of interest referred to
in the  definition  of "Fixed Base Rate" in Section 1.01 upon the basis of which
the rate of interest for any type of Fixed Rate Loans is to be determined do not
adequately cover the cost to the Banks of making or maintaining such Loans;

then the Agent shall give the Borrower and each Bank prompt notice thereof,  and
so long as such  condition  remains  in  effect,  the  Banks  shall  be under no
obligation to



                                       20

<PAGE>



make or renew  Loans of such type or to  convert  Loans of any  other  type into
Loans of such  type and the  Borrower  shall,  on the  last  day(s)  of the then
current  Interest  Period(s)  for the  outstanding  Loans of the affected  type,
either  prepay such Loans or convert  such Loans into  another  type of Loans in
accordance with Section 2.05.

         Section 4.03.  Illegality.  Notwithstanding any other provision in this
Agreement,  in the event that it becomes  unlawful  for any Bank or its  Lending
Office to (a) honor its obligation to make or renew  Eurodollar  Loans hereunder
or convert Loans of any type into Loans of such type, or (b) maintain Eurodollar
Loans hereunder, then such Bank shall promptly notify the Borrower thereof (with
a copy to the  Agent) and such  Bank's  obligation  to make or renew  Eurodollar
Loans and to convert  other  types of Loans  into  Loans of such type  hereunder
shall be  suspended  until  such  time as such Bank may again  make,  renew,  or
convert and maintain such affected Loans and such Bank's outstanding  Eurodollar
Loans, as the case may be, shall be converted in accordance with Section 4.04.

         Section 4.04. Certain  Conversions  pursuant to Sections 4.01 and 4.03.
If the Loans of any Bank of a  particular  type (Loans of such type being herein
called  "Affected  Loans" and such type being herein called the "Affected Type")
are to be converted pursuant to Section 4.01 or 4.03, such Bank's Affected Loans
shall be automatically  converted into Variable Rate Loans on the last day(s) of
the then current Interest Period(s) for the Affected Loans (or, in the case of a
conversion  required by Section  4.01(b) or 4.03,  on such  earlier date as such
Bank may specify to the Borrower with a copy to the Agent) and, unless and until
such Bank gives  notice as provided  below that the  circumstances  specified in
Section 4.01 or 4.03 which gave rise to such conversion no longer exist:

                  (a) to the extent that such Bank's Affected Loans have been so
converted,  all payments and  prepayments of principal  which would otherwise be
applied to such Bank's  Affected Loans shall be applied  instead to its Variable
Rate Loans;

                  (b) all Loans which would otherwise be made or renewed by such
Bank as Loans of the Affected  Type shall be made instead as Variable Rate Loans
and all Loans of such Bank which would  otherwise be converted into Loans of the
Affected Type shall be converted instead into (or shall remain as) Variable Rate
Loans; and

                  (c)  if  Loans  of  other  Banks  of  the  Affected  Type  are
subsequently  converted  into Loans of another  type (other than  Variable  Rate
Loans), such Bank's Variable Rate Loans shall be automatically  converted on the
conversion  date into Loans of such other type to the extent  necessary so that,
after  giving  effect  thereto,  all Loans held by such Bank and the Banks whose
Loans are so  converted  are held pro rata (as to principal  amounts,  types and
Interest Periods) in accordance with their respective Commitments.




                                       21

<PAGE>



         If such Bank gives  notice to the  Borrower  (with a copy to the Agent)
that the circumstances  specified in Section 4.01 or 4.03 which gave rise to the
conversion of such Bank's Affected Loans pursuant to this Section 4.04 no longer
exist (which such Bank agrees to do promptly upon such circumstances  ceasing to
exist) at a time when Loans of the Affected  Type are  outstanding,  such Bank's
Variable Rate Loans shall be converted upon the written consent of the Borrower,
on  the  first  day(s)  of the  next  succeeding  Interest  Period(s)  for  such
outstanding  Loans of the Affected Type to the extent  necessary so that,  after
giving effect thereto, all Loans held by the Banks holding Loans of the Affected
Type and by such  Bank are held pro rata (as to  principal  amounts,  types  and
Interest Periods) in accordance with their respective Commitments.

         Section 4.05. Certain Compensation. The Borrower shall pay to the Agent
for the account of each Bank,  upon the request of such Bank  through the Agent,
such amount or amounts as shall be sufficient (in the reasonable opinion of such
Bank) to compensate it for any loss,  cost or expense which such Bank determines
is attributable to:

                  (a) any payment, prepayment,  conversion or renewal of a Fixed
Rate Loan made by the  Borrower on a date other than the last day of an Interest
Period for such Loan (whether by reason of acceleration or otherwise); or

                  (b) any  failure by the  Borrower to borrow,  convert  into or
renew a Fixed  Rate Loan to be made,  converted  into or renewed by such Bank on
the date specified  therefor in the relevant notice under Sections 2.04, 2.05 or
2.06, as the case may be.

         Without  limiting the  foregoing,  such  compensation  shall include an
amount equal to the excess,  if any, of: (i) the present  value of the amount of
interest  which  otherwise  would have accrued on the principal  amount so paid,
prepaid,  converted  or renewed or not  borrowed,  converted  or renewed for the
period from and including the date of such payment,  prepayment or conversion or
failure to borrow,  convert or renew to but  excluding  the last day of the then
current  Interest  Period for such Loan (or, in the case of a failure to borrow,
convert or renew,  to but excluding the last day of the Interest Period for such
Loan which would have commenced on the date  specified  therefor in the relevant
notice) at the  applicable  rate of interest for such Loan  provided for herein;
over (ii) the present value of the amount of interest (as reasonably  determined
by such Bank) such Bank would have bid in the London  interbank  market (if such
Loan is a Eurodollar  Loan) for Dollar  deposits for amounts  comparable to such
principal  amount and maturities  comparable to such period.  A determination of
any Bank as to the  amounts  payable  pursuant  to this  Section  4.05  shall be
conclusive absent manifest error.

                        ARTICLE 5. CONDITIONS PRECEDENT.

         Section 5.01.  Documentary  Conditions Precedent.  The effectiveness of
this  Agreement,  the  obligations  of the  Banks  to  make  the  Loans  and the
obligations of



                                       22

<PAGE>



Chase to issue any Letter of Credit are subject to the condition  precedent that
the  Agent  shall  have  received  on or  before  the date of such  Loans or the
issuance of such Letters of Credit each of the following,  in form and substance
satisfactory to the Agent and its counsel:

                   (a)  counterparts  of this Agreement  executed by each of the
Borrower, the Subsidiary Guarantors, the Banks and the Agent;

                   (b) the Notes duly executed by the Borrower;

                   (c) evidence that all actions  necessary or appropriate  (or,
in any event,  as may be requested  by the Agent) to create,  perfect or protect
the Liens  created or  purported to be created by the  Security  Agreement,  the
Trademark Security Agreement and the Pledge Agreement have been taken;

                   (d)  certificates of the Secretary or Assistant  Secretary of
each of the  Obligors,  dated the Closing  Date,  (i) attesting to all corporate
action taken by such Obligor,  including  resolutions  of its Board of Directors
authorizing  the  execution,  delivery and  performance  of each of the Facility
Documents  to  which it is a party  and  each  other  document  to be  delivered
pursuant to this Agreement, (ii) certifying the names and true signatures of the
officers of such Obligor  authorized to sign the Facility  Documents to which it
is a party and the other  documents to be  delivered by such Obligor  under this
Agreement  and (iii)  verifying  that the charter  and  by-laws of such  Obligor
attached thereto are true, correct and complete as of the date thereof;

                  (e) a certificate of a duly authorized  officer of each of the
Obligors,   dated  the  Closing  Date,  stating  that  the  representations  and
warranties  in Article 6 are true and correct on such date as though made on and
as of  such  date  and  that no  event  has  occurred  and is  continuing  which
constitutes a Default or Event of Default;

                  (f) good standing  certificates  and  certified  copies of all
charter  documents  with respect to each Obligor  certified by the  Secretary of
State of its  jurisdiction  of  incorporation,  and  evidence  that  each of the
Obligors is qualified as a foreign  corporation in every other  jurisdiction  in
which it does  business  where the  failure to so qualify  could  reasonably  be
expected to have a Material Adverse Effect;

                  (g) favorable opinions of (i) Goodwin,  Procter & Hoar L.L.P.,
outside  counsel to the Obligors,  (ii) Wolin,  Fuller,  Ridley & Miller L.L.P.,
special  Texas  counsel to the  Obligors,  and (iii)  Fredrikson & Byron,  P.A.,
special  Minnesota  counsel to the  Obligors,  each dated the Closing  Date,  in
substantially the form of Exhibit C and as to such other matters as the Agent or
any Bank may reasonably request;

                  (h)  certified  complete and correct  copies of the  financial
statements referred to in Section 6.05; and




                                       23

<PAGE>



                  (i)  evidence  of the  current  status  of the  sale-leaseback
facilities  entered into or proposed to be entered into with  Franchise  Finance
Corporation of America ("FFCA") and AEI Fund Management, Inc. ("AEI").

         On the  Closing  Date,  the Banks  shall  surrender  to the Agent to be
delivered  to the  Borrower  the  Existing  Notes held by it under the  Existing
Credit Agreement, in each case marked "Replaced".

         Section 5.02. Additional  Conditions Precedent.  The obligations of the
Banks to make any Loans  pursuant  to a  borrowing  which  increases  the amount
outstanding  hereunder  (including the initial borrowing) or to issue any Letter
of Credit shall be subject to the further conditions  precedent that on the date
of such Loans, the following  statements shall be true: (a) the  representations
and warranties  contained in Article 6, in Article 3 of the Security  Agreement,
in Article 3 of the Trademark  Security Agreement and in Article 3 of the Pledge
Agreement,  are true  and  correct  on and as of the  date of such  Loans or the
issuance of such Letters of Credit as though made on and as of such date (except
for in all instances transactions and changes not prohibited by this Agreement);
and (b) no Default or Event of Default has occurred and is continuing,  or would
result from such Loans or the issuance of such Letter of Credit.

         Section  5.03.  Deemed   Representations.   Each  notice  of  borrowing
hereunder  or request for the issuance of a Letter of Credit and  acceptance  by
the Borrower of the proceeds of such borrowing or of the issuance of such Letter
of Credit shall  constitute a  representation  and warranty that the  statements
contained  in Section  5.02 are true and correct both on the date of such notice
or request and, unless such Borrower  otherwise notifies the Agent prior to such
borrowing or such issuance, as of the date of such borrowing or such issuance.

                   ARTICLE 6. REPRESENTATIONS AND WARRANTIES.

         Each of the Obligors hereby represents and warrants that:

         Section 6.01. Organization,  Good Standing and Due Qualification.  Each
of the  Consolidated  Entities is duly organized,  validly  existing and in good
standing  under  the  laws  of the  jurisdiction  of its  organization,  has the
corporate,  partnership or limited  liability company power and authority to own
its assets and to transact  the  business in which it is now engaged or proposed
to be engaged,  and is duly qualified as a foreign  corporation,  partnership or
limited  liability  company  and in good  standing  under the laws of each other
jurisdiction in which such  qualification  is required and where such failure to
qualify could reasonably be expected to have a Material Adverse Effect.

         Section  6.02.  Power  and  Authority;  No  Conflicts.  The  execution,
delivery and  performance  by each of the Obligors of the Facility  Documents to
which it is a party  have  been  duly  authorized  by all  necessary  corporate,
partnership  or limited  liability  company  action and do not and will not: (a)
require any consent or approval of its  stockholders,  partners or members;  (b)
contravene its organizational documents;



                                       24

<PAGE>



(c) violate any  provision  of, or require any filing  (other than the filing of
the financing  statements  contemplated by the Security Agreement and the filing
of the Trademark Security Agreement),  registration,  consent or approval under,
any law, rule, regulation (including, without limitation,  Regulation U), order,
writ, judgment,  injunction,  decree, determination or award presently in effect
having  applicability to any Consolidated  Entity;  (d) result in a breach of or
constitute  a default or require  any  consent  under any  indenture  or loan or
credit  agreement  or any  other  agreement,  lease or  instrument  to which any
Consolidated  Entity is a party or by which it or its properties may be bound or
affected if such breach,  default or failure to obtain consent could  reasonably
be expected to have a Material  Adverse Effect;  (e) result in, or require,  the
creation or  imposition  of any Lien (other than as created  under the  Security
Documents), upon or with respect to any of the properties now owned or hereafter
acquired by any Consolidated  Entity; or (f) cause any Consolidated Entity to be
in  default  under  any such  law,  rule,  regulation,  order,  writ,  judgment,
injunction,  decree,  determination  or award or any such indenture,  agreement,
lease or  instrument  if such  default  could  reasonably  be expected to have a
Material Adverse Effect.

         Section 6.03. Legally Enforceable Agreements. Each Facility Document to
which any Obligor is a party is, or when delivered under this Agreement will be,
a legal, valid and binding obligation of such Obligor  enforceable  against such
Obligor in accordance with its terms, except to the extent that such enforcement
may be limited by  applicable  bankruptcy,  insolvency  and other  similar  laws
affecting creditors' rights generally.

         Section 6.04.  Litigation.  There are no actions,  suits or proceedings
(including   counterclaims)  pending  or,  to  the  knowledge  of  any  Obligor,
threatened,  against or  affecting  any  Consolidated  Entity  before any court,
governmental agency or arbitrator,  which could reasonably be expected to have a
Material Adverse Effect.

         Section 6.05. Financial Statements.  (a) The consolidated balance sheet
of the Consolidated  Entities as at June 29, 1996, and the related  consolidated
and  consolidating  (by business  segment)  income  statements and  consolidated
statements of cash flows and changes in stockholders' equity of the Consolidated
Entities  for the  fiscal  year  then  ended,  and the  accompanying  footnotes,
together with the unqualified opinion on the consolidated statements of Deloitte
& Touche,  independent  certified public accountants,  copies of which have been
furnished to each of the Banks,  are complete and correct and fairly present the
financial  condition of the Consolidated  Entities at such dates and the results
of the operations of the  Consolidated  Entities for the periods covered by such
statements, all in accordance with GAAP consistently applied.

                  (b) The most recent  operating plan delivered to the Banks for
the  Consolidated  Entities for their current fiscal year, on a quarterly basis,
including budget, personnel,  facilities and capital expenditure projections, on
a quarterly  basis,  and projected income and cash flow statements for each such
fiscal year, on a quarterly  basis,  and  accompanied  by a  description  of the
material assumptions used in making such operating plan, have each been prepared
in good faith and are based



                                       25

<PAGE>



on  reasonable  estimates  for the  operating  performance  of the  Consolidated
Entities on and after the Closing Date.

                  (c) There are no liabilities of any Consolidated Entity, fixed
or  contingent,  which  are  material  but are not  reflected  in the  financial
statements or in the notes thereto and which would be required to be recorded in
such  financial  statements  or  notes  in  accordance  with  GAAP,  other  than
liabilities  arising in the ordinary  course of business since June 29, 1996. No
information, exhibit or report furnished by any Consolidated Entity to the Banks
in connection  with the  negotiation  of this  Agreement  contained any material
misstatement  of fact or omitted to state a material fact or any fact  necessary
to make the statements contained therein not materially  misleading.  Since June
29, 1996,  except as and to the extent disclosed in the operating plan delivered
to the Banks  with  respect  to the fiscal  quarter  of the  Borrower  ending on
September 28, 1996,  there has been no change which could reasonably be expected
to have a Material Adverse Effect.

         Section 6.06.  Ownership and Liens.  Each of the Consolidated  Entities
has title to, or valid leasehold interests in, all of its properties and assets,
real and personal,  including the properties and assets, and leasehold interests
reflected in the  financial  statements  referred to in Section 6.05 (other than
any properties or assets  disposed of in the ordinary  course of business),  and
none of the properties and assets owned by any  Consolidated  Entity and none of
its  leasehold  interests  is subject to any Lien,  except as  disclosed in such
financial  statements or as may be permitted  hereunder and except for the Liens
created by the Security Documents.

