Document:

Date: 30th June 1999

Grand Hotel Group Limited
as Borrower

The Lenders
Specified herein as Lenders

Arab Bank plc
as Administrative Agent

Arab Bank plc
as Security Agent and Trustee

Arab Bank plc
as Hedge Provider

Loan Agreement

providing for a secured loan facility in the maximum
of(pound)10,000,000

<PAGE>

Contents

No       Heading                                                            Page
         Clauses

1.       Definitions and Interpretation                                        2
1.1      Defined Terms                                                         2
1.2      Construction of Certain Terms                                        22
1.3      Construction of Certain References                                   24
1.4      Headings                                                             25

2.       The Facility                                                         25
2.1      Amount and Currency                                                  25
2.2      Participation of Lenders                                             25
2.3      Purpose                                                              25

3.       The Lenders                                                          26
3.1      Obligations of Lenders                                               26
3.2      Interests of Lenders                                                 26

4.       Availability and Drawing                                             27
4.1      Number of Advances                                                   27
4.2      Maximum Amount                                                       27
4.3      Conditions Precedent                                                 27
4.4      Procedure                                                            27
4.5      Transfer of Funds                                                    28
4.6      Cancellation of Unused Facility                                      29
4.7      No Waiver of Conditions                                              29
4.8      Authorisations for Disbursements                                     29
4.9      Failure to Draw                                                      30

5.       Interest Periods                                                     30
5.1      Selection by Borrower                                                31
5.2      Determination of Interest Periods                                    31
5.3      Deemed Selection                                                     32

6.       Interest                                                             33
6.1      Interest Rate                                                        33
6.2      Hedging Arrangements                                                 33
6.3      Payment of Interest                                                  34
6.4      Day Count Fraction                                                   34
6.5      Currency                                                             34
6.6.     Mandatory Costs Rate                                                 34

7.       Repayment and Prepayment                                             34
7.1      Repayment                                                            34

<PAGE>

7.2      Prepayment                                                           35
7.3      Obligation to Prepay Following Notice                                35
7.4      No Premature Repayment                                               36
7.5      Amounts and Currency of Repayments and Prepayments                   36

8.       Security                                                             36
8.1      Security                                                             36
8.2      Security Agent as Trustee                                            37

9.       Maintenance of Security                                              37
9.1      Covenants                                                            37
9.2      Calculations and Further Covenant                                    38
9.3      Failure to Comply                                                    39
9.4      Valuations                                                           40
9.5      Improvements to the Properties                                       40

10.      Single Currency                                                      44

11.      Representations and Warranties                                       44
11.1     Representations                                                      44
11.2     Lenders' Reliance                                                    50
11.3     Knowledge of Lenders                                                 50
11.4     Repetition                                                           51

12.      Undertakings                                                         51
12.1     Specific Undertakings                                                51
12.2     General                                                              62

13.      Changes in Circumstances                                             63
13.1     Illegality                                                           63
13.2     Increased Costs                                                      64
13.3     Market Disruption                                                    67
13.4     Prepayment                                                           71
13.5     Certificate                                                          71

14.      Payments                                                             72
14.1     Procedure                                                            72
14.2     Default Interest                                                     74
14.3     Withholding; Gross-up                                                75
14.4     Credit Against Tax                                                   76
14.5     Agency Payments                                                      77
14.6     Currency of Account                                                  78
14.7     Appropriation of Payments                                            78
14.8     Qualifying Lenders                                                   78
14.9     Double Taxation Treaties                                             79

15.      Default                                                              80
15.1     Events of Default                                                    80
15.2     Acceleration                                                         85

<PAGE>

16.      Expenses, Fees and Commissions                                       86
16.1     Initial and Continuing Costs                                         86
16.2     Enforcement Costs                                                    87
16.3     Stamp Duty                                                           87
16.4     Arrangement Fee                                                      88
16.5     Reimbursement by Borrower                                            88

17.      Indemnities                                                          88
17.1     General                                                              88
17.2     Currency Indemnity                                                   90
17.3     Independent Obligations                                              91
17.4     Double Counting                                                      91

18.      The Agents                                                           91
18.1     Appointment                                                          91
18.2     Duties of Administrative Agent                                       92
18.3     Duties of Security Agent                                             94
18.4     Performance of Duties                                                94
18.5     Agents' Discretions                                                  97
18.6     Limitation of Responsibilities                                       99
18.7     The Agents as a Lender                                              100
18.8     No Reliance on Agents                                               100
18.9     Lenders' Indemnity                                                  101
18.10    Change of Agents                                                    102
18.11    Signing of Transfer Certificates                                    103
18.12    Security Agent as Trustee                                           104
18.13    Acceptance of Title, Value and Valuation Bases                      111
18.14    Rule 146 of the Land Registration Rules                             111
18.15    The Borrower and the Agents                                         111
18.16    Agents of the Lenders                                               112
18.17    Agents' Knowledge                                                   112

19.      Transfer                                                            112
19.1     Agreement Binding on Successors                                     112
19.2     Borrower's Assignment                                               113
19.3     Novation                                                            113
19.4     Assignment                                                          115
19.5     Lending Offices                                                     116
19.6     Disclosure of Information                                           116
19.7     Costs                                                               116

20.      Set-Off/Pro-Rata Sharing                                            117
20.1     Set Off                                                             117
20.2     Pro-Rata Sharing                                                    118

21.      Notices                                                             120
21.1     Address                                                             120
21.2     Method and Receipt                                                  120
21.3     Deemed Notice                                                       121

<PAGE>

22.      Calculations and Evidence of Debt                                   121
22.1     Accounts                                                            121
22.2     Evidence                                                            121
22.3     Certificates and Determinations                                     121

23.      Severability                                                        122

24.      Waivers; Rights Cumulative                                          122

25.      Counterparts                                                        123

26.      Governing Law and Jurisdiction                                      123
26.1     Law                                                                 123
26.2     Submission to Jurisdiction                                          123
26.3     Other Jurisdictions                                                 123

The First Schedule                                                           125
The Lenders and their Commitments                                            125

The Second Schedule                                                          126
Form of Notice of Drawing                                                    126

The Third Schedule                                                           129
Form of Transfer Certificate                                                 129

The Fourth Schedule                                                          135
Conditions Precedent Documents                                               135

The Fifth Schedule                                                           141
Calculation of Mandatory Costs Rate                                          141

<PAGE>

THIS AGREEMENT is made the 30th* day of June* 1999

BETWEEN:

(1)    GRAND HOTEL GROUP LIMITED a company  registered under the laws of England
       and Wales under number 3657769 and whose registered  office is situate at
       Derbyshire House, 737a Wilmslow Road,  Didsbury,  Manchester M20 6WF*, as
       borrower ;

(2)    THE LENDERS, the respective names and offices of which are set out in the
       First Schedule, as lenders;

(3)    ARAB BANK plc, in its  capacity as  administrative  agent for the Lenders
       and the Hedge Provider;

(4)    ARAB BANK plc,  in its  capacity  as  security  agent and trustee for the
       Secured Parties; and

(5)    ARAB  BANK plc,  in its  capacity  as Hedge  Provider  under the  Hedging
       Arrangements.

WHEREBY IT IS AGREED as follows:

The Lenders have, at the request of the Borrower, agreed to the provision to the
Borrower of a secured loan facility in the maximum  amount of  (pound)10,000,000
upon the  terms and  subject  to the  conditions  hereinafter  contained  and in
particular, but without limitation, Clause 4.2.

--------
* Inserted in manuscript on executed Agreement

<PAGE>

NOW IT IS AGREED as follows:

1.     Definitions and Interpretation

1.1    Defined Terms

       In this Agreement, the Recitals and the Schedules and Appendices,  unless
       there is something in the subject or context inconsistent therewith,  the
       following expressions shall have the following meanings, namely:

       "Accounting Statement"      means  a  financial   statement   in  a  form
                                   approved by the Administrative  Agent for the
                                   purposes of Clause 12.1 (b):  such  financial
                                   statement,  unless the  Administrative  Agent
                                   otherwise  agrees,  to be in the  form of the
                                   sample statement set out in Appendix 6;

       "Acquisition Agreement"     means the asset sale agreement dated the same
                                   date as this Agreement  between Rank Holidays
                                   Division Limited (1) and the Borrower (2) for
                                   the   acquisition  by  the  Borrower  of  the
                                   Assets,    together   with   all   associated
                                   documents;

       "Administrative Agent"      means  Arab  Bank  plc,  in its

<PAGE>

                                   capacity as  administrative   agent  for  the
                                   Lenders and the Hedge Provider  and  includes
                                   any successor administrative  agent appointed
                                   hereunder;

       "Approved Valuer"           means  such  valuer or firm of valuers as may
                                   be appointed by the Administrative Agent from
                                   time  to  time   (in  its   discretion)   and
                                   "Approved   Valuation"   means  a   valuation
                                   carried out by an Approved Valuer;

       "Agents"                    means  the   Administrative   Agent  and  the
                                   Security  Agent,  and "Agent" means either of
                                   them, as the context requires;

       "Assets"                    means the Properties,  the Hotel Business and
                                   the  other  assets  to  be  acquired  by  the
                                   Borrower under the Acquisition  Agreement and
                                   as specified therein;

       "Availability Period"       means the  period  commencing  on the date of
                                   this Agreement and ending on the date falling
                                   three  months  after  such date or such later
                                   date  as  the  Lenders

<PAGE>

                                   may agree in their absolute discretion at the
                                   request of the Borrower;

       "Basis Point"               means one hundredth of one per cent. (0.01%);

       "Borrower"                  means Grand Hotel  Group  Limited,  a company
                                   registered  under  the  laws of  England  and
                                   Wales under number  3657769 whose  registered
                                   office is situate at 6 Leylands Park,  Colden
                                   Common, Winchester, Hampshire;

       "Borrower's Charge"         means the legal  charge and  debenture  to be
                                   executed by the  Borrower  pursuant to Clause
                                   8.1(a);

       "Calculation Period"        means  each  period of 12 months  ending on a
                                   Reporting Date;

       "Certificate of Title"      means the  certificates of title given to the
                                   Agents and the Lenders (and their successors,
                                   assignees and transferees) in relation to the
                                   Properties by Messrs. Herbert Smith and dated
                                   29 June* 1999;

