Document:

AMENDED AND RESTATED
                                CREDIT AGREEMENT

                         dated as of January 28, 2000,

                                  by and among

                          VERMONT PURE HOLDINGS, LTD.

                                      and

                          VERMONT PURE SPRINGS, INC.,

                     jointly and severally, the Borrowers,

                        the Lenders referred to herein,

                                      and

                           FIRST UNION NATIONAL BANK,

                       as Lender and Administrative Agent

<PAGE>

                               TABLE OF CONTENTS

                                                                            Page

ARTICLE I .....   DEFINITIONS .............................................    1
SECTION 1.1 ...   Definitions .............................................    1
SECTION 1.2 ...   General .................................................   15
SECTION 1.3 ...   Other Definitions and Provisions ........................   15

ARTICLE II ....   REVOLVING CREDIT FACILITY ...............................   15
SECTION 2.1 ...   Revolving Credit Loans ..................................   15
SECTION 2.2 ...   Procedure for Advances of Revolving Credit Loans ........   15
SECTION 2.3 ...   Repayment of Loans ......................................   16
SECTION 2.4 ...   Notes ...................................................   17
SECTION 2.5 ...   Permanent Reduction of the Aggregate Commitment .........   17
SECTION 2.6 ...   Termination of Credit Facility ..........................   18
SECTION 2.7 ...   Use of Proceeds .........................................   18

ARTICLE III ...   LETTER OF CREDIT FACILITY ...............................   18
SECTION 3.1 ...   L/C Commitment ..........................................   18
SECTION 3.2 ...   Procedure for Issuance of Letters of Credit .............   19
SECTION 3.3 ...   Commissions and Other Charges ...........................   19
SECTION 3.4 ...   L/C Participations ......................................   19
SECTION 3.5 ...   Reimbursement Obligation of the Borrowers ...............   20
SECTION 3.6 ...   Obligations Absolute ....................................   21
SECTION 3.7 ...   Effect of Application ...................................   22

ARTICLE IV ....   GENERAL LOAN PROVISIONS .................................   22
SECTION 4.1 ...   Interest ................................................   22
SECTION 4.2 ...   Notice and Manner of Conversion or Continuation of Loans    24
SECTION 4.3 ...   Fees ....................................................   25
SECTION 4.4 ...   Manner of Payment .......................................   25
SECTION 4.5 ...   Crediting of Payments and Proceeds ......................   26
SECTION 4.6 ...   Adjustments .............................................   26
SECTION 4.7 ...   Nature of Obligations of Lenders Regarding Extensions
                  of Credit; Assumption by the Administrative Agent .......   27
SECTION 4.8 ...   Changed Circumstances ...................................   27
SECTION 4.9 ...   Indemnity ...............................................   29
SECTION 4.10 ..   Capital Requirements ....................................   29
SECTION 4.11 ..   Taxes ...................................................   30
SECTION 4.12 ..   Security ................................................   31

ARTICLE V .....   CLOSING; CONDITIONS OF CLOSING AND BORROWING ............   31
SECTION 5.1 ...   Closing .................................................   32
SECTION 5.2 ...   Conditions to Closing and Initial Extensions of Credit ..   32

                                      -i-

<PAGE>

SECTION 5.3 ...   Conditions to All Extensions of Credit ..................   36

ARTICLE VI ....   REPRESENTATIONS AND WARRANTIES OF THE BORROWERS .........   37
SECTION 6.1 ...   Representations and Warranties ..........................   37
SECTION 6.2 ...   Survival of Representations and Warranties, Etc .........   44

ARTICLE VII ...   FINANCIAL INFORMATION AND NOTICES .......................   44
SECTION 7.1 ...   Financial Statements and Projections ....................   44
SECTION 7.2 ...   Officer's Compliance Certificate ........................   45
SECTION 7.3 ...   Accountants' Certificate ................................   45
SECTION 7.4 ...   Other Reports ...........................................   46
SECTION 7.5 ...   Notice of Litigation and Other Matters ..................   46
SECTION 7.6 ...   Accuracy of Information .................................   47

ARTICLE VIII ..   AFFIRMATIVE COVENANTS ...................................   47
SECTION 8.1 ...   Preservation of Corporate Existence and Related Matters .   47
SECTION 8.2 ...   Maintenance of Property .................................   48
SECTION 8.3 ...   Insurance ...............................................   48
SECTION 8.4 ...   Accounting Methods and Financial Records ................   48
SECTION 8.5 ...   Payment and Performance of Obligations ..................   48
SECTION 8.6 ...   Compliance With Laws and Approvals ......................   48
SECTION 8.7 ...   Environmental Laws ......................................   48
SECTION 8.8 ...   Compliance with ERISA ...................................   49
SECTION 8.9 ...   Compliance With Agreements ..............................   49
SECTION 8.10 ..   Conduct of Business .....................................   49
SECTION 8.11 ..   Visits and Inspections ..................................   49
SECTION 8.12 ..   Additional Subsidiaries .................................   50
SECTION 8.13 ..   Hedging Agreement .......................................   50
SECTION 8.15 ..   Further Assurances ......................................   50

ARTICLE IX ....   FINANCIAL COVENANTS .....................................   50
SECTION 9.1 ...   Leverage Ratio ..........................................   51
SECTION 9.2 ...   Fixed Charge Coverage Ratio .............................   51
SECTION 9.3 ...   Interest Coverage Ratio .................................   51
SECTION 9.4 ...   Minimum Net Worth .......................................   51

ARTICLE X .....   NEGATIVE COVENANTS ......................................   52
SECTION 10.1 ..   Limitations on Debt .....................................   52
SECTION 10.2 ..   Limitations on Guaranty Obligations .....................   52
SECTION 10.3 ..   Limitations on Liens ....................................   52
SECTION 10.4 ..   Limitations on Loans, Advances, Investments
                  and Acquisitions ........................................   53
SECTION 10.5 ..   Limitations on Mergers and Liquidation ..................   55
SECTION 10.6 ..   Limitations on Sale of Assets ...........................   56
SECTION 10.7 ..   Limitations on Dividends and Distributions ..............   56
SECTION 10.8 ..   Limitations on Exchange and Issuance of Capital Stock ...   56

                                      -ii-

<PAGE>

SECTION 10.9 ..   Transactions with Affiliates ............................   56
SECTION 10.10 .   Certain Accounting Changes ..............................   57
SECTION 10.11 .   Amendments; Payments and Prepayments of Subordinated Debt   57
SECTION 10.12 .   Restrictive Agreements ..................................   57
SECTION 10.13 .   Capital Expenditures ....................................   57

ARTICLE XI ....   DEFAULT AND REMEDIES ....................................   57
SECTION 11.1 ..   Events of Default .......................................   57
SECTION 11.2 ..   Remedies ................................................   60
SECTION 11.3 ..   Default Remedies ........................................   60
SECTION 11.4 ..   Rights and Remedies Cumulative; Non-Waiver; etc .........   61

ARTICLE XII ...   THE ADMINISTRATIVE AGENT ................................   61
SECTION 12.1 ..   Appointment .............................................   61
SECTION 12.2 ..   Delegation of Duties ....................................   61
SECTION 12.3 ..   Exculpatory Provisions ..................................   62
SECTION 12.4 ..   Reliance by the Administrative Agent ....................   62
SECTION 12.5 ..   Notice of Default .......................................   62
SECTION 12.6 ..   Non-Reliance on the Administrative Agent and Other Lenders  63
SECTION 12.7 ..   Indemnification .........................................   63
SECTION 12.8 ..   The Administrative Agent in Its Individual Capacity .....   64
SECTION 12.9 ..   Resignation of the Administrative Agent: Successor
                  Administrative Agent ...............................        64

ARTICLE XIII ..   MISCELLANEOUS ...........................................   65
SECTION 13.1 ..   Notices .................................................   65
SECTION 13.2 ..   Expenses; Indemnity .....................................   66
SECTION 13.3 ..   Set-off .................................................   66
SECTION 13.4 ..   Governing Law ...........................................   67
SECTION 13.5 ..   Consent to Jurisdiction .................................   67
SECTION 13.6 ..   Binding Arbitration; Waiver of Jury Trial ...............   67
SECTION 13.7 ..   Reversal of Payments ....................................   68
SECTION 13.8 ..   Injunctive Relief, Punitive Damages .....................   69
SECTION 13.9 ..   Accounting Matters ......................................   69
SECTION 13.10 .   Successors and Assigns; Participations ..................   69
SECTION 13.11 .   Amendments, Waivers and Consents ........................   72
SECTION 13.12 .   Performance of Duties ...................................   72
SECTION 13.13 .   All Powers Coupled with Interest ........................   73
SECTION 13.14 .   Survival of Indemnities .................................   73
SECTION 13.15 .   Titles and Captions .....................................   73
SECTION 13.16 .   Severability of Provisions ..............................   73
SECTION 13.17 .   Counterparts ............................................   73
SECTION 13.18 .   Term of Agreement .......................................   73
SECTION 13.19 .   Inconsistencies with Other Documents; Independent
                  Effect of Covenants .....................................   73
SECTION 13.20 .   Amendment and Restatement ...............................   74

                                     -iii-

<PAGE>

EXHIBITS

Exhibit A         -        Form of Revolving Credit Note
Exhibit B         -        Form of Notice of Borrowing
Exhibit C         -        Form of Notice of Account Designation
Exhibit D         -        Form of Notice of Prepayment
Exhibit E         -        Form of Notice of Conversion/Continuation
Exhibit F         -        Form of Officer's Certificate
Exhibit G         -        Form of Assignment and Acceptance

SCHEDULES

Schedule 1        -        Lenders and Commitments
Schedule 6.1 (a)  -        Jurisdictions of Organization and Qualification
Schedule 6.l(b)   -        Subsidiaries and Capitalization
Schedule 6.1(i)   -        ERISA Plans
Schedule 6.1(1)   -        Material Contracts
Schedule 6.1(m)   -        Labor and Collective Bargaining Agreements
Schedule 6.1(t)   -        Debt and Guaranty Obligations
Schedule 6.1(u)   -        Litigation
Schedule 10.3     -        Existing Liens
Schedule 10.4     -        Existing Loans, Advances and Investments

                                      -iv-

<PAGE>

     THIS AMENDED AND RESTATED  CREDIT  AGREEMENT is dated as of the 28th day of
January,  2000, by and among VERMONT PURE  HOLDINGS,  LTD., a Delaware  business
corporation,  VERMONT  PURE  SPRINGS,  INC.,  a Delaware  business  corporation,
(herein, the foregoing shall be referred to collectively,  jointly and severally
as the "Borrowers"),  the Lenders whose signatures appear on the signature pages
hereto (the  "Lenders"),  and FIRST UNION NATIONAL BANK, a national bank ("First
Union") as a Lender and as Administrative Agent for the Lenders

                                    RECITALS

     A. The  Borrowers  and First Union had  previously  entered  into,  and are
currently  parties to, that  certain Loan and  Security  Agreement,  dated as of
April 8, 1998 (the "Original  Agreement"),  whereby First Union agreed to extend
certain credit to the Borrowers,  including a revolving  working capital line of
credit in the amount up to Three Million and 00/100 Dollars  ($3,000,000.00) and
a facility  in the  amount of up to Fifteen  Million  Dollars  ($15,000,000)  to
finance the  acquisition  of certain types of assets and business  operations by
the  Borrowers.

     B. The Borrowers  desire to increase the amount of credit available to them
under the Original Agreement, and to amend and restate the Original Agreement as
provided  herein,  including  consolidating  the current working capital line of
credit and acquisition  facility for borrowing  purposes.

     C. The Borrowers have applied to The Vermont Economic Development Authority
for the  issuance of certain  industrial  revenue  bonds,  the proceeds of which
would be to finance a 38,000 square foot expansion of the existing manufacturing
and  warehouse  facility of Borrowers  located at Catamount  Industrial  Park on
Route  66,  Randolph,  Vermont,  as  well  as to  facilitate  the  purchase  and
installation  of  equipment  and  bottling  lines at such  location  (the  "Bond
Transaction").  It is  anticipated  that,  under the Revolving  Credit  Facility
provided  for in this  Credit  Agreement,  a direct  pay letter of credit in the
approximate  amount of Four Million  Three Hundred  Thousand and 00/100  Dollars
($4,300,000.00)  will be issued by the  Administrative  Agent,  on behalf of the
Lenders, in connection with such Bond Transaction.

     D.  First  Union and the other  Lenders  hereto,  desire to enter into this
Amended and Restated  Credit  Agreement,  on the terms and  conditions  provided
herein. NOW,  THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, such parties
hereby agree:

                                   ARTICLE I

                                  DEFINITIONS

     SECTION 1.1  Definitions.  The following  terms when used in this Agreement
shall have the meanings assigned to them below:

<PAGE>

    "Acquisition"  means the  purchase by the  Borrowers of all or a portion of
the  assets,  stock  or  other  equity  interests  of any  Person.

     "Acquisition Documents" means in connection with any Permitted Acquisition,
any asset  purchase  agreement  or similar  agreement,  and all other  documents
entered  into  or  delivered  in  connection  with  any  Permitted  Acquisition.

     "Adjusted  Cash Flow" means,  for the seller in any Permitted  Acquisition,
Cash Flow plus all non-recurring  seller's  salaries,  bonuses,  withdrawals and
other non-recurring  expenses.

     "Administrative  Agent" means First Union in its capacity as Administrative
Agent hereunder,  and any successor thereto appointed  pursuant to Section 12.9.

     "Administrative  Agent's  Office"  means the  office of the  Administrative
Agent  specified in or determined in accordance  with the  provisions of Section
13.1(c).

     "Affiliate" means, with respect to any Person, any other Person (other than
a Subsidiary) which directly or indirectly  through one or more  intermediaries,
controls,  or is  controlled  by, or is under common  control  with,  such first
Person or any of their  Subsidiaries.  The term "control" means (a) the power to
vote five percent (5%) or more of the securities or other equity  interests of a
Person  having  ordinary  voting  power,  or (b)  the  possession,  directly  or
indirectly,  of any  other  power  to  direct  or  cause  the  direction  of the
management  and  policies  of a  Person,  whether  through  ownership  of voting
securities, by contract or otherwise.

     "Aggregate   Commitment"   means  the  aggregate  amount  of  the  Lenders'
Commitments hereunder,  as such amount may be reduced or modified at any time or
from time to time  pursuant  to the  terms  hereof.  On the  Closing  Date,  the
Aggregate   Commitment   shall  be   Twenty-Five   Million  and  00/100  Dollars
($25,000,000.00).

     "Agreement" means this Amended and Restated Credit  Agreement,  as the same
may, from time to time, be amended, restated or otherwise modified.

     "Applicable Law" means all applicable  provisions of  constitutions,  laws,
statutes,   ordinances,   rules,  treaties,   regulations,   permits,  licenses,
approvals,  interpretations and orders of courts or Governmental Authorities and
all orders and decrees of all courts and arbitrators.

     "Applicable  Margin"  shall have the  meaning  assigned  thereto in Section
4.1(c).

     "Application"  means an application  submitted by the Borrowers in the form
specified  by the  Issuing  Lender,  from time to time,  requesting  the Issuing
Lender to issue a Letter of Credit.

     "Assignment  and  Acceptance"  shall have the meaning  assigned  thereto in
Section 13.10.

     "Available Commitment" means, as to any Lender at any time, an amount equal
to (a) such Lender's  Commitment  less (b) such  Lender's  Extensions of Credit.

     "Bond  Transaction"  shall  have  the  meaning  given  to that  term in the
Recitals.

                                      -2-

<PAGE>

     "Base  Rate"  means, at any time, the higher of (a) the Prime Rate, and (b)
the  Federal  Funds Rate plus 1/2 of 1%. Each change in the Base Rate shall take
effect simultaneously with the corresponding change or changes in the Prime Rate
or the Federal Funds Rate.

     "Base Rate Loan" means any Loan  bearing  interest at a rate based upon the
Base Rate,  as provided in Section 4.1.

     "Borrowers"  means,  unless the context requires  otherwise,  collectively,
jointly and severally,  Vermont Pure  Holdings,  Ltd., and Vermont Pure Springs,
Inc.,  together  with their  permitted  successors  and assigns,  including  any
trustees or receivers in any  bankruptcy  proceedings.

     "Business Day" means (a) for all purposes other than as set forth in clause
(b) below, any day other than a Saturday, Sunday, legal holiday, or day on which
banks and lending  institutions  in Charlotte,  North  Carolina or New York, New
York are authorized or directed by  governmental or executive order to close for
business,  and (b) with respect to all notices and  determinations in connection
with,  and payments of principal  and interest on, any LIBOR Rate Loan,  any day
that is a  Business  Day  described  in  clause  (a) and  that is also a day for
trading by and between banks in Dollar deposits in the London interbank  market.

     "Capital   Asset"   means,   with  respect  to  the   Borrowers  and  their
Subsidiaries,  any asset that should, in accordance with GAAP, be classified and
accounted  for  as a  capital  asset  on a  Consolidated  balance  sheet  of the
Borrowers and their Subsidiaries.

     "Capital   Expenditures"   means  expenditures  for  any  fixed  assets  or
improvements,  replacements,  substitutions  or additions  thereto  which have a
useful life of more than one year,  including  assets  acquired  pursuant to any
Capital Lease.

     "Capital  Lease"  means any lease for  property,  real,  personal or mixed,
under which such Person is the lessee and which,  in accordance  with GAAP, such
Lease is or  should be  capitalized  on the books of such  Person.

     "Cash Flow" means, for the applicable  immediately  preceding  rolling four
(4) quarters,  the sum of the  following,  determined on a  Consolidated  basis,
without  duplication,  for the Borrowers and their Subsidiaries:  (a) net income
for  the  applicable  immediately  preceding  period,  plus  (b)  the sum of (i)
Interest Expense,  (ii)  depreciation and amortization,  and (iii) provision for
income tax  expenses,  in all of the  foregoing  cases  without  adjustment  for
extraordinary  gains or losses.

     "Change of  Control"  means the  occurrence  of an event such that,  or the
entering into an agreement whereby,  any Person or two or more Persons acting in
concert  shall have (i)  acquired  beneficial  ownership  (within the meaning of
Rules 13d-3 of the  Securities  and  Exchange  Commission  under the  Securities
Exchange Act of 1934) of more than 49% of the fully diluted  common stock of the
Borrowers,  or (ii) acquired voting control of the fully diluted common stock of
the  Borrowers or of the board of  directors.

     "Closing  Date" means the date of this Agreement or such later Business Day
upon which each condition  described in Section 5.2 shall be satisfied or waived

                                      -3-

<PAGE>

in all respects in a manner acceptable to the Administrative  Agent, in its sole
discretion;  provided, however, in no event shall the Closing Date be later than
January 31, 2000.

     "Code"  means  the  Internal  Revenue  Code  of  1986,  and the  rules  and
regulations thereunder, as amended, supplemented or otherwise modified from time
to time.

     "Collateral"  means all property and assets of the Borrowers  which are now
or hereafter pledged to the Administrative Agent, for the ratable benefit of the
Lenders as security for the payment and performance of the Obligations, pursuant
to  any  Security  Document.

     "Collateral   Assignments"  means  those  certain   collateral   assignment
agreements  previously  executed  in favor of First  Union,  as amended by those
certain  modification  agreements  executed of even date  herewith,  whereby the
Borrowers  pledge  (and  confirm  their prior  pledge of) to the  Administrative
Agent,  for the  ratable  benefit  of  Administrative  Agent (in its  individual
capacity as a Lender) and the other  Lenders,  as security for the  Obligations,
the Borrowers'  respective  interests in all of their water and mineral  rights,
contracts,  licenses,  trademarks, trade names, leaseholds, general intangibles,
intellectual   property,    landlord   waivers,    estoppel   agreements,    and
non-disturbance  agreements,  as any of the  foregoing  may from time to time be
amended,  restated  or  modified.

     "Commitment" means, as to any Lender, the obligation of such Lender to make
Loans to and issue or participate in Letters of Credit issued for the account of
the  Borrowers  hereunder in an  aggregate  principal or face amount at any time
outstanding  not to exceed the amount set forth  opposite  such Lender's name on
Schedule 1 hereto,  as the same  obligations  and  commitments may be reduced or
modified  at any  time  or  from  time to time  pursuant  to the  terms  hereof.

     "Commitment  Percentage"  means, as to any Lender at any time, the ratio of
(a) the amount of the Commitment of such Lender to (b) the Aggregate  Commitment
of all of the  Lenders.

     "Consolidated"  means, when used with reference to financial  statements or
financial  statement  items  of  the  Borrowers  and  their  Subsidiaries,  such
statements  or  items on a  consolidated  basis in  accordance  with  applicable
principles of consolidation  under GAAP.

     "Credit  Facility" means the collective  reference to the Revolving  Credit
Facility and the L/C Facility.

     "Current  Maturities"  means  such  portion  of Funded  Debt which was paid
pursuant to a  contractual  obligation  to so pay such debt over the most recent
rolling four (4) quarters.

     "Debt" means,  with respect to the Borrowers and their  Subsidiaries at any
date and without duplication, the sum of the following, calculated in accordance
with GAAP: (a) all liabilities,  obligations and indebtedness  including but not
limited to obligations  evidenced by bonds,  debentures,  notes or other similar
instruments of any such Person, (b) all obligations to pay the deferred purchase
price of property or services of any such Person,  except trade payables arising
in the ordinary  course of business,  (c) all  obligations of any such Person as
lessee under Capital Leases,  (d) all debt of any other Person secured by a Lien
on any  asset of any  such  Person,  (e) all  Guaranty  Obligations  of any such
Person,  (f) all  obligations,  contingent  or  otherwise,  of any  such  Person

                                      -4-

<PAGE>

relative  to the face  amount  of  letters  of  credit,  whether  or not  drawn,
including  without  limitation  any  Reimbursement   Obligation,   and  banker's
acceptances  issued for the account of any such Person,  (g) all  obligations of
any such  Person to redeem,  repurchase,  exchange,  defease or  otherwise  make
payments in respect of capital stock or other securities of such Person, and (h)
all  obligations  incurred  by any such Person  pursuant to Hedging  Agreements.

     "Default" means any of the events specified in Section  11.1 which with the
passage of time, the giving of notice or any other  condition,  would constitute
an Event of Default.

     "Default  Rate" means a rate of interest  equal to the Base Rate plus three
percent (3%) per annum.  "Dollars"  or "$" means,  unless  otherwise  qualified,
dollars in lawful currency of the United States.

     "Eligible  Assignee" means,  with respect to any assignment 'of the rights,
interest and obligations of a Lender hereunder,  a Person that is at the time of
such  assignment (a) a commercial  bank  organized  under the laws of the United
States or any state thereof,  having  combined  capital and surplus in excess of
$500,000,000,  (b) a  commercial  bank  organized  under  the laws of any  other
country  that is a  member  of the  Organization  of  Economic  Cooperation  and
Development,  or a political  subdivision of any such country,  having  combined
capital and surplus in excess of $500,000,000,  (c) a finance company, insurance
company or other financial  institution which in the ordinary course of business
extends  credit of the type  extended  hereunder  and that has  total  assets in
excess of $1,000,000,000, (d) already a Lender hereunder (whether as an original
party to this Agreement or as the assignee of another Lender), (e) the successor
(whether by transfer of assets,  merger,  operation of law, or otherwise) to all
or substantially all of the commercial lending business of the assigning Lender,
or (f) any other  Person  that has been  approved  in  writing,  as an  Eligible
Assignee by the Borrowers and the Administrative Agent;  provided,  further, all
such  entities  shall comply,  or shall have  complied,  with the  provisions of
Section 13.10 herein.

     "Employee  Benefit Plan" means any employee benefit plan within the meaning
of Section 3(3) of ERISA which (a) is maintained  for employees of the Borrowers
or any ERISA  Affiliate  or (b) has at any time within the  preceding  six years
been  maintained  for the  employees  of the  Borrowers or any current or former
ERISA Affiliate.

     "Environmental  Laws"  means any and all  federal,  state  and local  laws,
statutes,   ordinances,   rules,  regulations,   permits,  licenses,  approvals,
interpretations  and orders of courts or Governmental  Authorities,  relating to
the protection of human health or the  environment,  including,  but not limited
to, requirements pertaining to the manufacture,  processing,  distribution, use,
treatment, storage, disposal,  transportation,  handling, reporting,  licensing,
permitting,  investigation or remediation of Hazardous Materials.

     "ERISA" means the Employee  Retirement Income Security Act of 1974, and the
rules and  regulations  thereunder,  each as amended,  supplemented or otherwise
modified.

                                      -5-

<PAGE>

    "ERISA  Affiliate"  means any Person who  together  with the  Borrowers  is
treated as a single employer  within the meaning of Section 414(b),  (c), (m) or
(o) of the Code or Section  4001(b) of ERISA.

     "Eurodollar   Reserve  Percentage"  means,  for  any  day,  the  percentage
(expressed as a decimal and rounded  upwards,  if necessary,  to the next higher
1/100th  of 1%) which is in effect  for such day as  prescribed  by the  Federal
Reserve Board (or any successor) for determining the maximum reserve requirement
(including without  limitation any basic supplemental or emergency  reserves) in
respect of eurocurrency liabilities or any similar category of liabilities for a
member bank of the Federal  Reserve System in New York City.  "Event of Default"
means any of the events specified in Section 11.1, provided that any requirement
for  passage  of time,  giving  of  notice,  or any  other  condition,  has been
satisfied.

     "Extensions of Credit" means, as to any Lender at any time, an amount equal
to the sum of (a) the aggregate  principal  amount of all Revolving Credit Loans
made  by such  Lender  then  outstanding,  plus  (b)  such  Lender's  Commitment
Percentage of the L/C  Obligations  then  outstanding.

     "FDIC" means the Federal Deposit  Insurance  Corporation,  or any successor
thereto.

     "Federal  Funds  Rate"  means,  the rate per  annum  (rounded  upwards,  if
necessary,  to the next higher 1/100th of 1%)  representing  the daily effective
federal  funds  rate as quoted by the  Administrative  Agent  and  confirmed  in
Federal  Reserve  Board  Statistical  Release  H.15  (519) or any  successor  or
substitute publication selected by the Administrative Agent. If, for any reason,
such rate is not  available,  then "Federal  Funds Rate" shall mean a daily rate
which is determined,  in the opinion of the Administrative Agent, to be the rate
at which federal funds are being offered for sale in the national  federal funds
market at 9:00 a.m. (Philadelphia time). Rates for weekends or holidays shall be
the same as the  rate for the most  immediate  preceding  Business  Day.

     "First  Union"  means  First  Union  National  Bank,  a  national   banking
association,  and its predecessors (including CoreStates Bank, N.A.), successors
and  assigns.

     "Fiscal Year" means the fiscal year of the Borrowers and their Subsidiaries
ending on  October  31 of each  year.

     "Fixed  Charges"  means the sum of: (a) Interest  Expense paid in cash, (b)
Current  Maturities,  and (c) income taxes paid in cash.

     "Fixed  Charge   Coverage"   means  the  ratio  of:  (a)  Cash  Flow  minus
non-financed  Capital  Expenditures  to (b) Fixed  Charges,  as  calculated on a
rolling four (4) quarter basis.

     "Funded Debt" means, on a consolidated basis and without  duplication:

     (a)  All  items  which  should  in  conformity  with  GAAP be classified as
          indebtedness  for borrowed money and as such should be included on the
          balance  sheet  of  Borrowers,   including  without  limitation,   (i)
          obligations  under the  Revolving  Credit  Notes,  (ii)  indebtedness,
          obligations and liabilities for borrowed money or for the

                                      -6-

<PAGE>

          deferred  purchase price of property,  (iii) Capital Leases,  (iv) all
          indebtedness,   obligations  and  liabilities  secured  by  any  lien,
          mortgage,  charge,  encumbrance  or security  interest on any property
          owned by Borrowers even though it has not assumed or otherwise  become
          liable for the payment  thereof;  and (v) Permitted  seller Notes; but
          excluding Subordinated Debt.

     (b)  All guarantees (whether by discount or otherwise), endorsements (other
          than for  collection  or deposit in the ordinary  course of Borrowers'
          business) and other contingent obligations of Borrowers in respect of,
          or  to  purchase  or   otherwise   acquire  or  become   liable  upon,
          indebtedness,  obligations or liabilities of others, including without
          limitation,  surety  bonds;

     (c)  All obligations  or liabilities of Borrowers  under or pursuant to any
          letter of credit, surety Bonds or similar obligations.

     "GAAP" means generally accepted accounting principles, as recognized by the
American Institute of Certified Public Accountants and the Financial  Accounting
Standards Board,  consistently  applied and maintained on a consistent basis for
the  Borrowers  and their  Subsidiaries  throughout  the  period  indicated  and
consistent  with  the  prior  financial  practice  of the  Borrowers  and  their
Subsidiaries.

     "Governmental  Approvals" means all  authorizations,  consents,  approvals,
licenses and exemptions of,  registrations and filings with, and reports to, all
Governmental  Authorities.

     "Governmental  Authority"  means any nation,  province,  state or political
subdivision  thereof,  and any  government or any Person  exercising  executive,
legislative,   regulatory  or  administrative  functions  of  or  pertaining  to
government,  and any  corporation or other entity owned or  controlled,  through
stock or capital  ownership or  otherwise,  by any of the  foregoing.

     "Guaranty Obligation"  means,  with  respect  to  the  Borrowers  and their
Subsidiaries,  without duplication, any obligation,  contingent or otherwise, of
any such  Person  pursuant  to which such  Person  has  directly  or  indirectly
guaranteed or become surety for any Debt or other obligation of any other Person
and, without limiting the generality of the foregoing, any obligation, direct or
indirect,  contingent or otherwise of any such Person (a) to purchase or pay (or
advance  or supply  funds for the  purchase  or  payment  of) such Debt or other
obligation (whether arising by virtue of partnership arrangements,  by agreement
to keep well, to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial  statement  condition or otherwise) or (b) entered into
for the  purpose of  assuring  in any other  manner the  obligee of such Debt or
other  obligation for the payment  thereof,  or to protect such obligee  against
loss in respect  thereof (in whole or in part);  provided that the term Guaranty
Obligation  shall not  include  endorsements  for  collection  or deposit in the
ordinary course of Borrowers' business.

     "Hazardous  Materials"  means any  substances or materials (a) which are or
become  defined  as  hazardous   wastes,   hazardous   substances,   pollutants,
contaminants,  chemical  substances  or mixtures or toxic  substances  under any
Applicable  Law,  (b)  which  are  toxic,   explosive,   corrosive,   flammable,
infectious, radioactive,  carcinogenic,  mutagenic or otherwise harmful to human
health  or the  environment  and are or  become  regulated  by any  Governmental

                                      -7-

<PAGE>

Authority,  (c) the presence of which require investigation or remediation under
any Applicable Law, (d) the discharge or emission or release of which requires a
permit or license under any Applicable Law or other Governmental  Approval,  (e)
which are deemed to constitute a nuisance, a trespass or pose a health or safety
hazard to persons or neighboring properties, (f) which consist of underground or
aboveground  storage tanks,  whether empty,  filled or partially filled with any
substance, or (g) which contain, without limitation,  asbestos,  polychlorinated
biphenyls, urea formaldehyde foam insulation, petroleum hydrocarbons,  petroleum
derived  substances or waste,  crude oil, nuclear fuel, natural gas or synthetic
gas.

     "Hedging  Agreement"  means any agreement  with respect to an interest rate
swap,  collar,  cap,  floor or a  forward  rate  agreement  or  other  agreement
regarding the hedging of interest rate risk exposure executed in connection with
hedging the interest rate exposure of the Borrowers,  and any confirming  letter
executed  pursuant  to such  hedging  agreement,  all as  amended,  restated  or
otherwise  modified.

     "Intangibles"  means as of the date of any determination  thereof the total
amount of goodwill,  patents, trade names, trademarks,  copyrights,  franchises,
experimental  expense,  organization  expense,  unamortized  debt  discount  and
expense, the excess of cost of shares acquired over book value of related assets
and such other assets as are properly  classified as "intangible  assets" of the
Borrowers  determined in accordance  with GAAP.

     "Interest Coverage" means the ratio of: (a) the Borrowers' Cash Flow to (b)
the Borrowers' Interest Expense, calculated on a rolling four (4) quarter basis.

     "Interest Expense" means interest expense paid in cash on account of Funded
Debt.

     "Interest  Period"  shall  have the  meaning  assigned  thereto  in Section
4.1(b).

     "Investment"  means  any  loan or advance to, or purchase or acquisition of
the securities or obligations  of, any Person or the assumption of any liability
of another  Person which,  in each case, did not arise from sales to such Person
in the ordinary course of business.

     "Issuing Lender" means First Union, in its capacity as issuer of any Letter
of Credit,  or any successor  thereto.

     "L/C Commitment" means the lesser of (a) Five Million  and  00/100  Dollars
($5,000,000.00)   and  (b)  the  Aggregate Commitment.

     "L/C Facility" means the letter of credit facility  established pursuant to
Article III hereof.

     "L/C Obligations"  means at any time, an amount equal to the sum of (a) the
aggregate  undrawn  and  unexpired  amount of the then  issued  and  outstanding
Letters of Credit (including all Obligations owing in connection with any Letter
of Credit issued in connection with the Bond  Transaction) and (b) the aggregate
amount of drawings  under Letters of Credit which have not then been  reimbursed
pursuant to Section 3.5.

     "L/C Participants" means the collective  reference to all the Lenders other
than the Issuing Lender.

                                      -8-

<PAGE>

     "Lender"  means each Person  executing this Agreement as a Lender set forth
on the signature pages hereto and each Person that hereafter  becomes a party to
this Agreement as a Lender  pursuant to Section 13.10.

     "Lending  Office"  means,  with  respect to any Lender,  the office of such
Lender maintaining such Lender's Commitment Percentage of the Loans.  "Letter(s)
of Credit" shall have the meaning assigned thereto in Section 3.1.

     "LIBOR" means the rate of interest per annum determined on the basis of the
rate for  deposits in Dollars in minimum  amounts of at least  $5,000,000  for a
period equal to the  applicable  Interest  Period which  appears on the Telerate
Page 3750 at approximately  11:00 a.m. (London time) two (2) Business Days prior
to  the  first  day  of the  applicable  Interest  Period  (rounded  upward,  if
necessary,  to the nearest  one-sixteenth of one percent  (1/16%)).  If, for any
reason,  such rate does not appear on Telerate Page 3750,  then "LIBOR" shall be
determined by the  Administrative  Agent to be the arithmetic  average  (rounded
upward,  if necessary,  to the nearest  one-sixteenth of one percent (1/16%)) of
the rate per annum at which  deposits in Dollars would be offered by first class
banks in the London interbank market to the Administrative  Agent  approximately
11:00 a.m.  (London  time) two (2)  Business  Days prior to the first day of the
applicable  Interest Period for a period equal to such Interest Period and in an
amount  substantially equal to the amount of the applicable Loan as indicated on
Borrowers'  Notice of  Borrowing.

     "LIBOR Rate"  means  an  interest  rate  per  annum equal to LIBOR plus the
Applicable  Margin.