         Section 6.07.  Taxes.  Each of the Consolidated  Entities has filed all
tax  returns  (federal,  state and local)  required to be filed and has paid all
taxes,  assessments  and  governmental  charges  and  levies  thereon to be due,
including  interest  and  penalties.  The federal  income tax  liability  of the
Consolidated  Entities has been audited by the Internal  Revenue Service and has
been finally  determined and satisfied for all taxable years up to and including
the taxable year ended 1984.

         Section 6.08.  ERISA. To the best knowledge of each Obligor,  each Plan
and Multiemployer  Plan, is in compliance in all material respects with, and has
been  administered in all material  respects in compliance  with, the applicable
provisions of ERISA, the Code and any other applicable Federal or state law, and
no event or condition is occurring or exists  concerning which any Obligor would
be under an  obligation  to  furnish  a report  to the Bank in  accordance  with
Section 7.08(m) hereof. As of the most recent valuation date for each Plan, each
Plan was "fully funded", which for purposes of this Section 6.08 shall mean that
the fair  market  value of the  assets of the Plan is not less than the  present
value of the accrued  benefits of all  participants  in the Plan,  computed on a
Plan  termination  basis.  To the best  knowledge of each  Obligor,  no Plan has
ceased  being fully  funded as of the date these  representations  are made with
respect to any Loan under this  Agreement.  For purposes of this  Section  6.08,
"material"  shall be  determined  in relation to the  financial  position of the
Consolidated Entities as specified in Section 10.01(g).




                                       26

<PAGE>



         Section  6.09.  Subsidiaries  and  Ownership of Stock.  Schedule I sets
forth the name of each  Subsidiary  of the  Borrower,  the  jurisdiction  of its
incorporation  and the  Persons  owning the  outstanding  capital  stock of such
Subsidiary.  All of the  outstanding  shares of capital stock of each Subsidiary
are validly issued, fully paid and nonassessable,  and all such shares are owned
by the Borrower or another Subsidiary free and clear of all Liens. Except as set
forth in Schedule I, neither the Borrower  nor any of its  Subsidiaries  owns or
holds the right to acquire any shares of stock or any other security or interest
in any other Person.

         Section  6.10.  Credit  Arrangements.  Schedule  II is a  complete  and
correct list of all credit  agreements,  indentures,  note purchase  agreements,
guaranties of indebtedness of third parties for borrowed money and guaranties of
obligations  of third  parties  as  lessees  under  Capital  Leases in excess of
$1,000,000,  Capital Leases and other  investments,  agreements and arrangements
presently in effect providing for or relating to extensions of credit (including
agreements  and  arrangements  for the  issuance  of  letters  of  credit or for
acceptance  financing)  in  respect of which any  Consolidated  Entity is in any
manner directly or  contingently  obligated;  and the maximum  principal or face
amounts of the credit in question, outstanding and which can be outstanding, are
correctly  stated,  and all Liens of any  nature  given or agreed to be given as
security therefor are correctly described or indicated in such Schedule.

         Section 6.11. Operation of Business.  Each of the Consolidated Entities
possesses all licenses, permits, franchises, patents, copyrights, trademarks and
trade  names,  or rights  thereto,  which are  material to conduct its  business
substantially  as now  conducted  and as presently  proposed to be conducted and
where the  failure to  possess  such  licenses,  permits,  franchises,  patents,
copyrights,  trademarks  and trade names could  reasonably be expected to have a
Material Adverse Effect, and no Consolidated Entity is in violation of any valid
rights of others with respect to any of the  foregoing  where such  violation is
material and could reasonably be expected to have a Material Adverse Effect.

         Section 6.12. Hazardous Materials. Each of the Consolidated Entities is
in compliance with all Environmental  Laws in effect in each jurisdiction  where
it is presently  doing  business  except where such failure to be in  compliance
could  not  reasonably  be  expected  to  have a  Material  Adverse  Effect.  No
Consolidated  Entity is subject to any  liability  under any  Environmental  Law
except where the existence of such liability could not reasonably be expected to
have a Material Adverse Effect.

         In addition,  no  Consolidated  Entity has received any (i) notice from
any governmental  authority by which any of its present or  previously-owned  or
leased real properties has been designated,  listed, or identified in any manner
by any  governmental  authority  charged with  administering  or  enforcing  any
Environmental Law as a Hazardous Material disposal or removal site, "Super Fund"
clean-up site, or candidate for removal or closure pursuant to any Environmental
Law,  (ii)  notice  of  any  Lien  arising  under  or  in  connection  with  any
Environmental  Law that has attached to any revenues of, or to, any of its owned
or leased  real  properties,  or (iii)  summons,  citation,  notice,  directive,
letter, or other written communication from any



                                       27

<PAGE>



governmental  authority  concerning any intentional or  unintentional  action or
omission by such Consolidated Entity in connection with its ownership or leasing
of any real Property  resulting in the releasing,  spilling,  leaking,  pumping,
pouring,  emitting,  emptying,  dumping, or otherwise disposing of any Hazardous
Material into the  environment  resulting in any violation of any  Environmental
Law, in each case where the effect of which could reasonably be expected to have
a Material Adverse Effect.

         Section 6.13. No Default on  Outstanding  Judgments or Orders.  Each of
the  Consolidated  Entities has satisfied all judgments  such that the aggregate
amount of  outstanding  judgments not otherwise  fully covered by insurance does
not exceed $500,000 and no Consolidated Entity is in default with respect to any
final  judgment,  writ,  injunction,  decree,  rule or  regulation of any court,
arbitrator  or  federal,  state,  municipal  or  other  governmental  authority,
commission, board, bureau, agency or instrumentality,  domestic or foreign which
could reasonably be expected to have a Material Adverse Effect.

         Section 6.14. No Defaults on Other Agreements.  No Consolidated  Entity
is in  default  in any  material  respect  in  the  performance,  observance  or
fulfillment of any of the obligations,  covenants or conditions contained in any
agreement or  instrument  which could  reasonably be expected to have a Material
Adverse Effect.

         Section 6.15. Labor Disputes and Acts of God. Neither any material part
of the business nor the  properties of any  Consolidated  Entity are affected by
any fire, explosion,  accident, strike, lockout or other labor dispute, drought,
storm,  hail,  earthquake,  embargo,  act of God or of the public enemy or other
casualty  (whether  or not covered by  insurance),  which  could  reasonably  be
expected to have a Material Adverse Effect.

         Section  6.16.  Governmental  Regulation.  No  Consolidated  Entity  is
subject to regulation  under the Public Utility Holding Company Act of 1935, the
Investment  Company Act of 1940, the Interstate  Commerce Act, the Federal Power
Act or any statute or regulation  limiting its ability to incur indebtedness for
money borrowed as contemplated hereby.

         Section  6.17.  No  Forfeiture.  Neither  the  Borrower  nor any of its
Subsidiaries  or  Affiliates  is  engaged  in or  proposes  to be engaged in the
conduct  of  any  business  or  activity  which  could  result  in a  Forfeiture
Proceeding  and no  Forfeiture  Proceeding  against  any of them is  pending  or
threatened.

         Section 6.18.  Solvency.

                  (a) The  present  balance  sheet  value of the  assets  of the
consolidated  group of the Consolidated  Entities after giving effect to all the
transactions  contemplated  by the  Facility  Documents  and the  funding of all
Commitments  and the  issuance  of all Letters of Credit  hereunder  exceeds the
amount that will be required to be paid on or in respect of the  existing  debts
and other liabilities (including



                                       28

<PAGE>



contingent  liabilities) of such consolidated  group as determined in accordance
with GAAP.

                  (b)  The  Property  of  each   Obligor  does  not   constitute
unreasonably  small  capital for such  Obligor to carry out its  business as now
conducted  and as proposed to be conducted  including  the capital needs of such
Obligor.

                  (c) No Obligor  intends to, nor does any Obligor  believe that
it will, incur debts beyond its ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be received by such Obligor,  and
of amounts to be  payable  on or in respect of debt of such  Obligor).  The cash
available to such Obligor after taking into account all other  anticipated  uses
of the cash of such  Obligor,  is  anticipated  to be sufficient to pay all such
amounts on or in respect of debt of such  Obligor when such amounts are required
to be paid.

                  (d) Except as may be otherwise fully covered by insurance,  no
Obligor  believes that final  judgments  against it in actions for money damages
will be rendered at a time when, or in an amount such that, such Obligor will be
unable to satisfy any such  judgments  promptly in  accordance  with their terms
(taking into account the maximum reasonable amount of such judgments in any such
actions  and the  earliest  reasonable  time at which  such  judgments  might be
rendered).  The cash  available  to each  Obligor  after taking into account all
other anticipated uses of the cash of such Obligor (including the payments on or
in respect of debt  referred  to in  paragraph  (c) of this  Section  6.18),  is
anticipated  to be  sufficient  to pay all  such  final  judgments  promptly  in
accordance with their terms.

         Section 6.19. Security Documents.  The Security Documents are effective
to create in favor of the Agent for the benefit of the Banks a legal,  valid and
enforceable  Lien on and security  interest in all right,  title and interest of
each Obligor in the  Collateral  securing the  obligations of the Obligors under
this  Agreement,  the  Notes,  the  Letters  of Credit  and the  other  Facility
Documents.  To the extent that a Lien on and security interest in the Collateral
can be  perfected  by the  filing of  financing  statements  under  the  Uniform
Commercial  Code, the Agent has a fully perfected and continuing  first priority
Lien on and  security  interest in such  Collateral  described  in the  Security
Agreement, the Trademark Security Agreement and the Pledge Agreement,  free from
all Liens other than Liens permitted under Section 8.03.

         Section  6.20.  New  Restaurants.  Schedule V  contains a complete  and
correct  report  containing  (a)  a  list  of  all  restaurants  for  which  any
Consolidated Entity has contractual commitments to acquire,  construct, lease or
commence operations after the date of this Agreement,  (b) the date of execution
of the  contracts  relating  to each such  acquisition,  construction,  lease or
commencement  of operations  and (c) the date upon which each such  acquisition,
construction,  lease or  commencement of operations has occurred or is projected
to occur.




                                       29

<PAGE>



                        ARTICLE 7. AFFIRMATIVE COVENANTS.

         So long as any  Obligation  shall remain  unpaid,  any Letter of Credit
shall  remain  outstanding  or any Bank  shall  have any  Commitment  under this
Agreement, the Borrower shall, and shall cause each of its Subsidiaries to:

         Section  7.01.  Maintenance  of  Existence.  Preserve  and maintain its
corporate  existence and good standing in the jurisdiction of its incorporation,
and qualify and remain qualified as a foreign  corporation in each  jurisdiction
in which such  qualification  is required  and where such  failure to so qualify
could reasonably be expected to have a Material Adverse Effect.

         Section 7.02. Conduct of Business.  Continue to engage in a business of
the same general type as conducted by it on the date of this Agreement.

         Section 7.03.  Maintenance of Properties.  Maintain,  keep and preserve
all of its Properties,  tangible and intangible,  (except those assets no longer
used or useful in the conduct of its business) necessary or useful in the proper
conduct of its business in good working order and  condition,  ordinary wear and
tear excepted.

         Section 7.04.  Maintenance of Records.  Keep adequate records and books
of account,  in which  complete  entries will be made in  accordance  with GAAP,
reflecting all financial transactions of the Consolidated Entities.

         Section  7.05.  Maintenance  of  Insurance.   Maintain  insurance  with
financially  sound and reputable  insurance  companies or  associations  in such
amounts and covering such risks as are usually  carried by companies  engaged in
the same or a similar  business and  similarly  situated,  which  insurance  may
provide for reasonable deductibility from coverage thereof.

         Section 7.06.  Compliance  with Laws.  Comply in all material  respects
with all applicable  laws,  rules,  regulations  and orders,  such compliance to
include, without limitation, paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its Property unless
contested in good faith by  appropriate  proceedings  and for which  appropriate
reserves have been established in accordance with GAAP.

         Section 7.07.  Right of Inspection;  Consultant.  (a) At any reasonable
time and from time to time,  and upon  reasonable  advance notice but no advance
notice shall be required if a Default or an Event of Default then exists, permit
the Agent or any Bank or any agent or  representative  thereof,  to examine  and
make  copies and  abstracts  from the records and books of account of, and visit
the  properties  of,  such  Consolidated  Entity,  and to discuss  the  affairs,
finances  and  accounts  of such  Consolidated  Entity  with  its  officers  and
directors and  independent  accountants and (b) upon the request of the Required
Banks,  agree to the  appointment  of an  independent  consultant  not a current
employee of a competitor  of the  Consolidated  Entities (as  determined  in the
reasonable discretion of the Banks), who shall be



                                       30

<PAGE>



selected  by  the  Banks  to  examine  the  financial   condition,   operations,
properties,  business and prospects of the Consolidated Entities for the benefit
of the Banks at the cost of the Borrower;  provided that such  consultant  shall
execute a  confidentiality  agreement in customary form, agree to use reasonable
precautions to keep all information of the  Consolidated  Entities  confidential
and take reasonable steps not to unduly interfere with the ongoing operations of
the Consolidated Entities.

  Section 7.08. Reporting Requirements. Furnish directly to each of the Banks:

                  (a) as soon as available and in any event within 90 days after
the end of each  fiscal year of the  Borrower,  consolidated  and  consolidating
balance  sheets of the  Consolidated  Entities as of the end of such fiscal year
and consolidated and  consolidating  (by business segment) income statements and
consolidated statements of cash flows and changes in stockholders' equity of the
Consolidated Entities for such fiscal year, all in reasonable detail and stating
in comparative form the respective  consolidated and  consolidating (by business
segment) figures for the corresponding  date and period in the prior fiscal year
and in the current  operating plan and all prepared in accordance  with GAAP and
as to the consolidated  statements  accompanied by an opinion thereon acceptable
to the  Agent and each of the Banks by  Deloitte  & Touche or other  independent
accountants  of  national  standing  selected  by the  Borrower;  provided  that
delivery  within the period  specified  above of copies of the Annual  Report on
Form 10-K of the Borrower  filed with the  Securities  and Exchange  Commission,
together  with  the  adjustments  to  such  consolidated   financial  statements
necessary to provide  consolidating  information  for each of its  Subsidiaries,
shall be deemed to satisfy the  requirements  of this Section 7.08(a) so long as
such Form 10-K as so adjusted shall contain the information  referred to in this
Section 7.08(a);

                  (b) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the Borrower,
consolidated and consolidating balance sheets of the Consolidated Entities as of
the end of such quarter and consolidated and consolidating (by business segment)
income  statements  and  consolidated  statements  of cash flows and  changes in
stockholders' equity of the Consolidated  Entities, for the period commencing at
the end of the previous fiscal year and ending with the end of such quarter, all
in reasonable detail and stating in comparative form the respective consolidated
and consolidating  (by business segment) figures for the corresponding  date and
period in the  previous  fiscal year and in the current  operating  plan and all
prepared in accordance with GAAP and certified by the chief financial officer of
the Borrower  (subject to year-end  adjustments);  provided that delivery within
the period specified above of copies of the Quarterly Report on Form 10-Q of the
Borrower filed with the Securities  and Exchange  Commission,  together with the
adjustments  to such  consolidated  financial  statements  necessary  to provide
consolidating  information  for each of its  Subsidiaries,  shall be  deemed  to
satisfy the requirements of this Section 7.08(b) so long as such Form 10-Q as so
adjusted shall contain the information referred to in this Section 7.08(b);