--------
* Inserted in manuscript on executed Agreement

<PAGE>

       "Commitment"                in  relation  to a Lender  means,  (a) if the
                                   Lender  is a  Lender  on  the  date  of  this
                                   Agreement,  the amount set out opposite  that
                                   Lender's  name in the First  Schedule and the
                                   amount  of  any  other  Lender's   Commitment
                                   acquired  by  that  Lender  under  Clause  19
                                   (Transfer);  and (b) if the Lender  becomes a
                                   Lender after the date of this Agreement,  the
                                   amount of that Lender's  Commitment  acquired
                                   by it under Clause 19 (Transfer),  and "Total
                                   Commitments" means the aggregate for the time
                                   being  of all  the  Commitments  of  all  the
                                   Lenders;

       "Completion Date"           means the date on which the sale and purchase
                                   of the  Assets to the  Borrower  is  actually
                                   completed;

       "Corporate Account          means an application  in the Security Agent's
       Application"                standard form  requesting  the opening of one
                                   or more accounts with the Security Agent;

       "Drawdown Date"             means the date on which the

<PAGE>

                                   Facility is drawn by the Borrower hereunder;

       "Encumbrance"               means any mortgage,  charge (whether fixed or
                                   floating),  pledge, lien,  hypothecation,  or
                                   other  interest  or  arrangement  of any kind
                                   conferring  or  having  a  commercial  effect
                                   analogous to conferring security;

       "Event of Default"          means any of those events specified in Clause
                                   15.1 (Events of Default);

       "Facility"                  means the loan facility made available to the
                                   Borrower pursuant to this Agreement;

       "Facility Amount"           means at any time the  amount  calculated  in
                                   accordance with Clause 4.2 at such time;

       "Hedge Provider"            means  Arab  Bank  plc,  in its  capacity  as
                                   counterparty to the Hedging Arrangements with
                                   the Borrower;

       "Hedging Arrangements"      means   the  ISDA   Agreement   and/or   each
                                   confirmation,  agreement or other document or
                                   matter evidencing or

<PAGE>

                                   constituting   an  interest  rate  management
                                   arrangement  relating  to the  Loan  or  part
                                   thereof,  all Hedging  Arrangements  to be in
                                   form and substance  acceptable to the Lenders
                                   in their absolute discretion;

       "Hedging Arrangements
       Charge"                     means  the  charge  to  be  executed  by  the
                                   Borrower pursuant to Clause 8.1(c);

       "Hedging Arrangements
       Commencement Date"          means   the   date  on  which   the   Hedging
                                   Arrangements come into effect;

       "Hotel Business"            means, as the context requires,  the business
                                   of owning and operating hotels at each of the
                                   Properties  carried  on up to the date of the
                                   Acquisition  Agreement  by  Butlin's  Limited
                                   (or an  associated company  thereof)  or  the
                                   business  of owning and  operating  hotels at
                                   each of the  Properties  to be  carried on by
                                   the Borrower from the Completion Date;

       "Improvement Programme"     means the detailed  programme  and budget for
                                   improvements to the Properties referred to in

<PAGE>

                                   Clause 9.5;

       "Indebtedness"              means,  with  respect  to  any  person,   any
                                   indebtedness or obligation  (whether  present
                                   or  future)  created,   issued,   guaranteed,
                                   incurred   or  assumed  by  such  person  for
                                   payment or repayment of money;

       "Inter-Creditor             means the  agreement  between  the  Borrower,
       Agreement"                  Cygnet  Ventures  Limited,  the  Agents,  the
                                   Lenders, and the Hedge Provider,  referred to
                                   in Clause 8.1(d);

       "Interest Costs"            in relation to a Calculation Period means the
                                   aggregate of all interest, fees, commissions,
                                   discounts  (other than trade  discounts)  and
                                   other costs,  charges and  expenses  accruing
                                   due from the Borrower during such Calculation
                                   Period under this Agreement  (after deducting
                                   all  amounts  payable  by the Hedge  Provider
                                   under the Hedging  Arrangements  but with the
                                   addition  of  all  amounts

<PAGE>

                                   (other than the initial  premium)  payable by
                                   the Borrower to the Hedge  Provider under the
                                   Hedging  Arrangements  in each case after the
                                   application  of Section 2(a) (Netting) of the
                                   ISDA Agreement, where applicable);

       "Interest Period"           means a period by reference to which interest
                                   is to be  calculated  and payable on the Loan
                                   or any other amount  hereunder as selected or
                                   determined  pursuant  to  Clause 5  (Interest
                                   Periods);

       "ISDA Agreement"            means  an   agreement  in  the  form  of  the
                                   International     Swaps    and    Derivatives
                                   Association          Master         Agreement
                                   (Multicurrency-Cross  Border)  1992 Edition a
                                   copy of which is  attached  as Appendix 5 (or
                                   such  other  form as may from time to time be
                                   specified by the Hedge Provider) entered into
                                   between the Hedge  Provider  and the Borrower
                                   for the purposes of effecting  interest  rate
                                   hedging  and/or   interest

<PAGE>

                                   rate  management  arrangements  in respect of
                                   the  interest  arising on some or all of  the
                                   Loan;

       "Key-man Charge"            means the  assignment  to be  executed by the
                                   Borrower pursuant to Clause 8.1(b);

       "Key-man Policy"            means a key-man life  assurance  policy taken
                                   out by the  Borrower  on the life of Mr Kevin
                                   Leech    in   the    sum    of    not    less
                                   than(pound)8,500,000   (eight   million  five
                                   hundred   thousand  pounds)  with  such  life
                                   assurance  company or office and in such form
                                   and on such  terms as are  acceptable  to the
                                   Administrative  Agent and  where the  context
                                   admits   includes   any   replacement    life
                                   assurance policy taken out by the Borrower or
                                   renewal thereof;

       "Lender"                    means  each of the  banks or other  financial
                                   institutions  specified in the First Schedule
                                   and  their  respective  successors  in title,
                                   Transferees and assigns;

<PAGE>

       "Lending Office"            means each branch office of a Lender  through
                                   which  such  Lender  is for  the  time  being
                                   acting for the purposes of this Agreement;

       "LIBOR"                     means,  in relation to any Interest Period or
                                   other period by  reference to which  interest
                                   is to be determined, the rate per annum which
                                   appears on display  page 3750 on the Telerate
                                   Service  (or such other  page as may  replace
                                   that page on that  service  or on such  other
                                   page and service as the Administrative  Agent
                                   may determine to have succeeded such service)
                                   for   deposits  in  Sterling   for  a  period
                                   comparable to such  Interest  Period or other
                                   period as  aforesaid,  as at  11:00am  on the
                                   Quotation  Date for such  Interest  Period or
                                   other  period  or,  if  no  such  rate  is so
                                   displayed,   the  arithmetic   mean  (rounded
                                   upwards,   if   necessary,   to  the  nearest
                                   one-sixteenth of one per cent (1/16%)) of the
                                   respective rates quoted

<PAGE>

                                   to the Administrative Agent by each Reference
                                   Bank  as  the  rates  at  which  deposits  in
                                   Sterling  are  offered by prime banks to such
                                   Reference Bank in the London Interbank Market
                                   for a  period  comparable  to  such  Interest
                                   Period  or other  period  at  11:00am  on the
                                   Quotation  Date for such  Interest  Period or
                                   other  such  period.  If any  Reference  Bank
                                   fails to  provide  a  quotation,  then  LIBOR
                                   shall be determined by reference to the rates
                                   offered  by  the  quoting   Reference   Banks
                                   provided  that if fewer  than  two  Reference
                                   Banks provide a quotation then LIBOR for such
                                   Interest Period or such other period shall be
                                   determined in accordance with Clause 13.3;

       "Loan"                      means the aggregate principal amount advanced
                                   by the Lenders  hereunder  or (as the context
                                   requires)  the  amount  thereof  for the time
                                   being outstanding hereunder;

<PAGE>

       "Loan Note"               means  the   (pound)10,400,000   non-interest
                                 bearing  loan note to be  issued  to  Butlin's
                                 Limited by the  Borrower  as  required by the
                                 Acquisition Agreement;

       "Majority Lenders"        means those  Lenders the  aggregate  of whose
                                 Outstandings comprise at least 66 2/3% of the
                                 Loan or, if the Loan has not then been  made,
                                 Lenders the  aggregate  of whose  Commitments
                                 represent  at  least  66  2/3%  of the  Total
                                 Commitments;

       "Mandatory Costs Rate"    means  the  additional  interest  rate on the
                                 Loan  (expressed  as a  rate  per  annum)  to
                                 compensate   the  Lenders  for  the  cost  of
                                 complying with the Sterling  mandatory liquid
                                 costs  requirements  and for the  cost of the
                                 fee   payable  to  the   Financial   Services
                                 Authority   as   specified   in  Clause   6.6
                                 (Mandatory Costs Rate);

       "Margin"                  means 200 Basis Points (2%) per annum;

       "Net Operating Profit"    means the net operating

<PAGE>

                                   profit   (calculated   as  set   out  in  the
                                   Accounting  Statement)  of the Borrower  such
                                   profit being  calculated  before deduction of
                                   the  cost of the  Improvement  Programme  and
                                   before deduction for depreciation;

       "Notice of Drawing"         means a notice of  drawing  in respect of the
                                   Facility substantially in the form set out in
                                   the Second  Schedule  issued by the  Borrower
                                   requesting  that  the  Facility  be  advanced
                                   hereunder;

       "Outstandings"              means,  in  relation to a Lender at any time,
                                   the aggregate  principal  amount of its share
                                   of  the  Loan  at  such   time   and   "Total
                                   Outstandings"   at   any   time   means   the
                                   Outstandings of all the Lenders at such time;

       "Participating Member
       State"                      means  a  member  of the  European  Community
                                   established by the Treaty of Rome of 25 March
                                   1957 (as amended by the Single  European  Act
                                   1986 and the  Maastricht  Treaty (signed on 1
                                   February  1992) and as  amended  from time to
                                   time)  which has for the time  being  adopted
                                   the

<PAGE>

                                   single  currency   in   accordance  with  the
                                   aforesaid treaty;

       "Permitted Charge"          means a second ranking  security  interest to
                                   be  executed  by the  Borrower  in  favour of
                                   Cygnet  Ventures  Limited such security being
                                   subject to the  Inter-Creditor  Agreement and
                                   described in the Third Schedule thereto;