     "LIBOR Rate Loan" means any Loan bearing  interest at a rate based upon the
LIBOR Rate as provided in Section  4.1(a).

     "Lien" means, with respect to any asset, any mortgage, lien pledge, charge,
security  interest or encumbrance of any kind in respect of such asset.  For the
purposes of this  Agreement,  a Person  shall be deemed to own subject to a Lien
any asset which it has acquired or holds  subject to the interest of a vendor or
lessor  under any  conditional  sale  agreement,  Capital  Lease or other  title
retention  agreement  relating  to such  asset.

     "Loans" means the  collective  reference to the Revolving  Credit Loans and
"Loan"  means any of such Loans.

     "Loan  Documents"  means,  collectively,  this  Agreement,  the Notes,  the
Applications,  any  Hedging  Agreement  with  any  Lender  (which  such  Hedging
Agreement is  permitted or required  hereunder),  the  Security  Documents,  the
Surety Agreements,  all agreements,  documents and instruments executed with and
delivered to any Lender in connection with the Bond Transaction,  and each other
financing  statement,  stock  power,  document,   instrument,   certificate  and
agreement  executed and delivered by the Borrowers,  their Subsidiaries or their
counsel in  connection  with this  Agreement or otherwise  referred to herein or
contemplated  hereby,  all as may be amended,  restated or  otherwise  modified.

                                      -9-

<PAGE>

     "Material  Adverse  Effect" means,  with respect to the Borrowers or any of
their  Subsidiaries,  a  material  adverse  effect  on the  properties,  assets,
business,  prospects,  operations  or condition  (financial or otherwise) of any
such Person or the ability of any such Person to perform its  obligations  under
the Loan  Documents  or  Material  Contracts  to which it is a party.

     "Material  Contract" means (a) any contract or other agreement,  written or
oral, of the Borrowers or any of their Subsidiaries involving monetary liability
of or to any such  Person in an amount in excess of $250,000  per annum,  or (b)
any other  contract or  agreement,  written or oral,  of the Borrowers or any of
their Subsidiaries the failure to comply with which could reasonably be expected
to have a Material Adverse Effect.

     "Mortgage"  means  that  certain  Mortgage  Deed,  Security  Agreement  and
Financing   Statement   Agreement  of  even  date   executed  in  favor  of  the
Administrative  Agent, for the ratable benefit of  Administrative  Agent (in its
individual  capacity  as a Lender)  and the  other  Lenders,  pursuant  to which
Vermont Pure Springs,  Inc. grants a security  interest and mortgage upon all of
its respective  real property,  subject only to permitted  liens consented to by
and  disclosed to  Administrative  Agent,  as of such mortgage may, from time to
time,  be  amended,   restated  or  modified.

     "Multiemployer  Plan" means a  "'multiemployer  plan" as defined in Section
4001(a)(3) of ERISA to which the Borrowers or any ERISA Affiliate is making,  or
is accruing an obligation to make, contributions within the preceding six years.

     "Net  Worth"  means,  at any time,  the  total net worth of the  Borrowers,
determined on a consolidated basis, without  duplications,  minus: (i) all loans
and  advances  to   shareholders   and  (ii)   guarantees  of   indebtedness  of
shareholders,  all as  determined  in  accordance  with GAAP.

     "Notes" means the  collective  reference to the Revolving  Credit Notes and
"Note" means any of such Notes.

     "Notice of Account  Designation" shall have the meaning assigned thereto in
Section 2.3(b).

     "Notice of Borrowing"  shall have the meaning,  assigned thereto in Section
2.2(a).

     "Notice of Conversion/Continuation" shall have the meaning assigned thereto
in Section 4.2.

     "Notice of Prepayment"  shall have the meaning  assigned thereto in Section
2.3(c).

     "Obligations"  means,  in each case,  whether now in existence or hereafter
arising:  (a) the  principal of and interest on  (including  interest  accruing,
after the filing of any bankruptcy or similar  petition) the Loans,  (b) the L/C
Obligations, (c) all payment and other obligations owing by the Borrowers to any
Lender or the  Administrative  Agent under any Hedging Agreement with any Lender
(which such  Hedging  Agreement is  permitted  or required  hereunder),  (d) any
payment  and  other  obligations  owing by the  Borrowers  to any  Lender or the
Administrative  Agent pursuant to the Bond  Transaction,  and (e) all other fees
and commissions  (including  attorney's  fees),  charges,  indebtedness,  loans,

                                      -10-

<PAGE>

liabilities,  financial accommodations,  obligations, covenants and duties owing
by the  Borrowers  to the Lenders or the  Administrative  Agent,  of every kind,
nature and description,  direct or indirect,  absolute or contingent,  due or to
become due, contractual or tortious, liquidated or unliquidated,  and whether or
not evidenced by any note,  in each case under or in respect of this  Agreement,
any Note,  any Letter of Credit or any of the other Loan  Documents.

     "Officer's Compliance  Certificate" shall have the meaning assigned thereto
in Section 7.2.

     "Original  Agreement"  shall  have the  meaning  given to that  term in the
Recitals.

     "Other Taxes" shall have the meaning  assigned  thereto in Section 4.11(b).

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

     "Pension Plan" means any Employee  Benefit Plan, other than a Multiemployer
Plan,  which is subject to the provisions of Title IV of ERISA or Section 412 of
the Code and which (a) is maintained for employees of the Borrowers or any ERISA
Affiliates or (b) has at any time within the preceding six years been maintained
for the  employees  of the  Borrowers  or any of their  current or former  ERISA
Affiliates.

     "Permitted  Acquisition" shall have the meaning assigned thereto in Section
10.4.

     "Permitted Assumed Liabilities" means bottle deposit  liabilities,  Capital
Leases for vehicles and equipment,  obligations for rent under operating leases,
and  Permitted  seller  Debt.

     "Permitted  Seller Notes" means notes issued to sellers in connection  with
any Permitted  Acquisition,  and issued in accordance to the conditions thereof,
which  notes  shall be  unsecured  and  subordinated  in right of payment to the
Borrowers'  Obligations  hereunder,  with all of the foregoing to be in form and
substance  satisfactory  to  each  of the  Lenders.  Despite  the  subordination
provisions,  Permitted  Seller Notes shall be deemed to constitute  Funded Debt,
not  Subordinated  Debt, for covenant  calculation  purposes.

     "Person"  means an  individual,  corporation,  limited  liability  company,
partnership,  association,  trust,  business trust,  joint venture,  joint stock
company,  pool,  syndicate,  sole proprietorship,  unincorporated  organization,
Governmental  Authority  or any other  form of entity or group  thereof.

     "Prime Rate" means,  at any time,  the rate of interest per annum  publicly
announced from time to time by First Union as its Prime rate. Each change in the
Prime Rate shall be  effective  as of the  opening of  business  on the day such
change in the Prime Rate occurs.  The parties hereto  acknowledge  that the rate
announced publicly by First Union as its Prime Rate is an index or base rate and
shall not  necessarily  be First  Union's  lowest or best  rate  charged  to its
customers or other banks.

     "Purchase Price" means the aggregate amount of cash paid, Permitted Assumed
Liabilities  assumed,  and Permitted  Seller Notes and common stock  issued,  in
connection with the Borrowers' undertaking any Permitted Acquisition.

                                      -11-
<PAGE>

     "Register"  shall have the meaning  assigned  thereto in Section  13.10(d).

     "Reimbursement  Obligation"  means  the  obligation  of  the  Borrowers  to
reimburse  the Issuing  Lender  pursuant to Section 3.5 for amounts  drawn under
Letters of Credit.

     "Required  Lenders"  means,  at any date,  any  combination  of Lenders who
collectively  hold at least  sixty-seven  percent (67%) of the aggregate  unpaid
principal  amount of the Notes and any L/C  Obligations,  or if there are no L/C
Obligations,  and if no amounts are outstanding  under the Notes,  then the term
"Required Lenders" means any combination of Lenders whose Commitment Percentages
aggregate at least sixty-seven percent (67%).

     "Responsible  Officer"  means any of the  following:  the  chief  executive
officer,  chief operating officer,  chief financial officer,  president,  or the
chairman  of the  Borrowers  or any other  officer of the  Borrowers  reasonably
acceptable to the  Administrative  Agent.

     "Revolving Credit Facility" means the revolving credit facility established
pursuant to Article II hereof,  and shall  include the  Revolving  Credit Loans.

     "Revolving Credit Loans" means, for any Lender,  any revolving loan made to
the Borrowers pursuant to Section 2.1, and all such revolving loans collectively
as the context requires.

     "Revolving  Credit Notes" means the  collective  reference to the Revolving
Credit  Notes  made by the  Borrowers  payable  to the  order  of  each  Lender,
substantially  in the form of Exhibit A hereto,  evidencing the Revolving Credit
Facility,   and  any  amendments  and  modifications  thereto,  any  substitutes
therefor, and any replacements,  restatements, renewals or extension thereof, in
whole or in part;  "Revolving  Credit Note" means any of such  Revolving  Credit
Notes.

     "Security  Agreements" means those certain security  agreements  previously
executed  in favor of First  Union,  as amended and  restated  by those  certain
amended and restated security  agreements of even date herewith by the Borrowers
and the Sureties in favor of the  Administrative  Agent, for the ratable benefit
of the Lenders,  whereby the Borrowers and the Sureties pledge to and grant (and
confirm their prior pledge and grant) to the Administrative Agent a lien against
and security interest in all tangible and intangible assets of the Borrowers and
the Sureties,  including without limitation, all now owned or hereafter acquired
inventory,   equipment,   deposit   accounts,   investment   property,   general
intangibles,  accounts receivable,  contract rights (including water and mineral
rights) and other personal property of the Borrowers and the Sureties, as any of
the  foregoing  may from time to time be  amended,  restated  or  modified.  The
Security  Agreements also includes that certain Security Agreement dated of even
date wit this  Agreement  executed and delivered in favor of the  Administrative
Agent,  for the  ratable  benefit  of the  Lenders,  whereby  Adirondack  Coffee
Service,  Inc.  grants to the  Administrative  Agent a lien against and security
interest  in  all  of its  tangible  and  intangible  assets  including  without
limitation,  all now owned or hereafter acquired inventory,  equipment,  deposit
accounts,   investment  property,  general  intangibles,   accounts  receivable,
contract  rights  (including  water and mineral  rights) and all other  personal

                                      -12-

<PAGE>

property of Adirondack Coffee Service, Inc., as the foregoing Security Agreement
may from time to time be amended,  restated or  modified.

     "Security  Documents" means the collective  reference to the Mortgage,  the
Security Agreements,  the Stock Pledge Agreements,  the Collateral  Assignments,
and each  other  agreement  or writing  pursuant  to which the  Borrowers  , the
Sureties or any Subsidiary thereof purports to pledge or grant to Administrative
Agent or any of the  Lenders  a  security  interest  in any  property  or assets
securing the  Obligations,  or any such Person  purports to guaranty the payment
and/or performance of the Obligations to the Lender.

     "Solvent"  means,  as  to  the  Borrowers  and  their  Subsidiaries,  on  a
particular  date,  any such  Person (a) has capital  sufficient  to carry on its
business and transactions and all business and transactions in which it is about
to engage and is able to pay its debts as they mature,  (b) owns property having
a value, both at fair valuation and at present fair saleable value, greater than
the amount required to pay its probable liabilities  (including  contingencies),
and (c) does not  believe  that it will incur  debts or  liabilities  beyond its
ability  to pay  such  debts  or  liabilities  as  they  mature.

     "Stock  Pledge  Agreements"  means those  certain  stock pledge  agreements
previously  executed  in favor of  First  Union,  as  amended  by those  certain
amendment  agreements of even date, by the Borrowers in favor of  Administrative
Agent,  for the  ratable  benefit  of  Administrative  Agent (in its  individual
capacity as a Lender) and the other Lenders,  together with all necessary  stock
powers, duly executed in blank, as any of the foregoing may from time to time be
amended,  restated or modified.  The Stock Pledge  Agreements also includes that
certain  Stock Pledge  Agreement  of even date,  and related  irrevocable  stock
power,  executed and  delivered by Vermont  Pure  Springs,  Inc. in favor of the
Administrative  Agent, for the ratable benefit of the Lenders,  granting a first
priority  security  interest  in and lien on all of the issued  and  outstanding
shares of stock of Adirondack  Coffee Service,  Inc.

     "Subordinated  Debt" means  indebtedness  for  borrowed  money  issued to a
Person other than a seller in a Permitted  Acquisition  which is  unsecured  and
subordinated in right of payment to the Borrowers' Obligations  hereunder,  with
all of the  foregoing to be in form and substance  satisfactory  to the Lenders.

     "Subsidiary" means as to any Person, any corporation,  partnership, limited
liability  company or other entity of which more than fifty percent (50%) of the
outstanding  capital stock or other ownership  interests  having ordinary voting
power to elect a majority of the board of  directors  or other  managers of such
corporation,  partnership,  limited  liability company or other entity is at the
time, directly or indirectly, owned by or the management is otherwise controlled
by such Person  (irrespective  of whether,  at the time,  capital stock or other
ownership  interests  of  any  other  class  or  classes  of  such  corporation,
partnership,  limited liability company or other entity shall have or might have
voting power by reason of the happening of any  contingency).  Unless  otherwise
qualified  references to  "Subsidiary" or  "Subsidiaries"  herein shall refer to
those of the Borrowers.

     "Sureties"  means,  unless the context  requires  otherwise,  collectively,
jointly  and  severally,  Excelsior  Springs  Water  Company,  Inc.,  a New York

                                      -13-

<PAGE>

business corporation,  A.M. Fridays, Inc., a New Hampshire business corporation,
and Adirondack Coffee Service, Inc., a New York corporation, together with their
permitted  successors  and  assigns,  including  any  trustee or receiver in any
bankruptcy   proceedings.

     "Surety  Agreements"  means  those  certain  surety  agreements  previously
executed  in favor of First  Union,  as amended and  restated  by those  certain
amended and restated  guaranty  agreements of even date herewith by the Sureties
in favor of the  Administrative  Agent,  for the ratable benefit of the Lenders,
whereby the  Sureties  agree to act as  unlimited  sureties  for the  repayment,
finally and in full, of all of the  Obligations,  as any of the foregoing may be
from time to time amended, restated or modified. The Surety Agreement also means
that certain  guaranty  agreement of even date  herewith  executed by Adirondack
Coffee Service,  Inc. in favor of the Administrative  Agent, the ratable benefit
of the  Lenders,  whereby  Adirondack  Coffee  Service,  Inc.  agrees  to act as
unlimited  surety  for  the  repayment,  finally  and  in  full,  of  all of the
Obligations,  as this  document  may from time to time be  amended,  restated or
modified.

     "Taxes" shall have the meaning  assigned  thereto in Section 4.11(a).

     "Termination  Date"  has the  meaning  given to that term in  Section  2.6.

     "Termination  Event" means:  (a) a "Reportable  Event" described in Section
4043 of ERISA,  or (b) the  withdrawal of the  Borrowers or any ERISA  Affiliate
from a Pension Plan during a plan year in which it was a "substantial  employer"
as defined in Section 4001 (a)(2) of ERISA,  or (c) the termination of a Pension
Plan,  the  filing  of a notice of intent  to  terminate  a Pension  Plan or the
treatment of a Pension Plan  amendment as a  termination  under  Section 4041 of
ERISA, or (d) the institution of proceedings to terminate, or the appointment of
a trustee  with  respect to, any Pension Plan by the PBGC or (e) any other event
or condition which would  constitute  grounds under Section 4042(a) of ERISA for
the termination  of, or the appointment of a trustee to administer,  any Pension
Plan,  or (f) the partial or complete  withdrawal  of the Borrowers or any ERISA
Affiliate from a Multiemployer Plan, or (g) the imposition of a Lien pursuant to
Section 412 of the Code or Section 302 of ERISA,  or (h) any event or  condition
whic results in the  reorganization or insolvency of a Multiemployer  Plan under
Sections 4241 or 4245 of ERISA,  or (i) any event or condition  which results in
the  termination  of a  Multiemployer  Plan under  Section 4041A of ERISA or the
institution  by PBGC of  proceedings  to  terminate a  Multiemployer  Plan under
Section 4042 of ERISA.

     "Uniform Customs" the Uniform Customs and Practice for Documentary  Credits
(1994 Revision),  International  Chamber of Commerce  Publication No. 500.

     "UCC" means the Uniform Commercial Code as in effect  in  the  Commonwealth
of Pennsylvania,  or, as the context  requires,  the Uniform  Commercial Code in
effect in each state where the Collateral  may at any time be located,  or where
Administrative Agent may need to take action to protect the Lenders' interest in
the  Collateral,  as any of the foregoing may be amended,  restated or otherwise
modified.

     "United States" means the United States of America.

                                      -14-
<PAGE>

     "Wholly-Owned" means, with respect to a Subsidiary,  that all of the shares
of capital stock or other ownership  interests of such Subsidiary are,  directly
or  indirectly,  owned or controlled by the Borrowers  and/or one or more of its
Wholly-Owned  Subsidiaries.

     SECTION 1.2  General.  Unless  otherwise  specified,  a  reference  in this
Agreement  to  a  particular  section,  subsection,  Schedule  or  Exhibit  is a
reference to that section,  subsection,  Schedule or Exhibit of this  Agreement.
Wherever from the context it appears appropriate, each term stated in either the
singular or plural shall include the singular and plural, and pronouns stated in
the  masculine,  feminine or neuter  gender  shall  include the  masculine,  the
feminine and the neuter. Any reference herein to "Philadelphia time" shall refer
to the applicable time of day in Philadelphia,  Pennsylvania.

     SECTION 1.3 Other Definitions and Provisions.

     (a)  Use of  Capitalized  Terms.  Unless  otherwise  defined  therein,  all
capitalized terms defined in this Agreement shall have the defined meanings when
used  in  this  Agreement,  the  Notes  and  the  other  Loan  Documents  or any
certificate,  report  or  other  document  made or  delivered  pursuant  to this
Agreement.

     (b)  Miscellaneous.  The words "hereof," "herein" and "hereunder" and words
of similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement.

     SECTION 2.1 Revolving Credit Loans.  Subject to the terms and conditions of
this Agreement,  each Lender  severally agrees to make Revolving Credit Loans to
the  Borrowers  from time to time from the Closing Date through the  Termination
Date as requested by the Borrowers in accordance  with the terms of Section 2.2;
provided,  that (a) the aggregate principal amount of all outstanding  Revolving
Credit Loans (after giving effect to any amount  requested) shall not exceed the
Aggregate  Commitment less the sum of all outstanding L/C  Obligations;  and (b)
the principal  amount of the  outstanding  Revolving  Credit Loans (after giving
effect to any amount  requested)  from any Lender to the Borrowers  shall not at
any  time  exceed  such  Lender's   Commitment  less  such  Lender's  Commitment
Percentage of  outstanding  L/C  Obligations.  Each  Revolving  Credit Loan by a
Lender  shall be in a principal  amount  equal to the amount that such  Lender's
Commitment  Percentage bears to the aggregate  principal amount of the Revolving
Credit Loan  requested by the Borrowers on such  occasion.  Subject to the terms
and conditions  hereof,  the Borrowers may borrow,  repay and reborrow Revolving
Credit Loans  hereunder until the  Termination  Date.

     SECTION 2.2 Procedure for Advances of Revolving  Credit Loans.

     (a) Requests for  Borrowing.  The Borrowers  shall give the  Administrative
Agent  irrevocable prior written notice in the form attached hereto as Exhibit B

                                      -15-

<PAGE>

(a "Notice of Borrowing") not later than 11:00 a.m.  (Philadelphia time): (i) on
the same Business Day of the proposed  advance,  if the Loan is to bear interest
at the Base Rate;  and (ii) at least three (3)  Business  Days before the day of
the  proposed  advance,  if the Loan is to bear  interest at the LIBOR Rate,  in
either case specifying (A) the date of such borrowing, which shall be a Business
Day and shall conform to the time  requirements  listed above, (B) the amount of
such  borrowing,  which (x) if the  advance is to accrue  interest  at the LIBOR
Rate,  shall be in a minimum  amount of  $250,000,  and  multiple  integrals  of
$250,000 thereof,  or (y) if the advance is to accrue interest at the Base Rate,
shall be in a minimum  amount of $250,000,  and multiple  integrals of $250,000;
and (C) in the case of a LIBOR Rate Loan,  the duration of the  Interest  Period
applicable thereto.  Notices received after 11:00 a.m. (Philadelphia time) shall
be deemed  received on the next  Business  Day. The  Administrative  Agent shall
promptly  notify the Lenders of each Notice of Borrowing.

     (b)  Disbursement  of  Revolving  Credit  Loans.  Not later  than 2:00 p.m.
(Philadelphia  time) on the  proposed  borrowing  date,  each  Lender  will make
available  to the  Administrative  Agent,  at the  office of the  Administrative
Agent,  for the account of the Borrowers,  and in funds  immediately  available,
such Lender's Commitment  Percentage of the Revolving Credit Loans to be made on
such  borrowing   date.   The  Borrowers   hereby   irrevocably   authorize  the
Administrative  Agent to  disburse  the  proceeds  of each  borrowing  requested
pursuant to this  Section 2.2 in  immediately  available  funds by  crediting or
wiring such proceeds to the deposit  account of the Borrowers  identified in the
most recent notice delivered by the Borrowers to the Administrative  Agent, each
such notice shall be substantially in the form of Exhibit C hereto (a "Notice of
Account  Designation")  or as  otherwise  agreed upon by the  Borrowers  and the
Administrative  Agent  from time to time.  Subject to Section  4.7  hereof,  the
Administrative  Agent  shall not be  obligated  to  disburse  the portion of the
proceeds of any Revolving Credit Loan requested  pursuant to this Section 2.2 to
the extent that any Lender has not made  available to the  Administrative  Agent
its  Commitment  Percentage of such Loan.

     SECTION 2.3 Repayment of Loans.

     (a) Repayment on Termination  Date. On the Termination  Date, the Borrowers
shall repay: (i) the outstanding principal amount of all Revolving Credit Loans,
(ii) all accrued but unpaid interest  thereon,  and (iii) all accrued but unpaid
costs,  fees  and  expenses  owing  by  the  Borrowers  to  the  Lenders  or the
Administrative  Agent under this  Agreement.  Additionally,  the Borrowers shall
make such payments, or provide such cash collateral, as may be required pursuant
to this Agreement with respect to the L/C Obligations.

     (b) Mandatory Repayment of Excess Loans. If at any time (i) the outstanding
principal  amount of all Loans exceeds (ii) the sum of (A) Aggregate  Commitment
minus (B) all outstanding L/C Obligations, the Borrowers shall repay immediately
upon  notice from the  Administrative  Agent,  by payment to the  Administrative
Agent for the account of the Lenders,  in immediately  available funds, or shall
furnish  Administrative  Agent with cash collateral  reasonably  satisfactory to
Administrative  Agent, the amount of such excess,  and each such repayment shall
be applied by Administrative  Agent first to the principal amount of outstanding
L/C  Obligations,  and second to the principal  amount of outstanding  Revolving
Credit Loans.  Such cash collateral  shall be applied in accordance with Section
11.2(b).  Each such repayment  shall be accompanied by any amount required to be
paid pursuant to Article IV hereof.

                                      -16-

<PAGE>

     (c) Optional  Repayments.  The  Borrowers  may at any time and from time to
time repay the Loans,  in whole or in part, upon (i) at least three (3) Business
Days' irrevocable notice to the Administrative  Agent with respect to LIBOR Rate
Loans,  and (ii) one (1)  Business Day  irrevocable  notice with respect to Base
Rate Loans (each such  notice  shall be  substantially  in the form of Exhibit D
attached hereto) (each, a "Notice of Prepayment") specifying the date and amount
of repayment and whether the  repayment is of LIBOR Rate Loans,  Base Rate Loans
or a combination thereof, and, if of a combination thereof, the amount allocable
to each. Upon receipt of such notice,  the  Administrative  Agent shall promptly
notify each Lender of the terms and conditions regarding prepayment. If any such
notice is given, the amount specified in such notice shall be due and payable on
the date set forth in such notice.  Partial  repayments shall be in an aggregate
amount of $250,000 or a whole multiple of $250,000 in excess thereo with respect
to Base Rate  Loans and  $250,000  or a whole  multiple  of  $250,000  in excess
thereof  with  respect  to  LIBOR  Rate  Loans.  Each  such  repayment  shall be
accompanied by any amount required to be paid pursuant to Article IV hereof.

     (d)  Limitation  on Repayment of LIBOR Rate Loans.  The  Borrowers  may not
repay any LIBOR Rate Loan on any day other than on the last day of the  Interest
Period  applicable  thereto  unless such  repayment is accompanied by any amount
required to be paid pursuant to Article IV hereof.

     SECTION 2.4 Notes.

     Revolving  Credit  Notes.  Each  Lender's  Revolving  Credit  Loans and the
obligation  of the  Borrowers  to repay such  Revolving  Credit  Loans  shall be
evidenced by a separate  Revolving Credit Note executed by the Borrowers payable
to the order of such Lender  representing the Borrowers'  obligation to pay such
Lender's  Commitment plus interest and all other fees, charges and other amounts
due thereon. Each Revolving Credit Note shall be dated the date hereof and shall
bear interest on the unpaid principal amount thereof at the applicable  interest
rate per annum specified in Section 4.1.

     SECTION 2.5 Permanent Reduction of the Aggregate Commitment.

     (a) Voluntary Reduction. The Borrowers shall have the right at any time and
from time to time, upon at least five (5) Business Days' prior written notice to
the  Administrative  Agent,  to permanently  reduce,  without premium or penalty
(except for those costs and fees enumerated in Article IV hereof with respect to
LIBOR Rate  Loans),  (i) the  entire  Aggregate  Commitment  at any time or (ii)
portions  of the  Aggregate  Commitment,  from  time to  time,  in an  aggregate
principal  amount not less than  $500,000  or any whole  multiple of $500,000 in
excess thereof.

     (b) Conditions. Each permanent reduction permitted pursuant to this Section
2.6 shall be  accompanied  by a payment of  principal  sufficient  to reduce the
aggregate  outstanding  Extensions of Credit of the Lenders after such reduction
to the Aggregate Commitment as so reduced, and if the Aggregate Commitment as so
reduced is less than the aggregate  amount of all outstanding  L/C  Obligations,
the Borrowers shall be required to deposit in a cash  collateral  account opened
by the  Administrative  Agent an amount equal to the aggregate  then undrawn and
unexpired amount of such Letters of Credit, together with an amount equal to all

                                      -17-

<PAGE>

outstanding  draws under all Letters of Credit,  which have not been  reimbursed
pursuant to Section 3.5 herein.  Any  reduction of the  Aggregate  Commitment to
zero  shall be  accompanied  by  payment  of all  outstanding  Obligations  (and
furnishing of cash collateral  satisfactory to the Administrative  Agent for all
L/C Obligations, together with an amount equal to all outstanding draws under al
Letters  of Credit,  which  have not been  reimbursed  pursuant  to Section  3.5
herein)  and shall  result in the  termination  of the  Commitments  and  Credit
Facility.  Such cash  collateral  shall be applied in  accordance  with  Section
11.2(b). If the reduction of the Aggregate  Commitment requires the repayment of
any LIBOR Rate Loan,  such repayment shall be accompanied by any amount required
to be paid  pursuant  to Article IV hereof.

     SECTION 2.6  Termination  of Credit  Facility.  The Credit  Facility  shall
terminate on the earliest of (a) January 31, 2005;  (b) the date of  termination
by the Borrowers  pursuant to Section 2.6(a);  (c) the occurrence of an event in
Section  11.1(j) or (k); or (d) the date of  termination  by the  Administrative
Agent on behalf of the Lenders  pursuant to Section  11.2(a)  (the  "Termination
Date").

     SECTION 2.7 Use of Proceeds. The Borrowers shall use the proceeds hereunder
solely to finance Permitted Acquisitions,  (b) for Letter of Credit issuance (up
to the  L/C  Commitment),  (c) for  Capital  Expenditures,  and (d) for  working
capital  and  general   corporate   requirements  of  the  Borrowers  and  their
Subsidiaries,  including  the payment of certain fees and  expenses  incurred in
connection with the transactions described herein.

     SECTION 3.1 L/C Commitment. Subject to the terms and conditions hereof, the
Issuing Lender,  in reliance on the agreements of the other Lenders set forth in
Section 3.4(a),  agrees to issue standby letters of credit ("Letters of Credit")
for the account of the  Borrowers  on any  Business  Day from the  Closing  Date
through but not including the  Termination  Date in such form as may be approved
from time to time by the Issuing Lender; provided, that the Issuing Lender shall
have no obligation to issue any Letter of Credit if, after giving effect to such
issuance:  (a) the L/C Obligations  would exceed the L/C Commitment,  or (b) the
L/C Obligations, together with the outstanding principal amount of all Revolving
Credit Loans, would exceed the Aggregate  Commitment (as the same may, from time
to time,  be reduced  pursuant  to Section  2.6  herein);  or (c) the  Available
Commitment  of any Lender  would be less than zero.  Each Letter of Credit shall
(i) be denominated in Dollars in a minimum amount of $75,000, (ii) be standby or
direct pay letter of credit  issued to support  obligations  of the Borrowers or
any of their  Subsidiaries,  contingent or  otherwise,  incurred in the ordinary
course of business,  including,  without limitation, any letter of credit issued
in connection with the Bond Transaction,  (iii) expire on a date satisfactory to
the Issuing Lender, which date shall be no later than one (1) year from the date
of issuance as to any standby letter of credit, or, if earlier,  the Termination
Date (unless otherwise agreed by the Administrative  Agent), and (iv) be subject
to the Uniform Customs and, to the extent not inconsistent  therewith,  the laws
of the Commonwealth of Pennsylvania. The Issuing Lender shall not at any time be

                                      -18-

<PAGE>

obligated  to issue any  Letter  of  Credit  hereunder  if such  issuance  would
conflict with, or cause the Issuing Lender or any L/C  Participant to exceed any
limits  imposed  by  any  Applicable  Law.  References  herein  to  "issue"  and
derivations  thereof  with  respect  to Letters  of Credit  shall  also  include
extensions  or  modifications  of any  existing  Letters of  Credit,  unless the
context  otherwise  requires.

     SECTION 3.2 Procedure for Issuance of Letters of Credit.  The Borrowers may
from time to time  request  that the Issuing  Lender issue a Letter of Credit by
delivering  to the  Issuing  Lender  at the  Administrative  Agent's  Office  an
Application  therefor,  completed  to the  satisfaction  of the Issuing  Lender,
together  with  such  other   certificates,   documents  and  other  papers  and
information as the Issuing Lender may request.  Upon receipt of any Application,
the  Issuing  Lender  shall  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,  subject to
Section 3.1 and the terms and  conditions  herein,  promptly issue the Letter of
Credit  requested  thereby (but in no event shall the Issuing Lender be required
to issue any Letter of Credit  earlier  than three (3)  Business  Days after its
receipt of the Application  therefor 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
upon by the Issuing Lender and the Borrowers.  The Issuing Lender shall promptly
furnish to the  Borrowers  a copy of such Letter of Credit and  promptly  notify
each Lender of the  issuance,  and upon  request by any Lender,  furnish to such
Lender a copy of such Letter of Credit together with  notification of the amount
of such Lender's L/C  Participation  therein.

     SECTION 3.3 Commissions  and Other Charges.

     (a) The Borrowers shall pay to the Administrative Agent, for the account of
the Issuing Lender and the L/C Participants,  a letter of credit commission with
respect  to each  Letter of Credit  issued,  in an  amount  equal to  applicable
percentage  set forth in the definition of Applicable  Margin  multiplied by the
face amount of any Letter of Credit issued; provided,  however, that the fee for
any Letter of Credit issued in connection with Bond Transaction shall be one and
seven  eighths  percent  (1.875%)  per  annum . The  determination  of which fee
multiple to be used at any time shall be determined in accordance with the chart
and relevant  provisions of Section 4.1 herein. Such commission shall be payable
on the date the  respective  Letter of Credit is issued.

     (b) In addition to the foregoing  commission,  the Borrowers  shall pay the
Administrative  Agent an issuance fee equal to one-eighth of one percent (.125%)
of the face  amount of each  Letter of Credit,  plus other  applicable  standard
issuance costs and expenses, payable on the date the respective Letter of Credit
is issued.  These fees shall inure solely to the benefit of the Issuing  Lender.

     (c) The Administrative Agent shall, promptly following its receipt thereof,
and except as  provided  in Section  3.3(b)  hereof,  distribute  to the Issuing
Lender  and the L/C  Participants  all  commissions  and  fees  received  by the
Administrative Agent in accordance with their respective Commitment Percentages.

     SECTION 3.4 L/C  Participations.

                                      -19-
<PAGE>

     (a) The Issuing  Lender  irrevocably  agrees to grant and hereby  grants to
each L/C  Participant,  and,  to induce the Issuing  Lender to issue  Letters of
Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase
and hereby  accepts  and  purchases  from the Issuing  Lender,  on the terms and
conditions  hereinafter stated, for such L/C Participant's own account and risk,
an  undivided  interest in the rights and  obligations  in each Letter of Credit
issued  hereunder  and the  amount  of each  draft  paid by the  Issuing  Lender
thereunder,  equal to such L/C  Participant's  Commitment  Percentage.  Each L/C
Participant unconditionally and irrevocably agrees with the Issuing Lender that,
if a draft is paid under any Letter of Credit  for which the  Issuing  Lender is
not  reimbursed in full by the  Borrowers in  accordance  with the terms of this
Agreement,  such L/C Participant  shall pay to the Issuing  Lender,  upon demand
from  the  Issuing  Lender  and at the  Issuing  Lender's  address  for  notices
specified  herein,  an  amount  equal  to  such  L/C  Participant's   Commitment
Percentage  of the amount of such  draft  which is not so  reimbursed.

     (b)  Upon  becoming  aware  of any  amount  required  to be paid by any L/C
Participant to the Issuing  Lender  pursuant to Section 3.4(a) in respect of any
unreimbursed  portion of any payment made by the Issuing Lender under any Letter
of Credit,  the Issuing  Lender shall notify each L/C  Participant of the amount
and due date of such required payment and such L/C Participant  shall pay to the
Issuing Lender the amount specified on or before the applicable due date. If any
such amount is paid to the Issuing  Lender  after the date such  payment is due,
such L/C Participant  shall pay to the Issuing Lender on demand,  in addition to
such unpaid amount, the product of (i) such unpaid amount,  times (ii) the daily
average Federal Funds Rate as determined by the Administrative  Agent during the
period from and  including  the date such payment is due until the date on which
such payment is  immediately  available to the Issuing  Lender,  times (iii) the
product of the number of days that elapse  during such period  divided by 360. A
certificate  of the Issuing  Lender with respect to any amounts owing under this
Section  3.4(b)  shall be  conclusive  in the  absence of manifest  error.  With
respect to payment to the Issuing Lender of the unreimbursed  amounts  described
in this Section  3.4(b),  if the L/C  Participants  receive notice that any such
payment is due (A) prior to 1:00 p.m.  (Philadelphia  time) on any Business Day,
such  payment  shall  be  due  that  Business  Day,  and  (B)  after  1:00  p.m.
(Philadelphia  time)  on any  Business  Day,  such  payment  shall be due on the
following  Business Day.