                                       31

<PAGE>



                  (c)   simultaneously   with  the  delivery  of  the  financial
statements  referred to above, a Compliance  Certificate of the chief  financial
officer of the  Borrower  (i)  certifying  that to the best of his  knowledge no
Default or Event of Default has occurred and is  continuing  or, if a Default or
Event of Default has  occurred and is  continuing,  a statement as to the nature
thereof and the action  which is proposed to be taken with  respect  thereto and
(ii) with  computations  demonstrating  compliance with the financial  covenants
contained in Article 9;

                  (d)  simultaneously  with the delivery of the annual financial
statements  referred to in Section  7.08(a),  a certificate  of the  independent
public accountants who audited such statements to the effect that, in making the
examination  necessary for the audit of such  statements,  they have obtained no
knowledge  of any  condition  or event which  constitutes  a Default or Event of
Default,  or if such  accountants  shall  have  obtained  knowledge  of any such
condition or event,  specifying in such certificate each such condition or event
of which they have knowledge and the nature and status thereof;

                  (e)   simultaneously   with  the  delivery  of  the  financial
statements  referred  to in Section  7.08(a) and  Section  7.08(b),  a narrative
explanation  signed by the chief financial officer of the Consolidated  Entities
of any material variance from the Consolidated  Entities' operating plan for the
fiscal year of the Borrower that is reflected in such financial statements;

                  (f) as soon as  available  and in any event not later than (x)
December 1, 1996 and (y) 30 days prior to the  commencement  of each fiscal year
of the Borrower,  (i) an operating  plan for the  Consolidated  Entities in form
acceptable to the Agent and the Required  Banks for their current and subsequent
fiscal year, on a quarterly basis, including budget,  personnel,  facilities and
capital expenditure projections,  on a quarterly basis, and projected income and
cash  flow and cash  receipts  and cash  disbursement  statements  for each such
fiscal year, on a quarterly  basis,  and  accompanied  by a  description  of the
material  assumptions  used in making such operating plan and (ii) a certificate
of the chief financial officer of the Borrower with  computations  demonstrating
compliance  with the financial  covenants  contained in Article 9 on a pro forma
basis;

                  (g) as soon as available and in any event within 30 days after
the end of each calendar month, a consolidated balance sheet of the Consolidated
Entities  as of the end of such month and  consolidated  and  consolidating  (by
business segment) income  statements and consolidated  statements of cash flows,
cash  receipts  and  cash  disbursements,   projected  cash  receipts  and  cash
disbursements  for the  current  month  and the  immediately  subsequent  eleven
calendar months and changes in stockholders' equity of the Consolidated Entities
for such month,  all in reasonable  detail and all prepared in  accordance  with
GAAP and certified by the chief  financial  officer of the Borrower  (subject to
quarterly and year-end  adjustments),  together with computations  demonstrating
compliance  with the financial  covenants  contained in Section 9.02 and Section
9.03;




                                       32

<PAGE>



                  (h)   simultaneously   with  the  delivery  of  the  financial
statements  referred  to in  Section  7.08(g),  a report  listing  the number of
"Fuddruckers" and "Champps"  restaurants as of the end of such month,  sales for
each such  restaurant for such month,  comparable  results to the  corresponding
month in the prior fiscal year for each such  restaurant and sales for each such
restaurant for the period  commencing at the end of the previous fiscal year and
ending with the end of such month;

                  (i)   simultaneously   with  the  delivery  of  the  financial
statements  referred to in Section  7.08(g),  a report  detailing the aged trial
balance of Daka, Inc. and its Subsidiaries, describing the current status of the
twelve  largest  accounts  listed on such aged trial balance and the  percentage
that each such account  contributes to the contribution margin of Daka, Inc. and
its Subsidiaries;

                  (j)   simultaneously   with  the  delivery  of  the  financial
statements  referred to in Section  7.08(g),  a report  describing  any entering
into, renewal, termination,  material amendment, material default or non-renewal
of any revenue-producing  contract during such month by Daka, Inc. of any of its
Subsidiaries  for which revenues during the current fiscal year are projected to
exceed $500,000 and the anticipated revenue gained or lost under such contract;

                  (k) promptly  after the  commencement  thereof,  notice of all
actions,  suits,  and proceedings  before any court or governmental  department,
commission,  board,  bureau,  agency or  instrumentality,  domestic  or foreign,
affecting  any  Consolidated  Entity  which,  if  determined  adversely  to such
Consolidated  Entity,  could  reasonably be expected to have a Material  Adverse
Effect;

                  (l) as soon as possible  and in any event within 10 days after
the  occurrence  of each  Default or Event of Default a written  notice  setting
forth the details of such  Default or Event of Default  and the action  which is
proposed to be taken by the Obligors with respect thereto;

                  (m) as soon as  possible,  and in any  event  within  ten days
after  any  Obligor  knows  or has  reason  to know  that any of the  events  or
conditions  specified  below  with  respect to any Plan or  Multiemployer  Plan,
whichever is applicable,  have occurred or exist, a statement signed by a senior
financial officer of such Obligor setting forth details respecting such event or
condition  and the action,  if any,  which such  Obligor or its ERISA  Affiliate
proposes  to take  with  respect  thereto  (and a copy of any  report  or notice
required to be filed with or given to PBGC by the Borrower or an ERISA Affiliate
with respect to such event or condition):  (i) any reportable  event, as defined
in Section 4043(b) of ERISA, with respect to a Plan, as to which PBGC has not by
regulation  waived  the  requirement  of  Section  4043(a)  of ERISA  that it be
notified within 30 days of the occurrence of such event (provided that a failure
to meet the minimum  funding  standard of Section 412 of the Code or Section 302
of ERISA including, without limitation, the failure to make on or before its due
date a required  installment  under Section 412(m) of the Code or Section 302(e)
of ERISA,  shall be a reportable event regardless of the issuance of any waivers
in accordance



                                       33

<PAGE>



with  Section  412(d) of the Code) and any  request for a waiver  under  Section
412(d) of the Code for any Plan;  (ii) the  distribution  under  Section 4041 of
ERISA of a notice of intent to  terminate  any Plan or any  action  taken by the
Borrower or an ERISA  Affiliate to terminate any Plan;  (iii) the institution by
PBGC of proceedings  under Section 4042 of ERISA for the  termination of, or the
appointment of a trustee to administer, any Plan, or the receipt by the Borrower
or any ERISA  Affiliate of a notice from a  Multiemployer  Plan that such action
has  been  taken by PBGC  with  respect  to such  Multiemployer  Plan;  (iv) the
complete or partial  withdrawal from a Multiemployer Plan by the Borrower or any
ERISA  Affiliate  that results in liability  under Section 4201 or 4204 of ERISA
(including  the  obligation  to  satisfy  secondary  liability  as a result of a
purchaser  default) or the receipt of the  Borrower  or any ERISA  Affiliate  of
notice from a  Multiemployer  Plan that it is in  reorganization  or  insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has
terminated  under Section 4041A of ERISA; (v) the institution of a proceeding by
a  fiduciary  or any  Multiemployer  Plan  against  the  Borrower  or any  ERISA
Affiliate to enforce  Section 515 of ERISA,  which  proceeding  is not dismissed
within 30 days;  (vi) the adoption of an amendment to any Plan that  pursuant to
Section  401(a)(29) of the Code or Section 307 of ERISA would result in the loss
of  tax-exempt  status of the trust of which such Plan is a part if the Borrower
or an ERISA Affiliate fails to timely provide security to the Plan in accordance
with the provisions of said  Sections;  (vii) any event or  circumstance  exists
which may  reasonably be expected to constitute  grounds for the Borrower or any
ERISA  Affiliate to incur  liability  under Title IV of ERISA or under  Sections
412(c)(11)  or 412(n) of the Code with  respect  to any  Plan;  and  (viii)  the
Unfunded  Benefit  Liabilities  of one or more Plans  increase after the date of
this  Agreement  in an amount  which is material  in  relation to the  financial
condition of the  Consolidated  Entities,  on a  consolidated  basis;  provided,
however,  that such  increase  shall not be deemed to be  material so long as it
does not exceed during any consecutive 3 year period $500,000;

                  (n)  promptly  after the  request of any Bank,  copies of each
annual  report filed  pursuant to Section 104 of ERISA with respect to each Plan
(including,  to the  extent  required  by  Section  104 of  ERISA,  the  related
financial and actuarial statements and opinions and other supporting statements,
certifications,  schedules and information  referred to in Section 103) and each
annual  report  filed with  respect to each Plan  under  Section  4065 of ERISA;
provided, however, that in the case of a Multiemployer Plan, such annual reports
shall  be  furnished  only if they are  available  to the  Borrower  or an ERISA
Affiliate;

                  (o) promptly  after the sending or filing  thereof,  copies of
all proxy statements,  financial statements and reports which the Borrower sends
to its  stockholders,  and copies of all regular,  periodic and special reports,
and all registration  statements  which any  Consolidated  Entity files with the
Securities and Exchange  Commission or any  governmental  authority which may be
substituted therefor, or with any national securities exchange;

                  (p) promptly upon receipt thereof, a copy of each other report
(including, without limitation, so-called management letters) submitted to any



                                                        34

<PAGE>



Consolidated  Entity by independent  accountants in connection  with any annual,
interim or special audit made by them of the books of any Consolidated Entity;

                  (q) promptly after the commencement  thereof or promptly after
any  Obligor  knows  of  the  commencement  or  threat  thereof,  notice  of any
Forfeiture Proceeding;

                  (r)   prior  to  the   execution   thereof,   copies   of  all
documentation  evidencing  the  FFCA  Sale-Leaseback  Transaction  and  the  AEI
Sale-Leaseback Transaction; and

                  (s)  such  other  information   respecting  the  condition  or
operations,  financial or otherwise,  of the Borrower or any of its Subsidiaries
as the Agent or any Bank may from time to time reasonably request.

         Section 7.09. Additional Subsidiary  Guarantors.  In the event that any
Subsidiary  of the Borrower  shall have as  determined at the end of each fiscal
quarter  of  the  Borrower  assets  greater  than  $500,000  (as  determined  in
accordance with GAAP),  the Borrower will  immediately  cause such Subsidiary to
become a "Subsidiary  Guarantor" (and thereby an Obligor hereunder)  pursuant to
an  Assumption  Agreement,  and shall  deliver such proof of  corporate  action,
incumbency of officers, opinions of counsel and other documents as is consistent
with those  delivered  by each  Obligor  pursuant  to Article 4 of the  Existing
Credit Agreement or as the Agent shall have reasonably requested.

         Section 7.10.  Interest Rate Protection  Agreements.  Within 30 days of
the Closing Date,  shall enter into and maintain in full force and effect at all
times Interest Rate  Protection  Agreements of a duration not less than 9 months
which  shall  be  with  one or more  of the  Banks  to  protect  itself  against
fluctuations  of  interest  rates  such  that the  interest  rate on a  notional
principal  amount of not less  than  $45,000,000  shall  never  exceed  the rate
established by the Required Banks.

                         ARTICLE 8. NEGATIVE COVENANTS.

         So long as any  Obligation  shall remain  unpaid,  any Letter of Credit
shall  remain  outstanding  or any Bank  shall  have any  Commitment  under this
Agreement,  the Borrower shall not, and shall cause each of its Subsidiaries not
to:

 Section 8.01. Debt. Create, incur, assume or suffer to exist any Debt, except:

                  (a) Debt of the Obligors under this Agreement,  the Notes, the
Letters of Credit and the other Facility Documents;

                  (b)  Debt  described  in  Schedule  II and,  unless  otherwise
identified  with an  asterisk  on  Schedule  II,  any  renewals,  extensions  or
refinancings  thereof,  provided  that the  principal  amount  thereof  does not
increase;




                                       35

<PAGE>



                  (c) Debt of any Obligor to any other  Obligor,  provided  that
(i) if such Debt is secured,  such Debt is evidenced  by a  promissory  note and
such note together  with such  security is pledged as collateral  for the Loans,
the Letter of Credit  Obligations and the other  obligations  under the Facility
Documents  and  (ii)  if  Debt  is  evidenced  by a  promissory  note  or  other
instrument,  such note is pledged to the Agent as collateral for the Loans,  the
Letter  of  Credit  Obligations  and the other  obligations  under the  Facility
Documents;

                  (d)  Debt  consisting  of  Guaranties  permitted  pursuant  to
Section 8.02;

                  (e) accounts payable to trade creditors in the ordinary course
of business for goods or services;

                  (f) Debt of any Consolidated  Entity secured by purchase money
Liens or incurred in connection  with Capital Leases provided that the aggregate
amount of such Debt for all Obligors  shall not exceed at any time  $15,000,000;
and

                  (g)  other  Debt of any  Consolidated  Entity  not  listed  in
clauses (a) through (f),  inclusive,  provided that the aggregate amount of such
Debt for all Consolidated Entities does not exceed at any time $500,000.

     Section 8.02. Guaranties, Etc. Assume, guarantee, endorse or otherwise
become directly or contingently responsible or liable for any Guaranty, except:

                  (a)  Guaranties  by the  Subsidiaries  of the  Borrower of the
Obligations;

                  (b) Guaranties by endorsement  of negotiable  instruments  for
deposit or collection, similar transactions in the ordinary course of business;

                  (c) Guaranties constituting Debt permitted pursuant to Section
8.01;

                  (d) Guaranties by any Obligor of any  obligations of any other
Obligor  permitted   hereunder  provided  that  the  aggregate  amount  of  such
obligations for all Obligors does not exceed $5,000,000;

                  (e) Guaranties by Fuddruckers, Inc. of rental payments owed by
Atlantic  Restaurant  Ventures,  Inc. under leases of "Fuddruckers"  restaurants
which will be or have been entered into in the ordinary course of business; and

                  (f)  Guaranties  by the Borrower of  obligations  under leases
permitted under Section 8.04.

Section 8.03. Liens. Create, incur, assume or suffer to exist, any Lien, upon or
with respect to any of its Properties, now owned or hereafter acquired, except:

                  (a)  Liens in  favor  of the  Agent  on  behalf  of the  Banks
securing the Loans and the Letter of Credit Obligations hereunder;



                                       36

<PAGE>




                  (b) Liens for taxes or assessments or other government charges
or levies if not yet due and  payable  or if due and  payable  if they are being
contested in good faith by  appropriate  proceedings  and for which  appropriate
reserves are maintained in accordance with GAAP;

                  (c) Liens imposed by law, such as  mechanic's,  materialmen's,
landlord's,  warehousemen's  and  carrier's  Liens,  and  other  similar  Liens,
securing  obligations  incurred in the ordinary course of business which are not
past due for more than 60 days,  or which are being  contested  in good faith by
appropriate proceedings and for which appropriate reserves have been established
in accordance with GAAP;

                  (d)   Liens   under   workmen's   compensation,   unemployment
insurance, social security or similar legislation (other than ERISA);

                   (e) Liens,  deposits or pledges to secure the  performance of
bids, tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement),  public or statutory obligations,
surety,  stay, appeal,  indemnity,  performance or other similar bonds, or other
similar obligations arising in the ordinary course of business;

                  (f) judgment and other  similar  Liens  arising in  connection
with court  proceedings which do not exceed $1,000,000 in the aggregate or where
the execution or other  enforcement of such Liens is effectively  stayed and the
claims  secured  thereby  are  being  actively  contested  in good  faith and by
appropriate proceedings;

                  (g) easements,  rights-of-way,  restrictions and other similar
encumbrances  which,  in the  aggregate,  do not  materially  interfere with the
occupation,  use and enjoyment by any Obligor of the Property encumbered thereby
in the  normal  course of its  business  or  materially  impair the value of the
Property subject thereto;

                  (h) Liens  described  on Schedule IV not  otherwise  permitted
under this Section 8.03 and, to the extent that such Lien secures Debt permitted
under  Section   8.01(b),   Liens  that  secure  any  renewals,   extensions  or
refinancings of such Debt, but not the extension of such Lien to other Property;
and

                  (i) purchase money Liens on any Property hereafter acquired or
the assumption of any Lien on Property existing at the time of such acquisition,
or a Lien  incurred  in  connection  with any  conditional  sale or other  title
retention  agreement or a Capital Lease;  provided that (i) any Property subject
to any of the foregoing is acquired by any Obligor in the ordinary course of its
business  and the Lien on any such  Property is created  contemporaneously  with
such acquisition; (ii) the obligation secured by any Lien so created, assumed or
existing  shall not exceed 100% of the lesser of cost or fair market value as of
the  time of  acquisition  of the  Property  covered  thereby  to  such  Obligor
acquiring the same; (iii) each such Lien shall attach only to the



                                       37

<PAGE>



Property so acquired and fixed  improvements  thereon;  and (iv) the obligations
secured by such Lien are permitted by the provisions of Section 8.01(f).