       "Permitted Encumbrance"     means:

                                   (a)  any lien or right of set-off arising (in
                                        either  case) by operation of law (or by
                                        agreement  to the  same  effect)  in the
                                        ordinary   course   of  the   Borrower's
                                        business  having regard to the custom in
                                        the relevant trade for the settlement of
                                        accounts;

                                   (b)  the Permitted Charge; and

                                   (c)  any  other   Encumbrance   approved   in
                                        writing by the Administrative Agent;

<PAGE>

       "Potential Event of
       Default"                    means any event or circumstance  which,  with
                                   the  giving  of notice  and/or  lapse of time
                                   and/or upon the Administrative Agent making a
                                   determination  under  Clause 15.1  (Events of
                                   Default),   would   constitute  an  Event  of
                                   Default;

       "Properties"                means the  properties  briefly known as Ocean
                                   Hotel Saltdean,  The Grand Hotel Scarborough,
                                   The Grand Hotel Margate,  The Metropole Hotel
                                   Blackpool  and the Grand Hotel  Llandudno  as
                                   more  particularly  described in the Schedule
                                   to  the  Borrower's   Charge  and  where  the
                                   context  admits  includes  any one or more of
                                   the  properties and any part or parts thereof
                                   and "Property" has a corresponding meaning;

       "Purchase Price"            means the  aggregate  amount  payable  by the
                                   Borrower  for the  purchase  of the Assets as
                                   specified  in Clause  3.1 of the  Acquisition
                                   Agreement  exclusive  of Value  Added Tax and
                                   any other Tax, less the amount  payable under
                                   the  Acquisition  Agreement in respect of any
                                   goodwill;

<PAGE>

       "Qualifying Lender"         means (a) a bank (as defined in Section  840A
                                   of the Income and Corporation Taxes Act 1988)
                                   which is within the charge to corporation tax
                                   as respects  interest  which would be payable
                                   to it  hereunder in  accordance  with Section
                                   349(3) of the  Income and  Corporation  Taxes
                                   Act   1988  or  (b)  a  bank   or   financial
                                   institution to which payments of interest may
                                   otherwise be made by the  Borrower  under the
                                   Security   Documents   without  deduction  of
                                   United Kingdom Taxes;

       "Quotation Date"            means, in relation to any period for which an
                                   interest rate is to be determined  hereunder,
                                   the  day   conclusively   determined  by  the
                                   Administrative  Agent  to be the day on which
                                   quotations would ordinarily be given by prime
                                   banks  in the  London  Interbank  Market  for
                                   deposits  in  Sterling  for  delivery  on the
                                   first day of that  period,  provided  that if
                                   for any such period the

<PAGE>

                                   Administrative    Agent    determines    that
                                   quotations  would ordinarily be given on more
                                   than one date,  the  Quotation  Date for that
                                   period shall be the last of those dates;

       "Reference Banks"           means the  principal  London  offices of Arab
                                   Bank plc, The  Hongkong and Shanghai  Banking
                                   Corporation Limited, Chase Manhattan Bank and
                                   any  bank  appointed  by  the  Administrative
                                   Agent to  replace a  Reference  Bank with the
                                   consent   of   the   Borrower   (not   to  be
                                   unreasonably   withheld   or   delayed)   and
                                   "Reference Bank" has a corresponding meaning;

       "Repayment Date"            means  each of the dates  falling  24, 36, 48
                                   and 60 months  after the Drawdown  Date,  the
                                   last of such dates being the "Final Repayment
                                   Date";

       "Repayment Instalment"      means each  instalment  for  repayment of the
                                   Loan, in each case as provided in Clause 7.1;

       "Reporting Date"            means 31  January,  30 April,

<PAGE>

                                   31 July and 31 October in each year or, where
                                   such  date is not a Sunday,  the  immediately
                                   preceding Sunday;

       "Secured Asset"             means any asset over which an Encumbrance is,
                                   or is to be,  created by or  pursuant  to any
                                   Security Document;

       "Secured Obligations"       means all monies which are now or at any time
                                   hereafter  may be or  become  due or owing by
                                   the  Borrower  to either of the Agents or any
                                   of the Lenders or the Hedge Provider under or
                                   pursuant to any of the Security Documents and
                                   any  other  liabilities,  whether  actual  or
                                   contingent,   now   existing   or   hereafter
                                   incurred  by the  Borrower  to  either of the
                                   Agents  or any of the  Lenders  or the  Hedge
                                   Provider  under  or  pursuant  to  any of the
                                   Security  Documents  (whether  in either case
                                   due,  owing or incurred by the Borrower alone
                                   or jointly  with any other  person(s)  and in
                                   whatever  name,  firm or

<PAGE>

                                   style and whether as principal or surety);

       "Secured Parties"           means  the  Agents  and the  Lenders  and the
                                   Hedge Provider;

       "Security Agent"            means  Arab  Bank  plc,  in its  capacity  as
                                   security  agent and  trustee  for the Secured
                                   Parties and includes any  successor  security
                                   agent appointed hereunder;

       "Security Documents"        means this Agreement,  the Borrower's Charge,
                                   the Key-man Charge, the Hedging  Arrangements
                                   Charge,   the   Hedging   Arrangements,   the
                                   Inter-Creditor  Agreement,  and  any  further
                                   agreement  or document  entered into under or
                                   pursuant   to  the  terms  of  any   Security
                                   Document or  otherwise  entered into or given
                                   at any  time  as  security  for  the  Secured
                                   Obligations;

       "Standby Letter of
       Credit"                     the standby  letter of credit issued or to be
                                   issued to Butlin's Limited by Citibank,  N.A.
                                   as required by the Acquisition Agreement;

<PAGE>

       "Subordinated Loan"         means   the   loan    facility   of   up   to
                                   (pound)100,000 made available to the Borrower
                                   by Cygnet Ventures Limited and referred to in
                                   the Inter-Creditor Agreement;

       "Taxes"                     means any  present or future  taxes,  levies,
                                   duties or  charges,  including  any  interest
                                   thereon and penalties in respect thereof, and
                                   any fees,  deductions  or  withholdings  of a
                                   similar nature and "Tax" and "Taxation" shall
                                   be construed accordingly;

       "Transfer Certificate"      means  an  instrument  executed  pursuant  to
                                   Clause 19.3;

       "Transferee"                means a  Qualifying  Lender to which a Lender
                                   transfers   all  or  part  of  such  Lender's
                                   rights,  benefits and obligations  under this
                                   Agreement  and the other  Security  Documents
                                   pursuant to Clause 19 (Transfer);

       "Valuation Basis"           means  the  Estimated  Realisation  Price (as
                                   defined in the RICS  Appraisal  and Valuation
                                   Manual  as from time to time

<PAGE>

                                   amended  by the  RICS)  or,  if the  same  is
                                   replaced   or  no  longer   published,   such
                                   reasonably  comparable valuation basis as the
                                   Administrative Agent may select;

       "Value"                     means  at any  time in  relation  to any real
                                   property (including the Properties) the value
                                   of the interest  held therein by the Borrower
                                   on  the   Valuation   Basis  at  such   time,
                                   determined by an Approved Valuer.

1.2    Construction of Certain Terms

       Any reference in this Agreement to:

       an "account"  shall include a sub-account  opened by the person with whom
       the account is maintained;

       a "business day" means a day (other than a Saturday or a Sunday) on which
       banks in London are open for  business  (excluding  any day on which such
       banks are open solely for the  purpose of settling  payments in Euro) and
       on which the London interbank market is operating;

       a  "dispute"  means  any  litigation  or  administrative  or  arbitration
       proceeding before or of any court,  tribunal,  arbitrator or

<PAGE>

       governmental or municipal authority, any labour dispute, any dispute with
       any  governmental  or municipal  authority  and any other  dispute of any
       kind;

       a "month" is a  reference  to a period  starting on one day in a calendar
       month  and  ending  on the  numerically  corresponding  day  in the  next
       calendar   month  (and   references   to  "months"   shall  be  construed
       accordingly)  save that,  where any such period would  otherwise end on a
       day which is not a business  day, it shall end on the next  business  day
       and, where  applicable,  interest  shall continue to accrue  accordingly,
       unless that day falls in the calendar month  succeeding  that in which it
       would  otherwise have ended,  in which case it shall end on the preceding
       business day provided  that,  if a period starts on the last business day
       in a calendar  month or if there is no numerically  corresponding  day in
       the month in which that period  ends,  that period  shall end on the last
       business day in that latter month;

       a  "subsidiary"  means (i) a subsidiary  as defined in Section 736 of the
       Companies  Act 1985 (as amended by Section 144 of the Companies Act 1989)
       and (ii) unless the context otherwise requires, a subsidiary  undertaking
       within the meaning of Section 258 of the  Companies Act 1985 (as inserted
       by Section 21 of the Companies Act 1989);

       a time of day shall be to London time; and

       the "winding-up" of a person includes the

<PAGE>

       amalgamation,     reconstruction,     reorganisation,     administration,
       dissolution,  liquidation,  winding-up,  merger or  consolidation of that
       person,  and any equivalent or analogous  procedure  under the law of any
       jurisdiction  in which the person is  incorporated or resident or carries
       on a material part of its business or has material assets.

1.3    Construction of Certain References

       Unless the context  otherwise  requires,  any reference in this Agreement
       to:

       a Clause,  Appendix or Schedule  shall be  construed  as a reference to a
       clause hereof or appendix or schedule hereto;

       a sub-clause  shall be  construed  as a reference to a sub-clause  of the
       Clause in which such reference appears;

       a paragraph  shall be construed as a paragraph of the sub-clause in which
       such reference appears;

       this Agreement or any other agreement or document shall be construed as a
       reference to this Agreement or, as the case may be, such other  agreement
       or  document  as the  same may have  been,  or may from  time to time be,
       amended, varied, supplemented or novated;

       the singular shall include the plural and vice versa;

       any statute or  regulation  shall be  construed  as a

<PAGE>

       reference to such statute or regulation as the same may have been, or may
       from time to time be, amended or re-enacted;

       "Sterling" and the sign "(pound)"  means the lawful currency for the time
       being of the United Kingdom and

       "Euro" means the lawful currency of the Participating Member States;

1.4    Headings

       Clause, Schedule and Appendix headings are for ease of reference only.