     (c) Whenever,  at any time after the Issuing  Lender has made payment under
any  Letter  of  Credit  and has  received  from  any L/C  Participant  such L/C
Participant's  Commitment  Percentage  of such payment in  accordance  with this
Section 3.4 and the Issuing Lender  thereafter  receives any payment  related to
such Letter of Credit (whether directly from the Borrowers or otherwise,  or any
payment of interest on account  thereof,  the Issuing Lender will  distribute to
such L/C Participant its pro rata share of such payment received (based upon the
ratio  that such L/C  Participant's  Commitment  Percentage  bears to the amount
received by Issuing Lender);  provided,  that in the event that any such payment
received by the Issuing  Lender  shall be required to be returned by the Issuing
Lender,  such L/C  Participant  shall  return to the  Issuing  Lender the amount
thereof  previously  received.

     SECTION 3.5 Reimbursement  Obligation of the Borrowers. In the event of any
drawing  under any Letter of Credit,  the Borrowers  agree to reimburse  (either
with the proceeds of a Revolving Credit Loan as provided for in this Section 3.5

                                      -20-

<PAGE>

or with funds from other sources), in same day funds, the Issuing Lender on each
date on which the Issuing  Lender  notifies the Borrowers of the date and amount
of a draft  paid  under any Letter of Credit for the amount of (a) such draft so
paid and (b) any amounts  referred to in Section 3.3(c)  incurred by the Issuing
Lender in connection with such payment.  Unless the Borrowers shall  immediately
notify the Issuing  Lender that the  Borrowers  intend to reimburse  the Issuing
Lender for such  drawing from other  sources or funds,  the  Borrowers  shall be
deemed to have timely given a Notice of Borrowing  to the  Administrative  Agent
requesting that the Lenders make a Revolving Credit Loan bearing interest at the
Base  Rate on such  date in the  amount  of (a)  such  draft  so paid and (b) an
amounts  referred  to in  Section  3.3(c)  incurred  by the  Issuing  Lender  in
connection with such payment, and the Lenders shall make a Revolving Credit Loan
bearing interest at the Base Rate in such amount, the proceeds of which shall be
applied to reimburse  the Issuing  Lender for the amount of the related  drawing
and costs and expenses.  Each Lender acknowledges and agrees that its obligation
to fund a Revolving Credit Loan in accordance with this Section 3.5 to reimburse
the Issuing  Lender for any draft paid under a Letter of Credit is absolute  and
unconditional  and  shall  not  be  affected  by  any  circumstance  whatsoever,
including,  without limitation,  non-satisfaction of the conditions set forth in
Section 2.3(a) or Article VI. If the Borrowers have elected to pay the amount of
such  drawing  with funds from other  sources  and shall fail to  reimburse  the
Issuing Lender as provided above, the unreimbursed  amount of such drawing shall
bear  interest at the rate which would be payable on any  outstanding  Base Rate
Loans which were then overdue from the date such amounts become payable (whether
at stated maturity, by acceleration or otherwise) until payment is full.

     SECTION 3.6 Obligations  Absolute.  The Borrowers'  obligations  under this
Article III (including without limitation the Reimbursement Obligation) shall be
absolute and  unconditional  under any and all circumstances and irrespective of
any set-off,  counterclaim or defense to payment which the Borrowers may have or
have had against the Issuing  Lender or any  beneficiary  of a Letter of Credit.
The Borrowers  also agree with the Issuing  Lender that the Issuing Lender shall
not be  responsible  for,  and the  Borrowers'  Reimbursement  Obligation  under
Section  3.5 shall not be  affected  by,  among other  things,  the  validity or
genuineness  of  documents  or of any  endorsements  thereon,  even  though such
documents  shall in fact  prove to be  invalid,  fraudulent  or  forged,  or any
dispute  between or among the  Borrowers  and any  beneficiary  of any Letter of
Credit or any other party to which such Letter of Credit may be  transferred  or
any claims  whatsoever of Borrowers  against any  beneficiary  of such Letter of
Credit or any suc  transferee.  The Issuing  Lender  shall not be liable for any
error, omission, interruption or delay in transmission,  dispatch or delivery of
any message or advice,  however  transmitted,  in connection  with any Letter of
Credit,  except for errors or  omissions  caused by the Issuing  Lender' s gross
negligence or willful  misconduct.  The Borrowers agree that any action taken or
omitted by the Issuing  Lender under or in connection  with any Letter of Credit
or the related drafts or documents,  if done in the absence of gross  negligence
or willful  misconduct and in accordance with the standards of care specified in
the Uniform Customs and, to the extent not inconsistent therewith, the UCC shall
be binding on the Borrowers and shall not result in any liability of the Issuing
Lender  to the  Borrowers.  The  responsibility  of the  Issuing  Lender  to the
Borrowers in connection with any draft presented for payment under any Letter of
Credit shall, in addition to any payment  obligation  expressly  provided for in
such Letter of Credit,  be limited to determining that the documents  (including
each  draft)  delivered  under  such  Letter of Credit in  connection  with such
presentment are in conformity with such Letter of Credit.

                                      -21-
<PAGE>

     SECTION 3.7 Effect of Application.  To the extent that any provision of any
Application  related to any Letter of Credit is inconsistent with the provisions
of this Article III, the provisions of this Article III shall apply.

SECTION 4.1       Interest.
     (a) Interest  Rate Options.  Subject to the  provisions of this Section 4.1
and Section 3.5 and provided no Event of Default has occurred and is continuing,
at the election of the  Borrowers,  the aggregate  principal  balance of (i) the
Revolving  Credit Notes or any portion  thereof  shall bear  interest at (A) the
Base  Rate;  or (B) LIBOR  plus the  Applicable  Margin as set forth in  Section
4.1(c);  provided  that the LIBOR Rate shall not be  available  until  three (3)
Business  Days after the Closing Date.  The  Borrowers  shall select the rate of
interest  (either  the Base Rate or the  LIBOR  Rate) and  Interest  Period,  if
applicable, for each Loan at the time a Notice of Borrowing is given pursuant to
Section 2.3 or at the time a Notice of Conversion/Continuation is given pursuant
to Section 4.2. Each Loan or portion thereof bearing  interest based on the Base
Rate shall be a "Base  Rate  Loan,"  and each Loan or  portion  thereof  bearing
interest  based on the LIBOR Rate shall be a "LIBOR  Rate Loan." Any Loan or any
portion  thereof as to which the Borrowers  have not duly  specified an interest
rate as  provided  herein  shall  be  deemed  a Base  Rate  Loan.

     (b) Interest  Periods/LIBOR Loans. In connection with each LIBOR Rate Loan,
the Borrowers,  by giving notice at the times described in Section 4.1(a), shall
elect an interest period (each,  an "Interest  Period") to be applicable to such
Loan,  which Interest Period shall be a period of one (1), two (2), three (3) or
six (6) months  with  respect to each LIBOR Rate Loan;  provided  that

               (i) the Interest Period shall commence on the date of the advance
of or  conversion  to any  LIBOR  Rate  Loan  and,  in the  case of  immediately
successive  Interest Periods,  each successive Interest Period shall commence on
the date on which  the  next  preceding  Interest  Period  expires;

               (ii) if any Interest Period would otherwise  expire on a day that
is not a Business Day, such Interest  Period shall expire on the next succeeding
Business Day;  provided,  however,  that if the  application  of this rule would
cause the Interest Period to extend into the next succeeding calendar month, the
Interest  Period  affected  by this  rule  shall  expire  on the next  preceding
Business Day;

               (iii) any Interest  Period with respect to a LIBOR Rate Loan that
begins on the last Business Day of a calendar month (or on a day for which there
is no  numerically  corresponding  day in the calendar  month at the end of such
Interest  Period)  shall end on the last  Business Day of the relevant  calendar
month at the end of such Interest  Period;

                                      -22-
<PAGE>

               (iv) no Interest Period shall extend beyond the Termination Date;
and

               (v)  there  shall  be no more  than  four  (4)  Interest  Periods
outstanding at any time.

     (c) Applicable Margin. The Applicable Margin provided for in Section 4.1(a)
with  respect  to the  Loans  (the  "Applicable  Margin")  shall  be  determined
according to the below referenced formula, which formula is based upon the ratio
of Funded Debt to Cash Flow, calculated (i) on the Closing Date, by reference to
the  most  recent  Financial  Statements  presented  by  the  Borrowers  to  the
Administrative  Agent; and (ii) for each consecutive fiscal quarter  thereafter,
by  reference  to  quarterly  Financial   Statements  and  Officer's  Compliance
Certificate  delivered by the Borrowers to the Administrative  Agent pursuant to
Sections  7.1(a) and 7.1(c)  herein.  The formula shall be as follows:

Ratio of Funded     Applicable Margin                              Unused
Debt to Cash Flow   for LIBOR Loans     Letter of Credit Fee   Commitment Fee

< 2.0 x             150 basis points     150 basis points      12.5 basis points
                    per annum                                  per annum
> 2.0 x < 3.0 x     200 basis points     200 basis points      25.0 basis points
                    per annum                                  per annum

                    per annum                                  per annum

Administrative  Agent on the first (1st)  Business  Day of the first (1st) month
following  receipt  by  the  Administrative  Agent  of the  quarterly  financial
statements  for the  Borrowers  and  their  Subsidiaries  and  the  accompanying
Officer's Compliance  Certificate setting forth the ratio of Funded Debt to Cash
Flow of the  Borrowers  and  their  Subsidiaries  as of the most  recent  fiscal
quarter  end.  Subject to Section  4.1(d),  in the event the  Borrowers  fail to
deliver such financial  statements and  certificate  within the time required by
Section 7.2(c) hereof, the Applicable  Margin,  Letter of Credit Fee, and Unused
Commitment Fee shall be the highest margin set forth above until the delivery of
such financial statements and certificate.

     (d)  Default  Rate.  Subject  to Section  11.2,  at the  discretion  of the
Administrative  Agent and Required  Lenders,  upon the occurrence and during the
continuance of an Event of Default (provided, however, upon the occurrence of an
Event of  Default  in  Sections  11.1(j)  or  11.1(k)  herein,  all  Obligations
hereunder shall  immediately  convert to and bear interest at the Default Rate),
all  outstanding  Loans  shall bear  interest  at a rate per annum  equal to the
Default Rate, and Borrowers shall be responsible for all "breakage"  costs, fees
and  expenses  as provided  for in Article IV herein with  respect to LIBOR Rate
Loans automatically converted pursuant to this Section.  Interest shall continue

                                      -23-

<PAGE>

to accrue on the Notes and the  outstanding  but  unreimbursed  draws  under the
Letters of Credit, after the filing, by or against the Borrowers of any petition
seeking  any  relief  in  bankruptcy  or  under  any  act or law  pertaining  to
insolvency or debtor  relief,  whether state,  federal or foreign.

     (e) Interest Payment and Computation. Interest on each Base Rate Loan shall
be payable in arrears on the first day of each calendar month.  Interest on each
LIBOR  Rate  Loan  shall be  payable  on the last  day of each  Interest  Period
applicable  thereto,  and if such Interest Period extends over three (3) months,
at the end of each three (3) month  interval  during such Interest  Period.  All
interest rates, fees and commissions provided hereunder shall be computed on the
basis of a 360-day year and assessed for the actual number of days elapsed.

     (f) Maximum Rate. In no contingency or event whatsoever shall the aggregate
of  all  amounts  deemed  interest  hereunder  or  under  any of  the  Notes  or
Obligations  charged or  collected  by the  Administrative  Agent or the Lenders
pursuant  to the  terms of this  Agreement  or  pursuant  to any of the Notes or
Letters of Credit exceed the highest rate  permissible  under any Applicable Law
which a court of competent  jurisdiction shall, in a final  determination,  deem
applicable  hereto.  In the event that such a court  determines that the Lenders
have charged or received interest  hereunder in excess of the highest applicable
rate, the rate in effect hereunder shall automatically be reduced to the maximum
rate  permitted by Applicable  Law and the Lenders  shall at the  Administrative
Agent's  option (i) promptly  refund to the Borrowers  any interest  received by
Lenders in excess of the maximum  lawful rate or (ii) shall apply such excess to
the  principal  balance of the  Obligations.  It is the intent  hereof  that the
Borrowers no pay or contract to pay, and that neither the  Administrative  Agent
nor any Lender  receive or contract to receive,  directly or  indirectly  in any
manner whatsoever, interest in excess of that which may be paid by the Borrowers
under   Applicable  Law.

     SECTION  4.2 Notice  and Manner of  Conversion  or  Continuation  of Loans.
Provided  that no Event of Default  has  occurred  and is then  continuing,  the
Borrowers shall have the option to: (a) convert at any time, following the third
Business Day after the Closing Date, all or any portion of its outstanding  Base
Rate Loans in a principal  amount  equal to  $250,000  or any whole  multiple of
$250,000  in excess  thereof  into one or more LIBOR Rate Loans and (b) upon the
expiration  of  any  Interest  Period,  (i)  convert  all  or  any  part  of its
outstanding  LIBOR Rate Loans in a principal amount equal to $250,000 or a whole
multiple  of $250,000 in excess  thereof  into Base Rate Loans or (ii)  continue
such LIBOR Rate Loans as LIBOR Rate  Loans.  Whenever  the  Borrowers  desire to
convert or  continue  Loans as  provided  above,  the  Borrowers  shall give the
Administrative  Agent  irrevocable  prior written notice in the form attached as
Exhibit E (a  "Notice  of  Conversion/Continuation")  not later  than 11:00 a.m.
(Philadelphia  time) three (3) Business  Days before the day on which a proposed
conversion  or  continuation  of such Loan is to be  effective.  Each  Notice of
Continuation/Conversation  shall  specify:  (A)  whether  the  Loans  are  to be
continued at or converted to the LIBOR Rate or the Base Rate, and in the case of
any LIBOR Rate Loan to be converted or  continued,  the last day of the Interest
Period  therefor,  (B) the effective  date of such  conversion  or  continuation
(which shall be a Business  Day),  (C) the principal  amount of such Loans to be
converted or continued  (provided the same is in the aggregate  amounts required
hereunder),  and (D) the Interest  Period to be applicable to such  converted or
continued  LIBOR  Rate  Loan.  Failure to  otherwise  comply  with the terms and
conditions of this section shall result in the conclusive  presumption  that the

                                      -24-

<PAGE>

Borrowers  have  selected the Base Rate at the end of any Interest  Period.  The
Administrative  Agent  shall  promptly  notify  the  Lenders  of such  Notice of
Conversion/Continuation.

SECTION 4.3 Fees.

     (a) Unused  Commitment  Fee.  Commencing on the Closing Date, the Borrowers
shall  pay to the  Administrative  Agent,  for the  account  of the  Lenders,  a
non-refundable  commitment fee at a rate per annum equal to the rate established
in Section 4.1(c) herein, based upon the ratio of Borrowers' Funded Debt to Cash
Flow,  which fee shall be calculated based upon the average daily unused portion
of the Aggregate  Commitment.  The commitment fee shall be payable in arrears on
the  last  Business  Day of each  quarter  during  the  term of this  Agreement,
commencing  March 31,  2000,  and again on the  Termination  Date.  Such  unused
commitment fee shall be distributed by the  Administrative  Agent to the Lenders
pro rata in accordance with each Lenders' respective Commitment Percentages.

     (b)  Administrative  Agent's and Other  Fees.  In order to  compensate  the
Administrative  Agent for syndicating and  administrating  the Loans and for its
obligations  hereunder,  the Borrowers agree to pay to the Administrative Agent,
for  Administrative  Agent's  account,  an annual  fee in the  amount of Fifteen
Thousand and no/100 Dollars  ($15,000),  payable on the date hereof,  and on the
first day of each  consecutive  December  thereafter  for the  duration  of this
Agreement.

     (c) Letter of Credit Fee.  Upon the  issuance of any Letter of Credit,  and
again upon the renewal of any Letter of Credit,  the Borrowers  shall pay to the
Administrative  Agent,  those  Letter of Credit  Fees  described  in Section 3.3
herein.

     (d) Closing Fee. In order to compensate  the Lenders for their  willingness
to  extend  credit  to the  Borrowers  hereunder,  and in  consideration  of the
Lenders' standing ready to extend credit hereunder,  the Borrowers shall pay the
Administrative  Agent,  for the account of the Lenders  based upon the  Lenders'
Commitment  Percentage,  a closing fee equal to Sixty-Two  Thousand Five Hundred
and no/100  Dollars  ($62,500).  The fee shall be paid on the Closing Date,  and
shall be deemed  unconditionally  earned upon the  execution of this  Agreement,
regardless of whether or not any credit is subsequently  extended, or Letters of
Credit  issued,  by the Lenders by and on behalf of the  Borrowers.

     SECTION 4.4 Manner of Payment.  Each payment by the Borrowers on account of
the  principal  of or interest on the Loans or of any fee,  commission  or other
amounts  (including the Reimbursement  Obligation)  payable to the Lenders under
this Agreement or any Note shall be made not later than 1:00 p.m.  (Philadelphia
time)  on  the  date   specified  for  payment  under  this   Agreement  to  the
Administrative Agent at the Administrative Agent's Office for the account of the
Lenders  (other  than as set forth  below)  pro rata in  accordance  with  their
respective  Commitment  Percentages  (except as specified below), in Dollars, in
immediately available funds and shall be made without any set-off,  counterclaim
or deduction  whatsoever.  Any payment  received after such time but before 2:00
p.m.  (Philadelphia time) on such day shall be deemed a payment on such date for
the purposes of Section 11.1, but for all other purposes shall be deemed to have
been made on the next succeeding  Business Day. Any payment  received after 2:00
p.m.  (Philadelphia  time)  shall  be  deemed  to have  been  made  on the  next

                                      -25-

<PAGE>

succeeding  Business Day for all  purposes.  Upon receipt by the  Administrative
Agent of each such payment,  the  Administrative  Agent shall distribute to each
Lender at its address  for  notices set forth  herein its pro rata share of such
payment  in  accordance  with such  Lender's  Commitment  Percentage  (except as
specified  below)  and shall wire  advice of the  amount of such  credit to each
Lender. Each payment by the Borrowers to the Administrative Agent of the Issuing
Lender's fees or L/C Participants' commissions shall be made in like manner, but
for the account of the Issuing Lender or the L/C  Participants,  as the case may
be. Each payment to the Administrative  Agent of Administrative  Agent's fees or
expenses  shall be made for the  account of the  Administrative  Agent,  and any
amount payable to any Lender under  Sections 4.8, 4.9, 4.10,  4.11 or l3.2 shall
be paid to the  Administrative  Agent for the account of the applicable  Lender.
Subject to Section  4.1(b)(ii) if any payment  under this  Agreement or any Note
shall be specified  to be made upon a day which is not a Business  Day, it shall
be made on the next succeeding day which is a Business Day and such extension of
time shall in such case be included in computing  any interest if payable  along
with such payment.

     SECTION 4.5  Crediting  of  Payments  and  Proceeds.  In the event that the
Borrowers shall fail to pay any of the Obligations  when due and the Obligations
have been  accelerated  pursuant to Section 11.2,  all payments  received by the
Lenders upon the Notes and the other Obligations,  and all net proceeds from the
enforcement of the Obligations shall be applied by Administrative Agent first to
all  expenses  then due and  payable  by the  Borrowers  hereunder,  then to all
indemnity  obligations then due and payable by the Borrowers hereunder,  then to
all  Administrative  Agent's  and  Issuing  Lender's  fees then due and  payable
hereunder,  then  to all  other  fees  and  commissions  then  due  and  payable
hereunder,  then to accrued and unpaid  interest on the Notes and  Reimbursement
Obligations,  then to any  termination  payments  due in  respect  of a  Hedging
Agreement with any Lender (which such Hedging Agreement is permitted or required
hereunder)  (pro rata in  accordance  with all such  amounts  due),  then to the
principal amount of the Notes and Reimbursement Obligation outstanding (pro rata
in accordance with all such amounts due) and then to the cash collateral account
described in Section  11.2(b) hereof to the extent of any L/C  Obligations  then
outstanding.

     SECTION 4.6 Adjustments.  If, subsequent to an Event of Default, any Lender
(a  "Benefitted  Lender")  shall at any time:  (a) receive any payment of all or
part of the Obligations  owing to it, or interest  thereon  (outside of payments
tendered  by the  Administrative  Agent  to such  Lender);  or (b)  receive  any
collateral in respect of the  Obligations  owing to it (whether  voluntarily  or
involuntarily,  by set-off or otherwise) in a greater  proportion  than any such
payment to and  collateral  received by any other Lender  (except for  permitted
discrepancies based upon the Lender's Commitment Percentage), if any, in respect
of the  Obligations  owing to such  other  Lender,  or  interest  thereon;  such
Benefited  Lender shall purchase for cash from the other Lenders such portion of
each such other  Lender's  Extensions  of Credit,  or shall  provide  such other
Lenders with the benefits of any such collateral,  or the proceeds  thereof,  as
shall be necessary to cause such Benefited Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the Lenders, except
for  permitted  discrepancies  based upon each Lender's  Commitment  Percentage;
provided,  that if all or any  portion of such  excess  payment or  benefits  is
thereafter  recovered  from  such  Benefited  Lender,  such  purchase  shall  be
rescinded,  and the purchase  price and benefits  shall be returned by the other
Lenders to such  Benefited  Lender to the extent of such  recovery,  but without
interest.  The  Borrowers  agree  that each  Lender so  purchasing  a portion of
another  Lender's  Extensions  of Credit  may  exercise  all  rights of  payment

                                      -26-

<PAGE>

(including,  without limitation, rights of set-off) with respect to such portion
as fully as if such Lender were the direct  holder of such  portion.  All of the
foregoing  is expressly  subject to the terms and  conditions  herein  regarding
limitations  on  remedies,  and  enforcement  thereof by the  Lenders,  Required
Lenders and  Administrative  Agent.  If any Lender shall at any time prior to an
Event of Default receive any payment of money or collateral,  from a party other
than the Administrative  Agent, such Lender shall promptly notify Administrative
Agent of such receipt,  and forthwith  deliver such  collateral or monies to the
Administrative Agent for the account of the Lenders.

     SECTION  4.7 Nature of  Obligations  of  Lenders  Regarding  Extensions  of
Credit;  Assumption by the Administrative  Agent. The obligations of the Lenders
under this  Agreement to make the Loans and issue or  participate  in Letters of
Credit  are  several  and are  not  joint  or  joint  and  several.  Unless  the
Administrative  Agent  shall  have  received  notice  from a  Lender  prior to a
proposed  borrowing  date  that  such  Lender  will  not make  available  to the
Administrative  Agent such Lender's ratable portion of the amount to be borrowed
on such date  (which  notice  shall not release  such Lender of its  obligations
hereunder),  the  Administrative  Agent may assume that such Lender has made and
will make such  portion  available to the  Administrative  Agent on the proposed
borrowing date in accordance with Section 2.3(b), and the  Administrative  Agent
may, in reliance upon such  assumption,  make available to the Borrowers on such
date a corresponding  amount.  If any Lender shall make such amount available to
Administrative Agent, on a date after such borrowing date, such Lender shall pay
to the  Administrative  Agent on  demand an  amount,  until  paid,  equal to the
product of (a) the amount not made  available  by such Lender to  Administrative
Agent in accordance  with the terms hereof,  times (b) the daily average Federal
Funds Rate during such period as determined by the  Administrative  Agent, times
(c) the product of (i) the number of days that elapsed from and  including  such
borrowing  date to the date on which  such  amount  not made  available  by such
Lender in  accordance  with the  terms  hereof  shall  have  become  immediately
available to the Administrative Agent, divided by (ii) 360. A certificate of the
Administrative  Agent with respect to any amounts owing under this Section shall
be  conclusive,  absent  manifest  error.  The  above  notwithstanding,  if such
Lender's  Commitment  Percentage of such  borrowing is not made available to the
Administrative  Agent by such  Lender  within  three (3)  Business  Days of such
borrowing  date,  the  Administrative  Agent shall be  entitled to recover  such
amount made available by the Administrative  Agent from the Borrowers on demand,
together  with  interest  thereon at the rate per annum  applicable to Base Rate
Loans  hereunder.  The failure of any Lender to make  available  its  Commitment
Percentage of any Loan requested by the Borrowers  shall not relieve such Lender
or any other  Lender of their  respective  obligations  hereunder  to make their
Commitment  Percentages of such Loan available on the borrowing  date. No Lender
shall be responsible  for the failure of any other Lender to make its Commitment
Percentage of such Loan available on the borrowing date.

     SECTION 4.8 Changed Circumstances.

     (a) Circumstances  Affecting LIBOR Rate  Availability.  If, with respect to
any Interest Period, the Administrative  Agent or any Lender (after consultation
with  Administrative  Agent) shall  determine  that, by reason of  circumstances
affecting the foreign  exchange and  interbank  markets  generally,  deposits in
eurodollars,  in the  applicable  amounts are not being quoted via Telerate Page
3750 or offered to the  Administrative  Agent or such  Lender for such  Interest

                                      -27-

<PAGE>

Period, then the Administrative Agent shall forthwith give notice thereof to the
Borrowers.  Thereafter,  until the  Administrative  Agent notifies the Borrowers
that such  circumstances  no longer exist, the obligation of the Lenders to make
LIBOR  Rate  Loans  and the right of the  Borrowers  to  convert  any Loan to or
continue  any Loan as a LIBOR Rate Loan shall be  suspended,  and the  Borrowers
shall:  (i) repay in full (or  cause to be repaid in full) the then  outstanding
principal  amount of each such LIBOR Rate Loans  together with accrued  interest
thereon,  o the last day of the then current Interest Period  applicable to such
LIBOR Rate Loan, or (ii) convert the then  outstanding  principal amount of each
such  LIBOR  Rate Loan to a Base  Rate Loan as of the last day of such  Interest
Period.

     (b) Laws  Affecting  LIBOR Rate  Availability.  If,  after the date hereof,
there shall occur the  introduction of, or any change in, any Applicable Law, or
any change in the  interpretation or administration  thereof by any Governmental
Authority,  central bank or comparable agency charged with the interpretation or
administration  thereof,  or should there occur any change in the  compliance by
any Lender (or any of their  respective  Lending  Offices)  with any  request or
directive  (whether  or not  having  the  force of law) of any  such  Authority,
central  bank or  comparable  agency,  the effect of which  makes it unlawful or
impossible for any of the Lenders (or any of their  respective  Lending Offices)
to honor its obligations hereunder to make or maintain any LIBOR Rate Loan, such
Lender shall  promptly give notice thereof to the  Administrative  Agent and the
Administrative  Agent shall  promptly give notice to the Borrowers and the other
Lenders.  Thereafter,  and until the Administrative Agent notifies the Borrowers
that such  circumstances  no longer exist, (i) the obligations of the Lenders to
make  LIBOR  Rate Loans and the right of the  Borrowers  to convert  any Loan or
continue any Loan as a LIBOR Rate Loan shall be  suspended  and  thereafter  the
Borrowers  may  select  only Base Rate Loans  hereunder,  and (ii) if any of the
Lenders  may not  lawfully  continue to maintain a LIBOR Rate Loan to the end of
the then current Interest Period applicable  thereto,  the applicable LIBOR Rate
Loan shall  immediately  be converted  to a Base Rate Loan for the  remainder of
such Interest  Period.

     (c)  Increased  Costs.  If,  after the date  hereof,  there shall occur the
introduction of, or any change in, any Applicable Law, or in the  interpretation
or  administration  thereof  by any  Governmental  Authority,  central  bank  or
comparable agency charged with the interpretation or administration  thereof, or
should the compliance by any of the Lenders (or any of their respective  Lending
Offices) with any request or directive  (whether or not having the force of law)
of such  Authority,  central bank or comparable  agency:

          (i) subject any of the  Lenders  (or any of their  respective  Lending
Offices) to any tax,  duty or other charge with  respect to any Note,  Letter of
Credit or Application,  or shall change the basis of taxation of payments to any
of the Lenders (or any of their respective  Lending Offices) of the principal of
or interest on any Note,  Letter of Credit or  Application  or any other amounts
due under this Agreement in respect  thereof  (except for changes in the rate of
tax on the overall  net income of any of the Lenders or any of their  respective
Lending Offices imposed by the jurisdiction in which such Lender is organized or
is or should be  qualified  to do  business,  or where  such  Lending  Office is
located); or

          (ii) impose, modify or deem applicable any reserve (including, without
limitation,  any  imposed  by the  Board of  Governors  of the  Federal  Reserve

                                      -28-

<PAGE>

System),  special deposit,  insurance or capital or similar  requirement against
assets of, deposits with or for the account of, or credit extended by any of the
Lenders (or any of their  respective  Lending Offices) or shall impose on any of
the Lenders (or any of their respective Lending Offices) or the foreign exchange
and interbank markets any other condition  affecting any Note;

and the result of any of the  foregoing  is to increase  the costs to any of the
Lenders  of  maintaining  any LIBOR Rate Loan or  issuing  or  participating  in
Letters  of  Credit or to reduce  the  yield or  amount of any sum  received  or
receivable  by any of the  Lenders  under this  Agreement  or under the Notes in
respect  of a LIBOR  Rate Loan or Letter  of  Credit or  Application,  then such
Lender shall promptly notify the  Administrative  Agent, and the  Administrative
Agent shall promptly  notify the Borrowers of such fact and demand  compensation
from the Borrowers  therefor and,  within fifteen (15) days after such notice by
the Administrative Agent, the Borrowers shall pay to such Lender such additional
amount or amounts as will  compensate  such Lender or Lenders for such increased
cost or reduction.  The Administrative  Agent will promptly notify the Borrowers
of any  event of which it has  knowledge  which  will  entitle  such  Lender  to
compensation pursuant to this Section 4.8(c);  provided, that the Administrative
Agent shall incu no liability  whatsoever to the Lenders or the Borrowers in the
event it fails to do so. The amount of such compensation shall be determined, in
the applicable  Lender's sole  discretion,  based upon the assumption  that such
Lender  funded its  Commitment  Percentage of the LIBOR Rate Loans in the London
interbank market and using any reasonable attribution or averaging methods which
such Lender  deems  appropriate  and  practical.  A  certificate  of such Lender
setting  forth the basis for  determining  such amount or amounts  necessary  to
compensate  such  Lender  shall  be  forwarded  to  the  Borrowers  through  the
Administrative  Agent and shall be conclusively  presumed to be correct save for
manifest error.

     SECTION 4.9 Indemnity.  The Borrowers  hereby indemnify each of the Lenders
against any loss or expense which may arise or be  attributable to each Lender's
obtaining,  liquidating or employing deposits or other funds acquired to effect,
fund or maintain any Loan (a) as a  consequence  of any failure by the Borrowers
to make any payment when due hereunder in connection with a LIBOR Rate Loan, (b)
due to any failure of the Borrowers to borrow on a date specified  therefor in a
Notice  of  Borrowing  or Notice  of  Continuation/Conversion  or (c) due to any
payment, prepayment (whether mandatory or permissive) or conversion of any LIBOR
Rate Loan (whether mandatory or permissive) on a date other than the last day of
the  Interest  Period  therefor.  The  amount of such loss or  expense  shall be
determined,  in  the  applicable  Lender's  sole  discretion,   based  upon  the
assumption  that such Lender funded its Commitment  Percentage of the LIBOR Rate
Loans in the London  interbank  market and using any  reasonable  attribution or
averaging  methods  which  such  Lender  deems  appropriate  and  practical.   A
certificate of such Lender setting forth the basis for  determining  such amount
or amounts  necessary  to  compensate  such  Lender  shall be  forwarded  to the
Borrowers through the Administrative Agent and shall be conclusively presumed to
be correct save for manifest error.

     SECTION 4.10 Capital  Requirements.  If either (a) the  introduction of, or
any change in, or in the interpretation of, any Applicable Law or (b) compliance
with any  guideline  or request from any central  bank or  comparable  agency or
other  Governmental  Authority  (whether or not having the force of law), has or
would have the effect of  reducing  the rate of return on the capital of, or has
affected or would affect the amount of capital required to be maintained by, any
Lender or any corporation  controlling such Lender as a consequence of, or  with

                                      -29-

<PAGE>

reference to the Commitments and other  commitments of this type, below the rate
which the Lender or such other  corporation  could  have  achieved  but for such
introduction,  change or  compliance,  then within five (5) Business  Days after
written demand by any such Lender,  the Borrowers  shall pay to such Lender from
time to time as  specified  by such  Lender  additional  amounts  sufficient  to
compensate  such Lender or other  corporation  for such  reduction in return.  A
certificate as to such amounts submitted to the Borrowers and the Administrative
Agent by such Lender, shall, in the absence of manifest error, be presumed to be
correct and binding for all purposes.

     SECTION 4.11 Taxes.

     (a)  Payments  Free  and  Clear.  Any and  all  payments  by the  Borrowers
hereunder  or under the Notes or the  Letters  of Credit  shall be made free and
clear of and without deduction for any and all present or future taxes,  levies,
imposts,  deductions,  charges or withholding,  and all liabilities with respect
thereto excluding,  (i) in the case of each Lender and the Administrative Agent,
income and franchise taxes imposed by the  jurisdiction  under the laws of which
such Lender or the Administrative Agent (as the case may be) is organized, or is
or should be qualified to do business,  or any political subdivision thereof and
(ii) in the case of each  Lender,  income  and  franchise  taxes  imposed by the
jurisdiction  of such  Lender's  Lending  Office  or any  political  subdivision
thereof (all such non-excluded  taxes,  levies,  imposts,  deductions,  charges,
withholdings and liabilities being hereinafter  referred to as "Taxes").  If the
Borrowers shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under any Note or Letter of Credit to any Lender or the
Administrative Agent, (A) the sum payable by Borrowers shall be increased as may
be necessary so that after making all required deductions  (including deductions
applicable  to  additional  sums payable under this Section 4.11) such Lender or
the  Administrative  Agent (as the case may be)  receives an amount equal to the
amount such party would have received had no such  deductions been made, (B) the
Borrowers  shall  make such  deductions,  (C) the  Borrowers  shall pay the full
amount  deducted  to  the  relevant  taxing  authority  or  other  authority  in
accordance  with  applicable  law, and (D) the  Borrowers  shall  deliver to the
Administrative  Agent evidence of such payment to the relevant taxing  authority
or other  authority  in the manner  provided in Section  4.11(d).

     (b) Stamp and Other Taxes. In addition, the Borrowers shall pay any present
or future stamp,  registration,  recordation or  documentary  taxes or any other
similar fees or charges or excise or property taxes, levies of the United States
or any  state  or  political  subdivision  thereof,  or any  applicable  foreign
jurisdiction, which arise from any payment made hereunder or from the execution,
delivery or registration  of, or otherwise with respect to, this Agreement,  the
Loans, the Letters of Credit, the other Loan Documents, or the perfection of any
rights or  security  interest  in respect  thereto  (hereinafter  referred to as
"Other Taxes").