         Section 8.04. New Restaurants.  Acquire,  construct, lease or otherwise
commence  operations  for, or commit to acquire,  construct,  lease or otherwise
commence  operations for, any new restaurants,  except for (a) "Fuddruckers" and
"Champps"  restaurants listed on Schedule V, (b) "Leo's Delis",  "Fudd's Cafes",
"French Quarter Cafes", "La Salsa" restaurants and "Mama Za" restaurants and (c)
signature  concepts  (whether  franchised,  leased or  licensed) in food service
locations  operated by Daka, Inc. and its Subsidiaries,  in each case so long as
no Default or Event of Default exists or would exist after giving effect to such
acquisition, construction, lease or commencement of operations.

         Section 8.05.  Investments.  Make, or permit any of its Subsidiaries to
make,  any loan or advance to any Person or purchase or  otherwise  acquire,  or
permit any such Subsidiary to purchase or otherwise acquire,  any capital stock,
assets, obligations or other securities of, make any capital contribution to, or
otherwise invest in, or acquire any interest in, any Person, except:

                  (a) direct  obligations of the United States of America or any
agency thereof with maturities of one year or less from the date of acquisition;

                  (b) commercial  paper of a domestic issuer rated at least "A1"
by Standard & Poor's Corporation or "P-1" by Moody's Investors Service, Inc.;

                  (c)  certificates  of deposit with  maturities  of one year or
less from the date of acquisition issued by any commercial bank operating within
the  United  States  of  America   having  capital  and  surplus  in  excess  of
$100,000,000;

                  (d)  for  stock,   obligations   or  securities   received  in
settlement of debts (created in the ordinary  course of business)  owing to such
Consolidated Entity;

                  (e)  advances  for  reimbursement  of  expenses  of  employees
incurred in the ordinary course of business;

                  (f) to or in any Obligor; and

                  (g) in Property to be used or useful in the ordinary course of
business of such Consolidated Entity.

         Section  8.06.  Dividends.  Declare or pay,  any  dividends,  purchase,
redeem,  retire or otherwise  acquire for value, any of its capital stock now or
hereafter  outstanding,  or make, any distribution of assets to its stockholders
as such whether in cash, assets or in obligations of such  Consolidated  Entity,
or allocate or otherwise  set apart,  any sum for the payment of any dividend or
distribution on, or for the purchase,  redemption or retirement of any shares of
its capital stock,  or make, any other  distribution  by reduction of capital or
otherwise in respect of any shares of its



                                       38

<PAGE>



capital stock,  or make,  payments of interest on, or payments or prepayments of
principal  of, or the  setting  apart of money for a sinking or other  analogous
fund for the purchase, redemption,  retirement or other acquisition of principal
or interest, on Consolidated Subordinated Debt, except that:

                  (a) any Consolidated  Entity may declare and deliver dividends
and make distributions payable solely in its common stock;

                  (b) any Consolidated  Entity may declare and deliver dividends
and make distributions to the Borrower or any Obligor; and

                  (c) the Borrower may pay dividends on or after January 1, 1997
on its Series A Preferred Stock as constituted on the Closing Date not exceeding
$50,000 in the aggregate in any 6 month period so long as no Default or Event of
Default exists or would exist after giving effect to such payment.

         Section  8.07.  Sale  of  Assets.  Sell,  lease,  assign,  transfer  or
otherwise  dispose  of  any  of its  now  owned  or  hereafter  acquired  assets
(including,  without limitation,  shares of stock and indebtedness,  receivables
and leasehold interests); except:

                  (a)  for  inventory  disposed  of in the  ordinary  course  of
business;

                  (b) the sale or other  disposition of assets no longer used or
useful in the conduct of its business;

                  (c) that any Obligor may sell,  lease,  assign,  or  otherwise
transfer its assets to any other Obligor;

                  (d) sales to FFCA and AEI of newly  constructed  "Fuddruckers"
and  "Champps"  restaurants  listed on  Schedule  V and of  already  constructed
"Fuddruckers"  restaurants  listed on Schedule VI to the extent  permitted under
Section 13.20;

                  (e) the sale of a "Champps"  restaurant  located in  Woodbury,
Minnesota to its franchisee  for  consideration  not less than  $1,200,000 to be
paid over a 7 year term on a 20 year amortization schedule;

                  (f) the  transfer of certain  leased  point-of-sale  equipment
(having a value not in excess of  $2,500,000)  to an  affiliate  of AT&T,  which
equipment or replacements therefor shall be relet by an Obligor;

                  (g) that any Obligor may license its intellectual  Property to
franchisees in the ordinary course of business; and

                  (h) the sale or other disposition of Property for cash so long
as the aggregate  consideration for such disposition and all other  dispositions
made after the Closing Date does not exceed $500,000.



                                       39

<PAGE>




         Section 8.08. Stock of Subsidiaries,  Etc. Sell or otherwise dispose of
any  shares  of  capital  stock of any  Subsidiary  of the  Borrower,  except in
connection  with a transaction  permitted under Section 8.10, or permit any such
Subsidiary  to  issue  any  additional  shares  of  its  capital  stock,  except
directors' qualifying shares.

         Section 8.09. Transactions with Affiliates. Enter into any transaction,
including, without limitation, the purchase, sale or exchange of Property or the
rendering of any service, with any Affiliate, including, without limitation, the
purchase, sale or exchange of Property or the rendering of any service, with any
Affiliate,  except in the  ordinary  course of and  pursuant  to the  reasonable
requirements of such Consolidated Entity's business and upon fair and reasonable
terms no less  favorable  to such  Consolidated  Entity  than would  obtain in a
comparable arm's length transaction with a Person not an Affiliate.

         Section 8.10. Mergers, Etc. Merge or consolidate with, or sell, assign,
lease or  otherwise  dispose of  (whether in one  transaction  or in a series of
transactions)  all or  substantially  all of its  assets  (whether  now owned or
hereafter  acquired) to, any Person,  or acquire all or substantially all of the
assets or the  business of any Person (or enter into any  agreement to do any of
the  foregoing),   except  that  any  Consolidated  Entity  may  merge  into  or
consolidate with or transfer assets to any Obligor.

         Section 8.11.  Acquisitions.  Make any Acquisition.

         Section 8.12. No Activities Leading to Forfeiture. Engage in or propose
to be engaged in the conduct of any business or activity which could result in a
Forfeiture Proceeding.

         Section 8.13.  Amendments or Waivers of Certain Documents.  (a) Defease
or make any payments the effect of which is to defease, or make any voluntary or
optional payment or prepayment on, or redemption of,  Consolidated  Subordinated
Debt, Consolidated Debt (other than refinancings of Capital Leases), obligations
under  the  FFCA  Sale-Leaseback   Transaction  or  obligations  under  the  AEI
Sale-Leaseback  Transaction,  in whole  or in part,  (b)  amend,  supplement  or
otherwise  change (or agree to any  amendment  or other  change of) the terms of
Consolidated  Subordinated Debt, if the effect of such amendment,  supplement or
change is to increase  the  interest  rate on  Consolidated  Subordinated  Debt,
advance  the dates  upon which  payment  of  principal  or  interest  are due on
Consolidated  Subordinated  Debt  (including  any change  that adds or  modifies
mandatory   prepayments),   change,  in  a  manner  materially  adverse  to  the
Consolidated Entities or which confers additional rights on the holders thereof,
any event of default or  covenant  (or any  definition  relating  thereto)  with
respect to Consolidated  Subordinated  Debt, change the redemption or repurchase
provisions with respect to Consolidated Subordinated Debt in a manner materially
adverse to the Consolidated  Entities or which confers  additional rights on the
holders   thereof,   change  the   subordination   provisions  of   Consolidated
Subordinated Debt or otherwise increase the obligations of the obligor or confer
additional rights on the holders of Consolidated  Subordinated Debt without,  in
each case,  obtaining  the prior written  consent of the Required  Banks to such
amendment or change.



                                       40

<PAGE>




         Section  8.14.  Restrictions.  Enter  into  or  suffer  to  exist,  any
agreement with any Person other than the Banks that (a) prohibits,  requires the
consent of such Person for or limits the ability of (i) any Consolidated  Entity
to pay dividends or make  distributions to any other  Consolidated  Entity,  pay
liabilities owed to any other Consolidated Entity, make loans or advances to any
other  Consolidated  Entity  or  transfer  any of  its  Property  to  any  other
Consolidated  Entity, (ii) any Consolidated  Entity to create,  incur, assume or
suffer to exist any Lien upon any of its  Property or (iii) any Obligor to enter
into any  modification or supplement of any Facility  Document;  or (b) contains
financial  covenants  which,  taken as a  whole,  are  more  restrictive  on the
Consolidated Entities than the financial covenants contained in Article 9.

         Section 8.15. Capital Expenditures.  Make or commit to make any Capital
Expenditure if the aggregate  amount of  Consolidated  Net Capital  Expenditures
incurred  (a) during any fiscal year of the Borrower  would exceed  $20,000,000,
(b) during the fiscal quarter of the Borrower  ending on December 28, 1996 would
exceed $7,000,000, (c) during the fiscal quarter of the Borrower ending on March
29,  1997 would  exceed  $7,000,000  and (d)  during  the fiscal  quarter of the
Borrower  ending on June 28,  1997 would  exceed  $6,000,000  and (e) during the
fiscal  quarter of the  Borrower  ending on  September  27,  1997  would  exceed
$2,000,000;  provided that any amount  permitted in a fiscal quarter that is not
expended  in such  fiscal  quarter  may be  carried  over  and  expended  in the
immediately  subsequent  fiscal  quarter in addition to the amount  permitted in
each such immediately subsequent fiscal quarter.

         Section 8.16. Rental Expense. Permit Consolidated Rental Expense during
any fiscal  quarter of the Borrower to exceed (a) with respect to leases of real
Property  containing  "Champps"  restaurants,   7%  of  gross  sales  from  such
restaurants  and  (b)  with  respect  to  leases  of  real  Property  containing
"Fuddruckers" restaurants, 10% of gross sales from such restaurants.

         Section 8.17.  Accounting and Tax Changes.  Make any significant change
in accounting or tax treatment or reporting practices,  except as required under
GAAP or the Code,  respectively,  or change the fiscal year of the  Consolidated
Entities.

                         ARTICLE 9. FINANCIAL COVENANTS.

         So long as any  Obligation  shall remain  unpaid,  any Letter of Credit
shall  remain  outstanding  or any Bank  shall  have any  Commitment  under this
Agreement, each of the Obligors jointly and severally covenants that:

         Section  9.01.  Net Income.  As determined as of the end of each fiscal
quarter of the Borrower,  Consolidated  Net Income for such fiscal quarter shall
be not  less  than  (a) if such  fiscal  quarter  ends on  September  28,  1996,
($4,500,000),  (b) if such fiscal quarter ends on December 28, 1996, $1,750,000,
(c) if such  fiscal  quarter  ends on March 29,  1997,  $2,000,000,  (d) if such
fiscal  quarter ends on June 28, 1997,  $2,500,000 or (e) if such fiscal quarter
ends after June 28, 1997, $1,000,000.




                                       41

<PAGE>



         Section  9.02.  Leverage  Ratio.  As  determined  as of the end of each
fiscal month of the Borrower,  the Leverage  Ratio shall be not greater than (a)
if such month is September, October or November, 2.25 to 1.00, (b) if such month
is December  or January,  2.15 to 1.00,  (c) if such month is  February,  March,
April or May, 2.50 to 1.00 or (d) if such month is June, July or August, 2.25 to
1.00.

         Section 9.03.  Minimum  Tangible Net Worth. At all times,  Consolidated
Tangible  Net Worth  shall not be less than the greater of the sum of (a) (i) if
such time is on or after  September  28,  1996 and  before  December  28,  1996,
$57,500,000, (ii) if such time is on or after December 28, 1996 and before March
29,  1997,  $59,000,000,  (iii) if such time is on or after  March 29,  1997 and
before June 28, 1997,  $61,500,000  or (iv) if such time is on or after June 28,
1997,  $63,750,000  plus (b) the aggregate  sum of the Fiscal  Quarter Net Worth
Increase Amounts calculated for each such fiscal quarter.

         Section 9.04.  Fixed Charge Coverage Ratio. As determined as of the end
of each fiscal quarter of the Borrower  ending after the Closing Date, the Fixed
Charge Coverage Ratio shall be not less than 1.30 to 1.00.

         Section 9.05.  Interest  Coverage Ratio. As determined as of the end of
each fiscal quarter of the Borrower  ending after the Closing Date, the Interest
Coverage  Ratio  shall  be not  less  than (a) if such  fiscal  quarter  ends on
December 28,  1996,  .50 to 1.00,  (b) if such fiscal  quarter ends on March 29,
1997, 1.10 to 1.00 or (c) if such fiscal quarter ends after March 29, 1997, 1.85
to 1.00.

                  ARTICLE 10.  EVENTS OF DEFAULT.