2.     The Facility

2.1    Amount and Currency

       Upon and subject to the terms and  conditions  of this  Agreement  and in
       reliance   upon  the   representations   and   warranties  in  Clause  11
       (Representations  and  Warranties) the Lenders agree to make available to
       the  Borrower a loan  facility in an amount not  exceeding  the  Facility
       Amount.

2.2    Participation of Lenders

       Each Lender will  participate in the Facility  through its Lending Office
       in the proportion borne by its Commitment to the Total Commitments.

2.3    Purpose

       The  proceeds  of the  Facility  are to be applied by the  Borrower in or
       towards  payment of the amount

<PAGE>

       of the  Purchase  Price  payable  upon the  Completion  Date,  and in the
       payment of  associated  costs and  expenses.  Neither the Lenders nor the
       Agents shall be concerned to ensure that such application takes place.

3.     The Lenders

3.1    Obligations of Lenders

       Save as provided in this Clause, the obligations of each Lender hereunder
       are  several;  the  failure  of any  Lender to carry out its  obligations
       hereunder shall not relieve any other Lender,  the Agents or the Borrower
       from any of its or their respective obligations to the parties hereto and
       neither  the  Agents  nor  any  Lender  shall  be  responsible   for  the
       obligations  of any  Lender  or (as the  case  may be) any  other  Lender
       hereunder.

3.2    Interests of Lenders

       Notwithstanding  any other term of this  Agreement,  the interests of the
       Lenders are  several and the  aggregate  amount  outstanding  at any time
       hereunder  from the Borrower to any Lender or to either of the Agents for
       its own account is a separate  and  independent  debt.  Save as expressly
       provided  herein or in any of the other  Security  Documents  each of the
       Agents and every  Lender shall each have the right to protect and enforce
       its rights  arising out of this  Agreement  and it shall not be necessary
       for any  Lender or (as the case may be)  either  Agent to be joined as an
       additional party in any proceedings for this purpose.

<PAGE>

4.     Availability and Drawing

4.1    Number of Advances

       Subject to the terms and  conditions of this Agreement the Borrower shall
       be entitled to draw the whole of the Facility by a single drawing.

4.2    Maximum Amount

       The amount of the Facility made available to the Borrower hereunder shall
       be the lesser of the following amounts:

       (a)    the sum of(pound)10,000,000;

       (b)    70% of the Purchase Price; and

       (c)    70% of the  lower of the  Approved  Valuations  of the  Properties
              referred to in paragraph 7 of the Fourth Schedule.

4.3    Conditions Precedent

       The  Facility  may not be  drawn  unless  the  Administrative  Agent  has
       received,  in form and  substance  satisfactory  to it, all the documents
       listed in the Fourth Schedule.

4.4    Procedure

       Subject to:

       (a)    the conditions set out in Clause 4.3 having been satisfied;

       (b)    no Event of  Default  and no  Potential  Event of  Default  having
              occurred;

<PAGE>

       (c)    the Administrative Agent having received by not later than 10:00am
              one business  day before the Drawdown  Date (or by such later time
              as the  Administrative  Agent after  consultation with the Lenders
              may agree) a Notice of Drawing  (which  shall be  irrevocable)  by
              telex or facsimile or letter duly  completed  and signed on behalf
              of the Borrower by a person duly authorised;

       (d)    the Drawdown Date being the Completion Date;

       (e)    the Administrative Agent having received irrevocable  instructions
              addressed  to it by the  Borrower  requesting  that  the  Loan  be
              disbursed by applying  the proceeds in or towards the  acquisition
              of the  Properties  and in the  payment  of  associated  costs and
              expenses approved by the Administrative Agent; and

       (f)    the  Administrative  Agent  having  received  all fees  costs  and
              expenses  then due and payable to it and/or agreed under Clause 16
              (Expenses, Fees and Commission),

       the Borrower  may, on any business  day during the  Availability  Period,
       draw the Facility.

4.5    Transfer of Funds

       On the Drawdown  Date each Lender shall pay to the  Administrative  Agent
       the  amount in  Sterling  notified  by the  Administrative  Agent to such
       Lender as the amount of such Lender's participation in the Facility to be
       advanced  on

<PAGE>

       the  Drawdown  Date.  All sums to be  advanced  by the  Lenders  shall be
       remitted to the  Administrative  Agent for value on the Drawdown  Date to
       the  account of the  Administrative  Agent in  accordance  with Clause 14
       (Payments). The Administrative Agent shall pay the sums received by it as
       directed by the Borrower in accordance with Clause 4.4(e).

4.6    Cancellation of Unused Facility

       Any part of the Facility  which is not drawn at the earlier of the expiry
       of the  Availability  Period or the Drawdown  Date shall be cancelled and
       shall not thereafter be available to the Borrower.

4.7    No Waiver of Conditions

       If the Administrative Agent in its discretion allows the Borrower to draw
       the Facility notwithstanding that some or all of the conditions specified
       in this Clause 4  (Availability  and Drawing) have not been satisfied the
       Lenders  shall not thereby be deemed to have  waived any such  conditions
       and the Borrower covenants with the Administrative  Agent and the Lenders
       to satisfy  such  conditions,  or to  procure  that such  conditions  are
       satisfied,  upon request from the  Administrative  Agent within such time
       limit as shall have been agreed and, failing agreement, immediately.

4.8    Authorisations for Disbursements

       The  Borrower  hereby  irrevocably  and

<PAGE>

       unconditionally   instructs   and   authorises   the   Lenders   and  the
       Administrative  Agent to advance  the  Facility  upon and  subject to the
       terms  hereof by paying  the  proceeds  thereof  by  disbursement  to the
       "Payee"  named in the Notice of Drawing  (less any  deductions  which the
       Administrative   Agent  is   authorised   to  make)  and  upon  any  such
       disbursement  to any such "Payee" and the deduction of any  deductions so
       authorised  the  Borrower  agrees  that the  Lenders  shall be deemed (in
       proportion  to the  respective  amounts  made  available  by  them to the
       Administrative  Agent)  to have  made  to the  Borrower  the  Loan in the
       aggregate of the amount so disbursed and any such deductions  which shall
       satisfy pro tanto the  obligations  of the Lenders to lend such amount to
       the Borrower hereunder.

4.9    Failure to Draw

       If for any reason the Facility is not drawn  hereunder  after  receipt by
       the  Administrative  Agent of a Notice of Drawing pursuant to Clause 4.4,
       the Borrower  will pay to each Lender (other than a Lender which fails to
       make available its portion of the Loan by reason of its own negligence or
       default) such amount as such Lender may certify (such certification to be
       conclusive  in the absence of manifest  error) as necessary to compensate
       it for any  resulting  loss or  expense  on  account  of funds  acquired,
       contracted  for or  utilised  in order to fund its  participation  in the
       Loan.

5.     Interest Periods

<PAGE>

5.1    Selection by Borrower

       Subject to the provisions of this Clause 5 (Interest  Periods) and Clause
       6 (Interest),  the Borrower may by notice received by the  Administrative
       Agent not later than  10:00am on the third  business day before the first
       day of each Interest Period (other than the first Interest  Period,  when
       the  selection  will be made in the  Notice of  Drawing,  and  subject to
       Clause 5.2 below)  select the duration of such  Interest  Period.  In the
       absence of a selection by the Borrower Clause 5.3 shall apply.

5.2    Determination of Interest Periods

       Subject to the provisions of Clause 6 (Interest)  each Interest Period in
       relation to the Loan shall have a duration  of 3, 6, 9 or 12 months,  (or
       such other  period as may be agreed with the  Administrative  Agent after
       consultation  with the  Lenders),  as  selected  or  deemed  to have been
       selected by the Borrower in accordance with Clause 5.1, but so that:

       (a)    the first Interest Period applicable to the Loan shall commence on
              the  Drawdown  Date and  shall  end on the last day of the  period
              selected by the Borrower pursuant to Clause 5.1 or deemed selected
              by the Borrower pursuant to Clause 5.3;

       (b)    save as  otherwise  provided in this  Agreement,  each  subsequent
              Interest  Period  shall  commence  on the expiry of the  preceding
              Interest Period;

<PAGE>

       (c)    any Interest  Period which would  otherwise  end on a day which is
              not a  business  day,  shall  be  extended  to  end  on  the  next
              succeeding  business  day  unless  that day falls in the  calendar
              month  succeeding  that in which it would otherwise have ended, in
              which case it shall end on the immediately preceding business day;

       (d)    any Interest Period which would otherwise overrun a Repayment Date
              shall be shortened to end on such Repayment Date; and

       (e)    the  right to  select  the  duration  of  Interest  Periods  shall
              determine on the Hedging  Arrangements  Commencement Date and from
              the Hedging Arrangements  Commencement Date Interest Periods shall
              (notwithstanding  Clause 5.3) be  coterminous  with the periods by
              reference to which  payments are to be calculated  pursuant to the
              Hedging Arrangements.

5.3    Deemed Selection

       If the Borrower  shall fail to select the duration of an Interest  Period
       in accordance with Clauses 5.1 and 5.2 then the Borrower shall be deemed,
       subject as  aforesaid,  to have  selected a duration  of 3 months or such
       other period as the Administrative Agent may (after consultation with the
       Lenders) specify for such Interest Period.

<PAGE>

6.     Interest

6.1    Interest Rate

       The rate of interest  applicable  to the Loan  during an Interest  Period
       applicable  thereto  shall  be  the  rate  per  annum  determined  by the
       Administrative Agent to be the aggregate of (i) the Margin and (ii) LIBOR
       for such Interest Period and (iii) the Mandatory Costs Rate.

6.2    Hedging Arrangements

       (a)    The Borrower has executed and delivered to the Hedge  Provider the
              ISDA Agreement.

       (b)    On  the  Drawdown   Date  the  Borrower   shall  enter  into  such
              confirmations  pursuant to the ISDA  Agreement to take effect from
              such date (being the Drawdown  Date or the last day of an Interest
              Period) as the Hedge Provider may specify.

       (c)    Without  prejudice to the generality of the foregoing the dates on
              which   payments   fall  to  be  made   pursuant  to  the  Hedging
              Arrangements shall coincide with the dates on which interest is to
              be paid on the Loan under this Agreement.