     (c)  Indemnity.   The  Borrowers   shall  indemnify  each  Lender  and  the
Administrative  Agent for the full amount of Taxes and Other  Taxes  (including,
without  limitation,  any Taxes and Other Taxes imposed by any  jurisdiction  on
amounts   payable   under  this  Section  4.11)  paid  by  such  Lender  or  the
Administrative  Agent  (as  the  case  may  be)  and  any  liability  (including
penalties,  interest and expenses)  arising  therefrom or with respect  thereto,
whether or not such Taxes or Other  Taxes were  correctly  or legally  asserted.
Such indemnification shall be made by Borrowers within thirty (30) days from the

                                      -30-

<PAGE>

date such Lender or the Administrative  Agent (as the case may be) makes written
demand therefor.

     (d)  Evidence  of  Payment.  Within  thirty (30) days after the date of any
payment by Borrowers of Taxes or Other Taxes, the Borrowers shall furnish to the
Administrative  Agent, at its address  referred to in Section 13.1, the original
or a certified copy of a receipt evidencing payment thereof or other evidence of
payment  satisfactory to the  Administrative  Agent.

     (e)  Delivery  of Tax  Forms.  Each  Lender  organized  under the laws of a
jurisdiction  other than the United States or any state thereof shall deliver to
the Borrowers,  with a copy to the Administrative  Agent, on the Closing Date or
concurrently  with the delivery of the relevant  Assignment and  Acceptance,  as
applicable,  (i) two United States Internal  Revenue Service Forms 4224 or Forms
1001, as applicable (or successor  forms)  properly  completed and certifying in
each case that such Lender is entitled to a complete  exemption from withholding
or deduction for or on account of any United States  federal  income taxes,  and
(ii) an Internal  Revenue Service Form W-8 or W-9 or successor  applicable form,
as the  case may be,  to  establish  an  exemption  from  United  States  backup
withholding  taxes. Each such Lender further agrees to deliver to the Borrowers,
with a copy to the  Administrative  Agent,  a Form  1001 or 4224 and Form W-8 or
W-9, or successor  applicable forms or manner of certification,  as the case may
be, on o before the date that any such form expires or becomes obsolete or after
the  occurrence  of any  event  requiring  a  change  in the  most  recent  form
previously  delivered by it to the  Borrowers,  certifying in the case of a Form
1001 or 4224 that  such  Lender is  entitled  to  receive  payments  under  this
Agreement  without  deduction or withholding of any United States federal income
taxes (unless in any such case an event (including without limitation any change
in treaty,  law or regulation)  has occurred prior to the date on which any such
delivery would  otherwise be required which renders such forms  inapplicable  or
the exemption to which such forms relate  unavailable  and such Lender  notifies
the  Borrowers and the  Administrative  Agent that it is not entitled to receive
payments without deduction or withholding of United States federal income taxes)
and, in the case of a Form W-8 or W-9,  establishing  an  exemption  from United
States backup  withholding tax.

     (f) Survival.  Without  prejudice to the survival of any other agreement of
the  Borrowers  hereunder,  the  agreements  and  obligations  of the  Borrowers
contained  in  this  Section  4.11  shall  survive  the  payment  in full of the
Obligations and the termination of the Commitments.

     SECTION 4.12 Security. The Obligations of the Borrowers shall be secured as
provided in the Security Documents.

                                      -31-
<PAGE>

     SECTION  5.1  Closing.  The  closing  shall  take  place at the  offices of
Stradley, Ronon, Stevens & Young, L.L.P., commencing at 2:00 p.m. on January 27,
2000, or on such other date as the parties hereto shall mutually agree.

     SECTION 5.2  Conditions to Closing and Initial  Extensions  of Credit.  The
obligation  of the Lenders to close this  Agreement and to make the initial Loan
or issue the initial  Letter(s) of Credit is subject to the satisfaction of each
of the following conditions:

     (a) Executed Loan Documents.  This Agreement,  the Revolving  Credit Notes,
the Security Documents and other Loan Documents shall be in a form and substance
satisfactory to Administrative Agent, shall have been duly authorized,  executed
and delivered to the  Administrative  Agent by the parties thereto,  shall be in
full force and effect,  no Default  shall exist  thereunder,  and the  Borrowers
shall have delivered original  counterparts thereof to the Administrative Agent.

     (b) Closing Certificates;  etc.

          (i) Officers'  Certificate of the Borrowers.  The Administrative Agent
 shall have  received  a  certificate  from a  Responsible  Officer, in form and
substance  satisfactory  to the  Administrative  Agent,  to the effect  that all
representations  and warranties of the Borrowers contained in this Agreement and
the other Loan Documents are true, correct and complete;  that the Borrowers are
not in violation of any of the  covenants  contained in this  Agreement  and the
other Loan Documents; that, after giving effect to the transactions contemplated
by  this  Agreement,  no  Default  or  Event  of  Default  has  occurred  and is
continuing;   and  that  the  Borrowers  have  satisfied  each  of  the  closing
conditions.

          (ii)  Certificate  of Secretary of the  Borrowers  and  Sureties.  The
Administrative  Agent shall have  received a  certificate  of the  secretary  or
assistant  secretary  of the  Borrowers  and the Sureties  certifying  as to the
incumbency and genuineness of the signature of each officer of the Borrowers and
the Sureties executing Loan Documents to which it is a party and certifying that
attached  thereto is a true,  correct and  complete  copy of (A) the articles of
incorporation  of the  Borrowers  and the Sureties and all  amendments  thereto,
certified as of a recent date by the appropriate  Governmental  Authority in the
Borrowers' and the Sureties jurisdiction(s) of incorporation,  (B) the bylaws of
the Borrowers and the Sureties as in effect on the date of such  certifications,
(C) resolutions  duly adopted by the Board of Directors of the Borrowers and the
Sureties  authorizing the borrowings  contemplated  hereunder and the execution,
delivery and performance of this Agreement and the other Loan Documents to which
it is a party,  and (D) each  certificate  required to be delivered  pursuant to
Section  5.2(b)(iii).

               (iii)  Certificates of Good Standing.  To the extent requested by
the Administrative Agent, the Administrative Agent shall have received long form
certificates  as of a recent date of the good  standing of the Borrowers and the
Sureties  under  the  laws of  Borrowers'  and  the  Sureties'  jurisdiction  of
organization  and each other  jurisdiction  where the Borrowers and the Sureties
are  qualified  to  do  business  and  a  certificate  of  the  relevant  taxing
authorities of such jurisdictions certifying that such Person has filed required
tax  returns  and owes no  delinquent  taxes.

                                      -32-
<PAGE>

               (iv)  Opinions of Counsel.  The  Administrative  Agent shall have
received  favorable  opinions  of  counsel  to the  Borrowers  and the  Sureties
addressed  to the  Administrative  Agent and the  Lenders  with  respect  to the
Borrowers  and the  Sureties,  the Loan  Documents and such other matters as the
Lenders  shall  request.

               (v) Tax Forms.  The  Administrative  Agent  shall  have  received
copies of the United States  Internal  Revenue Service forms required by Section
4.11(e) hereof, if any.

          (c) Collateral.

               (i) Filings and Recordings. All filings and recordations that are
necessary  to perfect the security  interests  of the Lenders in the  Collateral
described  in  the  Security   Documents   shall  have  been   received  by  the
Administrative  Agent, and the Administrative Agent shall have received evidence
satisfactory to the Administrative Agent that upon such filings and recordations
such security  interests  shall  constitute  valid and perfected  Liens thereon,
subject only to Liens previously  disclosed in writing to  Administrative  Agent
and   approved  by   Administrative   Agent.

               (ii)  Pledged  Collateral.  The  Administrative  Agent shall have
received (A) original stock  certificates or other  certificates  evidencing the
capital stock or other ownership  interests pledged pursuant to the Stock Pledge
Agreements,  together with an undated stock power for each such certificate duly
executed in blank by the registered  owner  thereof;  (B) copies of all relevant
contracts, licenses, leases, and agreements assigned to Administrative Agent for
the benefit of the Lenders, pursuant to the Collateral Assignment;  and (C) each
original promissory note pledged to Administrative Agent, for the benefit of the
Lenders,   pursuant  to  the  Security   Documents.

               (iii) Lien Search. The  Administrative  Agent shall have received
the  results  of a Lien  search  (including  a search as to  judgments,  pending
litigation and tax matters) made against the Borrowers and the Sureties (and, if
applicable,  the Subsidiaries)  under the Uniform Commercial Code (or applicable
judicial docket) as in effect in any state or jurisdiction  therein in which any
of Borrowers' and the Sureties  assets are located,  or where  Borrowers and the
Sureties conduct any of their respective business or operations, or where any of
the  Borrowers and the Sureties are  incorporated  or authorized to do business,
indicating  among other things that the Collateral is free and clear of any Lien
except for Liens permitted hereunder.

               (iv) Hazard and Liability  Insurance.  The  Administrative  Agent
shall have  received  (i) a report  from the  Borrowers'  independent  insurance
consultant,  in form and substance reasonably satisfactory to the Administrative
Agent,  stating that insurance satisfying the requirements of the Loan Documents
is in effect and (ii) received certificates of insurance, evidence of payment of
all insurance premiums for the current policy year of each, and, if requested by
the  Administrative  Agent,  copies  (certified  by a  Responsible  Officer)  of
insurance  policies,  in the form  required  under the  Security  Documents  and
otherwise in form and substance  reasonably  satisfactory to the  Administrative
Agent,  and (iii)  certificates  for all such  policies  of  insurance,  showing
Administrative  Agent as loss  payee,  without  contribution  by  Administrative
Agent,  which  certificates  shall  provide  that  no  modification,  amendment,

                                      -33-

<PAGE>

termination  or  cancellation  of  said  policies  shall  be  effective   unless
Administrative  Agent has been given  thirty  (30) days'  prior  written  notice
thereof.

               (v) Title Insurance. The Administrative Agent shall have received
a marked-up  commitment for a policy of title  insurance from a title  insurance
company acceptable to the Administrative Agent, insuring Lenders' first priority
Liens,  and showing no Liens  prior to Lenders'  Liens other than for ad valorem
taxes  not  yet  due  and  payable,   and/or  Liens   disclosed  in  writing  to
Administrative  Agent prior to the date hereof, and for which the Administrative
Agent has given its prior written  consent to the  existence of such Liens.  The
final title  insurance  policy shall be delivered  within thirty (30) days after
the  Closing  Date.  Further,  the  Borrowers  agree to  provide  or obtain  any
customary  affidavits and  indemnities as may be required or necessary to obtain
title insurance satisfactory to the Administrative Agent.

               (vi)  Title  Exceptions.  The  Administrative  Agent  shall  have
received  copies of all  recorded  documents  creating  exceptions  to the title
policy referred to in Section 5.2(c)(v).

               (vii)   Matters   Relating  to  Flood  Hazard   Properties.   The
Administrative  Agent shall have received a flood hazard  certification from the
National Research Center, or any successor agency thereto, regarding each parcel
of real property  securing any portion of the Obligations.

               (viii)  Surveys.  The  Administrative  Agent shall have  received
copies of as-built  surveys of a recent date of each parcel of real  property to
be  Collateral  under  this  Agreement,  certified  as  of a  recent  date  by a
registered  engineer or land surveyor.  Each such survey shall be accompanied by
an affidavit (a "Survey  Affidavit") of an authorized  signatory of the owner of
such property  stating that there have been no improvements or  encroachments to
the  property  since the date of the  respective  survey such that the  existing
survey is no longer accurate.  Such survey shall show the area of such property,
all boundaries of the land with courses and distances indicated, including chord
bearings and arc and chord  distances for all curves,  and shall show dimensions
and  locations  of all  easements,  private  drives,  roadways,  and other facts
materially  affecting  such  property,  and shall show such other details as the
Administrative Agent may reasonably request,  including without limitation,  any
encroachment  (and the extent thereof in feet and inches) onto the property,  or
by any of the  improvements  on the  property  upon  adjoining  land or upon any
easement burdening the property;  any improvements,  to the extent  constructed,
and the  relation of the  improvements  by distances  to the  boundaries  of the
property,  to any  easements  burdening  the  property,  and to the  established
setback lines,  building  lines and the street lines;  and if  improvements  are
existing,  (A) a statement of the number of each type of parking space  required
by  applicable  laws,  ordinances,   orders,  rules,  regulations,   restrictive
covenants and easements  affecting the improvement,  and the number of each such
type of parking space provided,  and (B) the locations of all utilities  serving
the improvement.

               (ix) Environmental  Assessments.  The Administrative  Agent shall
have received a Phase I  environmental  assessment and such other  environmental
reports reasonably  requested by the Administrative  Agent regarding each parcel
of real  property  which is  Collateral  hereunder,  which  assessment  shall be

                                      -34-

<PAGE>

conducted by an environmental  engineering firm acceptable to the Administrative
Agent  showing no  environmental  conditions  or  liabilities  in  violation  of
Environmental  Laws that could reasonably be expected to have a Material Adverse
Effect.

               (x) Other Real Property  Information.  The  Administrative  Agent
shall have received such other  certificates,  documents and  information as are
reasonably requested by the Lenders, including, without limitation,  engineering
and  structural  reports,  permanent  certificates  of occupancy and evidence of
zoning compliance, each in form and substance satisfactory to the Administrative
Agent.

     (d)  Consents;  Defaults.

               (i) Governmental  and Third Party Approvals.  The Borrowers shall
have obtained all necessary approvals, authorizations and consents of any Person
and of all Governmental  Authorities and courts having jurisdiction with respect
to the transactions contemplated by this Agreement and the other Loan Documents.

               (ii) No Injunction,  Etc. No action,  proceeding,  investigation,
regulation or  legislation  shall have been  instituted,  threatened or proposed
before any Governmental Authority to enjoin, restrain, or prohibit, or to obtain
substantial  damages in respect of, or which is related to or arises out of this
Agreement or the other Loan Documents or the  consummation  of the  transactions
contemplated  hereby or thereby,  or which, in the  Administrative  Agent's sole
discretion,   would  make  it  inadvisable   to  consummate   the   transactions
contemplated by this Agreement and such other Loan Documents.

               (iii) No Event of Default.  No Default or Event of Default  shall
have occurred and be continuing.

     (e) Financial Matters.

               (i) Financial  Statements.  The  Administrative  Agent shall have
received the most recent Consolidated  financial statements of the Borrowers and
their Subsidiaries, all in form and substance satisfactory to the Administrative
Agent and dated for the  period  ending not  earlier  than July 31,  1999.

               (ii) Financial  Condition  Certificate.  The Borrowers shall have
delivered  to the  Administrative  Agent a  certificate,  in form and  substance
satisfactory  to the  Administrative  Agent,  and  certified  as  accurate  by a
Responsible  Officer,  that (A) the Borrowers and each of their Subsidiaries are
each Solvent,  (B) the Borrowers' and the Sureties' payables are current and not
past due, (C) attached thereto is a pro forma balance sheet of the Borrowers and
their Subsidiaries setting forth on a pro forma basis the financial condition of
the Borrowers and their  Subsidiaries  on a Consolidated  basis as of that date,
reflecting  on a pro forma  basis the  effect of the  transactions  contemplated
herein,  including all fees and expenses in connection therewith, and evidencing
compliance on a pro forma basis with the covenants  contained in Articles IX and
X  hereof,  (D)  attached  thereto  are  the  financial  projections  previously
delivered to the  Administrative  Agent  representing the good faith opinions of
the Borrowers and senior management  thereof as to the projected results for the
five (5) year period commencing on the date hereof;  and (E) attached thereto is

                                      -35-

<PAGE>

a calculation of the Applicable Margin pursuant to Section 4.1(c).

               (iii) Payment at Closing;  Fee Letters.  The Borrowers shall have
paid the fees set forth or  referenced  in Section 4.3 and any other accrued and
unpaid fees or commissions due hereunder (including,  without limitation,  legal
fees and  expenses) to the  Administrative  Agent and Lenders,  and to any other
Person  such amount as may be due thereto in  connection  with the  transactions
contemplated  hereby,  including all taxes, fees and other charges in connection
with the execution,  delivery,  recording, filing and registration of any of the
Loan Documents. The Administrative Agent shall have received duly authorized and
executed copies of the fee letter agreement  referred to in Section 4.3(c).

     (f) Miscellaneous.

               (i) Notice of  Borrowing.  The  Administrative  Agent  shall have
received a Notice of Borrowing  from the  Borrowers in  accordance  with Section
2.3(a), and a Notice of Account  Designation  specifying the account or accounts
to which  the  proceeds  of any Loans  made  after  the  Closing  Date are to be
disbursed.

               (ii)  Proceedings and Documents.  All opinions,  certificates and
other  instruments  and all  proceedings  in  connection  with the  transactions
contemplated  by this Agreement  shall be  satisfactory in form and substance to
the Lenders. The Lenders shall have received copies of all other instruments and
other  evidence as the Lenders may  reasonably  request,  in form and  substance
satisfactory to the Lenders,  with respect to the  transactions  contemplated by
this Agreement and the taking of all actions in connection therewith.

               (iii) Due Diligence and Other Documents. The Borrowers shall have
delivered to the  Administrative  Agent such other  documents,  certificates and
opinions as the  Administrative  Agent may reasonably  request,  all in form and
substance satisfactory to the Administrative Agent. Additionally, Administrative
Agent  (or  its  counsel)  shall  have  undertaken  such  due  diligence  as the
Administrative  Agent deems  necessary or  advisable,  with the results  thereof
being  satisfactory  to  Administrative  Agent  and  its  counsel.

     SECTION 5.3 Conditions to All Extensions of Credit.  The obligations of the
Lenders  to make  any  Extensions  of  Credit,  whether  on the date  hereof  or
hereafter,  or change or convert any interest rate hereunder,  is subject to the
satisfaction of the following  conditions  precedent on the relevant  borrowing,
conversion,  or issue date, as applicable:

          (a)   Continuation   of    Representations    and   Warranties.    The
representations and warranties contained in Article VI shall be true and correct
on: (i) the date Borrowers submit an Application, Notice of Borrowing, or Notice
of Continuation/Conversion to Administrative Agent, and (ii) on the date of such
continuation,  conversation,  borrowing or issuance,  with the same effect as if
made on such date;  provided and except for any such warranty and representation
which is not a continuing  representation  or warranty  and which makes  express
reference to an earlier date.

          (b) No  Existing  Default.  No Default or Event of Default  shall have
occurred and be continuing  hereunder (i) on the borrowing  date with respect to

                                      -36-

<PAGE>

such Loan or after giving effect to the Loans to be made on such date or (ii) on
the issue date with respect to such Letter of Credit or after  giving  affect to
such  Letters of Credit on such date,  or (iii) on the date  Borrowers  submit a
Notice of  Continuation/Conversion,  Notice of Borrowing,  or  Application.

          (c)  Material  Adverse  Effect.  There  shall  not have  occurred  any
Material  Adverse  Effect since the later of: (i) the Closing  Date, or (ii) the
latest  borrowing  hereunder  or  issuance  of Letter of  Credit.

          (d)  Notice  of  Borrowing,   etc.  The  Borrowers   shall  submit  to
Administrative    Agent   a   Notice    of    Borrowing,    or   a   Notice   of
Continuation/Conversation,  or an Application,  as the case may be, completed in
accordance  with the terms hereof,  and, in the case of an Application or Notice
of  Borrowing,  the  Borrowers  shall  also  submit  a duly  executed  Officer's
Compliance  Certificate.

          (e) Additional  Documents.  The Borrowers shall, in addition to and in
conjunction with any of the foregoing, submit such other documents, instruments,
opinions,  information, or certificates, as the Administrative Agent may, in the
reasonable  exercise of its discretion,  so request.

          (f) The Bond  Transaction.  Prior to the  issuance  of any  Letter  of
Credit in connection  with the Bond  Transaction,  such  agreements,  documents,
instruments,  opinions,  information,  certificates  or  other  matters  as  the
Administrative  Agent or the Lenders may require, and as are or may be customary
in  connection  with the  issuance  of such a direct  pay  letter  of  credit in
connection with industrial revenue bond financings.

                                   ARTICLE VI

     SECTION 6.1  Representations  and Warranties.  To induce the Administrative
Agent and Lenders to enter into this Agreement and to induce the Lenders to make
Extensions  of Credit,  and/or  convert or continue the interest  rate in effect
from  time  to  time,  the  Borrowers   hereby  represent  and  warrant  to  the
Administrative  Agent and  Lenders  both before and after  giving  effect to the
transactions  contemplated  hereunder,   including,   without  limitation,   any
Extension of Credit or continuation or conversion of an interest rate, that:

     (a)  Organization;  Power;  Qualification.  Each of the Borrowers and their
Subsidiaries is duly organized,  validly existing and in good standing under the
laws of the jurisdiction of their incorporation or formation,  has the power and
authority to own their  properties  and to carry on their  business as now being
and hereafter  proposed to be conducted and are duly qualified and authorized to
do business in each  jurisdiction in which the character of their  properties or
the nature of their business requires such qualification and authorization.  The
jurisdictions  in which the Borrowers and their  Subsidiaries  are organized and
qualified  to do  business  as of the  Closing  Date are  described  on Schedule
6.1(a).

     (b) Ownership.  Each  Subsidiary of the Borrowers as of the Closing Date is
listed on Schedule  6.l(b).  As of the Closing Date, the  capitalization  of the
Borrowers and their Subsidiaries  consists of the number of shares,  authorized,

                                      -37-

<PAGE>

issued and outstanding,  of such classes and series,  with or without par value,
described on Schedule 6.1(b).  All outstanding shares of the Borrowers and their
Subsidiaries have been duly authorized and validly issued and are fully paid and
nonassessable.  The  shareholders  of the  Subsidiaries of the Borrowers and the
number of shares owned by each as of the Closing Date are  described on Schedule
6.1(b).  As of the  Closing  Date,  there  are  no  outstanding  stock  purchase
warrants, subscriptions, options, securities, instruments or other rights of any
type or nature  whatsoever,  which are  convertible  into,  exchangeable  for or
otherwise provide for or permit the issuance or purchase of capital stock of the
Borrowers or their  Subsidiaries,  except as described on Schedule  6.1(b).

     (c) Authorization of Agreement,  Loan Documents and Borrowing.  Each of the
Borrowers  and their  Subsidiaries  has the right,  power and  authority and has
taken all  corporate  and other action  necessary to  authorize  the  execution,
delivery and  performance of this Agreement and each of the other Loan Documents
to which any of the Borrowers or  Subsidiaries  are a party.  This Agreement and
each of the other Loan  Documents  have been duly  executed and delivered by the
duly authorized  officers of the Borrowers and each of their  Subsidiaries which
are a party thereto,  and each such document  constitutes  the legal,  valid and
binding  obligation  of the  Borrowers  or their  Subsidiary  which  are a party
thereto,  enforceable in accordance with their respective terms,  except as such
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar state or federal debtor relief laws from time to time in effect which
affect the enforcement of creditors'  rights in general and the  availability of
equitable  remedies.

     (d) Compliance of Agreement,  Loan Documents and Borrowing with Laws,  Etc.
The execution,  delivery and performance by the Borrowers and their Subsidiaries
of the Loan Documents to which each such Person is a party,  in accordance  with
their  respective   terms,   the  borrowings   hereunder  and  the  transactions
contemplated  hereby, do not and will not, by the passage of time, the giving of
notice or  otherwise,  (i)  require  any  Governmental  Approval  or violate any
Applicable  Law  relating to the  Borrowers or any of their  Subsidiaries,  (ii)
conflict with,  result in a breach of or constitute a default under the articles
of incorporation,  bylaws or other organizational  documents of the Borrowers or
any of their Subsidiaries, or under any indenture, agreement or other instrument
to which  such  Person  is a party or by which  any of their  properties  may be
bound, or (iii) result in or require the creation or imposition of any Lien upon
or with respect to any  property now owned or hereafter  acquired by such Person
other than Liens  arising under the Loan  Documents.

     (e) Compliance with Law; Governmental Approvals.  Each of the Borrowers and
their Subsidiaries (i) has all Governmental Approvals required by any Applicable
Law for it to conduct its  business,  each of which is in full force and effect,
is final and not  subject  to review on  appeal  and is not the  subject  of any
pending  or,  to the  best  of  Borrowers'  or  their  Subsidiaries'  knowledge,
threatened  by any direct or  collateral  proceeding,  and (ii) is in compliance
with each  Governmental  Approval  applicable to it and in  compliance  with all
other  material  Applicable  Laws  relating  to  it or  any  of  its  respective
properties  or the  businesses  conducted  by it,  as such  existed  on the date
hereof.

     (f) Tax Returns and Payments.  Each of the Borrowers and their Subsidiaries
has duly  filed or caused to be filed all  federal,  state,  local and other tax
returns  required by Applicable Law to be filed,  and has paid, or made adequate
provision  for the  payment  of,  all  federal,  state,  local and other  taxes,

                                      -38-

<PAGE>

assessments and governmental charges or levies upon it and its property, income,
profits and assets  which are due and  payable,  except  where such  Borrower or
Subsidiary has made adequate  reserves  therefor in accordance  with GAAP and is
diligently and in good faith contesting such tax, lien, charge or assessment. No
Governmental  Authority  has  asserted  any  Lien or  other  claim  against  the
Borrowers or Subsidiary  thereof with respect to unpaid taxes which has not been
discharged  or  resolved,  except  where such  Borrower or  Subsidiary  has made
adequate reserves therefor in accordance with GAAP and is diligently and in good
faith contesting such tax, lien, charge or assessment. The charges, accruals and
reserves on the books of the Borrowers and any of their  Subsidiaries in respect
of  federal,  state,  local and other  taxes for all Fiscal  Years and  portions
thereof  since  the date of the last  audit  of the  Borrowers  and any of their
Subsidiaries  by any  taxing  authority  are in the  judgment  of the  Borrowers
adequate,   and  the  Borrowers  do  not  anticipate  any  additional  taxes  or
assessments for any of such years.

     (g)  Intellectual  Property  Matters.  Each  of  the  Borrowers  and  their
Subsidiaries  owns  or  possesses  rights  to  use  all  franchises,   licenses,
copyrights,  copyright applications,  patents, patent rights or licenses, patent
applications,  trademarks,  trademark  rights,  trade names,  trade name rights,
copyrights  and rights  with  respect to the  foregoing  which are  required  to
conduct its  business.  To the best of the  Borrowers'  knowledge,  no event has
occurred which  permits,  or after notice or lapse of time or both would permit,
the revocation or termination of any such rights,  and neither the Borrowers nor
any Subsidiary thereof is liable to any Person for infringement under Applicable
Law with respect to any such rights as a result of its business operations.

     (h) Environmental  Matters

               (i) The properties owned, leased or operated by the Borrowers and
their Subsidiaries, together with all properties which are the subject of any of
the Collateral Assignments (herein, the "Properties") do not now contain, and to
the best of  their  knowledge  have  not  previously  contained,  any  Hazardous
Materials in amounts or  concentrations  which (A)  constitute or  constituted a
violation of applicable  Environmental Laws, or (B) could give rise to liability
under  applicable  Environmental  Laws;

               (ii) The Borrowers,  each  Subsidiary and such Properties and all
operations conducted in connection therewith are in compliance,  and to the best
of the  Borrowers'  knowledge,  have  been in  compliance,  with all  applicable
Environmental  Laws,  and  there is no  contamination  at,  under or about  such
Properties or such operations which could interfere with the continued operation
of such Properties or impair the fair saleable value thereof,

               (iii)  Neither  the  Borrowers  nor any  Subsidiary  thereof  has
received any notice of violation, alleged violation,  non-compliance,  liability
or potential liability regarding environmental matters,  Hazardous Materials, or
compliance  with  Environmental  Laws,  nor does the Borrowers or any Subsidiary
thereof  have  knowledge  or  reason to  believe  that any such  notice  will be
received or is being threatened;

               (iv) To the best of the Borrowers' knowledge, Hazardous Materials
have not been transported or disposed of to or from the Properties, in violation

                                      -39-

<PAGE>

of, or in a manner,  or to a location which could give rise to liability  under,
Environmental  Laws, nor have any Hazardous  Materials been generated,  treated,
stored or disposed of at, on or under any of such Properties in violation of, or
in  a  manner  that  could  give  rise  to  liability   under,   any  applicable
Environmental   Laws;

               (v) No judicial  proceedings or  governmental  or  administrative
action is pending, or, to the knowledge of the Borrowers,  threatened, under any
Environmental Law to which the Borrowers or any Subsidiary thereof is or will be
named as a party,  nor are there any consent  decrees or other decrees,  consent
orders,  administrative  orders  or other  orders,  or other  administrative  or
judicial  requirements  outstanding  under any Environmental Law with respect to
Borrowers,  any Subsidiary or such Properties or operations;  and

               (vi) There has been no release,  or to the best of the Borrowers'
knowledge,  threat of release, of Hazardous Materials at or from the Properties,
now or, to the best of  Borrowers'  knowledge in the past, in violation of or in
amounts or in a manner  that could give rise to  liability  under  Environmental
Laws.

     (i) ERISA.

          (i) As of the  Closing  Date,  neither  the  Borrowers  nor any  ERISA
Affiliate maintains or contributes to, or has any obligation under, any Employee
Benefit Plans other than those identified on Schedule 6.1(i);

          (ii) The Borrower and each ERISA  Affiliate is in compliance  with all
applicable provisions of ERISA and the regulations and published interpretations
thereunder  with respect to all Employee  Benefit  Plans except for any required
amendments for which the remedial  amendment period as defined in Section 401(b)
of the Code has not yet expired.  Each Employee Benefit Plan that is intended to
be  qualified  under  Section  401(a)  of the Code has  been  determined  by the
Internal Revenue Service to be so qualified, and each trust related to such plan
has been  determined to be exempt under Section 501(a) of the Code. No liability
has  been  incurred  by  the  Borrower  or any  ERISA  Affiliate  which  remains
unsatisfied for any taxes or penalties with respect to any Employee Benefit Plan
or any  Multiemployer  Plan;

          (iii) No Pension  Plan has been  terminated,  nor has any  accumulated
funding  deficiency  (as  defined  in  Section  412 of the Code)  been  incurred
(without  regard to any waiver  granted under Section 412 of the Code),  nor has
any funding waiver from the Internal  Revenue Service been received or requested
with respect to any Pension  Plan,  nor has the Borrower or any ERISA  Affiliate
failed to make any contributions or to pay any amounts due and owing as required
by Section  412 of the Code,  Section  302 of ERISA or the terms of any  Pension
Plan prior to the due dates of such contributions  under Section 412 of the Code
or Section 302 of ERISA, nor has there been any event requiring disclosure under
Section 4041(c)(3)(C) or 4063(a) of ERISA with respect to any Pension Plan;

          (iv) Neither the Borrower nor any ERISA  Affiliate has: (A) engaged in
a nonexempt prohibited  transaction described in Section 406 of ERISA or Section
4975  of the  Code,  (b)  incurred  any  liability  to the  BPGC  which  remains
outstanding other than the payment of premiums and there are no premium payments
which are due and unpaid, (C) failed to make a required  contribution or payment

                                      -40-

<PAGE>

to a Multiemployer  Plan, or (D) failed to make a required  installment or other
required  payment under Section 412 of the Code;

          (v) No  Termination  Event has occurred or is  reasonably  expected to
occur; and

          (vi) No proceeding,  claim,  lawsuit and/or  investigation is existing
or,  to the  best  knowledge  of the  Borrower  after  due  inquiry,  threatened
concerning  or involving  any (A) employee  welfare  benefit plan (as defined in
Section 3(1) of ERISA) currently maintained or contributed to by the Borrower or
any ERISA  Affiliate,  (B) Pension Plan, or (C)  Multiemployer  Plan.

     (j) Margin  Stock.  Neither  the  Borrower  nor any  subsidiary  thereof is
engaged  principally  or as one of its  activities  in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" (as each
such term is defined or used in  Regulation  U of the Board of  Governors of the
Federal Reserve System).  No part of the proceeds of any of the Loans or Letters
of  Credit  will be used for  purchasing  or  carrying  margin  stock or for any
purpose which violates,  or which would be inconsistent  with, the provisions of
Regulation  T, U or X of such Board of  Governors.

     (k) Government Regulation.  Neither the Borrower nor any Subsidiary thereof
is an "investment  company" or a company "controlled" by an "investment company"
(as each such term is defined or used in the Investment  Company Act of 1940, as
amended),  and neither the  Borrowers  nor any  Subsidiary  thereof is, or after
giving  effect to any Extension of Credit will be,  subject to regulation  under
the Public Utility Holding  Company Act of 1935 or the Interstate  Commerce Act,
each as amended,  or any other  Applicable Law which limits its ability to incur
or consummate the  transactions  contemplated  hereby.

     (l) Material Contracts.  Schedule 6.1(1) sets forth a complete and accurate
list of all Material Contracts of the Borrowers and their Subsidiaries in effect
as of the Closing Date not listed on any other  Schedule  hereto.  Other than as
set forth in Schedule 6.1(1),  each such Material  Contract is, and after giving
effect  to  the  consummation  of the  transactions  contemplated  by  the  Loan
Documents  will be,  in full  force  and  effect  in  accordance  with the terms
thereof.   The  Borrowers  and  their   Subsidiaries   have   delivered  to  the
Administrative Agent a true and complete copy of each Material Contract required
to be listed on  Schedule  6.1(1) or any other  Schedule  hereto.

     (m) Employee Relations.  Each of the Borrowers and their Subsidiaries has a
stable  work force in place and is not,  as of the  Closing  Date,  party to any
collective  bargaining  Agreement nor has any labor union been recognized as the
representative  of its  employees  except as set forth on Schedule  6.1(m).  The
Borrowers knows of no pending, threatened or contemplated strikes, work stoppage
or other  collective  labor  disputes  involving its employees or those of their
Subsidiaries.

     (n) Burdensome Provisions. Neither the Borrowers nor any Subsidiary thereof
is a party, to any indenture,  agreement,  lease or other instrument, or subject

                                      -41-

<PAGE>

to any corporate or partnership restriction, Governmental Approval or Applicable
Law which could  reasonably be expected to have a Material  Adverse Effect.

     (o) Financial  Statements.  The (i) Consolidated balance sheets and audited
financial  statements of the Borrowers and their  Subsidiaries as of October 31,
1998, and the related  statements of income and retained earnings and cash flows
for the Fiscal Years then ended, and (ii) unaudited  Consolidated  balance sheet
of the  Borrowers  and  their  Subsidiaries  as of July  31,  1999  and  related
unaudited interim statements of revenue and retained  earnings,  copies of which
have been furnished to the  Administrative  Agent and each Lender,  are complete
and correct and fairly present the assets,  liabilities,  and financial position
of the Borrowers and their Subsidiaries as of such dates, and the results of the
operations  and changes of financial  position  for the periods then ended.  All
such financial  statements,  including the related  schedules and notes thereto,
have been prepared in accordance with GAAP. The Borrowers and their Subsidiaries
have no Debt,  obligation or other unusual forward or long-term commitment which
is not fairly  reflected in the foregoing  financial  statements or in the notes
thereto.

     (p) No Material  Adverse  Change.  Since July 31,  1999,  there has been no
material adverse change in the properties,  business, operations,  prospects, or
condition (financial or otherwise) of the Borrowers and their Subsidiaries,  and
no event has occurred or condition  arisen that could  reasonably be expected to
have a Material Adverse Effect.