         Section 10.01. Events of Default.  Any of the following events shall be
an "Event of Default":

                  (a) the Borrower  shall:  (i) fail to pay the principal of any
Note on or before ten (10) days after the date when due and  payable;  (ii) fail
to pay any  Reimbursement  Obligation when due; or (iii) fail to pay interest on
any Note or any fee or other  amount  due  hereunder  on or before ten (10) days
after the date when due and payable;

                  (b) any  material  representation  or warranty  made or deemed
made by any Obligor in this Agreement or in any other Facility Document or which
is contained in any certificate, document, opinion, financial or other statement
furnished at any time under or in connection  with any Facility  Document  shall
prove to have been  incorrect in any material  respect on or as of the date made
or deemed made;

                  (c) any  Obligor  shall:  (i) fail to perform  or observe  any
term,  covenant or agreement  contained in Section 2.03 or Section 3.02, Section
7.08, Section 8.06 through Section 8.11,  inclusive,  or Article 9; or (ii) fail
to  perform  or  observe  any  term,  covenant  or  agreement  on its part to be
performed or observed (other than the



                                       42

<PAGE>



obligations  specifically  referred to elsewhere  in this Section  10.01) in any
Facility Document and such failure shall continue for 30 consecutive days;

                  (d)  any  Consolidated  Entity  shall:  (i)  fail  to pay  any
indebtedness  aggregating  in excess of $500,000,  including  but not limited to
material  indebtedness  for borrowed money  (excluding  the payment  obligations
described in (a) above), of such Obligor or any such Subsidiary, or any interest
or  premium  thereon,   when  due  (whether  by  scheduled  maturity,   required
prepayment,  acceleration,  demand or  otherwise);  or (ii) fail to  perform  or
observe any term,  covenant or condition on its part to be performed or observed
under any  agreement  or  instrument  relating  to any such  indebtedness,  when
required to be performed  or observed,  if the effect of such failure to perform
or observe is to accelerate,  or to permit the acceleration of, after the giving
of notice or  passage  of time,  or both,  the  maturity  of such  indebtedness,
whether or not such failure to perform or observe  shall be waived by the holder
of such  indebtedness;  or any such indebtedness shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment),  prior to the  stated  maturity  thereof;  or (iii) fail to pay any
rentals or other amounts owing under the FFCA Sale-Leaseback  Transaction or the
AEI Sale-Leaseback Transaction or otherwise fail to perform or observe any term,
covenant or  condition  thereunder  (after  giving  effect to  applicable  grace
periods and waivers);

                  (e) any  Consolidated  Entity:  (i) shall generally not, or be
unable to, or shall  admit in writing  its  inability  to, pay its debts as such
debts become due; or (ii) shall make an assignment for the benefit of creditors,
petition or apply to any tribunal for the  appointment of a custodian,  receiver
or trustee for it or a substantial  part of its assets;  or (iii) shall commence
any proceeding under any bankruptcy,  reorganization,  arrangement, readjustment
of debt, dissolution or liquidation law or statute of any jurisdiction,  whether
now or  hereafter  in  effect;  or (iv)  shall  have  had any such  petition  or
application filed or any such proceeding shall have been commenced,  against it,
in which an  adjudication or appointment is made or order for relief is entered,
or which petition, application or proceeding remains undismissed for a period of
60 days or more;  or shall be the  subject  of any  proceeding  under  which its
assets  may be subject to  seizure,  forfeiture  or  divestiture  (other  than a
proceeding in respect of a Lien permitted under Section 8.03(b));  or (v) by any
act or omission shall indicate its consent to,  approval of or  acquiescence  in
any such  petition,  application  or  proceeding  or  order  for  relief  or the
appointment of a custodian,  receiver or trustee for all or any substantial part
of its Property;  or (vi) shall suffer any such  custodianship,  receivership or
trusteeship to continue undischarged for a period of 30 days or more;

                  (f) one or more  judgments,  decrees or orders for the payment
of money not otherwise fully covered by insurance in excess of $1,000,000 in the
aggregate shall be rendered against any Consolidated  Entity and such judgments,
decrees or orders shall  continue  unsatisfied  and in effect for a period of 30
consecutive  days  without  being  vacated,  discharged,  satisfied or stayed or
bonded pending appeal;




                                       43

<PAGE>



                  (g) any event or  condition  shall occur or exist with respect
to any Plan or  Multiemployer  Plan  concerning  which any  Obligor  is under an
obligation  to furnish a report to the Bank in accordance  with Section  7.08(m)
hereof and as a result of such event or condition,  together with all other such
events or  conditions,  such Obligor has incurred or in the opinion of the Banks
is reasonably  likely to incur a liability to a Plan, a Multiemployer  Plan, the
PBGC, or a Section 4042 Trustee (or any  combination of the foregoing)  which is
material in relation to the  financial  position of the  Consolidated  Entities;
provided,  however,  that any such amount  shall not be deemed to be material so
long as all such amounts do not exceed $500,000 in the aggregate during the term
of this Agreement;

                  (h) the Unfunded Benefit Liabilities of one or more Plans have
increased  after the date of this  Agreement  in an amount which is material (as
specified in Section 7.08(m)(viii) hereof);

                  (i) (i) any  Person or two or more  Persons  acting in concert
shall have acquired  beneficial  ownership (within the meaning of Rules 13d-3 of
the Securities  and Exchange  Commission  under the  Securities  Exchange Act of
1934) of 25% or more of the outstanding  shares of voting stock of the Borrower;
and (ii) during any period of 12 consecutive months,  commencing before or after
the date of this  Agreement,  individuals  who at the beginning of such 12-month
period were  directors  of the  Borrower  cease for any reason to  constitute  a
majority of the board of directors of the Borrower;

                  (j) (i) any Forfeiture Proceeding shall have been commenced or
any Obligor shall have given any Bank written notice of the  commencement of any
Forfeiture  Proceeding  as  provided  in  Section  9.08(l)  and such  Forfeiture
Proceeding is not  dismissed  within 15 days of such  commencement;  or (ii) any
Bank has a good faith basis to believe  that a  Forfeiture  Proceeding  has been
threatened or commenced and such Forfeiture  Proceeding is not dismissed  within
15 days of such commencement;

                  (k) any of the Security  Documents shall at any time after its
execution  and  delivery  and for any  reason  cease:  (i) to create a valid and
perfected first priority security  interest in and to the Property  purported to
be subject  to such  Agreement  to the  extent  such  security  interest  can be
perfected by the filing of  financing  statements  under the Uniform  Commercial
Code; or (ii) to be in full force and effect or shall be declared null and void,
or the validity or  enforceability  thereof shall be contested by any Obligor or
any Obligor  shall deny it has any further  liability  or  obligation  under the
Security  Documents or any Obligor shall fail to perform any of its  obligations
thereunder;

                  (l) the  subordinating  party shall have  breached  any of the
subordination provisions of any document,  agreement or instrument evidencing or
relating to Consolidated Subordinated Debt; or




                                       44

<PAGE>



                  (m) the  Required  Banks shall have  determined  in good faith
(which  determination shall be conclusive absent manifest error) that a material
adverse change has occurred in the business,  operations,  properties, assets or
condition  (financial  or  otherwise)  of  the  Borrower  or of  the  enterprise
comprised of the Consolidated  Entities taken as a whole or that the prospect of
payment  under  this  Agreement,  the Notes or any other  Facility  Document  is
impaired.

         Section  10.02.  Remedies.  If any Event of Default  shall occur and be
continuing,  the Agent shall,  upon request of the  Required  Banks,  by written
notice to the Borrower, (a) declare the Commitments to be terminated,  whereupon
the same shall  forthwith  terminate  and so shall the  obligations  of Chase to
issue any Letter of Credit, (b) declare the outstanding  principal of the Notes,
all interest  thereon and all other amounts  payable under this  Agreement,  the
Notes  and the  other  Facility  Documents  to be  forthwith  due  and  payable,
whereupon the Notes,  all such interest and all such amounts shall become and be
forthwith  due and  payable,  without  presentment,  demand,  protest or further
notice of any kind,  all of which are hereby  expressly  waived by the  Borrower
and/or (c) direct the Borrower to pay to the Agent an amount, to be held as cash
security in the cash  collateral  account held by the Agent under  Section 3.08,
equal to the Letter of Credit  Obligations then  outstanding;  provided that, in
the case of an Event of  Default  referred  to in  Section  10.01(e)  or Section
10.01(i)(i)  above,  the Commitments  shall be immediately  terminated,  and the
Notes,  the Letter of Credit  Obligations,  all  interest  thereon and all other
amounts  payable  under this  Agreement  shall be  immediately  due and  payable
without notice,  presentment,  demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrower.

         Section 10.03.  Cure. With respect to, and only with respect to, Events
of Default  arising  from the breach of any  covenant  contained in Section 8.01
through  Section 8.03,  inclusive,  and Section  8.05,  prior to the exercise of
remedies under Section 10.02 and/or under the Security  Documents,  the Borrower
shall be entitled to receive  written notice from the Agent (or any Bank) and an
opportunity  to cure  during  the 15 day period  subsequent  to the date of such
notice;  provided that such  entitlement to notice and opportunity to cure shall
only be available so long as each Obligor  complies with all of its  obligations
under Section 7.08.

                       ARTICLE 11. UNCONDITIONAL GUARANTY.

         Section  11.01.   Guarantied   Obligations.   Each  of  the  Subsidiary
Guarantors,  jointly  and  severally,  in  consideration  of the  execution  and
delivery of this Agreement by the Banks and the Agent,  hereby  irrevocably  and
unconditionally  guarantees to the Agent,  for the benefit of the Banks,  as and
for such Subsidiary Guarantor's own debt, until final payment has been made:

                  (a) the due and punctual  payment in cash of the  Obligations,
in each case when and as the same  shall  become  due and  payable,  whether  at
maturity,  pursuant to  mandatory or optional  prepayment,  by  acceleration  or
otherwise,  all in accordance with the terms and provisions  hereof and thereof,
it being the intent of the



                                       45

<PAGE>



Subsidiary  Guarantors  that the guaranty  set forth in this Section  11.01 (the
"Unconditional  Guaranty")  shall be a guaranty of payment and not a guaranty of
collection; and

                  (b)  the   punctual   and   faithful   performance,   keeping,
observance,  and fulfillment by each of the Obligors of all duties,  agreements,
covenants  and  obligations  of the  Obligors  contained in each of the Facility
Documents to which it is a party.

         Section  11.02.  Performance  Under  This  Agreement.  In the event the
Borrower or any  Subsidiary  Guarantor  fails to make, on or before the due date
thereof,  any payment of the principal of, or interest on, the Notes, the Letter
of Credit Obligations or of any other amounts payable, or any other indebtedness
owing,  under any of the Facility Documents or if the Borrower or any Subsidiary
Guarantor shall fail to perform,  keep, observe, or fulfill any other obligation
referred  to in clause (a) or clause (b) of Section  11.01  hereof in the manner
provided  in the Notes,  the  Letters of Credit or in any of the other  Facility
Documents,  the  Subsidiary  Guarantors  shall  cause  forthwith  to be paid the
moneys,  or  to  be  performed,  kept,  observed,  or  fulfilled  each  of  such
obligations, in respect of which such failure has occurred.

         Section 11.03.  Waivers.  To the fullest extent permitted by law, each
Subsidiary Guarantor does hereby waive:

                  (a) notice of acceptance of the Unconditional Guaranty;

                  (b)  notice of any  borrowings  under this  Agreement,  or the
creation,  existence or acquisition of any of the  Obligations,  subject to such
Subsidiary  Guarantor's  right to make  inquiry  of the Agent to  ascertain  the
amount of the Obligations at any reasonable time;

                  (c) notice of the amount of the  Obligations,  subject to such
Subsidiary  Guarantor's  right to make  inquiry  of the Agent to  ascertain  the
amount of the Obligations at any reasonable time;

                  (d) notice of adverse change in the financial condition of the
Borrower,  any other Subsidiary  Guarantor or any other fact that might increase
such Subsidiary Guarantor's risk hereunder;

                  (e) notice of presentment for payment,  demand,  protest,  and
notice thereof as to the Notes, the Letters of Credit or any other instrument;

                  (f) notice of any Default or Event of Default;

                  (g) all other  notices  and  demands to which such  Subsidiary
Guarantor  might  otherwise  be  entitled  (except  if such  notice or demand is
specifically  otherwise  required  to be  given  to  such  Subsidiary  Guarantor
hereunder or under the other Facility Documents);




                                       46

<PAGE>



                  (h) the right by statute or  otherwise  to require any or each
Bank or the Agent to  institute  suit  against  the  Borrower  or to exhaust the
rights and remedies of any or each Bank or the Agent against the Borrower,  such
Subsidiary  Guarantor  being bound to the  payment of each and all  Obligations,
whether now existing or hereafter accruing, as fully as if such Obligations were
directly owing to each Bank by such Subsidiary Guarantor; and

                  (i) any defense  arising by reason of any  disability or other
defense (other than the defense that the  Obligations  shall have been fully and
finally  performed  and  indefeasibly  paid) of the Borrower or by reason of the
cessation from any cause  whatsoever of the liability of the Borrower in respect
thereof.

Until  all of the  Obligations  shall  have  been  paid  in  full,  none  of the
Subsidiary  Guarantors  shall have any right of subrogation,  reimbursement,  or
indemnity  whatsoever  in respect  thereof  and no right of  recourse to or with
respect  to any  assets or  Property  of the  Borrower  or any other  Subsidiary
Guarantor.  Nothing shall discharge or satisfy the obligations of the Subsidiary
Guarantor  hereunder  except the full and final  performance  and payment of the
Obligations  by the  Subsidiary  Guarantors,  upon  which  each  Bank  agrees to
transfer  and  assign its  interest  in the Notes to the  Subsidiary  Guarantors
without  recourse,  representation or warranty of any kind (other than that such
Bank owns  such  Notes and that  such  Notes are free of Liens  created  by such
holder). If an Event of Default shall exist, all of the Obligations shall in the
manner and subject to the limitations  provided herein for the  acceleration of,
the Notes and the Letter of Credit Obligations, forthwith become due and payable
without notice.

         Section 11.04. Releases. Each of the Subsidiary Guarantors consents and
agrees  that,  without  notice to or by such  Subsidiary  Guarantor  and without
affecting or impairing the obligations of such Subsidiary  Guarantor  hereunder,
each Bank or the Agent,  in the manner provided  herein,  by action or inaction,
may:

                  (a) compromise or settle, extend the period of duration or the
time for the payment,  or  discharge  the  performance  of, or may refuse to, or
otherwise not, enforce, or may, by action or inaction, release all or any one or
more parties to, any one or more of the Notes or the other Facility Documents;

                  (b)  grant  other  indulgences  to  the  Borrower  in  respect
thereof;

                  (c)  amend or modify  in any  manner  and at any time (or from
time to time) any one or more of the Notes,  the Letters of Credit and the other
Facility Documents in accordance with Section 13.01 or otherwise;

                  (d) release or substitute  any one or more of the endorsers or
guarantors of the Guarantied Obligations whether parties hereto or not; and




                                       47

<PAGE>



                  (e)  exchange,  enforce,  waive,  or  release,  by  action  or
inaction, any security for the Obligations (including,  without limitation,  any
of the  collateral  therefor)  or any other  guaranty of any of the Notes or the
Letter of Credit Obligations.
Section 11.05. Marshaling. Each of the Subsidiary Guarantors consents and agrees
that:

                  (a) the Agent  shall be under no  obligation  to  marshal  any
assets in favor of such Subsidiary  Guarantor or against or in payment of any or
all of the Obligations; and

                  (b)  to the  extent  the  Borrower  or  any  other  Subsidiary
Guarantor makes a payment or payments to any Bank,  which payment or payments or
any part thereof are  subsequently  invalidated,  declared to be  fraudulent  or
preferential,  set aside, or required,  for any of the foregoing  reasons or for
any other reason, to be repaid or paid over to a custodian,  trustee,  receiver,
or any other party under any  bankruptcy  law,  common law, or equitable  cause,
then to the extent of such payment or repayment,  the obligation or part thereof
intended to be satisfied  thereby  shall be revived and  continued in full force
and effect as if said payment or payments had not been made and such  Subsidiary
Guarantor shall be primarily liable for such obligation.

         Section 11.06. Liability. Each of the Subsidiary Guarantors agrees that
the liability of such  Subsidiary  Guarantor in respect of this Article 11 shall
be immediate and shall not be contingent upon the exercise or enforcement by any
Bank or the Agent of whatever  remedies  such Bank or the Agent may have against
the Borrower or any other Subsidiary Guarantor or the enforcement of any Lien or
realization upon any security such Bank or the Agent may at any time possess.

         Section 11.07. Primary Obligation. The Unconditional Guaranty set forth
in  this  Article  11 is a  primary  and  original  obligation  of  each  of the
Subsidiary  Guarantors  and  is  an  absolute,  unconditional,   continuing  and
irrevocable  guaranty of payment and  performance and shall remain in full force
and effect until the full and final payment of the  Obligations  without respect
to future  changes in conditions,  including  change of law or any invalidity or
irregularity  with  respect to the  issuance or  assumption  of any  obligations
(including,  without limitation, the Notes and the Letter of Credit Obligations)
of or by the Borrower or any other Subsidiary Guarantor,  or with respect to the
execution  and delivery of any agreement  (including,  without  limitation,  the
Notes and the other Facility  Documents) of the Borrower or any other Subsidiary
Guarantor.

         Section 11.08. Election to Perform Obligations.  Any election by any of
the Subsidiary  Guarantors to pay or otherwise perform any of the obligations of
the  Borrower  under the Notes or under  any of the  other  Facility  Documents,
whether pursuant to this Article 11 or otherwise, shall not release the Borrower
from such obligations or any of its other  obligations  under the Notes or under
any of the other Facility Documents.