       (d)    For so long as the Loan  remains  outstanding  the Hedge  Provider
              shall be entitled to pay to the Security  Agent any payments which
              the Hedge  Provider is required to pay to the  Borrower  under the
              Hedging  Arrangements  and for the  avoidance  of doubt,  any sums
              which

<PAGE>

              the  Borrower is required to pay to the Hedge  Provider  under the
              Hedging  Arrangements  shall be sums due under and  secured by the
              Security Documents in accordance with their terms.

6.3    Payment of Interest

       The Borrower  shall,  subject to the  provisions of Clause 13 (Changes in
       Circumstances),  14 (Payments) and 15 (Default),  pay interest accrued on
       the Loan  calculated in accordance  with this Clause 6 on the last day of
       each Interest Period.

6.4    Day Count Fraction

       Interest relative to each Interest Period shall accrue from day to day on
       the  basis  of a year  of 365  days  and for the  actual  number  of days
       elapsed.

6.5    Currency

       All interest on the Loan shall be calculated and paid in Sterling.

6.6.   Mandatory Costs Rate

       The provisions of the Fifth  Schedule  shall apply to the  calculation of
       the Mandatory Costs Rate in respect of the Loan.

7.     Repayment and Prepayment

7.1    Repayment

       The Borrower shall on each Repayment Date repay a repayment instalment in
       respect  of  the   principal   amount  of  the  Loan  in  the  amount  of
       (pound)2,500,000

<PAGE>

       and on the Final  Repayment  Date shall repay the  remaining  outstanding
       amount of the Loan by a single  payment,  together with any other amounts
       due, owing or incurred by it pursuant to this Agreement.

7.2    Prepayment

       If the Borrower has provided the Administrative  Agent with not less than
       10 business  days' prior  written  notice of its  intention to do so, the
       Borrower may prepay  without  premium or penalty the whole or any part of
       the Loan (and, if part, being an integral multiple of  (pound)250,000) on
       the last day of any Interest Period. On any prepayment the Borrower shall
       pay to the  Administrative  Agent for the account of the Lenders all such
       breakage  and other costs and  expenses as are referred to in Clause 17.1
       and as may be  applicable.  Any  amount  prepaid  shall be  applied in or
       towards discharge of the Repayment  Instalments in inverse order of their
       maturity.

7.3    Obligation to Prepay Following Notice

       Any notice given by the Borrower  under Clause 7.2 shall be  irrevocable,
       shall  specify  the date on which  the  prepayment  is to be made and the
       amount to be prepaid and shall on that date oblige the Borrower to pay to
       the  Administrative  Agent for the  account  of the  Lenders  the  amount
       therein stated and at the same time to pay all accrued interest and other
       amounts (including any due under Clause 17 (Indemnities))  falling due in
       respect of such prepayment.

<PAGE>

7.4    No Premature Repayment

       The Borrower shall not repay or prepay all or any part of the Loan except
       at the times and in the manner  expressly  provided for in this Agreement
       and shall not be entitled to re-borrow any amount repaid or prepaid.

7.5    Amounts and Currency of Repayments and Prepayments

       Each  repayment  and  prepayment  under this  Agreement  shall be made in
       Sterling and the Borrower shall at the same time pay all accrued interest
       and  other  amounts  (including  any due under  Clause 17  (Indemnities))
       falling due in respect of such repayment or prepayment.

8.     Security

8.1    Security

       As continuing  security for the discharge of all the Secured  Obligations
       the Borrower shall:

       (a)    execute  and  deliver  to the  Security  Agent a deed or  deeds of
              charge and debenture substantially in the form set out in Appendix
              1 including a charge by way of legal  mortgage  over the  freehold
              and leasehold  interests in the Properties  and a floating  charge
              over  the  undertaking  and  other  property  and  assets  of  the
              Borrower;

       (b)    execute and  deliver to the  Security  Agent a security  agreement
              containing  an  assignment  of all its right title and interest in
              the Key-man Policy  substantially  in the form set

<PAGE>

              out in Appendix 2;

       (c)    execute and  deliver to the  Security  Agent a security  agreement
              containing  an  assignment  of all its right title and interest in
              the  Hedging  Arrangements  substantially  in the  form set out in
              Appendix 3; and

       (d)    execute and deliver and  procure  the  execution  and  delivery by
              Cygnet Ventures Limited to the Security Agent of an inter-creditor
              agreement substantially in the form set out in Appendix 4.

8.2    Security Agent as Trustee

       The  Secured  Obligations  shall be secured by the  interests  and rights
       granted in favour of the Security Agent as trustee for the Agents and the
       Lenders under the Security  Documents and such interests and rights shall
       be held by the  Security  Agent upon trust for the benefit of the Secured
       Parties in such shares and ranking in such order as shall be from time to
       time applicable pursuant to any agreement between the Secured Parties.

9.     Maintenance of Security

9.1    Covenants

       The Borrower covenants with the Agents and the Lenders:

       (a)    to  ensure  that  the  Net  Operating  Profit  in each  and  every
              Calculation  Period  ending  on

<PAGE>

              or after 30 July 2000 is at least  equal to 125% of the  aggregate
              of (1) the Interest Costs for such Calculation Period and (ii) (in
              respect  of each  Calculation  Period  ending  on or after 30 July
              2001) (pound)2,500,000;

       (b)    to ensure  that the amount of the Loan does not at any time exceed
              70% of the Value of the Properties at such time; and

       (c)    use all reasonable endeavours to procure* that a Key-man Policy is
              maintained  until all sums due and to become due from the Borrower
              under or in connection with the Security  Documents have been paid
              or repaid in full and without limitation, shall use all reasonable
              endeavours to obtain a new Key-man Policy upon  substantially  the
              same terms from a life  office  acceptable  to the  Administrative
              Agent to take  effect  on and from the  expiry  of the term of the
              initial Key-man Policy

9.2    Calculations and Further Covenant

       For the purposes of Clause 9.1 (a):

       (a)    the  covenant  contained  in Clause  9.1(a)  shall be  applied  by
              reference to the Net Operating Profits specified in the Accounting
              Statement to be supplied by the  Borrower  pursuant to Clause 12.1
              (b) for the three  monthly  period ending on each  Reporting  Date
              (falling  on or  after  30  July  2000)  aggregated

--------
* Inserted in manuscript on executed Agreement

<PAGE>

              with  the  Net  Operating  Profits  specified  in  the  Accounting
              Statements for the three immediately preceding Reporting Dates, to
              the intent that the covenant in Clause  9.1(a) shall be applied on
              the basis of a rolling  Calculation Period of twelve months ending
              on each Reporting Date (falling on or after 30 July 2000)

       (b)    the Borrower  further  covenants with the Agent and the Lenders to
              ensure that the Net Operating  Profit in each  accounting  year of
              the Borrower (applied by reference to the annual audited financial
              statements  of the Borrower  referred to in Clause  12.1(a)) is at
              least equal to 125% of the aggregate of (i) the Interest  Costs in
              relation to the  Calculation  Period or Periods (or parts thereof)
              falling within and  corresponding  to each such financial year and
              (ii) (in respect of each financial year ending on or after 30 July
              2001) (pound)2,500,000;

       (c)    the  Administrative  Agent  may at any time and from  time to time
              require the Borrower to supply further information and evidence as
              to the calculation of each Accounting Statement.

9.3    Failure to Comply

       If at any time the Administrative Agent determines that the provisions of
       Clause 9.1 (b) are for the time being not  complied  with,  the  Borrower
       shall within 10 business days after the Administrative Agent has notified
       it of such  fact

<PAGE>

       in writing repay all or part of the Loan (as the Administrative Agent may
       specify)  such  that the  provisions  of Clause  9.1 (b) are  thenceforth
       complied with.

9.4    Valuations

       An  Approved   Valuation  of  the  Properties  may  if  required  by  the
       Administrative  Agent be carried out at the expense of the  Borrower  not
       more frequently than once every twelve months. The  Administrative  Agent
       shall  arrange for such  Approved  Valuation  if required by the Majority
       Lenders. The Administrative Agent shall also if requested by the Majority
       Lenders arrange for additional  Approved  Valuations of the Properties to
       be carried out. If any such additional  Approved Valuation indicates that
       on the date it was requested  the Borrower was complying  with Clause 9.1
       (b)  the  cost  thereof  shall  be  borne  by the  Lenders,  and if  such
       additional  Approved  Valuation  indicates that on such date the Borrower
       was not so  complying,  the cost of such  additional  Approved  Valuation
       shall be borne by the Borrower.

9.5    Improvements to the Properties

       (a)    The Borrower  shall within 60 days of the Drawdown Date produce to
              the  Administrative  Agent (in  sufficient  copies for each of the
              Lenders) a detailed  programme of and budget for  improvements  to
              the  Properties  together  with  plans,   specifications,   costs,
              estimates and a works programme at an anticipated cost

<PAGE>

              of not less than  (pound)1,500,000  (exclusive  of all  Taxes) and
              shall provide all such further  information in relation thereto as
              the Administrative Agent or the Lenders may reasonably require.

       (b)    The   Borrower   shall   obtain  the   written   approval  of  the
              Administrative  Agent  which  may  be  withheld  at  its  absolute
              discretion or given subject to any condition or conditions  (after
              consultation with the Lenders) to the Improvement Programme before
              implementing any of the relevant improvements.

       (c)    Subject to obtaining  the written  approval  referred to in Clause
              9.3(b)  the  Borrower  shall  forthwith  apply  for  and  use  all
              reasonable  endeavours  to obtain all planning and other  consents
              licences and/or  certificates  which may be required in connection
              with  the   Improvement   Programme  (and  supply  copies  to  the
              Administrative Agent) and shall commence and proceed diligently to
              complete or procure the  completion of the  Improvement  Programme
              and supply evidence  satisfactory to the Administrative Agent that
              by no later than the expiry of the period of eighteen  months from
              the  Drawdown  Date (i) the  Borrower  has from its own  resources
              spent not less  than(pound)1,500,000  (exclusive  of all Taxes) on
              the Improvement  Programme and (ii) that the Improvement Programme
              has been completed in all material respects.

<PAGE>

       (d)    The Borrower will permit the Agents (and all persons authorised by
              them) to enter the  Properties on  reasonable  prior notice at any
              time  in  order  to  inspect  the  progress  of  the   Improvement
              Programme.