     (q)  Solvency.  As of the  Closing  Date and  after  giving  effect to each
Extension of Credit made hereunder, the Borrowers and each of their Subsidiaries
will be  Solvent.

     (r) Titles to Properties. Each of the Borrowers and their Subsidiaries has:
(i) such title to the real property  owned by it as is necessary or desirable to
the conduct of its respective business, and (ii) valid and legal title to all of
its personal property and assets, including, but not limited to, those reflected
on the balance sheets of the Borrowers and their Subsidiaries delivered pursuant
to Section  6.1(m),  except  that  property  which has been  disposed  of by the
Borrowers or their Subsidiaries subsequent to such date, which dispositions have
been in the ordinary course of business, pursuant to an arm's length transaction
for fair market value, or as otherwise expressly permitted hereunder.

     (s)  Liens.  None of the  properties  and  assets of the  Borrowers  or any
Subsidiary  thereof is subject to any Lien,  except Liens permitted  pursuant to
Section 10.3. No financing  statement under the Uniform Commercial Code has been
filed in any state or other jurisdiction against the Borrowers or any Subsidiary
thereof,  and no Borrower or Subsidiary  has  otherwise  signed any financing or
security  agreement  (whether of record or not), except as permitted or noted in
Section 10.3 hereof.

     (t) Debt and  Guaranty  Obligations.  Schedule  6.l(t)  is a  complete  and
correct listing of all Debt and Guaranty  Obligations of the Borrowers and their
Subsidiaries as of the Closing Date in excess of Two Thousand and 00/100 Dollars
($200,000.00).  The Borrowers and their  Subsidiaries  have performed and are in
compliance  with all of the terms of such Debt and Guaranty  Obligations and all
instruments and agreements relating thereto, and no default or event of default,
or  event  or  condition  which  with  notice  or  lapse  of time or both  would

                                      -42-

<PAGE>

constitute  such a default or event of default on the part of the  Borrowers  or
their Subsidiaries exists with respect to any such Debt or Guaranty  Obligation.

     (u)  Litigation.  Except for matters  existing on the Closing  Date and set
forth on Schedule  6.1(u),  there are no actions,  suits or proceedings  pending
nor, to the knowledge of the Borrowers,  threatened  against or in any other way
relating  adversely to or affecting the Borrowers or any  Subsidiary  thereof or
any of their respective  properties in any court or before any arbitrator of any
kind or before or by any  Governmental  Authority.

     (v)  Absence of  Defaults.  No event has  occurred or is  continuing  which
constitutes  a Default or an Event of Default,  or which  constitutes,  or which
with the passage of time or giving of notice or both would constitute, a default
or event of  default  by the  Borrowers  or any  Subsidiary  thereof  under  any
Material  Contract or judgment,  decree or order to which the Borrowers or their
Subsidiaries  is a party or by which the Borrowers or their  Subsidiaries or any
of their respective properties may be bound or which would require the Borrowers
or their  Subsidiaries  to make any payment  thereunder  prior to the  scheduled
maturity  date  therefor.

     (w) Accuracy and  Completeness  of  Information.  All written  information,
reports and other papers and data  produced by or on behalf of the  Borrowers or
any  Subsidiary  thereof and furnished to the Lenders were, at the time the same
were so furnished,  complete and correct in all material  respects to the extent
necessary to present the  recipient  with a true and  accurate  knowledge of the
subject  matter.  No  document  furnished  or  written  statement  made  to  the
Administrative  Agent or the Lenders by the Borrowers or any Subsidiary  thereof
in connection with the  negotiation,  preparation or execution of this Agreement
or any of the Loan Documents  contains or will contain any untrue statement of a
fact material to the  creditworthiness of the Borrowers or their Subsidiaries or
omits or will  omit to state a fact  necessary  in order to make the  statements
contained therein not misleading. The Borrowers are not aware of any facts which
they have not disclosed in writing to the Administrative Agent having a Material
Adverse Effect, or insofar as the Borrowers can now foresee, could reasonably be
expected to have a Material Adverse Effect.

     (x)  Organizational   Documents.   The  organizational  documents  (bylaws,
charters, articles of incorporation,  limited partnership agreements,  operating
agreements  and  any  amendments  thereto,  etc.)  of the  Borrowers  and  their
Subsidiaries,  presented to the Administrative Agent and the Lenders prior to or
concurrent with the date hereof,  are the true,  accurate,  complete and current
version of such  documents,  and the Borrowers  shall not, nor shall they permit
their  Subsidiaries to, amend, alter or modify their  organizational  documents,
except as may be otherwise  permitted  herein in  connection  with any Permitted
Acquisition  or  merger,   consolidation  or   reorganization.

     (y) Year 2000 Compliance. Borrowers have taken, and shall continue to take,
all action  necessary  to ensure that their  computer  hardware,  computer-based
systems,  and software  (together with those of its  Subsidiaries)  are now, and
shall be after  December 31, 1999,  able to effectively  and accurately  process
data  including  dates and date sensitive  functions (the "Year 2000  Problem").
Borrowers have also  investigated the Year 2000 readiness of their key suppliers
and vendors and have developed  contingency  plans,  where necessary.  Borrowers
represent  and  warrant  that the Year  2000  Problem  will not have a  Material

                                      -43-

<PAGE>

Adverse  Effect on  Borrowers'  business  condition  (financial  or  otherwise),
operations,  properties,  prospects or ability to repay any of the  Obligations.
Upon  request,  Borrowers  shall  provide  assurances  acceptable to Lender that
Borrowers' computer systems and software are Year 2000 compliant. Borrower shall
immediately  advise Lender in writing of any material changes in Borrowers' Year
2000 plan,  timetable  or budget.

     SECTION  6.2  Survival  of   Representations   and  Warranties,   Etc.  All
representations   and   warranties   set  forth  in  this  Article  VI  and  all
representations and warranties contained in any certificate,  or any of the Loan
Documents (including but not limited to any such representation or warranty made
in or in connection with any amendment thereto) shall constitute representations
and warranties made under this  Agreement.  All  representations  and warranties
made  under this  Agreement  shall be made or deemed to be made at and as of the
Closing  Date,  shall  survive the  Closing  Date and shall not be waived by the
execution and delivery of this Agreement, any investigation made by or on behalf
of the Lenders made after the date of this Agreement or any borrowing hereunder.

                                  ARTICLE VII

                       FINANCIAL INFORMATION AND NOTICES

     Until all the  Obligations  have been  paid and  satisfied  in full and the
Commitments terminated,  unless Borrowers have obtained an amendment,  waiver or
consent,  as  applicable,  in the manner set forth in Section 13.11 hereof,  the
Borrowers will furnish or cause to be furnished to the Administrative  Agent and
to the Lenders at their respective addresses as set forth on Schedule I, or such
other office as may be designated by the  Administrative  Agent and Lenders from
time to time:

     SECTION 7.1 Financial  Statements and Projections.

     (a) Quarterly Financial Statements. As soon as practicable and in any event
within forty-five (45) days after the end of the first three (3) Fiscal quarters
on each Fiscal Year, an unaudited  Consolidated and consolidating  balance sheet
of the Borrowers and their  Subsidiaries as of the close of such Fiscal quarter,
and unaudited  Consolidated  and  consolidating  statements of income,  retained
earnings  and cash  flows for the  Fiscal  quarter  then  ended,  together  with
statements  through  that portion of the Fiscal Year then ended,  including  the
notes thereto,  all in reasonable  detail setting forth in comparative  form the
corresponding  figures  for  the  preceding  Fiscal  Year  and  prepared  by the
Borrowers in accordance with GAAP and, if applicable,  containing  disclosure of
the effect on the  financial  position or results of operations of any change in
the  application  of  accounting  principles  and  practices  during the period,
certified by the chief  financial  officer of the Borrowers to present fairly in
all  material  respects  the  financial  condition  of the  Borrowers  and their
Subsidiaries as of their  respective  dates and the results of operations of the
Borrowers and their Subsidiaries for the respective periods then ended,  subject
to normal year end adjustments.

                                      -44-

<PAGE>

  Additionally,  as  soon  as is  available,  but  in  no  event  later  than
forty-five  (45) days after the end of the each fiscal  quarter,  the  Borrowers
shall present  Administrative  Agent with their  Quarterly 10Q Report,  together
with all other  schedules,  documents,  certificates  and information  which the
Borrowers are required to submit to the Securities  and Exchange  Commission (or
any successor agency thereto, the "SEC").

     (b) Annual  Financial  Statements.  As soon as  available  and in any event
within  ninety  (90)  days  after  the  end of  each  Fiscal  Year,  an  audited
Consolidated  balance sheet of the Borrowers  and their  Subsidiaries  as of the
close of such  Fiscal  Year  and  audited  Consolidated  statements  of  income,
retained  earnings and cash flows for the Fiscal Year then ended,  including the
notes thereto,  all in reasonable  detail setting forth in comparative  form the
corresponding  figures for the preceding  Fiscal Year. Such statements  shall be
prepared by an independent  certified  public  accounting firm acceptable to the
Administrative  Agent in  accordance  with GAAP and, if  applicable,  containing
disclosure  of the effect on the  financial  position or results of operation of
any change in the application of accounting  principles and practices during the
year, and shall be  accompanied  by a report  thereon by such  certified  public
accountants  that is not  qualified  with  respect  to the scope of  limitations
imposed  by the  Borrowers  o any of  their  Subsidiaries  or  with  respect  to
accounting  principles  followed by the  Borrowers or any of their  Subsidiaries
which are not in accordance  with GAAP.

     Additionally,  as soon as is  available,  but in no event later than ninety
(90)  days  after the end of each  Fiscal  Year,  the  Borrowers  shall  present
Administrative  Agent with their Annual 10K Report,  including a CPA  Management
letter prepared by a certified public  accountant  acceptable to  Administrative
Agent,  together  with  all  other  schedules,   documents,   certificates,  and
information  which the  Borrowers  are required to submit to the SEC.

     (c) Annual Business Plan and Financial Projections.  As soon as practicable
and in any event within  ninety (90) days prior to the  beginning of each Fiscal
Year, a business plan of the Borrowers  and their  Subsidiaries  for the ensuing
five (5) Fiscal Years,  such plan to be prepared in accordance  with GAAP and to
include, on a quarterly basis, the following:  a quarterly operating and capital
budget, a projected income statement, statement of cash flows and balance sheet,
and  a  report   containing   management's   discussion  and  analysis  of  such
projections,  accompanied by a certificate  from the chief financial  officer of
the Borrowers to the effect that, to the best of such officer's knowledge,  such
projections are good faith  estimates of the financial  condition and operations
of the  Borrowers and their  Subsidiaries  for such five (5) Fiscal Year period.

     SECTION  7.2  Officer's  Compliance  Certificate.  At each  time  financial
statements  are delivered  pursuant to Sections  7.1(a) or (b) and at such other
times as the Administrative Agent shall reasonably request, a certificate of the
chief financial officer or the treasurer of the Borrowers in the form of Exhibit
F  attached  hereto  (an  "Officer's  Compliance   Certificate").

     SECTION 7.3 Accountants' Certificate. At each time financial statements are
delivered  pursuant to Section 7.1(b),  a certificate of the independent  public
accountants certifying such financial statements addressed to the Administrative
Agent for the benefit of the Lenders:

                                      -45-
<PAGE>

     (a) stating that in making the examination  necessary for the certification
of such financial statements, they obtained no knowledge of any Default or Event
of  Default  or, if such is not the case,  specifying  such  Default or Event of
Default  and  its  nature  and  period  of  existence;  and

     (b) including the  calculations  prepared by such  accountants  required to
establish whether or not the Borrowers and their  Subsidiaries are in compliance
with the  financial  covenants  set forth in  Article IX hereof as of the end of
each respective period; and

     (c) including a fully  executed copy of a letter from such  accountants  to
the Borrowers (i) expressly acknowledging that a primary intent of the Borrowers
(with  respect to such  statements)  is for such  accountants'  examination  and
report with respect to such  statements of the Borrowers to benefit or influence
the Lenders (A) in  connection  with  Extensions  of Credit and other  financial
accommodations  to  the  Borrowers  from  time  to  time,  or (B)  otherwise  in
connection  with  the  preparation,   review,  execution,  delivery,  amendment,
modification,   administration,   collection  and/or  enforcement  of  the  Loan
Documents, and (ii) expressly authorizing the Lenders to rely on the examination
and report of such accountants with respect to the audited financial  statements
of the  Borrowers as of and for such Fiscal Year then ending.

     SECTION 7.4 Other Reports.

     (a) Promptly upon receipt  thereof,  in addition to those reports which may
be required pursuant to Section 7.1 (b) herein,  copies of all reports,  if any,
submitted  to the  Borrowers  or  its  Board  of  Directors  by its  independent
certified  public  accountants in connection  with their auditing and accounting
function,   including,   without  limitation,  any  management  report  and  any
management  responses  thereto;  and

     (b) Such other information  regarding the operations,  business affairs and
financial  condition  of  the  Borrowers  or any of  their  Subsidiaries  as the
Administrative Agent or any Lender may reasonably request.

     SECTION 7.5 Notice of Litigation and Other Matters. Prompt (but in no event
later than ten (10) days after an officer  of the  Borrowers  obtains  knowledge
thereof)  telephonic  and  written  notice  of:

     (a) the commencement of all proceedings and investigations by or before any
Governmental  Authority and all actions and  proceedings  in any court or before
any arbitrator  against or involving the Borrowers or any Subsidiary  thereof or
any of their respective properties,  assets or businesses in which, if adversely
determined,  could result in liability in an amount equal to or greater than One
Hundred Thousand Dollars ($100,000);

     (b) any notice of any violation received by the Borrowers or any Subsidiary
thereof from any  Governmental  Authority  including,  without  limitation,  any
notice of a violation of any Environmental  Laws;

     (c) any labor  controversy that has resulted in, or threatens to result in,
a strike or other work action against the Borrowers or any  Subsidiary  thereof,

                                      -46-

<PAGE>

     (d) any  attachment,  judgment,  lien,  levy or  order  exceeding  $100,000
(whether  individually  or in the  aggregate)  that may be  assessed  against or
threatened against the Borrowers or any Subsidiary  thereof.

     (e) any Default or Event of  Default,  or any event  which  constitutes  or
which with the  passage of time or giving of notice or both would  constitute  a
default or event of default  under any Loan  Documents  or Material  Contract to
which  the  Borrowers  or any of their  Subsidiaries  is a party or by which the
Borrowers or any Subsidiary thereof or any of their respective properties may be
bound;

     (f) (i) any  unfavorable  determination  letter from the  Internal  Revenue
Service  regarding the  qualification  of an Employee Benefit Plan under Section
401(a) of the Code (alone,  with a copy thereof),  (ii) all notices  received by
the  Borrowers  or any ERISA  Affiliate of the PBGC's  intent to  terminate  any
Pension Plan or to have a trustee  appointed  to  administer  any Pension  Plan,
(iii) all  notices  received  by the  Borrowers  or any ERISA  Affiliate  from a
multi-employer  Plan sponsor  concerning  the imposition or amount of withdrawal
liability  pursuant to Section  4202 of ERISA and (iv) the  Borrowers  obtaining
knowledge or reason to know that any of the Borrowers or any ERISA Affiliate has
filed or intends to file a notice of intent to terminate  any Pension Plan under
a distress  termination  within the meaning of Section 4041(c) of ERISA; and

     (g) any event which makes any of the  representations  set forth in Section
6.1 inaccurate in any material  respect;  and

     (h) the occurrence of any Material Adverse Effect.

     SECTION 7.6  Accuracy of  Information.  All written  information,  reports,
statements  and other papers and data furnished by or on behalf of the Borrowers
to the  Administrative  Agent or any Lender  (other  than  financial  forecasts)
whether  pursuant to this Article VII or any other  provision of this Agreement,
or any of  the  Security  Documents,  shall  be,  at the  time  the  same  is so
furnished, complete and correct in all material respects to the extent necessary
to give the  Administrative  Agent or any  Lender  complete,  true and  accurate
knowledge of the subject matter based on the Borrowers' knowledge thereof.

     Until all of the  Obligations  have been paid and satisfied in full and the
Commitments terminated,  unless an amendment,  waiver or consent, as applicable,
has been  obtained in the manner  provided for in Section  13.11,  the Borrowers
will, and will cause each of their  Subsidiaries to:

     SECTION 8.1 Preservation of Corporate Existence and Related Matters. Except
as permitted by Section 10.5,  preserve and maintain  their  separate  corporate
existence and all rights,  franchises,  licenses and privileges necessary to the
conduct  of  its  business,  and  qualify  and  remain  qualified  as a  foreign

                                      -47-

<PAGE>

corporation and authorized to do business in each jurisdiction  where the nature
and scope of its  activities  require it to so  qualify  under  Applicable  Law.

     SECTION 8.2 Maintenance of Property. In addition to the requirements of any
of the Security  Documents,  protect and preserve all  properties  useful in and
material  to its  business,  including  copyrights,  patents,  trade  names  and
trademarks;  maintain  in  good  working  order  and  condition  all  buildings,
equipment and other tangible real and personal  property;  and from time to time
make or  cause to be made  all  renewals,  replacements  and  additions  to such
property necessary for the conduct of its business, so that the business carried
on in connection therewith may be properly and advantageously,  conducted at all
times.

     SECTION  8.3  Insurance.  Maintain  insurance  with  financially  sound and
reputable  insurance  companies  against  such risks and in such  amounts as are
customarily  maintained by similar businesses,  and as otherwise may be required
by the Security Documents and Applicable Law. On the Closing Date, and from time
to time  thereafter,  deliver to the  Administrative  Agent upon its request,  a
detailed  list of the  insurance  then  in  effect,  stating  the  names  of the
insurance  companies,  the amounts and rates of the insurance,  the dates of the
expiration  thereof and the properties and risks covered thereby.

     Additionally,  upon the Administrative Agent's request, the Borrowers shall
deliver to Administrative  Agent such  certificates as Administrative  Agent may
require; in each case listing the Administrative Agent, for and on behalf of the
Lenders  as the  loss  payee  (without  contribution),  and  providing  that  no
amendment, modification,  cancellation or termination shall be effective against
Administrative Agent, unless the Administrative Agent shall have received thirty
(30) days prior written notice thereof.

     SECTION 8.4 Accounting Methods and Financial Records.  Maintain a system of
accounting,  and keep such books,  records and accounts (which shall be true and
complete in all material  respects) as may be required or as may be necessary to
permit the  preparation of financial  statements in accordance  with GAAP and in
compliance  with  the   regulations  of  any   Governmental   Authority   having
jurisdiction  over  them or any of  their  respective  properties.

     SECTION 8.5 Payment and Performance of  Obligations.  Pay and discharge all
Obligations  under  this  Agreement  and the other  Loan  Documents,  and pay or
discharge (a) all taxes,  assessments and other governmental charges that may be
levied  or  assessed  upon  it or  any  of  its  property,  and  (b)  all  other
indebtedness,  obligations  and  liabilities in accordance  with customary trade
practices;  provided, that the Borrowers or such Subsidiary may contest any item
described  in clauses (a) or (b) of this Section 8.5, so long as such contest is
done in good faith, by proceedings diligently contested,  and the Borrowers have
established  adequate  reserves  therefor in accordance  with GAAP.  SECTION 8.6
Compliance  With Laws and Approvals.  Observe and remain in compliance  with all
Applicable  Laws  and  maintain  in  full  force  and  effect  all  Governmental
Approvals,  in each case applicable to the conduct of its business.  SECTION 8.7
Environmental  Laws.  In addition  to and without  limiting  the  generality  of

     Section 8.6  Compliance  with Laws and  Approvals.  Observe and remain in
compliance  with all  Applicable  Laws and maintain in full force and effect all
Governmental Approvals, in each case applicable to the conduct of its business.

     SECTION 8.7  Environmental  Laws.  In addition to and without  limiting the
generality  of Section 8.6, (a) comply with,  and ensure such  compliance by all

                                      -48-

<PAGE>

tenants and subtenants of the Properties, with all applicable Environmental Laws
and obtain,  maintain,  comply  with and ensure that all tenants and  subtenants
obtain,   comply  with  and   maintain,   any  and  all   licenses,   approvals,
notifications,  registrations  or permits  required by applicable  Environmental
Laws,  (b)  conduct and  complete  all  investigations,  studies,  sampling  and
testing,   and  all  remedial,   removal  and  other  actions   required   under
Environmental Laws, and promptly comply with all lawful orders and directives of
any  Governmental  Authority  regarding  Environmental  Laws,  and  (c)  defend,
indemnify and hold harmless the Administrative  Agent and the Lenders, and their
respective parents,  Subsidiaries,  Affiliates,  employees, agents, officers and
directors, from and against any claims, demands,  penalties, fines, liabilities,
settlements,  damages,  costs an expenses of  whatever  kind or nature  known or
unknown, contingent or otherwise,  arising out of, or in any way relating to the
presence of Hazardous  Materials,  or the violation of or noncompliance  with or
liability  under any  Environmental  Laws  applicable  to the  operations of the
Borrowers  or  such  Subsidiary,  or any  orders,  requirements  or  demands  of
Governmental  Authorities  related  thereto,   including,   without  limitation,
reasonable attorney's and consultant's fees,  investigation and laboratory fees,
response costs, court costs and litigation  expenses,  except to the extent that
any of the  foregoing  directly  result  from the gross  negligence  or  willful
misconduct of the party seeking indemnification therefor.

     SECTION 8.8 Compliance with ERISA. In addition to and without  limiting the
generality  of Section 8.6, (a) comply with all  applicable  provisions of ERISA
and the regulations and published interpretations thereunder with respect to all
Employee  Benefit  Plans,  (b) not take any  action or fail to take  action  the
result of which could be a liability to the PBGC or to a Multiemplover Plan, (c)
not  participate  in any prohibited  transaction  that could result in any civil
penalty  under ERISA or tax under the Code,  (d) operate each  Employee  Benefit
Plan in such a manner that will not incur any tax liability  under Section 4980B
of the Code or any liability to any qualified  beneficiary as defined in Section
4980B  of the  Code  and  (e)  furnish  to the  Administrative  Agent  upon  the
Administrative  Agent's request such additional  information  about any Employee
Benefit Plan as may be reasonably requested by the Administrative Agent.

     SECTION 8.9 Compliance  With  Agreements.  Comply in all respects with each
term,  condition and provision of all leases,  agreements and other  instruments
entered into in the conduct of its business including,  without limitation,  any
Material Contract;  provided,  that the Borrowers or such Subsidiary may contest
any such  lease,  agreement  or other  instrument,  so long as such  contest  is
conducted in good faith, through applicable  proceedings  diligently  conducted,
and provided  Borrowers  maintain adequate reserves therefore in accordance with
GAAP.

     SECTION   8.10  Conduct  of  Business.   Engage  only  in   businesses   in
substantially  the same fields as the  businesses  conducted on the Closing Date
and in lines of business  reasonably  related  thereto.

     SECTION  8.11  Visits  and  Inspections.   Permit  representatives  of  the
Administrative  Agent or any  Lender,  from time to time,  to visit and  inspect
their properties; inspect, audit and make extracts from their books, records and
files, including, but not limited to, management letters prepared by independent
accountants;  and discuss with their principal  officers,  and their independent
accountants,  their business, assets, liabilities,  financial condition, results
of  operations  and  business  prospects.  Notwithstanding  the  foregoing  (and
provided that no Event of Default has occurred and is continuing), the Borrowers

                                      -49-

<PAGE>

shall be provided with  reasonable  advance notice of any discussions to be held
with the Borrowers'  independent  accountants,  and the Borrowers  shall also be
afforded the  opportunity to participate and join in such  discussions.

     SECTION 8.12 Additional Subsidiaries.  In the event that, subsequent to the
Closing  Date,  any Borrower  shall  acquire or create any new  subsidiary,  the
Borrowers   shall,   within  ten  (10)  days  subsequent  to  such  creation  or
acquisition,  cause such  Subsidiary  to execute and  deliver to  Administrative
Agent:

     (a) duly executed Stock Pledge  Agreements,  or supplements  thereto,  such
that all of the capital  stock or other equity  interests of such  Subsidiary is
pledged to the  Administrative  Agent for the  benefit of, and on account of the
Lenders;

     (b) such other documents,  agreements,  instruments and certificates as the
Administrative  Agent  and the  Lenders  may  reasonably  request,  to bind such
Subsidiary  to the  terms  and  provisions  of  this  Agreement,  and  to  cause
Subsidiary to pledge such Subsidiary's  interests, if any, in the property given
as  Collateral  for the  payment and  performance  of the  Obligations;  and

     (c) favorable legal opinions addressed to the Administrative  Agent and the
Lenders in form and substance satisfactory to such entities, with respect to the
Subsidiary's   organizational   status,  and  with  respect  to  the  documents,
agreements  and  certificates  delivered  by  such  Subsidiary  pursuant  to the
provisions of Section 8.12(a) and 8.12(b) herein.

     SECTION  8.13  Hedging  Agreement.  Within  ninety (90) days of the Closing
Date, the Borrowers agree to purchase interest rate protection, in the form of a
Hedging  Agreement,  from one of the  Lenders,  or from some other  Person not a
party to this transaction;  provided,  however,  in the event that the Borrowers
purchase  (to the  extent  not  previously  purchased)  such  protection  from a
non-party to this  Agreement,  (i) such Hedging  Agreement must be in a form and
substance  satisfactory to all of the Lenders,  all of whom shall evidence their
consent or disapproval in writing,  and (ii) the Administrative Agent shall have
no obligation to allow such non-party to obtain any interest in the  Collateral.
At a minimum,  any such Hedging Agreement shall provide interest rate protection
covering at least fifty percent (50%) of the Aggregate Commitment,  and shall be
for a duration of at least three (3) years.

     SECTION  8.14  Further  Assurances.  Make,  execute  and  deliver  all such
additional and further acts, things, deeds and instruments as the Administrative
Agent or any Lender  may  reasonably  require to  document  and  consummate  the
transactions  contemplated  hereby and to vest completely in the  Administrative
Agent and the Lenders their respective  rights under this Agreement,  the Notes,
the Letters of Credit and the other Loan Documents.

                                  ARTICLE IX.
                              FINANCIAL COVENANTS

                                      -50-
<PAGE>

     Until all of the  Obligations  have been paid and satisfied in full and the
Commitments terminated,  unless an amendment,  waiver or consent, as applicable,
has been obtained in the manner set forth in Section 13.11 hereof, the Borrowers
and their  Subsidiaries on a Consolidated  basis will not:

     SECTION 9.1 Leverage Ratio: At any time, permit the ratio of Funded Debt to
the sum of (i) Cash Flow plus, without duplication,  (ii) Adjusted Cash Flow for
all Permitted Acquisitions during the prior four quarters to exceed

     (a) 3.75 to 1.00, for the period  commencing on the Closing Date and ending
on October 31, 2002;

     (b) 3.00 to 1.00, for the period  commencing on November 1, 2002 and ending
on October 31, 2003; and

     (c) 2.25 to 1.00,  for the period  commencing on November 1, 2003 until the
Termination  Date.

     Additionally, in the event there shall occur any Permitted Acquisition, the
Borrowers shall not, after giving effect to such Permitted  Acquisition,  permit
the Funded  Debt to the sum of (i) Cash Flow  plus,  without  duplication,  (ii)
Adjusted Cash Flow for all Permitted Acquisitions during the prior four quarters
to exceed, calculated as of the effective date of such Permitted Acquisition, on
a proforma  basis:

          (i) 3.50 to 1.00;  for the period  commencing  on the Closing Date and
 ending on October 31,  2002;

          (ii) 2.75 to 1.00; for the period  commencing on November 1, 2002, and
ending on October 31, 2003; and

          (iii) 2.00 to 1.00,  for the period  commencing  on  November 1, 2003,
until the Termination Date.

     SECTION 9.2 Fixed Charge Coverage  Ratio:  Permit the Fixed Charge Coverage
ratio  to be less  than  1.25 to  1.00,  measured  as of the end of each  fiscal
quarter.

     SECTION 9.3 Interest Coverage Ratio:  Permit the Interest Coverage ratio to
be less than to 2.50 to 1.0 as of the end of each  fiscal  quarter.

     SECTION 9.4  Minimum Net Worth.  The  Borrowers  shall  maintain an initial
minimum Net Worth equal to or greater  than  eleven  million and 00/100  Dollars
($11,000,000). Commencing on November 1, 1999, and as of and for the end of each
fiscal quarter thereafter, the Borrowers shall cause their Net Worth to increase
by the sum of: (i) 75% of  Borrowers'  net income,  as  determined in accordance
with GAAP, on a Consolidated  basis, plus (ii) 100% of their equity issuances or
pooling  transactions;  provided  further,  in the event net income for any such
period is  negative,  the  Borrowers  shall not be  entitled  to  subtract  such
shortfall from their  calculation  of, nor  obligations  regarding,  minimum Net
Worth.

                                      -51-

<PAGE>

                                   ARTICLE X.
                               NEGATIVE COVENANTS

     Until all of the  Obligations  have been paid and satisfied in full and the
Commitments terminated, unless consent has been obtained in the manner set forth
in Section 13.11 hereof, the Borrowers have not and will not permit any of their
Subsidiaries  to:

     SECTION 10.1 Limitations on Debt. Create,  incur, assume or suffer to exist
any Debt except:

     (a) the Obligations;

     (b)  Debt  incurred  in  connection  with a  Hedging  Agreement  (i) with a
counterparty and upon terms and conditions  (including interest rate) reasonably
satisfactory to the  Administrative  Agent or (ii) required  pursuant to Section
8.13;

     (c)  Subordinated   Debt;   provided  that  after  giving  effect  to  such
Subordinated Debt issuance,  Borrower's ratio of: (i) the sum of (A) Funded Debt
plus (B) Subordinated  Debt;  divided by (ii) Cash Flow, shall not exceed 4.5 to
1.0,  measured on a rolling,  prior four (4) quarter basis.

     (d) Debt  existing on the Closing Date and not  otherwise  permitted  under
this Section 10.1, as set forth on Schedule  6.1(t),  as the same may be renewed
or refinanced (but not the increase of the aggregate  principal  amount thereof)
thereof;

     (e)  purchase  money Debt of the  Borrowers  and their  Subsidiaries  in an
aggregate  amount not to exceed  $1,000,000  on any date of  determination;  and

provided,  that no agreement or instrument  with respect to Debt permitted to be
incurred  by this  Section  shall  restrict,  limit or  otherwise  encumber  (by
covenant or  otherwise)  the ability of any  Subsidiary of the Borrowers to make
any  payment  to the  Borrowers  or any of  their  Subsidiaries  (in the form of
dividends,  intercompany  advances or otherwise) for the purpose of enabling the
Borrowers  to  pay  the  Obligations.

     SECTION 10.2 Limitations on Guaranty Obligations.  Create, incur, assume or
suffer to exist any Guaranty Obligations except Guaranty Obligations in favor of
the  Administrative  Agent for the benefit of the  Administrative  Agent and the
Lenders.

     SECTION  10.3  Limitations  on Liens.  Create,  incur,  assume or suffer to
exist, any Lien on or with respect to any of its assets or properties (including
without limitation shares of capital stock or other ownership  interests),  real
or personal,  whether now owned or  hereafter  acquired,  except:

     (a) Liens for taxes,  assessments and other governmental  charges or levies
(excluding  any  Lien  imposed  pursuant  to any of the  provisions  of ERISA or

                                      -52-

<PAGE>

Environmental  Laws)  not yet due or as to which  the  period  of grace  (not to
exceed thirty (30) days), if any, related thereto has not expired,  or which are
being  contested  in  good  faith  and  by  appropriate  proceedings  diligently
contested,  if adequate  reserves  are  maintained  by  Borrowers  to the extent
required  by  GAAP;

     (b)  the  claims  of  materialmen,   mechanics,   carriers,   warehousemen,
processors or landlords for labor,  materials,  supplies or rentals  incurred in
the ordinary course of business,  (i) which are not overdue for a period of more
than  thirty  (30) days or (ii) which are being  contested  in good faith and by
appropriate  proceedings  diligently  contested,  if Borrower maintains adequate
reserves  therefor in accordance with GAAP.

     (c) Liens  consisting of deposits or pledges made in the ordinary course of
business in connection with, or to secure payment of, obligations under workers'
compensation,  unemployment insurance or similar legislation or obligations (not
to exceed  $50,000 under  customer  service  contracts;

     (d) Liens constituting  encumbrances in the nature of zoning  restrictions,
easements  and  rights or  restrictions  of record on the use of real  property,
which in the  aggregate are not  substantial  in amount and which do not, in any
case,  detract from the value of such  property or impair the use thereof in the
ordinary  conduct of  business;

     (e) Liens of the Administrative Agent for the benefit of the Administrative
Agent and the Lenders;

     (f) Liens not  otherwise  permitted  under Section 10.3 and in existence on
the  Closing  Date and  described  on Schedule  10.3;

     (g) Liens securing Debt permitted under Section 10.1(e);  provided that (i)
such Liens shall be created substantially simultaneously with the acquisition of
the related  asset,  (ii) such Liens do not at any time  encumber  any  property
other than the property  financed by such Debt, (iii) the amount of Debt secured
thereby is not increased  and (iv) the  principal  amount of Debt secured by any
such Lien shall at no time exceed one  hundred  percent  (100%) of the  original
purchase  price of such  property at the time it was  acquired and (v) such Lien
shall not prohibit the attachment or perfection of the Administrative Agent's or
Lenders' Liens pursuant to this  Agreement;  and

     (h) Liens securing Debt, as and to the extent  provided in Section 8.13 and
10.1(b).

     SECTION 10.4 Limitations on Loans, Advances,  Investments and Acquisitions.
Purchase,  own,  invest in or otherwise  acquire,  directly or  indirectly,  any
capital stock,  interests in any partnership or joint venture (including without
limitation the creation or capitalization  of any Subsidiary),  evidence of Debt
or other obligation or security,  substantially all or a portion of the business
or assets of any other Person or any other investment or interest  whatsoever in
any other Person, or make or permit to exist, directly or indirectly, any loans,
advances or extensions of credit to, or any investment in cash or by delivery of
property in, any Person except:

     (a)   investments   not  otherwise   permitted  by  this  Section  10.4  in
Subsidiaries existing on the Closing Date and the other existing loans, advances
and  investments  not  otherwise  permitted by this  Section  10.4  described on
Schedule 10.4;

                                      -53-
<PAGE>

     (b)   investments  in  (i)   marketable   direct   obligations   issued  or
unconditionally guaranteed by the United States of America or any agency thereof
maturing within 120 days from the date of acquisition  thereof,  (ii) commercial
paper  maturing  no more than 120 days  from the date of  creation  thereof  and
currently  having the highest rating  obtainable  from either  Standard & Poor's
Ratings  Services,  a division  of The  McGraw-Hill  Companies,  Inc. or Moody's
Investors Service, Inc., (iii) certificates of deposit maturing no more than 120
days from the date of creation thereof issued by commercial  banks  incorporated
under the laws of the United States of America,  each having  combined  capital,
surplus and undivided  profits of not less than $500,000,000 and having a rating
of "A" or better by a nationally  recognized rating agency;  provided,  that the
aggregate amount invested in such  certificates of deposit shall not at any time
exceed  $5,000,000 for any one such  certificate of deposit and  $10,000,000 for
any one such bank, or (iv) time deposits  maturing no more than 30 days from the
date of creation  thereof with commercial  banks or savings banks or savings and
loan  associations  each having membership either in the FDIC or the deposits of
which are insured by the FDIC and in amounts not exceeding  the maximum  amounts
of insurance thereunder;  and

     (c)  investments  by  the  Borrowers  or any  Subsidiary  in  the  form  of
acquisitions of all or  substantially  all of the business or a line of business
(whether by the acquisition of capital stock, assets or any combination thereof)
of any other Person,  provided such acquisition is a Permitted  Acquisition.  As
used herein,  an acquisition shall be deemed a Permitted  Acquisition,  provided
the  following  conditions  are  satisfied:

          (i)  The Purchase Price paid by the Borrowers in connection  with such
               acquisition  shall be less than  $3,000,000 in connection  with a
               single   acquisition;   or,   in  the  event  of  more  than  one
               acquisition,  said Purchase Price shall not exceed $10,000,000 in
               the aggregate  during any four (4) rolling fiscal quarter period.