                                       48

<PAGE>



         Section  11.09.  No  Election.  The Agent  shall have the right to seek
recourse  against any one or more of the  Subsidiary  Guarantors  to the fullest
extent provided for herein for such  Subsidiary  Guarantor's  obligations  under
this Agreement  (including,  without limitation,  this Article 11) in respect of
the  Notes.  No  election  to proceed  in one form of action or  proceeding,  or
against  any  party,  or on any  obligation,  shall  constitute  a waiver of the
Agent's  right to proceed in any other form of action or  proceeding  or against
other  parties  unless such holder has  expressly  waived such right in writing.
Specifically, but without limiting the generality of the foregoing, no action or
proceeding by any Bank or the Agent  against the Borrower  under any document or
instrument  evidencing  obligations  of the  Borrower  to such Bank or the Agent
shall serve to diminish the liability of any of the Subsidiary  Guarantors under
this Agreement  (including,  without limitation,  this Article 11) except to the
extent that such Bank finally and unconditionally shall have realized payment by
such  action or  proceeding,  notwithstanding  the effect of any such  action or
proceeding  upon any Subsidiary  Guarantor's  right of  subrogation  against the
Borrower.

         Section 11.10. Severability.  Subject to Article 10 hereof, each of the
rights and remedies  granted under this Article 11 to the Agent may be exercised
by the Agent  without  notice by the  Agent to, or the  consent  of or any other
action by, the Agent,  provided that each of the Subsidiary Guarantors will give
the Agent  immediate  notice of any exercise of rights and remedies by the Agent
under this Article 11.

         Section 11.11.  Other  Enforcement  Rights.  The Agent may proceed,  as
provided in Article 11 hereof, to protect and enforce the Unconditional Guaranty
by suit or suits or proceedings in equity, at law or in bankruptcy,  and whether
for the  specific  performance  of any covenant or  agreement  contained  herein
(including,  without  limitation,  in this Article 11) or in execution or aid of
any power herein  granted;  or for the recovery of judgment for the  obligations
hereby guarantied or for the enforcement of any other proper, legal or equitable
remedy  available  under  applicable  law.  Each Bank shall have, to the fullest
extent  permitted by law and this  Agreement,  a Lien upon, and right of set-off
against,  any and all credits and any and all other  Property of any  Subsidiary
Guarantor,  now or at any time  whatsoever  with, or in the  possession of, such
holder,  or  anyone  acting  for  such  holder,  as  security  for  any  and all
obligations of the Subsidiary Guarantors hereunder and such Lien shall be deemed
permitted for all purposes under Article 8 hereof.

         Section 11.12.  Delay or Omission;  No Waiver.  No course of dealing on
the part of any Bank or the  Agent  and no delay or  failure  on the part of any
such Person to exercise any right hereunder (including, without limitation, this
Article  11) shall  impair  such  right or  operate as a waiver of such right or
otherwise prejudice such Person's rights,  powers and remedies hereunder.  Every
right and remedy  given by the  Unconditional  Guaranty or by law to any Bank or
the Agent may be exercised from time to time as often as may be deemed expedient
by such Person.

         Section 11.13.  Restoration of Rights and Remedies.  If any Bank or the
Agent shall have  instituted any proceeding to enforce any right or remedy under
the  Unconditional  Guaranty,  under  any Note held by such  Bank,  or under any
Security



                                       49

<PAGE>



Document,  and such proceeding shall have been discontinued or abandoned for any
reason, or shall have been determined  adversely to such Bank or the Agent, then
and in every  such  case  each such  Bank,  the  Agent,  the  Borrower  and each
Subsidiary  Guarantor  shall,  except  as  may be  limited  or  affected  by any
determination in such proceeding,  be restored severally and respectively to its
respective former positions hereunder and thereunder, and thereafter, subject as
aforesaid,  the rights and remedies of such Bank or the Agent shall  continue as
though no such proceeding had been instituted.

         Section  11.14.  Cumulative  Remedies.  No remedy under this  Agreement
(including,  without limitation, this Article 11), the Notes or any of the other
Facility Documents is intended to be exclusive of any other remedy, but each and
every remedy shall be  cumulative  and in addition to any and every other remedy
given hereunder this Agreement (including, without limitation, this Article 11),
under the  Notes,  the  Letters  of  Credit  or under any of the other  Facility
Documents.

         Section 11.15. Survival. So long as the Obligations shall not have been
fully and finally  performed  and  indefeasibly  paid,  the  obligations  of the
Subsidiary  Guarantors  under this  Article 11 shall  survive the  transfer  and
payment  of any Note and the  payment in full of all the Notes and the Letter of
Credit Obligations and the expiration and termination of the Commitments.

                             ARTICLE 12. THE AGENT.

         Section 12.01.  Appointment,  Powers and Immunities of Agent. Each Bank
hereby  irrevocably  (but subject to removal by the Required  Banks  pursuant to
Section 12.09)  appoints and authorizes the Agent to act as its agent  hereunder
and under any  other  Facility  Document  with such  powers as are  specifically
delegated  to the Agent by the terms of this  Agreement  and any other  Facility
Document,  together with such other powers as are reasonably incidental thereto.
The Agent shall have no duties or  responsibilities  except those  expressly set
forth in this Agreement and any other Facility Document, and shall not by reason
of this  Agreement be a trustee for any Bank. The Agent shall not be responsible
to the Banks for any recitals, statements, representations or warranties made by
any  Obligor or any officer or  official  of such  Borrower or any other  Person
contained  in  this  Agreement  or  any  other  Facility  Document,  or  in  any
certificate or other  document or instrument  referred to or provided for in, or
received by any of them under, this Agreement or any other Facility Document, or
for the value, legality, validity, effectiveness, genuineness, enforceability or
sufficiency  of this  Agreement  or any  other  Facility  Document  or any other
document or  instrument  referred to or provided for herein or therein,  for the
perfection or priority of any  collateral  security for the Loans or the Letters
of Credit or for any failure by any  Obligor to perform  any of its  obligations
hereunder or thereunder.  The Agent may employ agents and  attorneys-in-fact and
shall not be responsible, except as to money or securities received by it or its
authorized  agents,  for the  negligence  or  misconduct  of any such  agents or
attorneys-in-fact selected by it with reasonable care. Neither the Agent nor any
of its directors,  officers,  employees or agents shall be liable or responsible
for any action taken or omitted to be taken by



                                       50

<PAGE>



it or them  hereunder  or under any other  Facility  Document  or in  connection
herewith or therewith,  except for its or their own gross  negligence or willful
misconduct.

         Section 12.02.  Reliance by Agent.  The Agent shall be entitled to rely
upon any certification,  notice or other communication (including any thereof by
telephone,  telex,  telegram or cable)  believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal  counsel,  independent  accountants  and
other experts  selected by the Agent.  The Agent may deem and treat each Bank as
the  holder  of the  Loans  made  by it and the  Letter  of  Credit  Obligations
attributable  to it for all  purposes  hereof  unless  and until a notice of the
assignment  or transfer  thereof  satisfactory  to the Agent signed by such Bank
shall have been  furnished  to the Agent but the Agent  shall not be required to
deal with any Person who has acquired a  participation  in any Loan or Letter of
Credit  Obligation from a Bank. As to any matters not expressly  provided for by
this Agreement or any other Facility  Document,  the Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder in accordance
with  instructions  signed by the Required Banks,  and such  instructions of the
Required Banks and any action taken or failure to act pursuant  thereto shall be
binding  on all of the Banks and any other  holder of all or any  portion of any
Loan or Letter of Credit Obligation.

         Section  12.03.  Defaults.  The  Agent  shall  not be  deemed  to  have
knowledge  of the  occurrence  of a Default or Event of Default  (other than the
non-payment  of  principal  of or interest on the Loans and the Letter of Credit
Obligations  to the extent the same is  required to be paid to the Agent for the
account of the Banks)  unless the Agent has  received  notice from a Bank or any
Obligor specifying such Default or Event of Default and stating that such notice
is a "Notice of Default." In the event that the Agent  receives such a notice of
the  occurrence  of a Default or Event of  Default,  the Agent shall give prompt
notice thereof to the Banks (and shall give each Bank prompt notice of each such
non-payment).  The Agent shall  (subject to Section 12.08) take such action with
respect  to such  Default or Event of Default  which is  continuing  as shall be
directed by the Required Banks;  provided that, unless and until the Agent shall
have received such directions,  the Agent may take such action,  or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interest of the Banks;  and provided further that the
Agent shall not be required to take any such action  which it  determines  to be
contrary to law.

         Section  12.04.  Rights  of  Agent  as a  Bank.  With  respect  to  its
Commitment,  the  Loans  made  by  it  and  the  Letter  of  Credit  Obligations
attributable to it, the Agent in its capacity as a Bank hereunder shall have the
same rights and powers  hereunder as any other Bank and may exercise the same as
though it were not acting as the Agent,  and the term  "Bank" or "Banks"  shall,
unless the context otherwise  indicates,  include the Agent in its capacity as a
Bank. The Agent and its affiliates  may (without  having to account  therefor to
any Bank) accept deposits from, lend money to (on a secured or unsecured basis),
and generally  engage in any kind of banking,  trust or other business with, any
Obligor (and any of its  affiliates) as if it were not acting as the Agent,  and
the Agent may accept fees and other consideration from any Obligor



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<PAGE>



for services in connection  with this  Agreement or otherwise  without having to
account for the same to the Banks.  Although the Agent and its affiliates may in
the course of such  relationships and  relationships  with other Persons acquire
information about any Obligor,  its Affiliates and such other Persons, the Agent
shall have no duty to disclose such information to the Banks.

         Section 12.05.  Indemnification  of Agent. The Banks agree to indemnify
the  Agent  (to the  extent  not  reimbursed  under  Section  13.03 or under the
applicable  provisions of any other Facility Document,  but without limiting the
obligations of the Obligors under Section 13.03 or such provisions),  ratably in
accordance with the aggregate  unpaid  principal amount of the Loans made by the
Banks and the Letter of Credit  Obligations  attributable  to the Banks (without
giving effect to any participations, in all or any portion of such Loans or such
Letter of Credit Obligations, sold by them to any other Person) (or, if no Loans
or  Letter  of  Credit  Obligations  are at the  time  outstanding,  ratably  in
accordance  with their  respective  Commitments),  for any and all  liabilities,
obligations,  losses,  damages,  penalties,  actions,  judgments,  suits, costs,
expenses or disbursements of any kind and nature whatsoever which may be imposed
on, incurred by or asserted  against the Agent in any way relating to or arising
out of this  Agreement,  any other  Facility  Document  or any  other  documents
contemplated by or referred to herein or the transactions contemplated hereby or
thereby  (including,  without  limitation,  the  costs  and  expenses  which the
Obligors  are  obligated  to pay under  Section  13.03 or under  the  applicable
provisions of any other  Facility  Document but  excluding,  unless a Default or
Event of Default has occurred, normal administrative costs and expenses incident
to the performance of its agency duties  hereunder) or the enforcement of any of
the terms  hereof or  thereof  or of any such other  documents  or  instruments;
provided  that no Bank  shall be liable for any of the  foregoing  to the extent
they  arise  from  the  negligence  or  willful  misconduct  of the  party to be
indemnified.

         Section 12.06. Documents. The Agent will forward to each Bank, promptly
after  the  Agent's  receipt  thereof,  a copy of each  report,  notice or other
document  required  by this  Agreement  or any  other  Facility  Document  to be
delivered to the Agent for such Bank.

         Section 12.07.  Non-Reliance on Agent and Other Banks. Each Bank agrees
that it has,  independently and without reliance on the Agent or any other Bank,
and based on such documents and information as it has deemed  appropriate,  made
its own  credit  analysis  of the  Obligors  and  decision  to enter  into  this
Agreement and that it will, independently and without reliance upon the Agent or
any other Bank,  and based on such  documents and  information  as it shall deem
appropriate  at the time,  continue to make its own  analysis  and  decisions in
taking or not taking action under this Agreement or any other Facility Document.
The Agent shall not be required to keep itself informed as to the performance or
observance by the Obligors of this Agreement or any other  Facility  Document or
any other  document  referred to or provided for herein or therein or to inspect
the  Properties or books of any Obligor.  Except for notices,  reports and other
documents and information expressly required to be furnished to the Banks by the
Agent hereunder, the Agent shall not have any



                                       52

<PAGE>



duty or  responsibility to provide any Bank with any credit or other information
concerning the affairs,  financial  condition or business of any Obligor (or any
of their  Affiliates)  which may come into the possession of the Agent or any of
its  affiliates.  The Agent shall not be required  to file this  Agreement,  any
other  Facility  Document or any  document or  instrument  referred to herein or
therein,  for  record or give  notice  of this  Agreement,  any  other  Facility
Document or any document or instrument referred to herein or therein, to anyone.

         Section  12.08.  Failure of Agent to Act.  Except for action  expressly
required of the Agent hereunder, the Agent shall in all cases be fully justified
in failing or refusing to act hereunder  unless it shall have  received  further
assurances   (which  may  include  cash   collateral)  of  the   indemnification
obligations of the Banks under Section 12.05 in respect of any and all liability
and expense  which may be incurred  by it by reason of taking or  continuing  to
take any such action.

         Section  12.09.  Resignation  or  Removal  of  Agent.  Subject  to  the
appointment and acceptance of a successor Agent as provided below, the Agent may
resign  at any time by  giving  written  notice  thereof  to the  Banks  and the
Borrower,  and the Agent may be removed at any time with or without cause by the
Required Banks; provided that the Borrower and the other Banks shall be promptly
notified thereof. Upon any such resignation or removal, the Required Banks shall
have the right to appoint a successor  Agent.  If no successor  Agent shall have
been so appointed by the Required Banks and shall have accepted such appointment
within 30 days after the retiring Agent's giving of notice of resignation or the
Required Banks' removal of the retiring  Agent,  then the retiring Agent may, on
behalf of the Banks,  appoint a successor Agent, which shall be a bank which has
an office in New York, New York or Boston, Massachusetts.  The Required Banks or
the  retiring  Agent,  as the  case may be,  shall  upon  the  appointment  of a
successor  Agent  promptly so notify the Borrower and the other Banks.  Upon the
acceptance of any  appointment  as Agent  hereunder by a successor  Agent,  such
successor  Agent  shall  thereupon  succeed  to and become  vested  with all the
rights,  powers,  privileges and duties of the retiring Agent,  and the retiring
Agent shall be discharged from its duties and obligations  hereunder.  After any
retiring  Agent's  resignation or removal  hereunder as Agent, the provisions of
this  Article  11 shall  continue  in effect  for its  benefit in respect of any
actions taken or omitted to be taken by it while it was acting as the Agent.

         Section 12.10.  Amendments Concerning Agency Function.  The Agent shall
not be  bound by any  waiver,  amendment,  supplement  or  modification  of this
Agreement or any other Facility  Document which affects its duties  hereunder or
thereunder unless it shall have given its prior consent thereto.

         Section  12.11.  Liability  of  Agent.  The  Agent  shall  not have any
liabilities or responsibilities to the Obligors on account of the failure of any
Bank to  perform  its  obligations  hereunder  or to any Bank on  account of the
failure of any Obligor to perform its  obligations  hereunder or under any other
Facility Document.




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<PAGE>



         Section 12.12. Transfer of Agency Function.  Without the consent of the
Obligors  or any Bank,  the Agent may at any time or from time to time  transfer
its  functions  as  Agent  hereunder  to any of its  offices  wherever  located,
provided  that the  Agent  shall  promptly  notify  the  Obligors  and the Banks
thereof.