       (e)    None of the Secured Parties shall have any liability in respect of
              the Improvement  Programme and no inspection or approval by any of
              the Secured Parties of the Improvement Programme and works carried
              out under it will constitute any warranty or  representation as to
              the design, fitness or satisfactory  completion of the Improvement
              Programme.

       (f)    Before  preparing  the  Improvement  Programme  the Borrower  will
              submit to the  Administrative  Agent for approval the names of the
              contractors,   architect,   structural   engineer  and  any  other
              professional advisors the Borrower intends to employ in connection
              with the  Improvement  Programme  (in each case where the value or
              fee   for   the   relevant   contract   or   appointment   exceeds
              (pound)100,000) and prior to commencing the Improvement  Programme
              the Borrower will if requested by the Administrative Agent procure
              that the construction contractor,  architect and any other members
              of the professional team shall execute deeds undertaking a duty of
              care in favour of the Security Agent in connection with the design
              construction and  implementation  of the Improvement  Programme in
              the BPFA form or in such  other form as the

<PAGE>

              Administrative Agent may reasonably require.

       (g)    Immediately  on entering  into a contract for or in respect of the
              execution  of the  Improvement  Programme  where  the value of the
              relevant contract  exceeds(pound)100,000 the Borrower will execute
              a security  assignment  of such  construction  contract and of all
              other  warranties  and  contracts   relating  to  the  Improvement
              Programme as the Administrative Agent may require in favour of the
              Security  Agent in such a form as the  Administrative  Agent shall
              require  and will also use its  reasonable  endeavours  to procure
              that the relevant  contractor will enter into a step-in  agreement
              with the Security Agent in such form as the  Administrative  Agent
              shall  reasonably   require  by  which  the  relevant   contractor
              undertakes  not to determine the relevant  contract as a result of
              the Borrower's  failure without first notifying the Security Agent
              and to permit the  Security  Agent or a receiver  appointed by the
              Security  Agent to take over the  relevant  contract  in the event
              that the Security Agent should  exercise the security rights under
              the Borrower's Charge.

       (h)    If the  Borrower  shall  obtain  any  performance  bond  or  other
              security for the performance by the construction contractor of the
              terms of the construction contract then it will assign the benefit
              of such bond to the Security Agent by way of security.

<PAGE>

10.    Single Currency

       Each of the  parties to this  Agreement  acknowledges  that if the United
       Kingdom  becomes a  Participating  Member State  Sterling  will or may be
       replaced by the Euro. The other parties to this Agreement  agree to amend
       the provisions of this Agreement if notified by the Administrative  Agent
       (after consultation with the Lenders) that any amendments are required to
       ensure  that  this  Agreement  reflects  market  practice  in the  London
       Interbank  Market at the  relevant  time  following  the  United  Kingdom
       becoming a Participating  Member State including  without  limitation any
       amendments  required in the duration of Interest Periods,  the definition
       of business day, the day-count fraction,  or in any other  administrative
       provisions of this Agreement.

11.    Representations and Warranties

11.1   Representations

       The  Borrower  represents  and  warrants  to the  Agents  and each of the
       Lenders that:

       (a)    the  Borrower  is  a  private  limited  liability  company,   duly
              incorporated  and validly  existing  under the laws of the England
              and  Wales  and has  power to carry on its  business  as it is now
              being conducted and to own property and other assets;

       (b)    the Borrower  has been  incorporated  specifically  to acquire the
              Properties and the Hotel Business and to run the Hotel

<PAGE>

              Business with the  assistance of the Facility and the Borrower has
              not previously traded or incurred liabilities except in connection
              with the  acquisition of the Properties and the Hotel Business and
              this  Facility and in  particular  (but  without  prejudice to the
              generality of the foregoing) the Borrower has not entered into any
              guarantee or borrowed money from any other person or company other
              than the  Lenders or by the  Subordinated  Loan or by the issue of
              the Loan Note or  entered  into any  transaction  having a similar
              effect nor has the Borrower  created nor is there  subsisting  any
              Encumbrance  on or over the  whole  or any part of the  Borrower's
              undertaking  or  assets   (including,   but  without   limitation,
              revenues),  present or future other than in favour of the Security
              Agent by the  Permitted  Charge or liens  arising in the  ordinary
              course of business;

       (c)    the execution,  delivery and performance of this Agreement and the
              other  Security  Documents are within the corporate  powers of the
              Borrower, have been duly authorised by all necessary corporate and
              other action and do not contravene any provision of applicable law
              or of the  Memorandum  and Articles of Association of the Borrower
              or any contract or agreement binding on the Borrower;

       (d)    the obligations and liabilities expressed to be assumed by each of
              the Borrower under each of the Security Documents are legal, valid
<PAGE>

              and  binding   obligations  of  the  Borrower  binding  on  it  in
              accordance with their respective  terms, and, without prejudice to
              the foregoing, the Borrower's Charge, the Key-man Charge, and* the
              Hedging  Arrangements  Charge * create  (inter  alia)  valid first
              priority charges over the assets thereby charged and which are not
              subject to any prior ranking Encumbrances or, other than Permitted
              Encumbrances  (excluding  for this purpose the Permitted  Charge),
              Encumbrances ranking pari passu;

       (e)    all necessary certificates, consents or approvals required for the
              use of each of the Properties in the manner presently used for the
              Hotel  Business  have been duly obtained and are in full force and
              effect;

       (f)    there are no  pending  or, to its  knowledge  having  made due and
              proper enquiry, threatened actions or proceedings before any court
              or  administrative  agency against the Borrower other than actions
              or  proceedings  details  of  which  have  been  disclosed  to the
              Administrative  Agent and which are being  disputed in good faith,
              nor is the Borrower in breach of or in default under any agreement
              to which it is a party  or  which is  binding  on it or any of its
              assets,  to an  extent or in a manner  which  may have a

--------
* Inserted in manuscript on executed Agreement

* Amended in manuscript on executed Agreement

<PAGE>

              material  adverse effect on the financial  condition or operations
              of the Borrower or  materially  impair the  Borrower's  ability to
              perform its obligations under this Agreement or any other Security
              Document and there are no pending or, to its knowledge having made
              due and proper enquiry, threatened disputes or proceedings arising
              out of or in connection with the Properties other than disputes or
              proceedings,   details  of  which  have  been   disclosed  to  the
              Administrative Agent and which are being disputed in good faith;

       (g)    the Borrower has not taken any  corporate or other action nor have
              any  legal  proceedings  been  started  or  (to  the  best  of its
              knowledge and belief) other steps taken or threatened  against the
              Borrower for its winding-up,  dissolution or  re-organisation,  or
              for the  appointment  of a  receiver,  trustee,  administrator  or
              similar  officer  of it or him of  any  or  all of its  assets  or
              revenues;

       (h)    the whole of the Borrower's  issued share capital is legally owned
              as follows:-

              Name                            Number of Ordinary Shares

              Cygnet Ventures Limited                    85
              Philip Mason                                6
              Patricia Mason                              4
              Stephen Last                                2
<PAGE>

              Rod Rodgers                                 2
              David Marriott                              1

       (i)    save as provided in the Security Documents,  the execution of this
              Agreement  and the other  Security  Documents  and the  Borrower's
              exercise  of  its  rights  and   performance  of  its  obligations
              hereunder and thereunder  will not result in the existence of, nor
              oblige the Borrower to create,  any Encumbrance over all or any of
              its present or future revenues or assets;

       (j)    all Accounting  Statements and financial  statements  from time to
              time  delivered to the Agents or the Lenders by the Borrower  will
              be prepared in accordance  with  accounting  principles  generally
              accepted in the United Kingdom and consistently  applied, and give
              a true and fair view of the  financial  condition  of the Borrower
              and its  subsidiaries  (if  any) at the date to  which  they  were
              prepared and the results of the Borrower's  operations  during the
              financial  year  ending  on  such  date  or,  in the  case  of the
              Accounting  Statements,  a true and fair  view of the  information
              required to be contained  therein for the relevant  period;  since
              publication of any such financial  statements  delivered there has
              been no adverse  change in the business or financial  condition of
              the Borrower or any of its subsidiaries (if any) which is material
              in  the  context  of  the   Borrower's   ability  to  perform  its
              obligations under this Agreement

<PAGE>

              or the other Security Documents;

       (k)    the  information  provided  by or on  behalf  of the  Borrower  in
              connection   with  the   negotiation   of  the  Facility  and  the
              preparation  of the  Security  Documents  was true,  complete  and
              accurate in all material respects when supplied,  and (to the best
              of the Borrower's  information  and belief) since the date of such
              supply there has been no material  adverse  change in the position
              of the Borrower rendering such information misleading;

       (l)    no Event of Default or Potential Event of Default has occurred and
              is continuing;

       (m)    the  Borrower  has  complied  in all  material  respects  with all
              Taxation  laws in all  jurisdictions  in  which it is  subject  to
              Taxation  and has  paid all  Taxes  due and  payable  by it and no
              claims are being asserted  against it in respect of Taxes save for
              assessments in relation to the ordinary  course of its business or
              claims  contested  in good faith and in respect of which  adequate
              provision  has been made and  disclosed in the latest  accounts of
              the Borrower or information in respect of which has been delivered
              to the Administrative Agent hereunder; and

       (n)    the Borrower is not (nor would be with the giving of notice or the
              lapse  of time or both)  in  breach  of or in  default  under  any
<PAGE>

              agreement  relating to any  Indebtedness to which it is a party or
              by which it may be bound, where the amount of such Indebtedness is
              in excess of (pound)75,000.

11.2   Lenders' Reliance

       The  Borrower  acknowledges  that it has  made  the  representations  and
       warranties  referred to in Clause 11.1 with the  intention of  persuading
       the Agents and the  Lenders  to enter  into this  Agreement  and that the
       Agents and the Lenders have entered into this  Agreement on the basis of,
       and in full reliance on, each of such representations and warranties. The
       Borrower  warrants  to the  Agents  and  the  Lenders  that  each of such
       representations  and  warranties  is true  and  correct  in all  material
       respects as of the date of this Agreement and that none of them omits any
       matter,  the  omission  of which  makes any of such  representations  and
       warranties misleading in any material respect.