               In the  event  that  the  consideration  proposed  to be  paid or
               assumed  exceeds the  aforementioned  levels,  the Borrowers must
               obtain   prior   written   consent  of  the   Required   Lenders.
               Additionally,   the   Borrowers   shall   not  pay  any  form  of
               consideration,   nor  assume  any   liability,   that  is  not  a
               constituent part of the definition herein of Purchase Price.

          (ii) The Purchase Price for any acquisition shall not exceed six times
               the seller's most recent rolling four (4) quarters' Adjusted Cash
               Flow, and the cash paid for any acquisition shall not exceed four
               times the seller's most recent rolling four (4) quarters Adjusted
               Cash Flow.

          (iii)No  Default or Event of Default  exists at the  proposed  time of
               the acquisition,  nor would any Default or Event of Default exist
               after giving effect to such acquisition.

                                      -54-
<PAGE>

          (iv) The  Administrative  Agent  and each of the  Lenders  shall  have
               received at least  thirty (30) days prior  written  notice of any
               proposed acquisition.

          (v)  The Lenders shall be satisfied with the nature and type of assets
               being acquired in connection with such acquisition,  and shall be
               satisfied  (both as to form and substance)  with the  Acquisition
               Documents governing such acquisition.

          (vi) No liabilities, either contingent or otherwise, shall be acquired
               by the  Borrowers or the  Subsidiaries  in  connection  with such
               acquisition except for Permitted Assumed  Liabilities.

          (vii)The  Borrowers  shall  grant the  Administrative  Agent,  for the
               ratable  benefit  of the  Lenders,  a first  priority,  perfected
               security interest in all property that the Borrowers acquire from
               the  seller in  connection  with  such  acquisition.

          (viii)The Borrowers  shall  certify  compliance  with  all   financial
               covenants contained in this Agreement, on a pro forma basis after
               giving  effect to the  Permitted  Acquisition,  using  historical
               Adjusted  Cash Flow of the  seller  for the most  recently  ended
               fiscal quarter prior to the date of the proposed acquisition,  as
               if the proposed acquisition had been consummated on the first day
               of such period.

     SECTION 10.5 Limitations on Mergers and Liquidation.  Merge, consolidate or
enter into any similar  combination with any other Person or liquidate,  wind-up
or dissolve itself (or suffer any liquidation or dissolution); provided, however
in the event that no Default then exists or would exist after  giving  effect to
any proposed transaction:

     (a) any  Wholly-Owned  Subsidiary of the Borrowers may merge with any other
Wholly-Owned  Subsidiary of the Borrowers;

     (b) any Wholly-Owned Subsidiary may merge into the Person such Wholly-Owned
Subsidiary was formed to acquire in connection with an acquisition  permitted by
Section 10.4(c);

     (c) any  Wholly-Owned  Subsidiary  of the  Borrowers  may wind-up  into the
Borrowers  or any other  Wholly-Owned  Subsidiary  of the  Borrowers  including,
without limitation, the contemplated dissolution of A.M. Fridays, Inc., provided
that the assets of A.M. Fridays, Inc. (if any) are transferred to one or more of
the  Borrowers,  under and subject to the existing  liens and security  interest
granted in favor of the Lenders; and

     (d) any of the Borrowers may merge with and into any other Person; provided
the  Borrower  is the  surviving  entity,  and the  Administrative  Agent's  and
Lenders'  positions  in the  Loan  Documents  and  Security  Documents  are  not
otherwise impaired.

                                      -55-
<PAGE>

     SECTION 10.6 Limitations on Sale of Assets.  Convey,  sell, lease,  assign,
transfer or otherwise  dispose of any of its property,  business or assets in an
amount  in  excess,  whether  individually  or in the  aggregate,  Five  Hundred
Thousand and 00/100 Dollars ($500,000.00)  (including,  without limitation,  the
sale of any  receivables  and  leasehold  interests  and any  sale-leaseback  or
similar transaction),  whether now owned or hereafter acquired,  except:

     (a) the sale of inventory in the ordinary course of business;

     (b) the sale of obsolete assets no longer used or usable in the business of
the Borrowers or any of their  Subsidiaries;  provided the aggregate fair market
value of the assets sold does not exceed (in addition to the $500,000 amount set
forth above in this Section 10.6)  Seventy-five and 00/100 Dollars  ($75,000.00)
during any Fiscal  Year;

     (c) the transfer of assets to the Borrowers or any Wholly-Owned  Subsidiary
of the  Borrowers  pursuant  to Section  10.5(c);  and

     (d) the sale or discount without recourse of accounts receivable arising in
the ordinary course of Borrowers'  business in connection with the compromise or
collection  thereof.

     SECTION 10.7 Limitations on Dividends and Distributions. Declare or pay any
dividends upon any of its capital stock;  purchase,  redeem, retire or otherwise
acquire,  directly or indirectly,  any shares of its capital stock,  or make any
distribution  of cash,  property  or assets  among the  holders of shares of its
capital stock, or make any change in its capital  structure;  provided that:

     (a) the Borrowers or any  Subsidiary may pay dividends in shares of its own
capital stock; and

     (b) any Subsidiary may pay cash dividends to the Borrowers.

     SECTION 10.8 Limitations on Exchange and Issuance of Capital Stock.  Issue,
sell or otherwise  dispose of any class or series of capital  stock that, by its
terms  or by  the  terms  of  any  security  into  which  it is  convertible  or
exchangeable, is, or upon the happening of an event or passage of time would be,
(a)  convertible  or  exchangeable  into Debt or (b)  required to be redeemed or
repurchased, including at the option of the holder, in whole or in part, or has,
or upon the happening of an event or passage of time would have, a redemption or
similar payment due.

     SECTION 10.9 Transactions with Affiliates.  Directly or indirectly (a) make
any loan or advance to, or purchase or assume any note or other obligation to or
from, any of its officers, directors, shareholders or other Affiliates, or to or
from any  member  of the  immediate  family of any of its  officers,  directors,
shareholders  or other  Affiliates,  or subcontract any operations to any of its
Affiliates or (b) enter into, or be a party to, any other  transaction  with any
of its  Affiliates,  except  pursuant  to  the  reasonable  requirements  of its
business  and upon fair and  reasonable  terms that are fully  disclosed  to and
approved in writing by the Required  Lenders prior to the  consummation  thereof
and are no less  favorable  to it than it would  obtain  in a  comparable  arm's
length  transaction  with a Person  not its  Affiliate.

                                      -56-
<PAGE>

     SECTION 10.10 Certain  Accounting  Changes.  Change its Fiscal Year end, or
make any change in its accounting  treatment and reporting  practices  except as
required  by  GAAP.

     SECTION 10.11  Amendments;  Payments and Prepayments of Subordinated  Debt.
Amend or modify (or permit the modification or amendment of) any of the terms or
provisions of any Subordinated Debt, or cancel or forgive, make any voluntary or
optional  payment or  prepayment  on, or redeem or acquire for value  (including
without  limitation by way of depositing  with any trustee with respect  thereto
money  or  securities  before  due for the  purpose  of  paying  when  due)  any
Subordinated Debt.

     SECTION  10.12  Restrictive  Agreements.  Enter  into any  agreement  which
contains any negative pledge on assets, or which restricts,  limits or otherwise
encumbers  Borrowers  ability  to incur  Liens on or with  respect to any of its
assets or properties.

     SECTION 10.13  Capital  Expenditures.  The  Borrowers  shall not during any
Fiscal Year, on a Consolidated basis, make any Capital Expenditures, whether for
cash,  credit,  exchange  or  on  any  other  terms,  to  the  extent  that  the
consideration  for such  Capital  Expenditures  is  greater  than 1.0  times the
Borrowers' annual depreciation expense.

                                   ARTICLE XI

                              DEFAULT AND REMEDIES

     SECTION 11.1 Events of Default.  Each of the following shall  constitute an
Event of  Default,  whatever  the reason for such event and  whether it shall be
voluntary or involuntary,  or be effected by operation of law or pursuant to any
judgment  or  order  of any  court  or any  order,  rule  or  regulation  of any
Governmental  Authority  or  otherwise:

     (a) Default in Payment of Principal of Loans and Reimbursement Obligations.
The  Borrowers  shall  default in any payment of principal of any Loan,  Note or
Reimbursement  Obligation  when and as due  (whether at  maturity,  by reason of
acceleration  or  otherwise).

     (b) Other Payment Default.  The Borrowers shall default in the payment when
and as due (whether at maturity,  by reason of  acceleration  or  otherwise)  of
interest on any Loan,  Note or  Reimbursement  Obligation  or the payment of any
other  Obligation,  and such default  shall  continue  unremedied  for three (3)
Business Days.

     (c) Misrepresentation.  Any representation or warranty made or deemed to be
made by the Borrowers or any of their  Subsidiaries  under this  Agreement,  any
Loan Document or any amendment hereto or thereto (including  representations and
warranties  that, by operation of this  Agreement,  are deemed to be re-affirmed
upon the occurrence of certain events and  conditions),  shall at any time prove
to have been incorrect or misleading in any material respect when made or deemed
made.

                                      -57-
<PAGE>

     (d)  Default in  Performance  of Certain  Covenants.  The  Borrowers  shall
default in the performance or observance of any covenant or agreement  contained
in Section  7.5(e) or Articles VIII, IX or X of this  Agreement.

     (e) Default in Performance of Other Covenants and Conditions. The Borrowers
or any Subsidiary  thereof shall default in the performance or observance of any
term,  covenant,  condition or agreement contained in this Agreement (other than
as  specifically  provided for otherwise in this Section 11.1) or any other Loan
Document  and such  default  shall  continue for a period of ten (10) days after
written  notice  thereof has been given to the  Borrowers by the  Administrative
Agent,  except with respect to the  covenants set forth in Sections 7.1 and 7.2,
with respect to which such default need only be  continuing  for a period of ten
(10) days after  written  notice  thereof has been given to the Borrowers by the
Administrative  Agent.

     (f)  Hedging  Agreement.  Any  termination  payment  shall  be  due  by the
Borrowers  under any Hedging  Agreement,  after the expiration of any notice and
cure period,  if any, and such amount is not paid within three (3) Business Days
of the due date thereof.

     (g) Debt  Cross-Default.  The Borrowers or any of their Subsidiaries shall:
(i)  default  in  the  payment  of  any  Debt  (other  than  the  Notes  or  any
Reimbursement  Obligation) the aggregate  outstanding amount of which Debt is in
excess of $50,000 beyond the period of grace if any,  provided in the instrument
or  agreement  under  which  such  Debt  was  created,  or (ii)  default  in the
observance or  performance of any other  agreement or condition  relating to any
Debt  (other  than the  Notes or any  Reimbursement  Obligation)  the  aggregate
outstanding  amount of which Debt is in excess of $100,000 or  contained  in any
instrument or agreement  evidencing,  securing or relating  thereto or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause,  or to permit the holder or holders of such Debt (or a
trustee or agent on behalf of such holder or holders) to cause,  with the giving
of notice if required, any such Debt to become due prior to its stated maturity.

     (h) Other Cross-Defaults.  The Borrowers or any of their Subsidiaries shall
default in the payment when due, or in the  performance  or  observance,  of any
obligation  or  condition  of any Material  Contract;  provided and except,  the
foregoing  shall not apply so long as the existence of any such default is being
contested  by the  Borrowers  or such  Subsidiary  in good faith by  appropriate
proceedings diligently conducted,  and adequate reserves in respect thereof have
been  established on the books of the Borrowers or such Subsidiary to the extent
required by GAAP.

     (i) Change in Control. There shall occur a Change in Control.

     (j)  Voluntary  Bankruptcy  Proceeding.  The  Borrowers  or any  Subsidiary
thereof shall (i) commence a voluntary  case under the federal  bankruptcy  laws
(as now or hereafter in effect),  (ii) file a petition seeking to take advantage
of any other  laws,  domestic or foreign,  relating to  bankruptcy,  insolvency,
reorganization, winding up or composition for adjustment of debts, (iii) consent
to or fail to contest  in a timely and  appropriate  manner any  petition  filed
against it in an involuntary case under such bankruptcy laws or other laws, (iv)
apply for or consent to, or fail to contest in a timely and appropriate  manner,
the  appointment  of, or the taking of  possession  by, a  receiver,  custodian,

                                      -58-

<PAGE>

trustee,  or  liquidator  of itself or of a  substantial  part of its  property,
domestic or foreign, (v) admit in writing its inability to pay its debts as they
become due,  (vi) make a general  assignment  for the benefit of  creditors,  or
(vii) take any  corporate  action  for the  purpose  of  authorizing  any of the
foregoing.

     (k) Involuntary Bankruptcy Proceeding.  A case or other proceeding shall be
commenced  against  the  Borrowers  or any  Subsidiary  thereof  in any court of
competent  jurisdiction seeking (i) relief under the federal bankruptcy laws (as
now or  hereafter  in  effect) or under any other  laws,  domestic  or  foreign,
relating to bankruptcy, insolvency,  reorganization, winding up or adjustment of
debts, or (ii) the appointment of a trustee, receiver, custodian,  liquidator or
the  like  for  the  Borrowers  or any  Subsidiary  thereof  or  for  all or any
substantial part of their respective assets,  domestic or foreign, and such case
or proceeding  shall  continue  without  dismissal or stay for a period of sixty
(60) consecutive days, or an order granting the relief requested in such case or
proceeding  (including,  but not  limited  to, an order for  relief  under  such
federal bankruptcy laws) shall be entered.

     (l) Failure of Agreements.  Any provision of this Agreement or of any other
Loan  Document  shall  for any  reason  cease to be  valid  and  binding  on the
Borrowers  or  Subsidiary  party  thereto or any such  Person  shall so state in
writing, or this Agreement or any other Loan Document shall for any reason cease
to create a valid and perfected first priority Lien on, or security interest in,
any of the collateral  purported to be covered thereby,  in each case other than
in accordance with the express terms hereof or thereof.

     (m) Termination  Event. The occurrence of any of the following events:  (i)
the Borrowers or any ERISA  Affiliate fails to make full payment when due of all
amounts  which,  under the  provisions of any Pension Plan or Section 412 of the
Code, the Borrowers or any ERISA  Affiliate is required to pay as  contributions
thereto,  (ii) an accumulated funding deficiency in excess of $250,000 occurs or
exists,  whether or not  waived,  with  respect  to any  Pension  Plan,  (iii) a
Termination  Event or (iv) the  Borrowers  or any ERISA  Affiliate  as employers
under one or more  Multiemployer  Plans,  makes a complete or partial withdrawal
from any such  Multiemployer  Plan and the plan  sponsor  of such  Multiemployer
Plans  notifies  such  withdrawing  employer  that such  employer has incurred a
withdrawal  liability  requiring payments in an amount exceeding  $250,000.

     (n) Judgment. A judgment or order for the payment of money which causes the
aggregate  amount of all such  judgments  to exceed  $200,000 in any Fiscal Year
shall be entered against the Borrowers or any of their Subsidiaries by any court
and such judgment or order shall continue without discharge or stay for a period
of thirty (30) days.

     (o) Loss of Revenue.  Should the Borrowers lose any broker,  distributor or
customer which,  for the most recent twelve month period (measured back from the
end of the most recent  calendar  month)  accounted for fifteen percent (15%) or
more of the Borrowers'  gross revenue for such period unless,  within 45 days of
receiving notice or obtaining knowledge of such termination, the Borrowers shall
provide to the  Administrative  Agent projections  (satisfactory to the Lenders)
indicating  that such  lost  revenues  will not cause or result in a Default  or
Event of Default (it being understood that such projections shall include, among
other items, a compliance  certificate  showing the  anticipated  effect of such
loss on the  Borrowers'  revenues,  and  such  projections  contain  assumptions
satisfactory to the Lenders).

                                      -59-
<PAGE>

     SECTION 11.2 Remedies. Upon the occurrence of an Event of Default, with the
consent of the  Required  Lenders,  the  Administrative  Agent may,  or upon the
request of the Required Lenders,  the  Administrative  Agent shall, by notice to
the  Borrowers:

     (a) Acceleration,  Termination of Facilities.  Declare the principal of and
interest on the Loans,  the Notes,  the  Reimbursement  Obligations  at the time
outstanding, and all other amounts owed to the Lenders and to the Administrative
Agent under this  Agreement or any of the other Loan  Documents  (other than any
Hedging Agreement) (including, without limitation, all L/C Obligations,  whether
or not the  beneficiaries of the then  outstanding  Letters of Credit shall have
presented the documents  required  thereunder) and all other Obligations  (other
than  obligations  owing under any Hedging  Agreement),  to be forthwith due and
payable,  whereupon the same shall  immediately  become due and payable  without
presentment,  demand,  protest  or other  notice of any  kind,  all of which are
expressly waived,  anything in this Agreement or the other Loan Documents to the
contrary notwithstanding, and terminate the Credit Facility and any right of the
Borrowers to request borrowings or Letters of Credit thereunder;  provided, that
upon the occurrence of an Event of Default  specified in Section 11.1(j) or (k),
the Credit Facility shall be automatically terminated and all Obligations (other
than obligations owing under any Hedging Agreement) shall  automatically  become
due and  payable.

     (b) Letters of Credit. With respect to all Letters of Credit which have not
been  presented  for  honor  at the  time  of an  acceleration  pursuant  to the
preceding  paragraph,  require the  Borrowers  at such time to deposit in a cash
collateral  account  opened by the  Administrative  Agent an amount equal to the
aggregate unexpired amount of such Letters of Credit, which are outstanding, but
have not yet been drawn on or presented  for payment.  Amounts held in such cash
collateral account shall be applied by the  Administrative  Agent to the payment
of drafts drawn under such  Letters of Credit,  and the unused  portion  thereof
after all such Letters of Credit shall have expired or been fully drawn upon, if
any, shall be applied to repay the other Obligations.  After all such Letters of
Credit shall have expired or been fully drawn upon, the Reimbursement Obligation
shall have been  satisfied,  and all other  Obligations  shall have been paid in
full, the balance,  if any, in such cash collateral account shall be returned to
the Borrowers.

     (c) Rights of  Collection.  Exercise  on behalf of the  Lenders  all of its
other rights and remedies  under this  Agreement,  the other Loan  Documents and
Applicable Law, in order to satisfy all of the Borrowers'  Obligations.

     SECTION 11.3 Default Remedies.  Upon the occurrence of a Default,  which is
not also an Event of  Default,  and until the  Borrowers  cure such  Default (if
permitted),   the  Administrative  Agent  may,  in  its  sole  discretion:   (i)
immediately  suspend  Borrowers' rights under this Agreement to borrow under any
Note or apply for the  issuance  of any Letter of Credit or other  Extension  of
Credit,  and to the  extent  that  the  Borrower  has  previously  submitted  an
Application,  yet the Issuing  Lender has not  presented the Letter of Credit to
the applicable  beneficiary for the  beneficiary's  account,  the Issuing Lender
need not present such Letter of Credit to the beneficiary  until such Default is
cured, if permitted, and (ii) immediately suspend Borrowers' rights to request a
continuation or conversion of any interest rate. The Administrative  Agent shall
be entitled to exercise such remedies without  presentment,  demand,  protest or
other notice of any kind to Borrowers, all of which are hereby expressly waived.

                                      -60-
<PAGE>

     SECTION  11.4  Rights  and  Remedies  Cumulative;   Non-Waiver;   Etc.  The
enumeration  of the  rights and  remedies  of the  Administrative  Agent and the
Lenders set forth in this  Agreement  is not intended to be  exhaustive  and the
exercise  by the  Administrative  Agent and the  Lenders  of any right or remedy
shall not preclude  the  exercise of any other rights or remedies,  all of which
shall be  cumulative,  and shall be in  addition  to any  other  right or remedy
allowed  hereunder,  under the Loan Documents or that may now or hereafter exist
in law or in equity or by suit or otherwise.  No delay or failure to take action
on the part of the  Administrative  Agent or any Lender in exercising any right,
power or privilege  shall operate as a waiver  thereof,  nor shall any single or
partial  exercise  of any such right,  power or  privilege  preclude  another or
further exercise thereof or the exercise of any other right,  power or privilege
or shall be  construed  to be a waiver  of any  Event of  Default.  No course of
dealing between the Borrowers, the Administrative Agent and the Lenders or their
respective agents or employees shall be effective to change, modify or discharge
any  provision  of this  Agreement  or any of the  other  Loan  Documents  or to
constitute a waiver of any Event of Default.

                                  ARTICLE XII

                            THE ADMINISTRATIVE AGENT

     SECTION 12.1 Appointment. Each of the Lenders hereby irrevocably designates
and appoints  First Union as  Administrative  Agent of such  Lenders  under this
Agreement and the other Loan  Documents for the term hereof and each such Lender
irrevocably  authorizes First Union as Administrative  Agent for such Lender, to
take such action on its behalf under the  provisions  of this  Agreement and the
other Loan  Documents and to exercise such powers and perform such duties as are
expressly  delegated to the Administrative  Agent by the terms of this Agreement
and such other Loan Documents  together with such other powers as are reasonably
incidental thereto. Any provision elsewhere in this Agreement or such other Loan
Documents to the contrary  notwithstanding,  the Administrative  Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
therein,  or  any  fiduciary  relationship  with  any  Lender,  and  no  implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this  Agreement  or the other Loan  Documents  or  otherwise  exist
against the Administrative  Agent. Any reference to the Administrative  Agent in
this Agreement  shall be deemed to refer to the  Administrative  Agent solely in
its  capacity  as  Administrative  Agent  and not in its  capacity  as a Lender.

     SECTION 12.2 Delegation of Duties. The Administrative Agent may execute any
of its respective duties under this Agreement and the other Loan Documents by or
through agents or  attorneys-in-fact  and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not  be  responsible   for  the  negligence  or  misconduct  of  any  agents  or
attorneys-in-fact  selected by the  Administrative  Agent with reasonable  care;
provided,  however,  that the  Administrative  Agent shall be responsible if the
Borrowers  provide  prompt  written  notice to the  Administrative  Agent of any
dereliction  in  the  performance  of  any  such  delegated   duties  which  the
Administrative  Agent,  in its sole  discretion,  deems to be curable,  and with
respect to which the  Administrative  Agent fails to use  reasonable  efforts to
cure  such  dereliction  by any such  agent or  attorney-in-fact.

                                      -61-
<PAGE>

     SECTION 12.3 Exculpatory  Provisions.  Neither the Administrative Agent nor
any  of  its  officers,   directors,   employees,   agents,   attorneys-in-fact,
Subsidiaries or Affiliates  shall be (a) liable for any action lawfully taken or
omitted  to be  taken by it or such  Person  under or in  connection  with  this
Agreement or the other Loan Documents  (except for actions  occasioned solely by
its or such Person's or entities' own gross  negligence or willful  misconduct),
or (b)  responsible  in any  manner  to any of the  Lenders  for  any  recitals,
statements,  representations or warranties made by the Borrowers or any of their
Subsidiaries or of any officer thereof,  whether  contained in this Agreement or
the other Loan  Documents  or in any  certificate,  report,  statement  or other
document referred to or provided for in, or received by the Administrative Agent
under or in connection with this Agreement or the other Loan Documents,  nor for
the value, validity, effectiveness,  genuineness,  enforceability or sufficiency
of this  Agreement  or the other  Loan  Documents,  nor for any  failure  of the
Borrowers or any of their  Subsidiaries to perform its obligations  hereunder or
thereunder.  Outside of  Administrative  Agent's general duties  hereunder,  and
excepting  Administrative  Agent's gross  negligence or willful  misconduct (and
that of its employees, agents, Affiliates,  Subsidiaries, officers and attorneys
in fact),  the  Administrative  Agent shall not be under any  obligation  to any
Lender to ascertain or to inquire as to the  observance or performance of any of
the agreements contained in, or conditions of this Agreement,  or to inspect the
properties, books or records of the Borrowers or any of their Subsidiaries.

     SECTION 12.4 Reliance by the Administrative Agent. The Administrative Agent
shall be entitled to rely,  and shall be fully  protected  in relying,  upon any
note, writing,  resolution,  notice, consent,  certificate,  affidavit,  letter,
cablegram,  telegram,  telecopy, telex or teletype message,  statement, order or
other  document  or  conversation  reasonably  believed  by it to be genuine and
correct and to have been  signed,  sent or made by the proper  Person or Persons
and upon advice and statements of legal counsel (including,  without limitation,
counsel to the Borrowers), independent accountants and other experts selected by
the Administrative  Agent. The Administrative Agent may deem and treat the payee
of any Note as the owner  thereof for all  purposes  unless such Note shall have
been  transferred in accordance  with Section l3.10 hereof.  The  Administrative
Agent shall be fully  justified  in failing or refusing to take any action under
this  Agreement and the other Loan  Documents  unless it shall first receive the
advice or concurrence of the Required Lenders as the Administrative  Agent deems
appropriate,  or shall first be indemnified to its  satisfaction  by the Lenders
against  any  and  all   liability   and  expense   which  may  be  incurred  by
Administrative Agent's taking or continuing any such action; provided and except
the Administrative Agent shall not be indemnified for Administrative Agent's own
gross negligence or willful  misconduct.  The Administrative  Agent shall in all
cases be fully  protected in acting or in  refraining  from  acting,  under this
Agreement  and the Notes in accordance  with a request of the Required  Lenders,
and such request and any action taken or failure to act pursuant  thereto  shall
be binding upon all the Lenders and all future holders of the Notes.

     SECTION  12.5  Notice of  Default.  The  Administrative  Agent shall not be
deemed to have  knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless it has received notice from a Lender, the Borrowers, or
any third party  submitting  reports and statements  pursuant to this Agreement,
referring  to this  Agreement,  describing  such Default or Event of Default and
stating  that such  notice  is a  "notice  of  default."  In the event  that the
Administrative  Agent  receives  such a notice,  it shall  promptly  give notice

                                      -62-

<PAGE>

thereof to the  Lenders.  The  Administrative  Agent shall take such action with
respect to such Default or Event of Default as shall be  reasonably  directed by
the Required Lenders;  provided further that unless and until the Administrative
Agent shall have received such  directions,  the  Administrative  Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such  Default or Event of Default as it shall deem  necessary or
advisable,  or in the best  interests of the  Lenders,  to the extent that other
provisions of this Agreement  expressly require that any such action be taken or
not be taken  only with the  consent  and  authorization  or the  request of the
Lenders or Required Lenders notwithstanding.

     SECTION 12.6  Non-Reliance on the  Administrative  Agent and Other Lenders.
Each Lender expressly acknowledges that neither the Administrative Agent nor any
of its respective officers,  directors,  employees,  agents,  attorneys-in-fact,
Subsidiaries or Affiliates has made any  representations or warranties to it and
that no act by the Administrative Agent hereinafter taken,  including any review
of the affairs of the Borrowers or any of their Subsidiaries, shall be deemed to
constitute any  representation  or warranty by the  Administrative  Agent to any
Lender.  Each  Lender  represents  to the  Administrative  Agent  that  it  has,
independently  and without reliance upon the  Administrative  Agent or any other
Lender,  and based on such  documents and  information as such Lender has deemed
appropriate,  made its own  appraisal of and  investigation  into the  business,
operations,  property, financial and other condition and creditworthiness of the
Borrowers and their Subsidiaries and made its own decision to make the Loans and
issue or  participate  in  Letters  of  Credit  hereunder  and  enter  into this
Agreement.  Each Lender also represents that it will,  independently and without
reliance upon the  Administrative  Agent or any other Lender,  and based on such
documents and information as it shall deem appropriate at the time,  continue to
make its own credit  analysis,  appraisals and decisions in taking or not taking
action  under  this  Agreement  and the other Loan  Documents,  and to make such
investigation  as it  deems  necessary  to  inform  itself  as to the  business,
operations,  property, financial and other condition and creditworthiness of the
Borrowers  and  their  Subsidiaries.  Except  for  notices,  reports  and  other
documents   expressly   required  to  be   furnished   to  the  Lenders  by  the
Administrative   Agent   hereunder   or  by  the  other  Loan   Documents,   the
Administrative  Agent shall not have any duty or  responsibility  to provide any
Lender with any credit or other information concerning the business, operations,
property,  financial and other condition or creditworthiness of the Borrowers or
any of their Subsidiaries, which information may come into the possession of the
Administrative  Agent or any of its respective officers,  directors,  employees,
agents,   attorneys-in-fact,    Subsidiaries   or   Affiliates.

     SECTION  12.7   Indemnification.   The  Lenders   agree  to  indemnify  the
Administrative  Agent in its capacity as such and (to the extent not  reimbursed
by the Borrowers and without limiting the obligation of the Borrowers to do so),
ratably  according to the respective  amounts of their  Commitment  Percentages,
from  and  against  any  and  all  liabilities,  obligations,  losses,  damages,
penalties,  actions,  judgments,  suits,  costs,  expenses,  attorneys  fees, or
disbursements  of any  kind  whatsoever  which  may at any time be  imposed  on,
incurred by or asserted against the Administrative  Agent in any way relating to
or arising out of this Agreement or the other Loan  Documents,  or any documents
contemplated   by  or  referred  to  herein  or  therein  or  the   transactions
contemplated   hereby  or  thereby  or  any  action  taken  or  omitted  by  the
Administrative Agent under or in connection with any of the foregoing,  provided
that  no  Lender  shall  be  liable  for  the  payment  of any  portion  of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,

                                      -63-

<PAGE>

costs,  expenses  or  disbursements  resulting  solely  from the  Administrative
Agent's bad faith,  gross  negligence or willful  misconduct.  The agreements in
this  Section  12.7 shall  survive the  termination  of this  Agreement  and the
payment of the Notes, any Reimbursement Obligation and all other amounts payable
hereunder.

     SECTION  12.8 The  Administrative  Agent in Its  Individual  Capacity.  The
Administrative  Agent and its  respective  Subsidiaries  and Affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
the  Borrowers  as though the  Administrative  Agent were not an  Administrative
Agent  hereunder.  With  respect  to any Loans  made or  renewed by it, any Note
issued to it, and any Letter of Credit  issued by it or  participated  in by it,
the  Administrative  Agent  shall have the same  rights  and  powers  under this
Agreement  and the other Loan  Documents as any Lender and may exercise the same
as though it were not an  Administrative  Agent,  and the  terms  "'Lender"  and
"Lenders"  shall include the  Administrative  Agent in its individual  capacity.

     SECTION  12.9   Resignation   of  the   Administrative   Agent:   Successor
Administrative  Agent.  Subject to the appointment and acceptance of a successor
as provided  below,  the  Administrative  Agent may resign at any time by giving
notice thereof to the Lenders and the Borrowers. Upon any such resignation,  the
Required  Lenders  shall  have the right to appoint a  successor  Administrative
Agent,  which  successor  shall have  minimum  capital  and  surplus of at least
$500,000,000.  If no successor Administrative Agent shall have been so appointed
by the Required Lenders and shall have accepted such  appointment  within thirty
(30) days after the Administrative Agent's giving of notice of resignation, then
the  Administrative  Agent may,  on behalf of the  Lenders,  appoint a successor
Administrative  Agent, which successor shall have minimum capital and surplus of
at least $500,000,000.  Upon the acceptance of any appointment as Administrative
Agent   hereunder  by  a  successor   Administrative   Agent,   such   successor
Administrative Agent shall thereupon  succeed to and  become  vested  with all
rights, powers, privileges and duties of the retiring, Administrative Agent, and
the  retiring  Administrative  Agent  shall be  discharged  from its  duties and
obligations  hereunder.  After any retiring  Administrative  Agent's resignation
hereunder as  Administrative  Agent,  the  provisions of this Section 12.9 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 Administrative Agent.

                                      -64-
<PAGE>

                                  ARTICLE XIII

                                  MISCELLANEOUS

     SECTION 13.1 Notices.

     (a)  Method  of  Communication.   Except  as  otherwise  provided  in  this
Agreement,  all notices and communications  hereunder shall be in writing, or by
telephone  subsequently  confirmed in writing.  Any notice shall be effective if
delivered by hand delivery or sent via telecopy,  recognized  overnight  courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party  hereto (i) on the date of delivery if  delivered by hand or
sent by telecopy,  (ii) on the next Business Day if sent by recognized overnight
courier  service and (iii) on the third  Business Day following the date sent by
certified mail, return receipt requested.

     (b) Addresses for Notices.  Notices to any party shall be sent to it at the
following addresses,  or any other address as to which all the other parties are
notified in writing.

          If to the Borrowers:    Vermont Pure Springs,  Inc.
                                  Catamount Industrial Park
                                  Route 66, P.O. Box C
                                  Randolph Center, VT 05060
                                  Attention:  Bruce MacDonald,
                                  Chief Financial  Officer
                                  Telephone No.: (802) 728-3600
                                  Telecopy No.:(802) 728-4614

          With copies to:         Ledgewood Law Firm
                                  521 Locust Street
                                  Philadelphia, PA 19102
                                  Attention:  Kevin F. Berry, Esquire
                                  Telephone No.:  (215) 731-9450
                                  Telecopy No.:  (215) 735-2513

          If to First Union as
          Administrative Agent:   First Union National Bank
                                  PA 4848
                                  1339 Chestnut Street
                                  Philadelphia, PA  19107
                                  Telephone No.: (215) 786-2161
                                  Telecopy No.: (215) 786-8448
                                  Attention:  David W. Mills, Vice President

          With copies to:         Stradley, Ronon, Stevens & Young, LLP
                                  2600 One Commerce Square
                                  Philadelphia, PA  19103
                                  Attention: Paul A. Patterson, Esquire
                                  Telephone No.: (215) 564-8000
                                  Telecopy No.: (215) 564-8120

                                      -65-
<PAGE>

          If to any Lender:       To the Address set forth on Schedule 1 hereto

     (c)  Administrative   Agent's  Office.  The  Administrative   Agent  hereby
designates its office located at the address set forth above,  or any subsequent
office which shall have been specified for such purpose by written notice to the
Borrowers  and Lenders as provided  for herein,  as the  Administrative  Agent's
Office  referred to herein,  to which payments are to be made and at which Loans
will be disbursed and Letters of Credit issued.