         Section  12.13.  Non-Receipt  of Funds by the  Agent.  Unless the Agent
shall have been  notified by a Bank or the Borrower  (either one as  appropriate
being  the  "Payor")  prior to the date on which  such  Bank is to make  payment
hereunder to the Agent or the  Borrower is to make payment to the Agent,  as the
case may be (either such payment being a "Required Payment"), which notice shall
be effective  upon receipt,  that the Payor does not intend to make the Required
Payment to the Agent,  the Agent may assume that the  Required  Payment has been
made and may, in reliance upon such  assumption  (but shall not be required to),
make the amount thereof available to the intended recipient on such date and, if
the Payor has not in fact made the Required  Payment to the Agent, the recipient
of such payment (and, if such recipient is the Borrower and the Payor Bank fails
to pay the amount  thereof to the Agent  forthwith  upon demand,  the  Borrower)
shall,  on demand,  repay to the Agent the amount made  available to it together
with  interest  thereon  for the  period  from the date such  amount was so made
available by the Agent until the date the Agent  recovers  such amount at a rate
per annum equal to the average daily Federal Funds Rate for such period.

         Section  12.14.  Withholding  Taxes.  Each Bank  represents  that it is
entitled  to  receive  any  payments  to be made  to it  hereunder  without  the
withholding of any tax and will furnish to the Agent such forms, certifications,
statements  and other  documents  as the Agent may request  from time to time to
evidence such Bank's  exemption  from the  withholding of any tax imposed by any
jurisdiction  or to  enable  the  Agent to comply  with any  applicable  laws or
regulations relating thereto.  Without limiting the effect of the foregoing,  if
any Bank is not  created or  organized  under the laws of the  United  States of
America or any state  thereof,  in the event that the payment of interest by the
Borrower is treated for U.S.  income tax purposes as derived in whole or in part
from sources from within the U.S., such Bank will furnish to the Agent Form 4224
or  Form  1001  of  the  Internal   Revenue   Service,   or  such  other  forms,
certifications,  statements  or  documents,  duly executed and completed by such
Bank as evidence of such Bank's  exemption from the withholding of U.S. tax with
respect thereto. The Agent shall not be obligated to make any payments hereunder
to such Bank in respect of any Loan,  Letter of Credit or such Bank's Commitment
until  such  Bank  shall  have  furnished  to  the  Agent  the  requested  form,
certification, statement or document.

         Section 12.15.  Several Obligations and Rights of Banks. The failure of
any Bank to make any Loan to be made by it on the  date  specified  therefor  or
make any  payment  with  respect  to any  Reimbursement  Obligation  on the date
specified  therefor  shall not relieve any other Bank of its  obligation to make
its Loan on such date, but no Bank shall be  responsible  for the failure of any
other Bank to make a Loan to be made by such  other Bank or to make any  payment
with respect to any  Reimbursement  Obligation.  The amounts payable at any time
hereunder to each Bank shall be a



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<PAGE>



separate and  independent  debt,  and each Bank shall be entitled to protect and
enforce its rights arising out of this Agreement,  and it shall not be necessary
for any other Bank to be joined as an  additional  party in any  proceeding  for
such purpose.

         Section 12.16.  Pro Rata Treatment of Loans,  Etc. Except to the extent
otherwise provided: (a) each borrowing under Section 2.04 shall be made from the
Banks,  each  reduction or termination  of the amount of the  Commitments  under
Section 2.07 shall be applied to the Commitments of the Banks,  and each payment
of commitment  fee accruing  under Section 2.11 shall be made for the account of
the  Banks,  pro  rata  according  to the  amounts  of their  respective  unused
Commitments;  (b) each  conversion  under  Section 2.05 of Loans of a particular
type (but not conversions  provided for by Section 4.04), shall be made pro rata
among the Banks holding Loans of such type according to the respective principal
amounts  of such  Loans  by such  Banks;  (c) each  prepayment  and  payment  of
principal of or interest on Loans of a particular type and a particular Interest
Period shall be made to the Agent for the account of the Banks  holding Loans of
such type and Interest Period pro rata in accordance with the respective  unpaid
principal  amounts of such Loans of such Interest  Period held by such Banks and
(d) each  prepayment and payment of Letter of Credit  Obligations  shall be made
pro rata in  accordance  with the Pro Rata  Share of the Banks in the  Letter of
Credit Obligations attributable to such Banks.

         Section 12.17.  Sharing of Payments Among Banks. If a Bank shall obtain
payment of any principal of or interest on any Loan made by it or any payment of
any Letter of Credit Obligations  attributable to it through the exercise of any
right of setoff,  banker's lien,  counterclaim,  or by any other means, it shall
promptly  purchase  from the other  Banks  participations  in (or, if and to the
extent  specified by such Bank,  direct  interests in) the Loans made by, or the
Letter of Credit  Obligations  attributable to, the other Banks in such amounts,
and make such other  adjustments  from time to time as shall be equitable to the
end that all the Banks  shall  share the  benefit  of such  payment  (net of any
expenses  which may be incurred by such Bank in  obtaining  or  preserving  such
benefit) pro rata in  accordance  with the unpaid  principal and interest on the
Loans and the Letter of Credit Obligations held by each of them. To such end the
Banks shall make  appropriate  adjustments  among  themselves  (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored.  The Obligors agree that any Bank so purchasing a participation (or
direct  interest)  in the  Loans  made by, or the  Letter of Credit  Obligations
attributable  to, the other Banks may  exercise  all rights of setoff,  banker's
lien,  counterclaim  or similar  rights with respect to such  participation  (or
direct  interest).  Nothing  contained herein shall require any Bank to exercise
any such right or shall affect the right of any Bank to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness of
the Obligors.

         Section 12.18. Security Documents.  Subject to the foregoing provisions
of this Section 12, the Agent shall, on behalf of the Banks: (a) execute any and
all of the Security Documents on behalf of the Banks; (b) hold and apply any and
all  Collateral,  and the  proceeds  thereof,  at any time  received  by it,  in
accordance with the provisions of the Security Documents and this Agreement; (c)
exercise any and all rights, powers



                                       55

<PAGE>



and remedies of the Banks under this Agreement or any of the Security Documents,
including  the  giving of any  consent  or waiver  or the  entering  into of any
amendment,  subject to the provisions of Section 12.03; (d) execute, deliver and
file UCC financing statements,  mortgages, deeds of trust, lease assignments and
other such  agreements,  and possess  instruments on behalf of any or all of the
Banks;  and (e) in the  event  of  acceleration  of the  Borrower's  obligations
hereunder, use its best efforts to sell or otherwise liquidate or dispose of the
Collateral and otherwise  exercise the rights of the Banks  thereunder  upon the
direction of the Required Banks.

         Section 12.19. Collateral. Notwithstanding Section 12.18, the Agent and
the other Banks agree, as among  themselves,  that the Agent shall not,  without
the  consent  of the  Required  Banks,  make  any  sale  or  disposition  of the
Collateral pursuant to any of the Security Documents.  The Agent acknowledges to
the other Banks that it is acting in an agency  capacity  hereunder and that the
security interest in the Collateral granted under the Security Documents secures
the obligations of the Obligors under this Agreement,  the Notes, the Letters of
Credit and the other Facility  Documents owing to all of the Banks. In the event
of any Default or Event of Default,  the Agent will apply and/or pay over to the
Banks any net proceeds  derived from the Collateral pro rata on the basis of the
aggregate  unpaid principal amount of the Loans made by the Banks and the Letter
of Credit Obligations attributable to the Banks. The Agent will be reimbursed or
properly  indemnified  by the Banks in the event the Agent is  requested  by the
Banks to take or omit to take any action  with  respect to the  Collateral  (any
such  reimbursement  or  indemnification  to be pro rata as  provided in Section
12.05).  The Agent shall have the right to retain counsel to advise it as to any
action or decision with respect to the Collateral and shall be reimbursed by the
other Banks for the cost of the same (to the extent the Agent is not  reimbursed
by any Obligor)  prior to  distributing  any of the  Collateral  or any proceeds
thereof (any such reimbursement to be pro rata as aforesaid).

         Section 12.20. Amendment of Section 12. Except with respect to Sections
12.18 and 12.19,  the Borrower  hereby agrees that the  foregoing  provisions of
this Section 12 constitute an agreement  amount the Agent and the Banks (and the
Agent and the Banks  acknowledge that the Borrower is not a party to or bound by
such  foregoing  provisions)  and  that  any and all of the  provisions  of this
Section 12 may be amended at any time by the Required  Banks without the consent
or approval of, or notice to, the Borrower.

                           ARTICLE 13. MISCELLANEOUS.

         Section 13.01.  Amendments and Waivers.  Except as otherwise  expressly
provided  in this  Agreement,  any  provision  of this  Agreement  or any  other
Facility  Document may be amended or modified  only by an  instrument in writing
signed by the Borrower, the Agent and the Required Banks, or by the Borrower and
the Agent  acting with the consent of the  Required  Banks and any  provision of
this  Agreement  or any other  Facility  Document  may be waived by the Required
Banks or by the Agent  acting with the consent of the Required  Banks;  provided
that no amendment,  modification or waiver shall, unless by an instrument signed
by all of the Banks or by the Agent



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<PAGE>



acting with the consent of all of the Banks: (a) increase or extend the term, or
extend the time or waive any requirement  for the reduction or  termination,  of
the  Commitments,  (b) extend the date fixed for the payment of  principal of or
interest on any Loan, (c) reduce the amount of any payment of principal  thereof
or the rate at which interest is payable  thereon or any fee payable  hereunder,
(d) alter the terms of this Section 13.01,  (e) amend the definition of the term
"Required Banks", (f) waive any of the conditions precedent set forth in Article
5 hereof, (g) discharge any Subsidiary Guarantor from its Unconditional Guaranty
under Article 10 hereof or (h) release all or any part of the Collateral (except
for sales otherwise allowed hereunder) and provided, further, that any amendment
of Article 12 hereof or any amendment  which  increases the  obligations  of the
Agent  hereunder  shall require the consent of the Agent. No failure on the part
of the  Agent or any Bank to  exercise,  and no delay in  exercising,  any right
hereunder  shall  operate as a waiver  thereof or preclude  any other or further
exercise  thereof  or the  exercise  of any other  right.  The  remedies  herein
provided are cumulative and not exclusive of any remedies provided by law.

         Section 13.02. Usury. Anything herein to the contrary  notwithstanding,
the  obligations  of the Borrower  under this  Agreement  and the Notes shall be
subject to the limitation that payments of interest shall not be required to the
extent that receipt thereof would be contrary to provisions of law applicable to
a Bank  limiting  rates of interest  which may be charged or  collected  by such
Bank.

         Section  13.03.  Expenses.  The Obligors  shall  reimburse the Agent on
demand for all  reasonable  costs,  expenses,  and charges  (including,  without
limitation, reasonable fees and charges of external legal counsel for the Agent)
in connection with the preparation of, and any amendment,  supplement, waiver or
modification to (in each case, whether or not consummated),  this Agreement, any
other Facility Document and any other documents prepared in connection  herewith
or  therewith.  The  Obligors  shall  reimburse  the Agent and each Bank for all
reasonable  costs,   expenses  and  charges   (including,   without  limitation,
reasonable  fees and  charges of external  legal  counsel for the Agent and each
Bank) in  connection  with the  enforcement  or  preservation  of any  rights or
remedies  during  the  existence  of an Event  of  Default  (including,  without
limitation,  in connection  with any  restructuring  or insolvency or bankruptcy
proceeding).  The Obligors  agree to indemnify the Agent and each Bank and their
respective directors, officers, employees and agents from, and hold each of them
harmless against, any and all losses,  liabilities,  claims, damages or expenses
incurred  by any of them  arising  out of or by reason of any  investigation  or
litigation or other  proceedings  (including  any  threatened  investigation  or
litigation or other  proceedings)  directly relating to this Agreement or to any
actual or proposed  use by the  Borrower of the  proceeds of the Loans or to the
performance or  enforcement  of this Agreement or the other Facility  Documents,
including,  without limitation, the reasonable fees and disbursements of counsel
incurred  in  connection  with any such  investigation  or  litigation  or other
proceedings  (but  excluding any such losses,  liabilities,  claims,  damages or
expenses  incurred by reason of the gross negligence or wilful misconduct of the
Person to be indemnified).




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<PAGE>



         Section 13.04. Survival. The obligations of the Obligors under Sections
4.01, 4.05 and 13.03 shall survive the repayment of the Loans and the Letters of
Credit and the termination of the Commitments.

         Section 13.05.  Assignment; Participations.

                  (a) This  Agreement  shall be binding upon, and shall inure to
the  benefit  of,  the  Obligors,  the  Agent,  the Banks  and their  respective
successors  and  assigns,  except that the  Obligors  may not assign or transfer
their  rights  or  obligations   hereunder.   Each  Bank  may  assign,  or  sell
participations  in, all or any part of any Loan or its  rights  and  obligations
under the Letters of Credit to another bank or other entity;  provided that each
such  assignment  shall be in a minimum  amount  equal to  $5,000,000;  provided
further that any such  assignment by such Bank of its rights and  obligations in
respect of the Letters of Credit shall  require the prior  consent of Chase such
consent not to be  unreasonably  withheld,  in which event (i) in the case of an
assignment,  upon notice  thereof by the Bank to the Borrower with a copy to the
Agent,  the  assignee  shall  have,  to the  extent of such  assignment  (unless
otherwise  provided  therein),  the same rights,  benefits and obligations as it
would have if it were a Bank hereunder; and (ii) in the case of a participation,
the  participant  shall  have no rights  under the  Facility  Documents  and all
amounts  payable by the Borrower  under Article 3 shall be determined as if such
Bank had not sold such  participation.  The  agreement  executed by such Bank in
favor of the  participant  shall not give the  participant  the right to require
such Bank to take or omit to take any action  hereunder  except action  directly
relating to (i) the  extension  of a payment date with respect to any portion of
the principal of or interest on any amount  outstanding  hereunder  allocated to
such  participant,  (ii)  the  reduction  of the  principal  amount  outstanding
hereunder or (iii) the reduction of the rate of interest  payable on such amount
or any amount of fees payable hereunder to a rate or amount, as the case may be,
below that which the participant is entitled to receive under its agreement with
such Bank. Such Bank may furnish any information  concerning the Obligors in the
possession  of  such  Bank  from  time to time  to  assignees  and  participants
(including  prospective  assignees  and  participants);  provided that such Bank
shall require any such prospective assignee or such participant  (prospective or
otherwise)  to  agree  in  writing  to  maintain  the  confidentiality  of  such
information.  In connection with any assignment  pursuant to this paragraph (a),
the assigning Bank shall pay the Agent an administrative fee for processing such
assignment in the amount of $5,000.

                  (b)  In  addition  to  the  assignments   and   participations
permitted under  paragraph (a) above,  any Bank may assign and pledge all or any
portion of its Loans, its Notes and its rights and obligations under the Letters
of Credit to (i) any affiliate of such Bank or (ii) any Federal  Reserve Bank as
collateral  security  pursuant to  Regulation A of the Board of Governors of the
Federal Reserve System and any Operating Circular issued by such Federal Reserve
Bank. No such  assignment  shall release the assigning Bank from its obligations
hereunder.

         Section  13.06.  Notices.  Unless  the party to be  notified  otherwise
notifies the other party in writing as provided in this  Section,  and except as
otherwise provided



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<PAGE>



in this Agreement,  notices shall be given to the Agent by telephone,  confirmed
by telex,  telecopy or other  writing,  and to the Banks and to the  Obligors by
ordinary  mail or  telecopier  addressed  to such  party at its  address  on the
signature page of this  Agreement.  Notices shall be effective:  (a) if given by
mail,  72 hours  after  deposit in the mails with first class  postage  prepaid,
addressed as  aforesaid;  and (b) if given by  telecopier,  when the telecopy is
transmitted to the telecopier number as aforesaid;  provided that notices to the
Agent and the Banks shall be effective upon receipt.

         Section  13.07.  Setoff.  The Obligors  agree that, in addition to (and
without limitation of) any right of setoff, banker's lien or counterclaim a Bank
may  otherwise  have,  each Bank shall be  entitled,  at its  option,  to offset
balances (general or special,  time or demand,  provisional or final) held by it
for the account of the Obligors at any of such Bank's offices,  in Dollars or in
any other  currency,  against  any amount  payable by the  Obligors to such Bank
under this Agreement or such Bank's Note which is not paid when due  (regardless
of whether such balances are then due to the  Obligors),  in which case it shall
promptly  notify the Obligors and the Agent  thereof;  provided that such Bank's
failure to give such notice shall not affect the validity  thereof.  Payments by
the Obligors hereunder shall be made without setoff or counterclaim.