11.3   Knowledge of Lenders

       The rights and  remedies of the Agents and the Lenders in relation to any
       misrepresentation or breach of warranty on the part of the Borrower shall
       not be  prejudiced by any  investigation  by or on behalf of the Agent or
       the Lenders  into the affairs of the Borrower or the Hotel  Business,  by
       the execution or the performance of this Agreement or by any other act or
       thing  which may be done by, or on behalf of the Agents or the Lenders in
       connection  with this Agreement and

<PAGE>

       which might, apart from this Clause, prejudice such rights or remedies.

11.4   Repetition

       The  representations  and  warranties  made by the  Borrower  pursuant to
       Clause 11.1 and the warranty made by the Borrower pursuant to Clause 11.2
       (other than that made in Clause  11.1(b))  shall survive the execution of
       this  Agreement  and the drawing of the Facility  hereunder  and shall be
       deemed  to be  repeated  on the date of the  Notice  of  Drawing,  at the
       beginning  of each  Interest  Period as if made at and in  respect of the
       circumstances existing at each such time.

12.    Undertakings

12.1   Specific Undertakings

       The Borrower undertakes with the Agents and each of the Lenders that from
       and after the date  hereof  and until all sums due and to become due from
       the Borrower under or in connection with the Security Documents have been
       paid or repaid in full the Borrower shall:-

       (a)    as soon as the same become available,  but in any event within 180
              days after the end of each of its financial years,  deliver to the
              Administrative  Agent sufficient copies for each of the Lenders of
              the  financial   statements  relating  to  the  Borrower  and  its
              subsidiaries  (if any)  for such  financial  year  (including  its
              balance sheet and profit and loss account) prepared and audited in

<PAGE>

              accordance  with  generally  accepted  accounting  practice in the
              United Kingdom,  consistently applied,  approved by the Borrower's
              Board of Directors and certified by a duly  authorised  officer of
              the  Borrower  as  giving a true and  fair  view of the  financial
              condition of the Borrower and its  subsidiaries (if any) as at the
              end of the period to which those financial  statements  relate and
              of the results of its and their operations during such period;

       (b)    deliver to the Administrative  Agent sufficient copies for each of
              the Lenders as soon as the same become  available but in any event
              within 30 days after each Reporting Date, financial statements and
              management  accounts  of the  Borrower  signed  by a  director  or
              directors of the Borrower for the period of three months ending on
              such  Reporting  Date,  such  statements and accounts to be in the
              form of the Accounting  Statement and prepared in accordance  with
              generally accepted  accounting  practice in the United Kingdom and
              shall (without  limitation)  certify the Net Operating  Profit for
              each such period, and if the Administrative  Agent so requests the
              Borrower will procure that such  statements  and accounts shall be
              certified  by the  Borrower's  auditors  as giving a true and fair
              view of the  information  contained  therein  by not later than 60
              days after the relevant Reporting Date;

<PAGE>

       (c)    deliver to the Administrative Agent (in sufficient copies for each
              of the Lenders if the  Administrative  Agent so requests) promptly
              upon  becoming   aware  of  them,   details  of  any   litigation,
              arbitration or administrative proceedings which are current, or to
              its  knowledge  having made due and proper  enquiry  threatened or
              pending  in  relation  to the  Borrower  and  which  if  adversely
              determined  would or is likely to give rise to a liability  on the
              part of the Borrower in excess of (pound)75,000;

       (d)    from  time to time at the  request  of the  Administrative  Agent,
              furnish the  Administrative  Agent with such information about the
              Properties,  the Hotel Business, or the financial condition of the
              Borrower, as the Administrative Agent may reasonably require;

       (e)    obtain,  comply with the terms of and do all that is  necessary to
              maintain in full force and effect all  authorisations,  approvals,
              licences,   certificates  and  consents  required  in  or  by  all
              applicable  laws and  regulations  to enable the  Borrower and the
              Shareholders  lawfully to enter into and perform their  respective
              obligations under the Security Documents, and to authorise the use
              of the  Properties in the manner in which the  Properties are from
              time to time used;

       (f)    promptly upon becoming aware of the same inform the Administrative
              Agent of the

<PAGE>

              occurrence of any  Potential  Event of Default or Event of Default
              and on the date hereof, on each day on which it delivers financial
              statements to the  Administrative  Agent under Clauses  12.1(a) or
              (b) and also upon receipt of a written request to that effect from
              the Administrative Agent confirm that no such event has occurred;

       (g)    promptly notify the Administrative Agent of:

              (i)    any  Encumbrance  of  which  the  Borrower   becomes  aware
                     attaching to the assets or revenues of the Borrower  (other
                     than  an  Encumbrance  created  in  favour  of  the  Agents
                     pursuant  to  the   Security   Documents   or  a  Permitted
                     Encumbrance); and

              (ii)   any  occurrence  (including  without  limitation  any third
                     party claim or  liability)  of which the  Borrower  becomes
                     aware  which  would be likely to affect the  ability of the
                     Borrower  to  perform  its  obligations  under  any  of the
                     Security Documents;

       (h)    not without the prior written consent of the Administrative Agent,
              which may be withheld at its absolute  discretion or given subject
              to any  condition  or  conditions  (after  consultation  with  the
              Lenders);

              (i)    grant or  authorise  the  grant of any  lease,  tenancy  or
                     licence of all or any

<PAGE>

                     part of the  Properties  (save for any licences  granted to
                     hotel  guests in the course of the  Borrower's  business as
                     hoteliers and any other licence for a period (including any
                     period or periods for which the  licensee  may have a right
                     of renewal)  not  exceeding 12 months and in each such case
                     so long as no  tenancy  or other  proprietary  interest  or
                     security of tenure is created thereby);

              (ii)   grant,  enter into,  or  authorise  any  agreement  for the
                     operation  of all or any part of the Hotel  Business or the
                     Properties  as a franchise or on a franchise  basis or with
                     any  person or persons to operate or manage all or any part
                     of the Hotel Business or the Properties  (including without
                     limitation any reservations  service  agreement) or for the
                     Hotel  Business to be operated under any flag or as part of
                     a group including hotels other than the Properties;

              provided  that (1) in the event that any such  written  consent is
              given by the  Administrative  Agent, the Borrower will promptly at
              its cost,  supply such  documents and other  information  relating
              thereto as the Administrative  Agent may reasonably  require;  (2)
              without  limitation to its  discretion to decline to give any such
              consent  or to  impose  further  conditions  to the  giving of any

<PAGE>

              consent) the Administrative  Agent may, upon giving any consent in
              relation to any matter falling within paragraph (ii) above require
              an  undertaking  from  the  relevant  person  or  person  with the
              Security  Agent not to determine  the relevant  agreement  without
              first giving notice to the Security Agent and agreeing to continue
              such agreement with or for the benefit of the Secured Parties, and
              from the Borrower to perform its obligations  under and to use all
              reasonable  endeavours to enforce the terms of such  agreement and
              to  maintain   such   agreement  in  force,   and  to  notify  the
              Administrative  Agent of any notice  received under such agreement
              (including  without  limitation)  any report or  communication  in
              respect of any shortfall or decline in  operational  standards and
              (3) the  Administrative  Agent  hereby  consents  to the  Borrower
              entering into the Butlin's  Licence, the RLMS Services  Agreement,
              the Butlin's Services Agreement and the LSA Services Agreement (as
              those terms are defined in the Acquisition Agreement);

       (i)    from and after the Completion Date:-

              (i)    obtain,  comply  with  the  terms  of  and  do  all  things
                     necessary   to  maintain  in  full  force  and  effect  all
                     authorisations,   approvals,  certificates,   licences  and
                     consents  required  in  or  by  all  applicable  rules  and
                     regulations  for the use of the  Properties for the purpose
                     of

<PAGE>

                     the Hotel Business;

              (ii)   insure   the   Properties   at  all  times  in  their  full
                     reinstatement  values in  accordance  with the terms of the
                     Borrower's Charge and subject thereto against such risks as
                     the  Administrative  Agent  shall  reasonably  require  and
                     pending  any  such  requirement  against  such  risks  as a
                     prudent  owner  of  the  Properties   would  reasonably  be
                     expected to cover which  insurance shall include full cover
                     against  risks of  terrorism  (to the extent  available  on
                     reasonably  commercial  terms) to the  satisfaction  of the
                     Administrative Agent and to procure that the Security Agent
                     is  nominated  as loss payee  under such policy (or, if the
                     Security  Agent  shall so direct,  that such  insurance  is
                     effected  in the  joint  names  of  the  Borrower  and  the
                     Security Agent); and

              (iii)  effect and maintain such  insurance in respect of the Hotel
                     Business  as a  reasonably  prudent  operator of a business
                     comparable  with the Hotel  Business  may  effect or as the
                     Administrative   Agent  may  from  time  to  time   require
                     including  (but not limited to) third party  liability  and
                     business  interruption  insurance  in  such  amount  as the
                     Administrative   Agent  shall  reasonably  require  and  to
                     procure that

<PAGE>

                     the  Security  Agent is  nominated as loss payee under such
                     policy (or,  if the  Security  Agent shall so direct,  that
                     such  insurance  is  effected  in the  joint  names  of the
                     Borrower and the Security Agent).