     SECTION  13.2  Expenses;   Indemnity.   The  Borrowers  will  (a)  pay  all
out-of-pocket  expenses of the  Administrative  Agent in connection with (i) the
preparation,  execution,  negotiation  and delivery of this  Agreement  and each
other  Loan  Document,  whenever  the same  shall  be  executed  and  delivered,
including  without  limitation all  out-of-pocket  syndication and due diligence
expenses and reasonable fees and disbursements of counsel for the Administrative
Agent and (ii) the preparation,  execution and delivery of any waiver, amendment
or consent by the Administrative Agent or the Lenders relating to this Agreement
or any other Loan Document,  including,  without limitation  reasonable fees and
disbursements  of counsel for the  Administrative  Agent, (b) pay all reasonable
out-of-pocket  expenses of the  Administrative  Agent and each  Lender  actually
incurred in connection with the administration and enforcement of any rights and
remedies of the Administrative Agent and Lenders under this Agreement, including
consulting with appraisers,  accountants, engineers, attorneys and other Persons
concerning  the  nature,   scope  or  value  of  any  right  or  remedy  of  the
Administrative Agent or any Lender hereunder or under any other Loan Document or
any factual  matters in  connection  therewith,  which  expenses  shall  include
without  limitation the reasonable fees and  disbursements of such Persons,  and
(c)  defend,  indemnify  and hold  harmless  the  Administrative  Agent  and the
Lenders,  and their respective  parents,  Subsidiaries,  Affiliates,  employees,
agents, officers and directors, from and against any losses,  penalties,  fines,
liabilities,  settlements  damages,  costs and  expenses,  suffered  by any such
Person  in  connection  with  any  claim,  investigation,  litigation  or  other
proceeding  (whether  or not the  Administrative  Agent or any Lender is a party
thereto) and the prosecution and defense  thereof,  arising out of or in any way
connected  with the Agreement,  any other Loan Document or the Loans,  including
without  limitation  reasonable  attorney's an consultant's  fees, except to the
extent that any of the foregoing  directly  result from the gross  negligence or
willful misconduct of the party seeking indemnification  therefor.

     SECTION 13.3  Set-off.  In  addition to any rights now or hereafter granted
under  Applicable Law and not by way of limitation of any such rights,  upon and
after the occurrence of any Event of Default and during the continuance thereof,
the  Lenders and any  assignee or  participant  of a Lender in  accordance  with
Section 13.10 are hereby authorized by the Borrowers at any time or from time to
time,  without  notice to the Borrowers or to any other Person,  any such notice
being hereby  expressly  waived,  to set off and to appropriate and to apply any
and all deposits (general or special, time or demand, including, but not limited
to,  indebtedness  evidenced  by  certificates  of deposit,  whether  matured or
unmatured) and any other  indebtedness at any time held or owing by the Lenders,
or any such assignee or  participant  to or for the credit or the account of the
Borrowers,  against and on account of the Obligations irrespective of whether or
not (a) the Lenders  shall have made any demand  under this  Agreement or any of
the other Loan Documents or (b) the Administrative Agent shall have declared any
or all of the Obligations to be due and payable as permitted by Section 11.2 and
although such Obligations shall be contingent or unmatured.  The  Administrative
Agent and the  Lenders  shall incur no  penalties,  nor be  responsible  for the

                                      -66-

<PAGE>

payment  of any  fees,  costs,  expenses  or  "breakage"  costs  on  account  of
exercising  such  remedies  and  such  setoff;  the  foregoing  being  the  sole
responsibility of the Borrowers. SECTION 13.4 Governing Law. This Agreement, the
Notes  and the  other  Loan  Documents,  unless  otherwise  expressly  set forth
therein,  shall be governed by,  construed and enforced in  accordance  with the
laws of the Commonwealth of Pennsylvania,  without reference to the conflicts or
choice of law principles thereof.

     SECTION 13.5 Consent to  Jurisdiction.  The  Borrowers  hereby  irrevocably
consent to the personal  jurisdiction of the state and federal courts located in
Philadelphia  County,  Pennsylvania,  in any action,  claim or other  proceeding
arising out of any dispute in connection with this Agreement,  the Notes and the
other Loan Documents, any rights or obligations hereunder or thereunder,  or the
performance of such rights and  obligations.  The Borrowers  hereby  irrevocably
consent  to the  service of a summons  and  complaint  and other  process in any
action, claim or proceeding brought by the Administrative Agent or any Lender in
connection  with this  Agreement,  the Notes or the other  Loan  Documents,  any
rights or obligations hereunder or thereunder, or the performance of such rights
and  obligations,  on behalf of  themselves  or their  property,  in the  manner
specified in Section  13.1.  Nothing in this Section 13.5 shall affect the right
of the  Administrative  Agent or any Lender to serve legal  process in any other
manner  permitted by  Applicable  Law or affect the right of the  Administrative
Agent or any Lender to bring any action or  proceeding  against the Borrowers or
their properties in the courts of any other jurisdictions.

     SECTION  13.6  Binding  Arbitration;  Waiver  of Jury  Trial.

     (a) Binding  Arbitration.  Upon demand of any party, whether made before or
after institution of any judicial proceeding,  any dispute, claim or controversy
arising  out of,  connected  with or  relating  to the Notes or any  other  Loan
Documents ("Disputes"),  between or among parties to the Notes or any other Loan
Document,  all  Disputes  shall be resolved by binding  arbitration  as provided
herein. Institution of a judicial proceeding by a party does not waive the right
of that party to demand  arbitration  hereunder.  Disputes may include,  without
limitation, tort claims, counterclaims,  claims brought as class actions, claims
arising  from Loan  Documents  executed in the future,  disputes as to whether a
matter is subject to arbitration,  or claims  concerning any aspect of the past,
present  or  future  relationships  arising  out of or  connected  with the Loan
Documents.  Arbitration  shall be conducted under and governed by the Commercial
Financial Disputes  Arbitration Rules (the "Arbitration  Rules") of the American
Arbitration  Association and Title 9 of the U.S. Code. All arbitration  hearings
shall be conducted in Philadelphia,  Pennsylvania.  The expedited procedures set
forth in Rule 51, et seq. of the Arbitration Rules shall be applicable to claims
of less than  $1,000,000.  All applicable  statutes of limitation shall apply to
any  Dispute.  A  judgment  upon the award may be  entered  in any court  having
jurisdiction.  Any arbitration  proceeding demanded hereunder shall begin within
ninety  (90) days  after  such  demand  thereof  and shall be  concluded  within
one-hundred and twenty (120) days after such demand.  These time limitations may
not be extended  unless a party hereto shows cause for  extension  and then such
extension  shall not exceed a total of sixty (60) days. The panel from which all
arbitrators  are selected shall be comprised of licensed  attorneys.  The single
arbitrator  selected for expedited  procedure  shall be a retired judge from the

                                      -67-

<PAGE>

highest court of general jurisdiction,  state or federal, of the state where the
hearing  will be  conducted.  The  parties  hereto do not  waive any  applicable
Federal or state substantive law except as provided herein.  Notwithstanding the
foregoing,  this  paragraph  shall not apply to any Hedging  Agreement that is a
Loan Document.

     (b) Jury Trial.  THE  ADMINISTRATIVE  AGENT,  EACH LENDER AND THE BORROWERS
HEREBY ACKNOWLEDGE THAT BY AGREEING TO BINDING ARBITRATION THEY HAVE IRREVOCABLY
WAIVED THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM
OR  OTHER  PROCEEDING  ARISING  OUT OF  ANY  DISPUTE  IN  CONNECTION  WITH  THIS
AGREEMENT,  THE NOTES OR THE OTHER LOAN  DOCUMENTS,  ANY  RIGHTS OR  OBLIGATIONS
HEREUNDER OR THEREUNDER, THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS, AND THE
INTERPRETATION  THEREOF.

     (c) Preservation of Certain  Remedies.  The preceding  binding  arbitration
provisions,  notwithstanding, the parties hereto and to the other Loan Documents
preserve,  without diminution,  certain remedies that such Persons may employ or
exercise  freely,  either alone, in conjunction  with or during a Dispute.  Each
such Person shall have and hereby  reserves the right to proceed in any court of
proper  jurisdiction  or by self help to exercise  or  prosecute  the  following
remedies:  (i) all rights to foreclose  against any real or personal property or
other  Collateral  or security by exercising a power of sale granted in the Loan
Documents or under applicable law or by judicial  foreclosure and sale, (ii) all
rights of self help including peaceful  occupation of property and collection of
rents, set off, and peaceful possession of property, (iii) obtaining provisional
or ancillary remedies including injunctive relief,  sequestration,  garnishment,
attachment,  appointment  of receiver  and in filing an  involuntary  bankruptcy
proceeding,  and (iv) when  applicable,  a judgment by  confession  of judgment.
Preservation  of these  remedies  does not limit the power of an  arbitrator  to
grant similar  remedies  that may be requested by a party in a Dispute.  SECTION

     13.7 Reversal of Payments.  To the extent the  Borrowers  make a payment or
payments to the Administrative  Agent for the ratable benefit of the Lenders, or
the  Administrative  Agent  receives  any payment or proceeds of the  collateral
which  payments or proceeds or any part  thereof are  subsequently  invalidated,
declared to be  fraudulent  or  preferential,  set aside  and/or  required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state
or federal  law,  common law or  equitable  cause,  then,  to the extent of such
payment or proceeds  repaid,  the  Obligations  or part  thereof  intended to be
satisfied  shall be revived  and  continued  in full force and effect as if such
payment or proceeds had not been received by the Administrative  Agent.

                                      -68-

<PAGE>

     SECTION 13.8 Injunctive Relief, Punitive Damages.

     (a) The  Borrowers  recognize  that,  in the  event the  Borrowers  fail to
perform,  observe or discharge any of its obligations or liabilities  under this
Agreement,  any remedy of law may prove to be inadequate  relief to the Lenders.
Therefore,  the Borrowers agree that the Lenders, at the Lenders' option,  shall
be  entitled  to  temporary  and  permanent  injunctive  relief in any such case
without the necessity of proving actual damages.

     (b)  The  Administrative   Agent,  Lenders  and  Borrowers  (on  behalf  of
themselves and their Subsidiaries) hereby agree that no such Person shall have a
remedy of  punitive,  consequential,  special or exemplary  damages  against any
other party to a Loan  Document and each such Person  hereby waives any right or
claim to punitive, consequential, special or exemplary damages that they may now
have or may arise in the future in  connection  with any  Dispute,  whether such
Dispute is resolved through arbitration or judicially.

     SECTION 13.9 Accounting Matters. All financial and accounting calculations,
measurements and  computations  made for any purpose relating to this Agreement,
including, without limitation, all computations utilized by the Borrowers or any
Subsidiary  thereof to determine  compliance with any covenant contained herein,
shall, except as otherwise  expressly  contemplated hereby or unless there is an
express written direction by the Administrative  Agent to the contrary agreed to
by the  Borrowers,  be  performed  in  accordance  with GAAP as in effect on the
Closing  Date.  In the event  that  changes  in GAAP  shall be  mandated  by the
Financial  Accounting  Standards  Board,  or  any  similar  accounting  body  of
comparable standing,  or shall be recommended by the Borrowers' certified public
accountants,  to the extent that such changes would modify such accounting terms
or the interpretation or computation thereof,  such changes shall be followed in
defining  such  accounting  terms only from and after the date the Borrowers and
the Lenders shall have amended this Agreement to the extent necessary to reflect
any such changes in the financial  covenants  and other terms and  conditions of
this  Agreement.

     SECTION  13.10  Successors  and  Assigns;  Participations.

     (a) Benefit of Agreement.  This Agreement shall be binding,  upon and inure
to the benefit of the Borrowers,  the Administrative  Agent and the Lenders, all
future holders of the Notes, or any part of the indebtedness  evidenced thereby,
and their respective  successors and assigns;  provided,  however, the Borrowers
shall not  assign  or  transfer  any of its  rights or  obligations  under  this
Agreement  without the prior written  consent of each Lender.

     (b)  Assignment  by  Lenders.  Each  Lender  may,  with the  consent of the
Borrower (which consent shall only be required provided that no Default or Event
of Default has  occurred)  and the consent of the  Administrative  Agent,  which
consents  shall not be  unreasonably  withheld,  assign to one or more  Eligible
Assignees all or a portion of its interests,  rights and obligations  under this
Agreement (including,  without limitation, all or a portion of the Extensions of
Credit owing to such Lender and the Notes held by such Lender);  provided  that:

          (i) each such assignment shall be of an equivalent, and not a varying,
percentage  of all the  assigning  Lender's  rights and  obligations  under this
Agreement;

                                      -69-
<PAGE>

          (ii) if less than all of the  assigning  Lender's  Commitment is to be
assigned,  the Commitment so assigned shall not be less than  $5,000,000;

          (iii) the parties to each such assignment shall execute and deliver to
the Administrative  Agent, for its acceptance and recording in the Register,  an
Assignment  and  Acceptance  in the  form  of  Exhibit  F  attached  hereto  (an
"Assignment  and  Acceptance"),  together  with any Notes or  Letters  of Credit
subject to such assignment;

          (iv) such assignment  shall not, without the consent of the Borrowers,
require the Borrowers to file a  registration  statement with the Securities and
Exchange Commission or apply to or qualify the Loans or the Notes under the blue
sky  laws  of  any  state;  and

          (v) the  assigning  Lender  shall pay to the  Administrative  Agent an
assignment  fee of $3,500  upon such  Lender's  delivery of the  Assignment  and
Acceptance  to the  Administrative  Agent;  provided  that no such fee  shall be
payable  upon any  assignment  by a Lender to an  Affiliate  thereof.

Upon such  execution,  delivery,  acceptance and  recording,  from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five (5) Business  Days after the execution  thereof,  (A) the
assignee  thereunder shall be a party hereto and, to the extent provided in such
Assignment and  Acceptance,  have the rights and  obligations of a Lender hereby
and (B) the Lender  thereunder shall, to the extent provided in such assignment,
be released from its obligations under this Agreement.

     (c) Rights and Duties Upon  Assignment.  By  executing  and  delivering  an
Assignment and Acceptance,  the assigning and assuming Lender thereunder confirm
to and agree  with each  other and the other  parties  hereto to be bound by the
terms  and  provisions  of this  Agreement,  to the  extent  set  forth  in such
Assignment and Acceptance.

     (d)  Register.  The  Administrative  Agent  shall  maintain  a copy of each
Assignment and Acceptance  delivered to it and a register for the recordation of
the names and addresses of the Lenders and the amounts of the Commitment and the
Extensions  of  Credit  with  respect  to each  Lender  from  time to time  (the
"Register").  The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrowers,  the Administrative Agent and the Lenders may
treat each person whose name is recorded in the  Register as a Lender  hereunder
for all  purposes  of this  Agreement.  The  Register  shall  be  available  for
inspection by the Borrowers or any Lender at any reasonable time upon reasonable
prior notice.

     (e) Issuance of New Notes.  Upon its receipt of a completed  Assignment and
Acceptance  executed  by the  Borrowers,  the  assigning  Lender and an Eligible
Assignee  together  with any  Note or  Notes  subject  to such  assignment,  the
Administrative Agent shall, if such Assignment and Acceptance has been completed
and is  substantially  in the form of Exhibit G:

          (i)  accept  such   Assignment   and   Acceptance;

          (ii) record the information  contained therein in the Register;

          (iii)give prompt notice thereof to the Lenders and the Borrowers;  and

                                      -70-
<PAGE>

          (iv) promptly  deliver a copy of such Assignment and Acceptance to the
Borrowers.

Within five (5)  Business  Days after  receipt of notice,  the  Borrowers  shall
execute and deliver to the Administrative Agent, in exchange for the surrendered
Note or Notes,  a new Note or Notes to the order of such  Eligible  Assignee  in
amounts equal to the Commitment  assumed by such Eligible  Assignee  pursuant to
such Assignment and  Acceptance;  together with a new Note or Notes to the order
of the  assigning  Lender in an amount  equal to the  Commitment  retained by it
hereunder.  Such new Note or Notes  shall be dated  the  effective  date of such
Assignment and Acceptance and shall  otherwise be in  substantially  the form of
the assigned Notes delivered to the assigning Lender;  provided however, the new
Note  or  Notes  may  contain  such  language  as  the  assigning  Lender,   the
Administrative Agent, or the Eligible Assignee may in the reasonable exercise of
its discretion, deem necessary to preserve the priority of the security interest
in the Collateral which is security for the  Obligations.  Each surrendered Note
or Notes shall be canceled and returned to the  Borrowers.

     (f)  Participations.  Each  Lender may sell  participations  to one or more
banks or other entities in all or a portion of its rights and obligations  under
this  Agreement  (including,  without  limitation,  all  or  a  portion  of  its
Extensions  of Credit and the Notes held by it);  provided  that:

          (i)  each  such  participation  shall be in an  amount  not less  than
$5,000,000;

          (ii)  such  Lender's  obligations  under  this  Agreement  (including,
without  limitation,  its Commitment) shall remain unchanged;

          (iii) such Lender shall remain solely responsible to the other parties
hereto for the  performance of such  obligations;

          (iv) such Lender  shall  remain the holder of the Notes held by it for
all purposes of this Agreement;

          (v) the  Borrowers,  the  Administrative  Agent and the other  Lenders
shall  continue to deal solely and directly with such Lender in connection  with
such Lender's  rights and  obligations  under this  Agreement;

          (vi)  such  Lender  shall not  permit  such  participant  the right to
approve any waivers,  amendments or other modifications to this Agreement or any
other Loan Document other than waivers,  amendments or modifications which would
reduce  the  principal  of or the  interest  rate on any  Loan or  Reimbursement
Obligation, extend the term or increase the amount of the Commitment, reduce the
amount of any fees to which such  participant is entitled,  extend any scheduled
payment  date for  principal of any Loan or,  except as  expressly  contemplated
hereby or thereby,  release  substantially all of the Collateral;  and

         (vii) any such  disposition  shall  not,  without  the  consent of the
Borrowers,  require the  Borrowers  to file a  registration  statement  with the
Securities  and Exchange  Commission  to apply to qualify the Loans or the Notes
under  the  blue  sky  law  of  any  state.

                                      -71-
<PAGE>

     (g) Disclosure of Information;  Confidentiality.  The Administrative  Agent
and the  Lenders  shall  hold all  non-public  information  with  respect to the
Borrowers  obtained  pursuant to the Loan  Documents  in  accordance  with their
customary procedures for handling confidential  information;  provided, that the
Administrative Agent may disclose information relating to this Agreement to Gold
Sheets and other similar bank trade publications, such information to consist of
deal terms and other  information  customarily  found in such  publications  and
provided  further,  that the  Administrative  Agent and Lenders may disclose any
such  information to the extent such  disclosure is required by law or requested
by any regulatory authority.  Any Lender may, in connection with any assignment,
proposed assignment,  participation or proposed  participation  pursuant to this
Section  13.10,  disclose to the  assignee,  participant,  proposed  assignee or
proposed  participant,  any information  relating to the Borrowers  furnished to
such Lende by or on behalf of the  Borrowers;  provided,  that prior to any such
disclosure,  each such  assignee,  proposed  assignee,  participant  or proposed
participant  shall  agree with the  Borrowers  or such  Lender to  preserve  the
confidentiality  of any  confidential  information  relating  to  the  Borrowers
received from such Lender.

     (h) Certain  Pledges or  Assignments.  Nothing  herein  shall  prohibit any
Lender  from  pledging or  assigning  any Note to any  Federal  Reserve  Bank in
accordance with Applicable Law.

     SECTION 13.11 Amendments,  Waivers and Consents. Except as set forth below,
any term, covenant, agreement or condition of this Agreement or any of the other
Loan  Documents  may be amended or waived by the  Lenders  if, but only if, such
amendment, waiver or consent is in writing signed by the Required Lenders (or by
the Administrative Agent with the consent of the Required Lenders) and delivered
to the  Administrative  Agent and,  in the case of an  amendment,  signed by the
Borrowers; provided, that no amendment, waiver or consent shall (a) increase the
amount or extend  the time of the  obligation  of the  Lenders  to make Loans or
issue or participate in Letters of Credit (including without limitation pursuant
to Section 2.7); (b) extend the originally scheduled time or times of payment of
the  principal of any Loan or  Reimbursement  Obligation or the time or times of
payment of interest on any Loan or Reimbursement Obligation; (c) reduce the rate
of interest or fees payable on any Loan or Reimbursement Obligation;  (d) reduce
the principal  amount of any Loan or  Reimbursement  Obligation;  (e) permit any
subordination  of the  principal  or  interest  on  any  Loan  or  Reimbursement
Obligation;  (f) permit any assignment (other than as specifically  permitted or
contemplated in this Agreement) of any of the Borrower's  rights and obligations
hereunder;  (g) release any material  portion of the  Collateral  or release any
Security Document (other than as specifically  permitted or contemplated in this
Agreement or the applicable Security  Document);  or (h) amend the provisions of
this Section  13.11 or the  definition of Required  Lenders;  unless each of the
Lenders has given their prior written  consent to the course of action  proposed
to be taken in (a) through (h) hereof.  In  addition,  no  amendment,  waiver or
consent to the  provisions  of (a) Article XII shall be made without the written
consent of the  Administrative  Agent and (b)  Article  III  without the written
consent  of the  Issuing  Lender.

     SECTION 13.12 Performance of Duties. The Borrowers'  obligations under this
Agreement and each of the Loan Documents  shall be performed by the Borrowers at
its sole cost and expense.

                                      -72-
<PAGE>

     SECTION 13.13 All Powers Coupled with Interest.  All powers of attorney and
other  authorizations  granted to the Lenders,  the Administrative Agent and any
Persons  designated by the  Administrative  Agent or any Lender  pursuant to any
provisions of this Agreement or any of the other Loan Documents  shall be deemed
coupled  with  an  interest  and  shall  be  irrevocable  so  long as any of the
Obligations  remain  unpaid  or  unsatisfied  or this  Agreement  has  not  been
terminated.

     SECTION 13.14 Survival of  Indemnities.  Any  termination of this Agreement
notwithstanding,  the  indemnities  to which  the  Administrative  Agent and the
Lenders are  entitled  under the  provisions  of this Article XIII and any other
provision of this Agreement and the Loan Documents  shall continue in full force
and effect and shall protect the  Administrative  Agent and the Lenders  against
events arising after such  termination  as well as before.

     SECTION  13.15  Titles and  Captions.  Titles  and  captions  of  Articles,
Sections and subsections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.

     SECTION 13.16  Severability of Provisions.  Any provision of this Agreement
or  any  other  Loan  Document  which  is  prohibited  or  unenforceable  in any
jurisdiction  shall, as to such jurisdiction,  be ineffective only to the extent
of such prohibition or  unenforceability  without  invalidating the remainder of
such  provision or the remaining  provisions  hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.

     SECTION 13.17 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate  counterparts,  each of
which when so executed  shall be deemed to be an  original  and shall be binding
upon all parties,  their successors and assigns, and all of which taken together
shall  constitute one and the same  agreement.

     SECTION 13.18 Term of Agreement. This Agreement shall remain in effect from
the Closing Date through and including the date upon which all Obligations shall
have been  indefeasibly and irrevocably  paid,  performed and satisfied in full.
The  Administrative  Agent is  hereby  permitted  to  release  all  Liens on the
Collateral  in favor of the  Administrative  Agent,  for the ratable  benefit of
itself and the Lenders,  upon repayment of the outstanding  principal of and all
accrued  interest on the Loans,  payment of all  outstanding  fees and  expenses
hereunder and the  termination  of the Lender's  Commitments.  No termination of
this  Agreement  shall affect the rights and  obligations  of the parties hereto
arising  prior to such  termination.

     SECTION 13.19  Inconsistencies with Other Documents;  Independent Effect of
Covenants.  (a) In the event there is a conflict or  inconsistency  between this
Agreement  and any  other  Loan  Document,  the  terms of this  Agreement  shall
control;  provided,  however, that any provision of the Security Documents which
imposes  additional  burdens on the Borrowers or their  Subsidiaries  or further
restricts  the  rights  of the  Borrowers  or their  Subsidiaries  or gives  the
Administrative  Agent or Lenders  additional rights shall not be deemed to be in
conflict or inconsistent  with this Agreement and such provisions shall be given
full force and effect.

     (b) The  Borrowers  expressly  acknowledge  and agree  that  each  covenant
contained in Articles VIII, IX, or X hereof shall be given  independent  effect.

                                      -73-

<PAGE>

Accordingly,  the  Borrowers  shall not engage in any  transaction  or other act
otherwise  permitted under any covenant contained in Articles VIII, IX, or X if,
before or after giving effect to such transaction or act, the Borrowers shall or
would be in breach of any other  covenant  contained in Articles VIII, IX, or X.

     SECTION 13.20 Amendment and Restatement. This Agreement is an amendment and
restatement of the Original Agreement between the Borrowers and First Union, and
it is not  intended  to be,  nor shall it be  construed  as, a  novation  of the
Borrowers'  responsibilities  and  obligations  to First  Union  pursuant to the
Original Agreement. It is specifically acknowledged and agreed that the security
interests and rights granted to First Union pursuant to the Original  Agreement,
are to continue in full force and effect (except to the extent, if any, modified
herein),  and the priority and perfection of all such security  interests in the
Collateral  shall  continue  to date from the dates  originally  established  in
connection with the Original Agreement.

     (Remainder of page intentionally left blank - signatures on next page]

                                      -74-
<PAGE>

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed  under seal by their duly  authorized  officers,  all as of the day and
year first written above.

ATTEST:                                    VERMONT PURE HOLDINGS, LTD.,
                                           as Borrower

By:_______________________________         By:________________________________
Name:    Bruce MacDonald                   Name:   Timothy Fallon
Title:   Chief Financial Officer and       Title:  Chief Executive Officer and
         Secretary                                 President

(Corporate Seal)

ATTEST:                                    VERMONT PURE SPRINGS, INC.,
                                           as Borrower

By:_______________________________         By:________________________________
Name:    Bruce MacDonald                   Name:   Timothy Fallon
Title:   Chief Financial Officer and       Title:  Chief Executive Officer and
         Secretary                                 President

(Corporate Seal)

                                           FIRST UNION NATIONAL BANK,
                                           as Administrative Agent and Lender

                                           By:________________________________
                                           Name:  David W. Mills
                                           Title:  Vice President

                                           KEYBANK NATIONAL ASSOCIATION,
                                           as Lender

                                           By:________________________________
                                           Name:  John W. Kingston
                                           Title:  Senior Vice President

                                      -75-
<PAGE>

                                   Schedule 1
                           (Lenders and Commitments)

LENDER                                COMMITMENT
                                      PERCENTAGE                   COMMITMENT
First Union National Bank
PA 4848
1339 Chestnut Street
Philadelphia, PA  19107
Attn:
Telephone No.: (215) 786-2161
Telecopy No.: (215) 786-8448              60%                      $15,000,000

KeyBank National Association
149 Bank Street
P.O. Box 949
Burlington, VT
Telephone No.: (802) 660-4474
               (800) 642-5154
Telecopy No.: (802) 864-6908              40%                      $10,000,000

                                      -76-
<PAGE>

                                  EXHIBIT A-1
                                       to
                                Credit Agreement
                         dated as of January 28, 2000,
                                  by and among
          VERMONT PURE HOLDINGS, LTD. and VERMONT PURE SPRINGS, INC.,
                                 as Borrowers,
                           the Lenders party thereto,
                                      and
                           First Union National Bank,
                            as Administrative Agent

                         FORM OF REVOLVING CREDIT NOTE

                             REVOLVING CREDIT NOTE

                                      -77-
<PAGE>

$15,000,000                                                    January 28, 2000

     FOR VALUE  RECEIVED,  the  undersigned,  VERMONT  PURE  HOLDINGS,  LTD. and
VERMONT PURE  SPRINGS,  INC. (the  "Borrowers"),  promise to pay to the order of
First Union National Bank (the "Lender"), at the place and times provided in the
Credit Agreement referred to below, the principal sum of Fifteen Million Dollars
($15,000,000)  or, if less, the principal  amount of all Revolving  Credit Loans
made by the Lender from time to time pursuant to that certain Credit  Agreement,
dated as of even date herewith (as amended,  restated or otherwise modified, the
"'Credit  Agreement")  among the Borrowers,  the Lenders who are or may become a
party thereto  (collectively,  the  "Lenders") and First Union National Bank, as
Administrative Agent. Capitalized terms used herein and not defined herein shall
have the  meanings  assigned  thereto in the Credit  Agreement.

     All payments of principal and interest on this Revolving  Credit Note shall
be payable in lawful  currency  of the United  States of America in  immediately
available  funds  to the  account  designated  in  the  Credit  Agreement.

     This  Revolving  Credit Note is entitled to the benefits of, and  evidences
Obligations incurred under, the Credit Agreement, to which reference is made for
a description of the security for this Revolving Credit Note and for a statement
of the terms and conditions on which the Borrowers are permitted and required to
make  prepayments  and repayments of principal of the  Obligations  evidenced by
this Revolving  Credit Note and on which such  Obligations may be declared to be
immediately due and payable.

     THIS REVOLVING  CREDIT NOTE SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF PENNSYLVANIA,  WITHOUT REFERENCE TO THE CONFLICTS OR
CHOICE OF LAW PRINCIPLES  THEREOF.

     The Debt  evidenced  by this  Revolving  Credit  Note is senior in right of
payment  to all  Subordinated  Debt  referred  to in the Credit  Agreement.

     The Borrowers hereby waive all  requirements as to diligence,  presentment,
demand of payment,  protest  and  (except as  required by the Credit  Agreement)
notice  of any kind  with  respect  to this  Revolving  Credit  Note.

     After the  occurrence  of an Event of  Default,  as  defined  in the Credit
Agreement,  each of the Borrowers jointly and severally  irrevocably  authorizes
and  empowers any attorney or any clerk of any court of record to appear for and
confess  judgment  against any one or more of the Borrowers for such sums as are
due owing  under this Note,  with our without  declaration,  with costs of suit,
without  stay of  execution  and with an amount  not to exceed  the  greater  of
fifteen  percent  (15%) of the  principal  amount owing under this Note, or Five
Thousand  Dollars  ($5,000) added for  collection  fees. If a copy of this Note,
verified  by  affidavit  by or on behalf of the Lender  shall have been filed in
such action,  it shall not be necessary to file the original with this Note. The
authority granted under the warrant of attorney to confess judgment shall not be
exhausted by the initial  exercise  thereof,  and may be exercised by the Lender
from time to time.

                                      -78-

<PAGE>

     IN WITNESS  WHEREOF,  the undersigned  have executed this Revolving  Credit
Note under seal as of the day and year first above written.

ATTEST:                                    VERMONT PURE HOLDINGS, LTD.,
                                           as Borrower

By:_______________________________         By:________________________________
Name:    Bruce MacDonald                   Name:   Timothy Fallon
Title:   Chief Financial Officer and       Title:  Chief Executive Officer and
         Secretary                                 President

(Corporate Seal)

ATTEST:                                    VERMONT PURE SPRINGS, INC.,
                                           as Borrower

By:_______________________________         By:________________________________
Name:    Bruce MacDonald                   Name:   Timothy Fallon
Title:   Chief Financial Officer and       Title:  Chief Executive Officer and
         Secretary                                 President

(Corporate Seal)

                                      -79-
<PAGE>

                             REVOLVING CREDIT NOTE
$10,000,000                                                    January 28, 2000

     FOR VALUE  RECEIVED,  the  undersigned,  VERMONT  PURE  HOLDINGS,  LTD. and
VERMONT PURE  SPRINGS,  INC. (the  "Borrowers"),  promise to pay to the order of
KeyBank National Association (the "Lender"),  at the place and times provided in
the Credit Agreement referred to below, the principal sum of Ten Million Dollars
($10,000,000)  or, if less, the principal  amount of all Revolving  Credit Loans
made by the Lender from time to time pursuant to that certain Credit  Agreement,
dated as of even date herewith (as amended,  restated or otherwise modified, the
"'Credit  Agreement")  among the Borrowers,  the Lenders who are or may become a
party thereto  (collectively,  the  "Lenders") and First Union National Bank, as
Administrative Agent. Capitalized terms used herein and not defined herein shall
have the  meanings  assigned  thereto in the Credit  Agreement.

     All payments of principal and interest on this Revolving  Credit Note shall
be payable in lawful  currency  of the United  States of America in  immediately
available  funds  to the  account  designated  in  the  Credit  Agreement.

     This  Revolving  Credit Note is entitled to the benefits of, and  evidences
Obligations incurred under, the Credit Agreement, to which reference is made for
a description of the security for this Revolving Credit Note and for a statement
of the terms and conditions on which the Borrowers are permitted and required to
make  prepayments  and repayments of principal of the  Obligations  evidenced by
this Revolving  Credit Note and on which such  Obligations may be declared to be
immediately  due and payable.

     THIS REVOLVING  CREDIT NOTE SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF PENNSYLVANIA,  WITHOUT REFERENCE TO THE CONFLICTS OR
CHOICE OF LAW PRINCIPLES  THEREOF.

     The Debt  evidenced  by this  Revolving  Credit  Note is senior in right of
payment  to all  Subordinated  Debt  referred  to in the Credit  Agreement.

     The Borrowers hereby waive all  requirements as to diligence,  presentment,
demand of payment,  protest  and  (except as  required by the Credit  Agreement)
notice  of any kind  with  respect  to this  Revolving  Credit  Note.

     After the  occurrence  of an Event of  Default,  as  defined  in the Credit
Agreement,  each of the Borrowers jointly and severally  irrevocably  authorizes
and  empowers any attorney or any clerk of any court of record to appear for and
confess  judgment  against any one or more of the Borrowers for such sums as are
due owing  under this Note,  with our without  declaration,  with costs of suit,
without  stay of  execution  and with an amount  not to exceed  the  greater  of
fifteen  percent  (15%) of the  principal  amount owing under this Note, or Five
Thousand  Dollars  ($5,000) added for  collection  fees. If a copy of this Note,
verified  by  affidavit  by or on behalf of the Lender  shall have been filed in
such action,  it shall not be necessary to file the original with this Note. The
authority granted under the warrant of attorney to confess judgment shall not be
exhausted by the initial  exercise  thereof,  and may be exercised by the Lender
from time to time.

                                      -80-
<PAGE>

     IN WITNESS  WHEREOF,  the undersigned  have executed this Revolving  Credit
Note under seal as of the day and year first above written.