         Section  13.08.  JURISDICTION;  IMMUNITIES.  (a)  THE  OBLIGORS  HEREBY
IRREVOCABLY  SUBMIT TO THE  JURISDICTION  OF ANY  MASSACHUSETTS  STATE OR UNITED
STATES  FEDERAL  COURT  SITTING IN SUFFOLK  COUNTY OVER ANY ACTION OR PROCEEDING
ARISING OUT OF OR  RELATING TO THIS  AGREEMENT  OR THE NOTES,  AND THE  OBLIGORS
HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING
MAY BE HEARD AND DETERMINED IN SUCH  MASSACHUSETTS  STATE OR FEDERAL COURT.  THE
OBLIGORS  IRREVOCABLY  CONSENT TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH
ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO THE OBLIGORS AT
ITS ADDRESS SPECIFIED IN SECTION 13.06. THE OBLIGORS AGREE THAT A FINAL JUDGMENT
IN ANY SUCH  ACTION OR  PROCEEDING  SHALL BE  CONCLUSIVE  AND MAY BE ENFORCED IN
OTHER  JURISDICTIONS  BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW. THE  OBLIGORS  FURTHER  WAIVE ANY  OBJECTION TO VENUE IN SUCH STATE AND ANY
OBJECTION  TO AN ACTION OR  PROCEEDING  IN SUCH  STATE ON THE BASIS OF FORUM NON
CONVENIENS.  THE OBLIGORS  FURTHER AGREE THAT ANY ACTION OR  PROCEEDING  BROUGHT
AGAINST THE AGENT SHALL BE BROUGHT ONLY IN MASSACHUSETTS  STATE OR UNITED STATES
FEDERAL COURT SITTING IN SUFFOLK  COUNTY.  THE OBLIGORS WAIVE ANY RIGHT THEY MAY
HAVE TO JURY TRIAL.

                  (b) Nothing in this  Section  13.08 shall  affect the right of
the Agent or any Bank to serve legal  process in any other  manner  permitted by
law or  affect  the  right  of the  Agent or any Bank to  bring  any  action  or
proceeding  against  any  Obligor  or its  Property  in the  courts of any other
jurisdictions.




                                       59

<PAGE>



                  (c) To the  extent  that  any  Obligor  has or  hereafter  may
acquire any immunity  from  jurisdiction  of any court or from any legal process
(whether from service or notice, attachment prior to judgment, attachment in aid
of execution,  execution or  otherwise)  with respect to itself or its Property,
such  Obligor  hereby  irrevocably  waives  such  immunity  in  respect  of  its
obligations under this Agreement and the Notes.

         Section 13.09. Table of Contents;  Headings.  Any table of contents and
the headings  and  captions  hereunder  are for  convenience  only and shall not
affect the interpretation or construction of this Agreement.

         Section  13.10.  Severability.  The  provisions  of this  Agreement are
intended to be  severable.  If for any reason any  provision  of this  Agreement
shall be held invalid or unenforceable in whole or in part in any  jurisdiction,
such provision shall, as to such  jurisdiction,  be ineffective to the extent of
such invalidity or unenforceability without in any manner affecting the validity
or enforceability  thereof in any other jurisdiction or the remaining provisions
hereof in any  jurisdiction.  To the  extent  that  mandatory  and  non-waivable
provisions of applicable law  (including but not limited to any applicable  laws
pertaining to fraudulent  conveyance  and any applicable  business  corporation,
partnership and limited  liability company laws) otherwise would render the full
amount of any Subsidiary  Guarantor's  obligations hereunder and under the other
Facility  Documents  invalid  or  unenforceable,   such  Subsidiary  Guarantor's
obligations hereunder and under the other Facility Documents shall be limited to
the maximum amount which does not result in such invalidity or unenforceability.

         Section  13.11.  Counterparts.  This  Agreement  may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument,  and any party hereto may execute this Agreement by signing any
such counterpart.

         Section 13.12. Integration. The Facility Documents set forth the entire
agreement  among the parties hereto  relating to the  transactions  contemplated
thereby and  supersede any prior oral or written  statements or agreements  with
respect to such transactions.

         Section 13.13.  GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
INTERPRETED  AND CONSTRUED IN ACCORDANCE  WITH, THE LAW OF THE  COMMONWEALTH  OF
MASSACHUSETTS.

         Section  13.14.  Confidentiality.  Each Bank and the Agent  agrees  (on
behalf of itself and each of its affiliates,  directors, officers, employees and
representatives)  to  use  reasonable  precautions  to  keep  confidential,   in
accordance  with safe and sound banking  practices,  any non-public  information
supplied to it by the Obligors pursuant to this Agreement which is identified by
the  Obligors as being  confidential  at the time the same is  delivered  to the
Banks or the Agent,  provided that nothing  herein shall limit the disclosure of
any such information (i) to the extent required by statute,  rule, regulation or
judicial process, (ii) to counsel for any of the Banks or the Agent, (iii) to



                                       60

<PAGE>



bank examiners,  auditors or accountants, (iv) in connection with any litigation
to  which  any one or more of the  Banks is a party  or (v) to any  assignee  or
participant (or prospective assignee or participant) so long as such assignee or
participant  (or prospective  assignee or participant)  agrees to use reasonable
precautions to keep such information confidential;  and provided finally that in
no event  shall any Bank or the Agent be  obligated  or  required  to return any
materials furnished by the Obligers.

         Section  13.15.  Treatment  of Certain  Information.  The  Obligors (a)
acknowledge  that services may be offered or provided to it (in connection  with
this Agreement or otherwise) by each Bank or by one or more of their  respective
subsidiaries or affiliates and (b)  acknowledge  that  information  delivered to
each Bank by the Obligors may be provided to each such subsidiary and affiliate.

         Section 13.16.  New Subsidiary  Guarantors.  Each of the Obligors not a
signatory to the  Existing  Credit  Agreement  unconditionally  and  irrevocably
accepts,  adheres to, and becomes party to and bound as a "Subsidiary Guarantor"
under  this  Agreement,  as fully if such  Obligor  had  been  signatory  to the
Existing Credit  Agreement as a "Subsidiary  Guarantor".  In  confirmation  (but
without   limitation)   of  the   foregoing,   each  such  Obligor   hereby  (a)
unconditionally  agrees to make  prompt  payment  in full when due  (whether  at
stated maturity,  by acceleration or otherwise) of the principal and interest on
all of the  Obligations  and  (b)  unconditionally  grants,  bargains,  conveys,
assigns,  transfers,  mortgages,  hypothecates,  pledges,  confirms and grants a
continuing security interest to the Agent, for the ratable benefit of the Banks,
in and to the Collateral.

         Section 13.17.  Reaffirmation.  Each of the Obligors  acknowledges that
the Liens  granted to the Agent under the Security  Documents in the  Collateral
secures all obligations of each of the Obligors under this Agreement, the Notes,
the  Letters  of Credit and the other  Facility  Documents,  including,  without
limitation,  all liabilities and obligations  under the Loans as herein modified
and increased  and all of the Letter of Credit  Obligations.  All  references to
"Note" or "Notes" in any  Facility  Document  shall be deemed to be to the Notes
issued  hereunder.  All  references  to "Secured  Obligations"  in any  Facility
Document shall be deemed to include all liabilities  and  obligations  under the
Loans  as  herein  modified  and  increased  and  all of the  Letter  of  Credit
Obligations.  Each of the Obligors further acknowledges and reaffirms all of its
other respective obligations and duties under the Facility Documents to which it
is a party.

         Section 13.18. Certain Waivers.  Each of the Agent and the Banks hereby
waives any Default or Event of Default  arising  from the  noncompliance  by the
Borrower  with (a) Sections  9.01,  9.02,  9.03 and 9.06 of the Existing  Credit
Agreement for the fiscal quarter of the Consolidated Entities ending on June 28,
1996 and (b) Sections 9.01, 9.02, 9.03 and 9.06 of the Existing Credit Agreement
for the fiscal  quarter of the  Consolidated  Entities  ending on September  28,
1996.

         Section 13.19. Revisions to the Security Documents.  Each of the Agent,
the Lenders and the  Obligors  hereby  agrees  that  Schedule A to the  Security
Agreement



                                       61

<PAGE>



is hereby  amended and  restated as set forth on Schedule A hereto.  Each of the
Agent,  the Lenders  and the  Obligors  hereby  agrees  that the  definition  of
"Pledged  Stock" is hereby  amended to add "The Great Bagel Coffee  Company,  an
Arizona  corporation,  The Great  Bagel  Coffee  Franchising  Corp.,  a Delaware
corporation,  the Gemini  Production  Facility,  Inc.,  an Arizona  corporation"
immediately subsequent to "Americana Dining Corp., a Delaware corporation".

         Section 13.20. Permitted  Sale-Leasebacks.  (a) Notwithstanding Section
8.03,  Section 8.04, Section 8.05 and Section 8.07 hereof and Section 3.01(b) of
the Security  Agreement,  each of the Agent and the Banks hereby consents to the
proposed sale of newly constructed  "Fuddruckers" restaurants listed on Schedule
V hereto and already constructed "Fuddruckers" restaurants listed on Schedule VI
hereto by Fuddruckers,  Inc. to, and the  simultaneous  leaseback from, FFCA and
the grant by  Fuddruckers,  Inc. in favor of FFCA of a security  interest in the
furnishings  and  equipment  located at each such  restaurant  substantially  in
accordance  with  the  terms  and  conditions  of the  commitment  letter  dated
September  13, 1994 from FFCA to  Fuddruckers,  Inc., as amended by that certain
letter dated  October 25, 1995 and as  supplemented  by that  certain  letter of
intent  dated  October  7,  1996  delivered  by FFCA (the  "FFCA  Sale-Leaseback
Transaction"),  copies of which have been  furnished  to the Banks.  Each of the
Agent and the Banks hereby agrees to, and does hereby, subordinate their Lien in
the  furnishings  and  equipment  located  at each such  Fuddruckers  restaurant
subject  to such  sale-leaseback  and do hereby  agree to execute  such  further
instruments and agreements of  subordination  as may be reasonably  necessary to
effectuate  or evidence  the  intention of this  Section  13.20(a).  Each of the
Obligors  acknowledges  that the consent of the Banks  contained in this Section
13.20(a)  is  subject  to the  condition  that  any  documentation  executed  to
effectuate the FFCA Sale-Leaseback  Transaction after the date hereof is subject
to the approval of the Required Banks.

                  (b)  Notwithstanding  Section 8.03, Section 8.04, Section 8.05
and  Section  8.07,  each  of the  Agent  and the  Banks  hereby  consents  to a
development  and  sale-leaseback  financing  facility up to a maximum  principal
amount of  $40,000,000  for the  proposed  sale of newly  constructed  "Champps"
restaurants listed on Schedule V hereto by Champps  Entertainment,  Inc. to, and
the simultaneous  leaseback from, AEI substantially in accordance with the terms
and conditions of the Multi-Site Sale Leaseback  Financing Agreement for Champps
Entertainment,  Inc.  dated December 6, 1995 among AEI, the Borrower and Champps
Entertainment,  Inc., as amended by that certain  Amendment to  Multi-Site  Sale
Leaseback  Financing  Agreement dated as of January 10, 1996, as further amended
by that  certain  Second  Amendment  to  Multi-  Site Sale  Leaseback  Financing
Agreement  dated as of August  28,  1996 and as  supplemented  by the term sheet
dated  September  30, 1996  delivered  by AEI  (together  with all  implementing
documentation, the "AEI Sale-Leaseback Transaction"),  copies of which have been
furnished to the Banks.  Each of the Obligors  acknowledges  that the consent of
the Banks  contained in this Section  13.20(b) is subject to the condition  that
any  documentation  executed to effectuate  the AEI  Sale-Leaseback  Transaction
after the date hereof is subject to the approval of the Required Banks.




                                       62

<PAGE>



         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.

DAKA INTERNATIONAL, INC.


By__________________________________
Name:
Title:


FUDDRUCKERS, INC.


By__________________________________
Name:
Title:


DAKA, INC.


By__________________________________
Name:
Title:


CASUAL DINING VENTURES, INC.


By__________________________________
Name:
Title:


ATLANTIC RESTAURANT VENTURES,
INC.


By__________________________________
Name:
Title:



                      [SIGNATURE PAGE TO CREDIT AGREEMENT]

<PAGE>



DAKA RESTAURANTS, L.P.
By its General Partner, Daka, Inc.


By__________________________________
Name:
Title:


FRENCH QUARTER COFFEE COMPANY


By__________________________________
Name:
Title:


AMERICANA DINING CORP.


By__________________________________
Name:
Title:


CHAMPPS ENTERTAINMENT OF
EDISON, INC.


By__________________________________
Name:
Title:


CHAMPPS ENTERTAINMENT OF
TEXAS, INC.


By__________________________________
Name:
Title:



                      [SIGNATURE PAGE TO CREDIT AGREEMENT]

<PAGE>



CHAMPPS ENTERTAINMENT OF
WAYZATA, INC.


By__________________________________
Name:
Title:


CHAMPPS ENTERTAINMENT, INC.


By__________________________________
Name:
Title:


SPECIALTY CONCEPTS, INC.


By__________________________________
Name:
Title:


GEMINI PRODUCTION FACILITY, INC.


By__________________________________
Name:
Title:


THE GREAT BAGEL AND COFFEE
COMPANY


By__________________________________
Name:
Title:




                      [SIGNATURE PAGE TO CREDIT AGREEMENT]

<PAGE>



THE GREAT BAGEL AND COFFEE
FRANCHISING CORP.


By__________________________________
Name:
Title:


Address for Notices:

One Corporate Place
55 Ferncroft Road
Danvers, Massachusetts 01923
Telecopier No.:(508)774-1334

                      [SIGNATURE PAGE TO CREDIT AGREEMENT]

<PAGE>



AGENT:
THE CHASE MANHATTAN BANK


By__________________________________
Name:
Title:

Address for Notices:

4 Chase Metrotech Center
13th Floor
Brooklyn, NY 11245
Attention: New York Agency

with a copy to:

c/o Chemical New England Corporation
85 Wells Avenue
Suite 200
Newton, MA 02159-3215
Attention: Roger Stone


                      [SIGNATURE PAGE TO CREDIT AGREEMENT]

<PAGE>



BANKS:
THE CHASE MANHATTAN BANK


By__________________________________
Name:
Title:

Lending Office and Address for Notices:

c/o Chemical New England Corporation
85 Wells Avenue
Suite 200
Newton, MA 02159-3215
Attention: Roger Stone


                      [SIGNATURE PAGE TO CREDIT AGREEMENT]

<PAGE>



BANKS:
FLEET NATIONAL BANK


By__________________________________
Name:
Title:

Lending Office and Address for
Notices:

One Federal Street
Boston, MA 02211
Attention: Amy Tsokanis

                      [SIGNATURE PAGE TO CREDIT AGREEMENT]

<PAGE>



BANKS:
MELLON BANK, N.A.


By__________________________________
Name:
Title:

Lending Office and Address for
Notices:

One Boston Place
Boston, MA 02108
Attention: Steven Wagner

                      [SIGNATURE PAGE TO CREDIT AGREEMENT]

<PAGE>



BANKS:
THE FIRST NATIONAL BANK OF
BOSTON


By__________________________________
Name:
Title:

Lending Office and Address for
Notices:

New England Corporate Banking
Mail Stop 01-07-05
100 Federal Street
Boston, MA 02110
Attention: William Latham


                      [SIGNATURE PAGE TO CREDIT AGREEMENT]