ATTEST:                                    VERMONT PURE HOLDINGS, LTD.,
                                           as Borrower

By:_______________________________         By:________________________________
Name:    Bruce MacDonald                   Name:   Timothy Fallon
Title:   Chief Financial Officer and       Title:  Chief Executive Officer and
         Secretary                                 President

(Corporate Seal)

ATTEST:                                    VERMONT PURE SPRINGS, INC.,
                                           as Borrower

By:_______________________________         By:________________________________
Name:    Bruce MacDonald                   Name:   Timothy Fallon
Title:   Chief Financial Officer and       Title:  Chief Executive Officer and
         Secretary                                 President

(Corporate Seal)

                                      -81-
<PAGE>

                                   EXHIBIT B
                                       to
                                Credit Agreement
                         dated as of January 28, 2000,
                                  by and among
          VERMONT PURE HOLDINGS, LTD. and VERMONT PURE SPRINGS, INC.,
                                 as Borrowers,
                           the Lenders party thereto,
                                      and
                           First Union National Bank,
                            as Administrative Agent

                          FORM OF NOTICE OF BORROWING

                                      -82-
<PAGE>

                              NOTICE OF BORROWING

                           Dated as of______________

First Union National Bank,
PA 4848
1339 Chestnut Street
Philadelphia, PA  19107
Attention:_____________________
Telephone No.: (215) 786-2161
Telecopy No.: (215) 786-8448

Ladies and Gentlemen:

     This  irrevocable  Notice of Borrowing  is  delivered to you under  Section
2.3(a) of the  Credit  Agreement  dated as of , 1999 (as  amended,  restated  or
otherwise modified, the "Credit Agreement"), by and among VERMONT PURE HOLDINGS,
LTD. and VERMONT PURE SPRINGS, INC. (the "Borrowers"), the lenders party thereto
(the "Lenders") and First Union National Bank, as  Administrative  Agent.

     1. The Borrowers  hereby  request that the Lenders make a Revolving  Credit
Loan to the Borrowers in the aggregate principal amount of $ . [Complete with an
amount in  accordance  with  Section  2.2(a) of the  Credit  Agreement.]

     2. The  Borrowers  hereby  requests that such Loan be made on the following
Business Day: . [Complete with a Business Day in accordance  with Section 2.2(a)
of the Credit  Agreement.]

     3. The  Borrowers  hereby  requests  that the  Revolving  Credit  Loan bear
interest  at the  following  interest  rate,  plus  the  Applicable  Margin,  if
applicable, as set forth below:

Component of Loan   Interest Rate    Interest Period      Termination Date for
                                     (LIBOR Rate only)    Interest Period (if
                                                          applicable)

                    Base Rate or
                    LIBOR Rate

     4. The principal amount of all Loans and L/C Obligations  outstanding as of
the date  hereof  (including  the  requested  Loan) does not exceed the  maximum
amount  permitted  to be  outstanding  pursuant  to  the  terms  of  the  Credit
Agreement.

                                      -83-
<PAGE>

     5. All of the  conditions  applicable to the Loan  requested  herein as set
forth in the Credit Agreement have been satisfied as of the date hereof and will
remain satisfied to the date of such Loan.

     6.  Capitalized  terms used  herein and not defined  herein  shall have the
meanings assigned thereto in the Credit Agreement.

                            [Signature Page Follows]

                                      -84-
<PAGE>

     IN WITNESS WHEREOF,  the undersigned have executed this Notice of Borrowing
on behalf of the Borrowers this day of , .

ATTEST:                                    VERMONT PURE HOLDINGS, LTD.,
                                           as Borrower

By:_______________________________         By:________________________________
Name:    Bruce MacDonald                   Name:   Timothy Fallon
Title:   Chief Financial Officer and       Title:  Chief Executive Officer and
         Secretary                                 President

(Corporate Seal)

ATTEST:                                    VERMONT PURE SPRINGS, INC.,
                                           as Borrower

By:_______________________________         By:________________________________
Name:    Bruce MacDonald                   Name:   Timothy Fallon
Title:   Chief Financial Officer and       Title:  Chief Executive Officer and
         Secretary                                 President

(Corporate Seal)

                                      -85-

<PAGE>

                                   EXHIBIT C
                                       to
                                Credit Agreement
                         dated as of January 28, 2000,
                                  by and among
           VERMONT PURE HOLDINGS, LTD. and VERMONT PURE SPRINGS, INC.
                                 as Borrowers,
                           the Lenders party thereto,
                                      and
                           First Union National Bank,
                            as Administrative Agent

                     FORM OF NOTICE OF ACCOUNT DESIGNATION

                                      -86-
<PAGE>

                         NOTICE OF ACCOUNT DESIGNATION
                            Dated as of:____________

First Union National Bank, as Administrative Agent
PA 4848
1339 Chestnut Street
Philadelphia, PA  19107
Attention:
Telephone No.: (215) 786-2161
Telecopy No.: (215) 786-8448

Ladies and Gentlemen:

     This Notice of Account Designation is delivered to you under Section 2.2(b)
of the Credit  Agreement  dated as of , 1999 (as amended,  restated or otherwise
modified, the "Credit Agreement") by and among, VERMONT PURE HOLDINGS,  LTD. and
VERMONT PURE  SPRINGS,  INC. (the  "Borrowers"),  the lenders party thereto (the
"Lenders")  and First Union  National  Bank,  as  Administrative  Agent.

     1. The  Administrative  Agent is hereby  authorized  to  disburse  all Loan
proceeds into the following account(s):

                      ___________________________________
                      ABA Routing Number:________________
                      Account Number:____________________

     2. This  authorization  shall  remain in effect  until  revoked  or until a
subsequent  Notice of Account  Designation  is  provided  to the  Administrative
Agent.

     3.  Capitalized  terms used  herein and not defined  herein  shall have the
meanings  assigned  thereto in the Credit  Agreement.

     IN WITNESS  WHEREOF,  the undersigned  have executed this Notice of Account
Designation this _____day of _______________, _____.

ATTEST:                                    VERMONT PURE HOLDINGS, LTD.,
                                           as Borrower

By:_______________________________         By:________________________________
Name:    Bruce MacDonald                   Name:   Timothy Fallon
Title:   Chief Financial Officer and       Title:  Chief Executive Officer and
         Secretary                                 President

(Corporate Seal)

                                      -87-
<PAGE>

ATTEST:                                    VERMONT PURE SPRINGS, INC.,
                                           as Borrower

By:_______________________________         By:________________________________
Name:    Bruce MacDonald                   Name:   Timothy Fallon
Title:   Chief Financial Officer and       Title:  Chief Executive Officer and
         Secretary                                 President

(Corporate Seal)

                                      -88-

<PAGE>

                                   EXHIBIT D
                                       to
                                Credit Agreement
                         dated as of January 28, 2000,
                                  by and among
           VERMONT PURE HOLDINGS, LTD. and VERMONT PURE SPRINGS, INC.
                                 as Borrowers,
                           the Lenders party thereto,
                                      and
                           First Union National Bank,
                            as Administrative Agent

                          FORM OF NOTICE OF PREPAYMENT

                                      -89-
<PAGE>

                              NOTICE OF PREPAYMENT
                            Dated as of:_____________

First Union National Bank, as Administrative Agent
PA 4848
1339 Chestnut Street
Philadelphia, PA  19107
Attention:
Telephone No.: (215) 786-2161
Telecopy No.: (215) 786-8448

Ladies and Gentlemen:

     This  irrevocable  Notice of  Prepayment  is delivered to you under Section
2.3(c) of the  Credit  Agreement  dated as of , 1999 (as  amended,  restated  or
otherwise  modified,  the  "Credit  Agreement"),  by  and  among,  VERMONT  PURE
HOLDINGS,  LTD. and VERMONT PURE SPRINGS,  INC. (the  "Borrowers"),  the lenders
party thereto (the  "Lenders") and First Union National Bank, as  Administrative
Agent.

     1. The Borrowers hereby provides notice to the Administrative Agent that it
shall  repay the  following  [Base Rate Loans]  and/or  [LIBOR  Rate  Loans]:  .
(Complete  with  an  amount  in  accordance  with  Section  2.3  of  the  Credit
Agreement.)

     2. The Loan to be prepaid is a  Revolving  Credit  Loan.

     3. The Borrowers  shall repay the  above-referenced  Loans on the following
Business  Day: .  (Complete  with a Business  Day at least one (1)  Business Day
subsequent  to the date of this Notice of  Prepayment  with  respect to any Base
Rate Loan that is a Revolving Credit Loan and three (3) Business Days subsequent
to date of this Notice of Prepayment with respect to any LIBOR Rate Loan that is
a  Revolving  Credit  Loan.)

     4.  Capitalized  terms used  herein and not defined  herein  shall have the
meanings  assigned  thereto in the Credit  Agreement.

     IN WITNESS WHEREOF, the undersigned have executed this Notice of Prepayment
this _____day of ____________, ______.

ATTEST:                                    VERMONT PURE HOLDINGS, LTD.,
                                           as Borrower

By:_______________________________         By:________________________________
Name:    Bruce MacDonald                   Name:   Timothy Fallon
Title:   Chief Financial Officer and       Title:  Chief Executive Officer and
         Secretary                                 President

(Corporate Seal)

                                      -90-
<PAGE>

ATTEST:                                    VERMONT PURE SPRINGS, INC.,
                                           as Borrower

By:_______________________________         By:________________________________
Name:    Bruce MacDonald                   Name:   Timothy Fallon
Title:   Chief Financial Officer and       Title:  Chief Executive Officer and
         Secretary                                 President

(Corporate Seal)

                                      -91-

<PAGE>

                                   EXHIBIT E
                                       to
                                Credit Agreement
                         dated as of January 28, 2000,
                                  by and among
           VERMONT PURE HOLDINGS, LTD. and VERMONT PURE SPRINGS, INC.
                                 as Borrowers,
                           the Lenders party thereto,
                                      and
                           First Union National Bank,
                            as Administrative Agent

                   FORM OF NOTICE OF CONVERSION/CONTINUATION

                                      -92-
<PAGE>

                       NOTICE OF CONVERSION/CONTINUATION
                         Dated as of:_________________

First Union National Bank, as Administrative Agent
PA 4848
1339 Chestnut Street
Philadelphia, PA  19107
Attention:
Telephone No.: (215) 786-2161
Telecopy No.: (215) 786-8448

Ladies and Gentlemen:

     This  irrevocable  Notice  of  Conversion/Continuation  (the  "Notice")  is
delivered to you under Section 4.2 of the Credit  Agreement dated as of , , 1999
(as amended,  restated or otherwise modified,  the "Credit  Agreement"),  by and
among  VERMONT  PURE  HOLDINGS,   LTD.  and  VERMONT  PURE  SPRINGS,  INC.  (the
"Borrowers"), the lenders party thereto (the "Lenders") and First Union National
Bank, as  Administrative  Agent.

     1. This Notice is  submitted  for the purpose of.  (Check one and  complete
applicable  information in accordance  with the Credit  Agreement.)

     *    Converting all or a portion of a Base Rate Loan into a LIBOR Rate Loan

     (a)  The aggregate  outstanding  principal  balance of such Loan is $ .

     (b)  The  principal  amount  of such  Loan to be  converted  is $ .

     (c)  The requested effective date of the conversion of such Loan is , .

     (d)  The requested  Interest  Period  applicable  to the converted  Loan is
          months.

     *    Converting  a portion of LIBOR Rate Loan into a Base Rate Loan

                                      -93-
<PAGE>

     (a)  The aggregate  outstanding  principal  balance of such Loan is $ .

     (b)  The last day of the current  Interest  Period for such Loan is , .

     (c)  The  principal  amount  of such  Loan to be  converted  is $ .

     (d)  The requested  effective  date of the conversion of such Loan is , .

     *    Continuing  all or a portion of a LIBOR Rate Loan as a LIBOR Rate Loan

     (a)  The aggregate  outstanding  principal  balance of such Loan is $ .

     (b)  The last day of the current  Interest  Period for such Loan is , .

     (c)  The  principal  amount  of such  Loan to be  continued  is $ .

     (d)  The requested  effective date of the  continuation of such Loan is , .

     (e)  The requested  Interest  Period  applicable  to the continued  Loan is
          _______ months.

     2. The principal amount of all Loans and L/C Obligations  outstanding as of
the date hereof does not exceed the maximum  amount  permitted to be outstanding
pursuant  to the  terms  of  the  Credit  Agreement.

     3. All of the conditions  applicable to the conversion or  continuation  of
the Loan  requested  herein  as set  forth in the  Credit  Agreement  have  been
satisfied or waived as of the date hereof and will remain satisfied or waived to
the date of such Loan.

     4.  Capitalized  terms used  herein and not defined  herein  shall have the
meanings  assigned  thereto in the Credit  Agreement.

     IN  WITNESS   WHEREOF,   the  undersigned  have  executed  this  Notice  of
Conversion/ Continuation this ____day of ________________, _____.

ATTEST:                                    VERMONT PURE HOLDINGS, LTD.,
                                           as Borrower

By:_______________________________         By:________________________________
Name:    Bruce MacDonald                   Name:   Timothy Fallon
Title:   Chief Financial Officer and       Title:  Chief Executive Officer and
         Secretary                                 President

(Corporate Seal)

ATTEST:                                    VERMONT PURE SPRINGS, INC.,
                                           as Borrower

By:_______________________________         By:________________________________
Name:    Bruce MacDonald                   Name:   Timothy Fallon
Title:   Chief Financial Officer and       Title:  Chief Executive Officer and
         Secretary                                 President

(Corporate Seal)

                                      -94-

<PAGE>

                                   EXHIBIT F

                                       to
                                Credit Agreement
                         dated as of January 28, 2000,
                                  by and among
           VERMONT PURE HOLDINGS, LTD. and VERMONT PURE SPRINGS, INC.
                                 as Borrowers,
                           the Lenders party thereto,
                                      and
                           First Union National Bank,
                            as Administrative Agent

                    FORM OF OFFICER'S COMPLIANCE CERTIFICATE

                                      -95-
<PAGE>

                        OFFICER'S COMPLIANCE CERTIFICATE

     The undersigned,  on behalf of VERMONT PURE HOLDINGS, LTD. and VERMONT PURE
SPRINGS, INC. (the "Borrowers"),  hereby certify to the Administrative Agent and
the  Lenders  each as defined  in the Credit  Agreement  referred  to below,  as
follows:

     1. This  Certificate  is  delivered  to you  pursuant to Section 7.2 of the
Credit Agreement dated as of , 1999 (as amended, restated or otherwise modified,
the "Credit Agreement"),  by and among the Borrowers,  the lenders party thereto
(the  "Lenders")  and  First  Union  National  Bank,  as  Administrative  Agent.
Capitalized  terms used herein and not defined  herein  shall have the  meanings
assigned  thereto in the Credit  Agreement.

     2. I have  reviewed the  financial  statements  of the  Borrowers and their
Subsidiaries  dated as of and for the period[s]  then ended and such  statements
fairly present in all material respects the financial condition of the Borrowers
and its  Subsidiaries  as of the  dates  indicated  and  the  results  of  their
operations  and cash flows for the period[s]  indicated.

     3. I have reviewed the terms of the Credit Agreement,  and the related Loan
Documents and have made, or caused to be made under my supervision,  a review in
reasonable  detail of the  transactions  and the  condition of the Borrowers and
their  Subsidiaries  during  the  accounting  period  covered  by the  financial
statements  referred to in Paragraph 2 above.  Such review has not disclosed the
existence  during or at the end of such  accounting  period of any  condition or
event  that  constitutes  a Default  or an Event of  Default,  nor do I have any
knowledge of the existence of any such condition or event as at the date of this
Certificate [except, if such condition or event existed or exists,  describe the
nature and period of existence thereof and what action the Borrowers have taken,
is taking and proposes to take with respect  thereto].

     4. The Applicable  Margin and calculations  determining such figure are set
forth on the attached Schedule 1 and the Borrowers and their Subsidiaries are in
compliance  with the financial  covenants  contained in Article IX of the Credit
Agreement as shown on such Schedule 1 and the  Borrowers and their  Subsidiaries
are in compliance  with the other  covenants and  restrictions  contained in the
Credit Agreement.

     WITNESS the following signatures as of the____day of __________,____.

ATTEST:                                    VERMONT PURE HOLDINGS, LTD.,
                                           as Borrower

By:_______________________________         By:________________________________
Name:    Bruce MacDonald                   Name:   Timothy Fallon
Title:   Chief Financial Officer and       Title:  Chief Executive Officer and
         Secretary                                 President

(Corporate Seal)

                                      -96-
<PAGE>

ATTEST:                                    VERMONT PURE SPRINGS, INC.,
                                           as Borrower

By:_______________________________         By:________________________________
Name:    Bruce MacDonald                   Name:   Timothy Fallon
Title:   Chief Financial Officer and       Title:  Chief Executive Officer and
         Secretary                                 President

(Corporate Seal)

                                      -97-
<PAGE>

                                   Schedule 1
                                       to
                        Officer's Compliance Certificate

                                      -98-
<PAGE>

                                   EXHIBIT G
                                       to
                                Credit Agreement
                         dated as of January 28, 2000,
                                  by and among
           VERMONT PURE HOLDINGS, LTD. and VERMONT PURE SPRINGS, INC.
                                 as Borrowers,
                           the Lenders party thereto,
                                      and
                           First Union National Bank,
                            as Administrative Agent

                       FORM OF ASSIGNMENT AND ACCEPTANCE

                                      -99-
<PAGE>

                           ASSIGNMENT AND ACCEPTANCE
                         Dated as of:__________________

     Reference  is made to the Credit  Agreement  dated as of , 1999 as amended,
restated or otherwise  modified  (the "Credit  Agreement")  by and among VERMONT
PURE  HOLDINGS,  LTD. and VERMONT PURE  SPRINGS,  INC.  (the  "Borrowers"),  the
lenders  party  thereto  (the  "Lenders")  and First  Union  National  Bank,  as
Administrative Agent. Capitalized terms used herein which are not defined herein
shall  have  the  meanings  assigned  thereto  in  the  Credit  Agreement.

     _______________________ (the "Assignor") and _________________________ (the
"Assignee") agree as follows:

     1. The Assignor hereby sells and assigns to the Assignee,  and the Assignee
hereby  purchases  and assumes from the Assignor,  as of the Effective  Date (as
defined below),  a % interest in and to all of the Assignor's  interest,  rights
and obligations  with respect to its Revolving  Credit  Commitment and Revolving
Credit Loans  (including such percentage of the outstanding L/C Obligations) and
the Assignor  thereby  retains % of its interest  therein.  This  Assignment and
Acceptance  is entered  pursuant to, and  authorized  by,  Section  13.10 of the
Credit  Agreement.

     2. The Assignor (i) represents that, as of the date hereof,  its Commitment
Percentage  (without  giving  effect to  assignments  thereof which have not yet
become  effective) under the Credit Agreement is %, the outstanding  balances of
its Revolving Credit Loans (including its Revolving Credit Commitment Percentage
of the outstanding L/C Obligations)  (unreduced by any assignments thereof which
have not yet become  effective)  under the Credit Agreement is $ ; (ii) makes no
representation  or warranty  and assumes no  responsibility  with respect to any
statements,  warranties or  representations  made in or in  connection  with the
Credit  Agreement  or  any  other  Loan  Document  or the  execution,  legality,
validity,  enforceability,  genuineness,  sufficiency  or  value  of the  Credit
Agreement or any other instrument or document furnished pursuant thereto,  other
than that the Assignor is the legal and  beneficial  owner of the interest being
assigned by it hereunder and that such interest is free and clear of any adverse
claim;  (iii) makes no  representation or warranty and assumes no responsibility
with respect to the financial  condition of the Borrowers or their  Subsidiaries
or the  performance or observance by the Borrowers or their  Subsidiaries of any
of their  obligations  under the Credit  Agreement  or any other  instrument  or
document furnished or executed pursuant thereto; and (iv) attaches the Revolving
Credit Note  delivered to it under the Credit  Agreement  and requests  that the
Borrowers  exchange such  Revolving  Credit Note for new Revolving  Credit Notes
payable to each of the Assignor and the Assignee as follows:

                                     -100-
<PAGE>

     Revolving Credit Note
     Payable to the Order of:            Principal Amount of Note:

     _______________________             $_______________________
     _______________________             $_______________________

     3. The Assignee (i) represents  and warrants that it is legally  authorized
to enter into this Assignment and Acceptance; (ii) confirms that it has received
a copy  of the  Credit  Agreement,  together  with  copies  of the  most  recent
financial  statements  delivered  pursuant to Section 7.1 thereof and such other
documents and  information  as it has deemed  appropriate to make its own credit
analysis and decision to enter into this Assignment and Acceptance; (iii) agrees
that it will,  independently and without reliance upon the Assignor or any other
Lender or Administrative Agent and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Credit Agreement; (iv) confirms that it is
an Eligible Assignee;  (v) appoints and authorizes the  Administrative  Agent to
take such  action as agent on its behalf and to exercise  such powers  under the
Credit  Agreement  and  the  other  Loan  Documents  as  are  delegated  to  the
Administrative  Agent by the terms  thereof,  together  with such  powers as are
reasonably  incidental  thereto;  (vi) agrees that it will perform in accordance
with their terms all the obligations  which by the terms of the Credit Agreement
and the other Loan  Documents  are  required to be  performed by it as a Lender;
(vii) agrees to hold all  confidential  information in a manner  consistent with
the provisions of Section 13.10(g) of the Credit Agreement;  and (viii) includes
herewith for the Administrative  Agent the two forms required by Section 4.11(e)
of the Credit Agreement (if not previously delivered).

     4. The effective date for this  Assignment  and Acceptance  shall be as set
forth in Section 1 of Schedule 1 hereto (the  "Effective  Date").  Following the
execution  of this  Assignment  and  Acceptance,  it will  be  delivered  to the
Administrative  Agent for,  to the  extent  required  by the  Credit  Agreement,
consent  by the  Borrowers  and the  Administrative  Agent  and  acceptance  and
recording in the Register.

     5.  Upon  such  consents,  acceptance  and  recording,  from and  after the
Effective  Date, (i) the Assignee  shall be a party to the Credit  Agreement and
the other  Loan  Documents  to which  Lenders  are  parties  and,  to the extent
provided in this Assignment and Acceptance, have the rights and obligations of a
Lender under each such  agreement,  and (ii) the Assignor  shall,  to the extent
provided  in this  Assignment  and  Acceptance,  relinquish  its  rights  and be
released  from its  obligations  under the Credit  Agreement  and the other Loan
Documents.

     6.  Upon  such  consents,  acceptance  and  recording,  from and  after the
Effective Date, the  Administrative  Agent shall make all payments in respect of
the interest assigned hereby (including  payments of principal,  interest,  fees
and other  amounts) to the  Assignee.  The Assignor and Assignee  shall make all
appropriate  adjustments  in payments for periods prior to the Effective Date or
with respect to the making of this assignment  directly between  themselves.

     7. THIS  ASSIGNMENT AND  ACCEPTANCE  SHALL BE DEEMED TO BE A CONTRACT UNDER
SEAL AND SHALL BE GOVERNED BY AND CONSTRUED IN  ACCORDANCE  WITH THE LAWS OF THE
COMMONWEALTH  OF  PENNSYLVANIA,  WITHOUT  REGARD TO CONFLICT OF LAW  PRINCIPLES.

                                     -101-
<PAGE>

     WITNESS the following signatures as of the _______ day of ______, ________.

                                             ASSIGNOR:

                                             By:______________________________
                                             Title:___________________________

                                             ASSIGNEE:

                                             By:______________________________
                                             Title:___________________________

                                     -102-
<PAGE>

Acknowledged and Consented to on behalf of the Borrowers:

ATTEST:                                    VERMONT PURE HOLDINGS, LTD.,
                                           as Borrower

By:_______________________________         By:________________________________
Name:    Bruce MacDonald                   Name:   Timothy Fallon
Title:   Chief Financial Officer and       Title:  Chief Executive Officer and
         Secretary                                 President

(Corporate Seal)

ATTEST:                                    VERMONT PURE SPRINGS, INC.,
                                           as Borrower

By:_______________________________         By:________________________________
Name:    Bruce MacDonald                   Name:   Timothy Fallon
Title:   Chief Financial Officer and       Title:  Chief Executive Officer and
         Secretary                                 President

(Corporate Seal)

Consented to and Accepted by:

FIRST UNION NATIONAL BANK,
as Administrative Agent

By:_______________________________
Name:_____________________________
Title:____________________________

                                     -103-
<PAGE>

                                   Schedule 1
                                       to
                           Assignment and Acceptance

1.   Effective Date                                __________________,  _____

2.   Assignor's Interest Prior to Assignment

     (a)  Revolving Credit Commitment Percentage                      _______%

     (b)  Outstanding balance of Revolving Credit Loans        $_____________

     (c)  Outstanding balance of Assignor's Revolving
          Credit Commitment Percentage of the L/C
          Obligations                                          $_____________

 3. Assigned Interest (from Section
          1) of Revolving Credit Loans                               _______%

4.   Assignee's Extensions of Credit After Effective Date

     (a)  Total outstanding  balance of Assignee's
          Revolving Credit Loans (line 2(b) times line 3)      $_____________

     (b)  Total  outstanding  balance of Assignee's
          Revolving Credit Commitment Percentage of
          the L/C Obligations (line 2(c) times line 3)         $_____________

5.   Retained Interest of Assignor after Effective Date

     (a)  Retained  Interest (from  Section 1) of Revolving
          Credit  Commitment Percentage                       $______________

     (b)  Outstanding balance of Assignor's Revolving
          Credit Loans (line 2(b) times line 5(a))            $______________

     (c)  Outstanding balance of Assignor's Revolving
          Credit Commitment Percentage of L/C Obligations
         (line 2(c) times line 5(a))                          $______________

                                     -104-

<PAGE>

6.   Payment Instructions

(a)      If payable to Assignor, to the account of Assignor to:

                _______________________________________________
                _______________________________________________
                ABA No.:_______________________________________
                Account Name:__________________________________
                Account No.:___________________________________
                Attn:__________________________________________
                Ref:___________________________________________

(b)      If payable to Assignee, to the account of Assignee to:

              _______________________________________________
                _______________________________________________
                ABA No.:_______________________________________
                Account Name:__________________________________
                Account No.:___________________________________
                Attn:__________________________________________
                Ref:___________________________________________

                                     -105-SETTLEMENT AGREEMENT

1.   The parties to this  Settlement  Agreement are Vermont Pure Holdings,  Ltd.
     ("Vermont Pure"), and Pristine Mountain Springs, Inc., Amsource LLC, Barton
     Lord and Ronald Colton (collectively, the "Debtors").

2.   The  Debtors  shall pay to Vermont  Pure the sum of One Million Two Hundred
     Seventy Thousand Dollars  ($1,270,000.00)  no later than December 15, 1999.
     One hundred fifty thousand  dollars  ($150,000.00)  of this amount shall be
     delivered to Charles  Dougherty as escrow agent ("Escrow  Agent"),  pending
     the resolution of issues  described in paragraph  three of this  Settlement
     Agreement.  The balance of One Million One Hundred Twenty Thousand  Dollars
     ($1,120,000.00)  shall be  delivered  to  Vermont  Pure at its  offices  in
     Randolph, Vermont.

3.   Vermont  Pure  shall   provide  the  Debtors   with  proof  that   Wesfield
     Construction  Company  has  been  paid in cash or  equivalent  accepted  by
     Wesfield the sum of One Hundred Thirty Thousand  Dollars  ($130,000.00)  in
     connection   with  the  June  18,  1999   disbursement  by  Marcon  Capital
     Corporation.  If Vermont  Pure cannot  provide  this proof by December  31,
     1999,  the Escrow  Agent shall  refund the  Debtors  the One Hundred  Fifty
     Thousand Dollars  ($150,000.00)  held in escrow.  If Vermont Pure takes the
     position  that it has  offered  such  evidence,  the  Debtors  may elect by
     written  notice  delivered  to Vermont  Pure by  January 4, 2000,  to offer
     evidence to the  contrary,  so long as such offer of evidence is made on or
     before January 15, 2000.  The parties  hereby appoint the mediator  Charles
     Dougherty to serve as arbitrator of any dispute  between the parties on the
     adequacy  of such  proof  of  payment  to  Wesfield.  The  decision  of the
     arbitrator  (which  shall be  rendered  by  January  30,  2000  unless  the
     arbitrator  determines that additional evidence is required) on the process
     and  substance  for  resolving  such  dispute  shall be final,  binding and
     non-appealable.   The  parties   shall  split   equally  the  cost  of  any
     arbitration.

4.   The  Debtors  hereby  acknowledge  that the  assignment  of all  rights  of
     Amsource LLC under the Amended and Restated  Spring Water License and Water
     Supply  Agreement,  dated April 13, 1999  ("Water  Supply  Agreement"),  to
     Vermont Pure is final, absolute and irrevocable, and hereby irrevocably and
     finally  waive any  objection  to or argument  against the  enforcement  by
     Vermont Pure of that  agreement  according to its terms.  The Debtors shall
     execute  a  binding  acknowledgement  (the  "Acknowledgement"),  in a  form
     suitable  for  recording  in Vermont land  records,  confirming  all of the
     rights  provided to Vermont Pure under the Water Supply  Agreement and this
     Settlement  Agreement,  including  (without  limitation) rights to purchase
     water on a priority  basis and the rights of first refusal  provided for in

<PAGE>

     the Water Supply  Agreement.  None of the Debtors  shall take any action to
     interfere with Vermont Pure's rights under the Water Supply Agreement.

5.   Vermont Pure and the Debtors  shall execute an Addendum to the Water Supply
     Agreement providing that Amsource, LLC, shall have the right to purchase on
     a priority equal to Vermont Pure's up to five million  (5,000,000)  gallons
     per month from the Pristine  Mountain Spring in Stockbridge (the "Spring").
     By equal  priority,  this  paragraph  means that the parties  shall have an
     equal right,  superior to any other party, to purchase in the aggregate the
     first ten  million  (10,000,000)  gallons  per month from the  Spring;  any
     shortfall  in supply shall be borne  equally by the  parties.  Vermont Pure
     shall  retain  all other  priority  rights  provided  by the  Water  Supply
     Agreement,  and Pristine shall not convey  priority rights in the Spring to
     any other  party.  The rights  provided to Amsource  under the Addendum may
     only be exercised by Amsource.  Amsource's  rights under the Addendum shall
     be  non-assignable,  except that in the event that a majority of Amsource's
     membership  interests are transferred or conveyed by the Debtors,  Amsource
     may continue to exercise the rights provided by the Addendum.

6.   This  Settlement  Agreement does not effect any novation of any of the Loan
     Documents  (i.e.,  as  that  term  is  defined  in the  Debenture  Purchase
     Agreement  and related  documents,  dated  December 29,  1998)  assigned by
     Marcon  Capital  Corporation  to Vermont Pure. In the event of a failure to
     make the  payments  required or execute the  Addendum  and  Acknowledgement
     provided by this Settlement  Agreement,  Vermont Pure may enforce the terms
     of this Settlement Agreement,  or, at its sole election,  any or all of the
     Loan  Documents.  By making  this  Settlement  Agreement,  Vermont  Pure is
     postponing  its  enforcement of the Loan Documents in return for the actual
     performance  of  the  above-referenced  obligations  under  the  Settlement
     Agreement.  Provided,  however,  that if Vermont Pure elects to enforce the
     Loan Documents instead of this Settlement Agreement,  then, notwithstanding
     Paragraph four above, the  Acknowledgement  shall be no longer enforceable,
     and the parties shall be free to argue claims and  positions  regarding the
     Water Supply Agreement.  Further  provided,  that in the event Vermont Pure
     elects to  enforce  this  Settlement  Agreement,  it shall be  entitled  to
     recover interest on all past due sums at the rate of 14 percent per year.

7.   Vermont Pure and the Debtor  shall stay all pending  court  actions  unless
     there is a failure to make the payment,  or execute the  Acknowledgement or
     Addendum of this Settlement  Agreement,  at which point any party may, with
     written  notice to all other parties,  pursue  pending court  actions,  and
     institute other proceedings.  Simultaneously  upon the payment of all money
     required under this Settlement  Agreement,  and the execution and tendering
     of the  Acknowledgement and Addendum related to the Water Supply Agreement,
     the  parties  shall  jointly  stipulate  to the  dismissal  of all  pending
     litigation  against  each  other with  prejudice,  and  Vermont  Pure shall
     provide the Debtors  with all  original  Loan  Documents  marked  "paid and
     satisfied",  and shall execute all other documents  provided by the Debtors
     which are reasonably  necessary to terminate any security interest provided

<PAGE>

     by the Loan Documents. Without limitation, the Loan Documents terminated by
     Vermont Pure in such  circumstance  shall  include all rights of conversion
     into ownership interest in Amsource, LLC.

8.   Upon the payment of all money required under this Settlement Agreement, and
     the execution and tendering of the  Acknowledgement and Addendum related to
     the Water  Supply  Agreement,  Vermont  Pure shall  indemnify  the  Debtors
     against all claims made by Marcon  arising out of or  connected to the Loan
     Documents or the  operating  agreement  of  Amsource,  LLC, and the parties
     shall  exchange  mutual   releases,   excepting  only  performance  of  the
     obligations  arising  under  this  Settlement  Agreement  and Water  Supply
     Agreement.  In the event any party  prevails  in an action to  enforce  the
     terms of this Settlement  Agreement,  that party may recover its reasonable
     costs of litigation, including attorneys' fees.

9.   Vermont Pure hereby  represents  that it is fully  authorized  to make this
     Settlement  Agreement,  and that it makes this Settlement  Agreement freely
     and  voluntarily  following  the advice of counsel of its choice,  and that
     Vermont Pure's agreement is not based on any  representation or warranty by
     the Debtors,  except  those  contained in this  Settlement  Agreement.  The
     Debtors hereby  represent that Lincoln  Craighead is no longer  involved in
     the  management of Amsource.  The Debtors  further  represent that they are
     fully authorized to execute this Settlement Agreement on behalf of Amsource
     and  Pristine  Mountain  Springs,  Inc.,  and that all  Debtors  make  this
     Settlement  Agreement  freely and  voluntarily,  following  full  advice of
     counsel  of  their  choosing,  and  not  based  on any  representations  or
     warranties of Vermont Pure.

Dated at Boston Massachusetts, this first day of December, 1999.

/s/: Timothy Fallon
--------------------------------
Vermont Pure Holdings, Ltd.
By Timothy Fallon, its President

/s/: Ronald Colton
--------------------------------
Amsource, LLC
By Ronald Colton, President

/s/: Ronald Colton
--------------------------------
Pristine Mountain Springs, Inc.
By Ronald Colton, President

/s/: Ronald Colton
--------------------------------
Ronald Colton

/s/: Barton Lord
--------------------------------
Barton Lord

<PAGE>

Approved as to form:

/s/: Kevin Berry
---------------------------------
Vermont Pure Counsel, Kevin Berry

/s/: Michael Marks
--------------------------------
Vermont Pure Counsel, Michael Marks

/s/: Biron Bedard
--------------------------------
Amsource LLC Counsel, Biron Bedard

/s/: Frank Kenison
--------------------------------
Amsource LLC Counsel, Frank Kenison

/s/: M.B. Neisner, Jr.
--------------------------------
Pristine Mountain Springs of Vermont, Inc. Counsel, M.B. Neisner, Jr.

/s/: M.B. Neisner
--------------------------------
Ronald Colton Counsel, M.B. Neisner

/s/: Biron Bedard
--------------------------------
Barton Lord Counsel, Biron Bedard

Witnessed by Mediator:

/s/: Charles Dougherty
--------------------------------
Charles Dougherty

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00003-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00003-of-00352.parquet"}]]