       (j)    not without the prior written consent of the Lenders:-

              (i)    save in favour of the Security Agent in accordance with the
                     Security  Documents,  create or permit to be  created or to
                     subsist any Encumbrance on or over the whole or any part of
                     the  Borrower's  undertaking  or  assets  (including,   but
                     without limitation, revenues), present or future other than
                     Permitted Encumbrances; or

              (ii)   except in accordance with the Security Documents, borrow or
                     raise  any money or incur  credit  or give any  guarantees,
                     indemnities or other  assurances  against  financial  loss,
                     other  than  by  the  issue  of  the  Loan  Note  or by the
                     Subordinated Loan;

       (k)    not  exercise  or omit to  exercise  any  right or  discretion  in
              relation to the  Properties or the Hotel Business in such a way as
              may  adversely  affect the value  thereof or the  interest  of the
              Lenders and the Security  Agent therein and,  without  limitation,
              not to exercise  any right to break or  determine  any

<PAGE>

              lease  under  which  any of the  Properties  is held  prior to the
              expiry of the full  contractual  term  thereof  without  the prior
              written consent of the Lenders;

       (l)    not without the prior written consent of the Administrative  Agent
              (after  consultation  with the  Lenders)  or save  pursuant to the
              Improvement  Programme to construct any new buildings or structure
              on the  Properties  or alter or remove the existing  structures or
              buildings or any part or parts thereof or any fixtures therein;

       (m)    deliver to the Administrative Agent (in sufficient copies for each
              of the Lenders) copies of all documents despatched by the Borrower
              to its  shareholders  (or any  class  of  them)  or its  creditors
              generally  (or any class of its  creditors)  at the same time that
              they are despatched;

       (n)    permit  each of the Agents and any  person  (being an  accountant,
              auditor,  solicitor,  valuer or other professional adviser of such
              Agent)  authorised  by  either  of such  Agents  to  have,  at all
              reasonable  times during normal  business  hours and on reasonable
              notice,  access to the  Properties  and the  accounting  books and
              records of the Borrower;

       (o)    pay and  discharge  all Taxes  prior to the date on which the same
              become  overdue  unless,  and only to the extent that,  such Taxes
              shall  be  contested  in good  faith by  appropriate

<PAGE>

              proceedings,  pending  determination of which payment may lawfully
              be withheld;

       (p)    promptly and in any event within any  applicable  period  provided
              for the same in any applicable statute,  law or regulation deliver
              all necessary  forms and documents  required to be delivered to or
              registered  with any  governmental,  statutory  or  other  body or
              agency in  connection  with the Security  Documents and any of the
              transactions contemplated thereunder;

       (q)    not without the prior written consent of the Administrative  Agent
              sell,  transfer,  lease,  lend or otherwise  dispose of any of its
              undertaking  and assets from time to time owned by it with a value
              in excess of (pound)75,000;

       (r)    not, without the prior written consent of the Administrative Agent
              (after  consultation  with the  Lenders),  make any  change in the
              Hotel Business which would result in a substantial  change in such
              business (including,  without limitation, the name under which any
              of the Properties is operated as a hotel),  nor carry on any other
              business which is substantial in relation to the Hotel Business as
              at present conducted;

       (s)    not, without the prior written consent of the Administrative Agent
              (after  consultation with the Lenders),  merge or consolidate with
              any other  person or enter into any joint  venture

<PAGE>

              or partnership agreement;

       (t)    not, without the prior written consent of the Administrative Agent
              (after consultation with the Lenders),  incorporate any company as
              its  subsidiary or acquire any shares or securities  issued by any
              company;

       (u)    not, without the prior written consent of the Administrative Agent
              (after consultation with the Lenders),  make any redemption of any
              of its shares,  purchase any of its shares or otherwise reduce its
              issued  share  capital  from time to time,  nor declare or pay any
              dividend  or  other  distribution  on its  shares  nor to make any
              repayment  or partial  repayment  of the stock  constituted  by or
              under the Loan Note prior to 23 June 2002 nor make or agree to the
              conversion of such stock nor consent to the transfer of such stock
              other  than as  permitted  by the  Loan  Note  nor*  agree  to any
              variation of the terms of the Loan Note ;

       (v)    take all steps  available  to the  Borrower  which are  reasonably
              required  by the  Administrative  Agent so as to  enable  interest
              payable hereunder to be made without deduction of Tax;

       (w)    procure  the  delivery by no later than 30  September  1999 to the
              Administrative Agent from a suitably qualified professional person

--------
* Amended in manuscript on executed Agreement

<PAGE>

              or firm  acceptable to the  Administrative  Agent of a certificate
              addressed to the  Administrative  Agent and the Lenders confirming
              that all computer and other  systems used in  connection  with the
              Hotel Business and/or the Properties are Millennium compliant; and

       (x)    comply in all respects with its obligations  under the Acquisition
              Agreement and will (subject always to the terms of the Acquisition
              Agreement   Charge)   enforce  or  procure   enforcement   of  the
              Acquisition   Agreement  and  its  rights  under  the  Acquisition
              Agreement in accordance  with its terms and will not amend or vary
              the same in any  material  respect  or grant any waiver of time or
              indulgence  under the Acquisition  Agreement and will so far as is
              within  its power of  procurement  proceed  to  completion  of the
              Acquisition Agreement in accordance with its terms.

12.2   General

       The  Borrower  hereby  agrees that at any time and from time to time upon
       the written request of the Administrative Agent and/or the Security Agent
       the Borrower will  promptly and duly execute,  deliver and do any and all
       such further acts, instruments,  documents,  matters and things as either
       of the Agents may  reasonably  require for the purpose of  obtaining  the
       full benefit or intended benefit of this Agreement and the other Security
       Documents  and of the  rights,  title,

<PAGE>

       interest and powers granted or intended to be granted herein and therein.

13.    Changes in Circumstances

13.1   Illegality

       If for any reason it becomes  unlawful or prohibited by law or regulatory
       requirement or any judgment, order or direction of any court, tribunal or
       authority  binding  upon a Lender for any Lender to make or maintain  its
       participation  in the Loan or to give  effect  to any of its  obligations
       owed to the Borrower as  contemplated by this Agreement or to fund in the
       London Interbank Market the whole or any part of its participation in the
       Loan,  such  Lender  shall  inform  the  Administrative   Agent  and  the
       Administrative  Agent shall thereupon give notice to the Borrower to that
       effect  and   thereupon   the  Borrower   shall   prepay  such   Lender's
       participation  in the Loan on the latest  date as may be  required by the
       relevant law or regulatory  requirement in accordance with and subject to
       the provisions of Clause 13.4.  Without  prejudice to the  obligations of
       the  Borrower  to so  prepay,  the  Administrative  Agent,  the Lender so
       affected and the Borrower shall negotiate in good faith during the period
       of 30 days  next  succeeding  the  giving of such  notice  with a view to
       agreeing an alternative  basis  mutually  acceptable to such Borrower and
       the Lender for such Lender to make or maintain its  participation  in the
       Loan.

<PAGE>

13.2   Increased Costs

       If by reason of the  introduction of or any change in any applicable law,
       treaty,  regulation  or  regulatory  requirement  or  any  change  in the
       interpretation  or  application  of any of the foregoing by any judicial,
       governmental  or other  competent  body or  authority  or if by reason of
       compliance  by any  Lender or either of the  Agents  with any  applicable
       directive, request or requirement (whether or not having the force of law
       but with which banks normally comply) of any central bank (including, but
       not limited to, the European  Central  Bank) or  governmental,  fiscal or
       other authority (including,  but not limited to, a directive,  request or
       requirement  relating  to any  Lender's  allocation  of  capital  for the
       purpose of its business):-

       (a)    the cost to any  Lender of  making,  funding  or  maintaining  its
              participation  in the Loan  (including,  without  prejudice to the
              generality of the foregoing increased costs as a result of changes
              or modifications in any applicable reserve requirements or capital
              adequacy  requirements or supervisory fees) or of otherwise giving
              effect to this Agreement or any of the  arrangements  contemplated
              hereby is increased; and/or

       (b)    any sum  received  or  receivable  by any  Lender or either of the
              Agents under or in  connection  with this  Agreement or any of the
              other Security  Documents or the effective return to any Lender or
              either of the Agents

<PAGE>

              under or in  connection  with this  Agreement  or any of the other
              Security Documents is reduced; and/or

       (c)    any  Lender or either of the Agents  makes any  payment or forgoes
              any interest or other return on or  calculated by reference to the
              amount  of any  sum  received  or  receivable  by it  under  or in
              connection  with  this  Agreement  or any of  the  other  Security
              Documents; and/or

       (d)    any  Lender  suffers  a  reduction  in the rate of  return  on its
              overall  capital in respect of this Agreement  below a level which
              might  reasonably  have been expected at the date hereof and which
              it would otherwise have been able to achieve; and/or

       (e)    any Lender or either of the Agents is subject to  liability to Tax
              in connection  with its  Commitment or share of  Outstandings  (if
              any) or any part thereof or in connection with any of the Security
              Documents,

       in any such case by or in an amount (in this  Clause  referred  to as the
       "Relevant  Amount") which such Lender or such Agent deems material,  then
       and in any such case:

              (i)    the  claimant  (being  such  Lender or, as the case may be,
                     such Agent wishing to make a claim under this Clause) shall
                     promptly  notify the  Borrower  in writing  (in the case of
                     such  Lender,  through  the

<PAGE>

                     Administrative Agent) of the happening of such event;

              (ii)   the   Borrower   shall   pay  from  time  to  time  to  the
                     Administrative  Agent for the account of the  claimant,  on
                     demand made to it, such amounts as the claimant may specify
                     to be necessary to compensate the claimant for the Relevant
                     Amount; and

              (iii)  in the  case of a demand  made by a  Lender,  the  Borrower
                     shall be at liberty  at any time after the  receipt of such
                     notice,  so long as the  circumstances  giving rise to such
                     Relevant  Amount  continue,  on  giving  not less than five
                     business  days'  irrevocable  notice to the  Administrative
                     Agent and such Lender, to prepay all (but not part only) of
                     such Lender's  participation in the Loan in accordance with
                     and subject to the provisions of Clause 13.4,

       and the  right  to make any  such  demand  as is  referred  to in  Clause
       13.2(ii) shall survive the repayment or prepayment of the Loan.

       Provided  that the  Borrower  shall have no  obligation  to make  payment
       pursuant to Clause 13.2(ii) where any increased cost:

       (a)    is compensated for by the payment of the Mandatory Costs Rate;

<PAGE>

       (b)    is compensated  for by the operation of Clause 14.3  (Withholding)
              or would have been compensated for by the operation of such clause
              but for a Lender ceasing to be a Qualifying Lender;

       (c)    which  represents Tax on, or any change in the rate of Tax on, the
              overall net  income,  profits or gains of a Lender (or the overall
              net income of a division or branch of the  Lender)  imposed in the
              jurisdiction  in which its principal  office or Lending Office for
              the time  being is  situate  or in  which it is  resident  for Tax
              purposes  or is  carrying  on  business  and by virtue  thereof is
              subject to Tax in that jurisdiction; or

       (d)    is  attributable  to a Lender  incurring,  after  the date of this
              Agreement,  a commitment to lend (or lending  pursuant to any such
              commitment)  in breach of any  regulation  of any central  bank or
              other fiscal, monetary or other authority having jurisdiction over
              that Lender.

13.3   Market Disruption

       (a)    Notwithstanding   anything  to  the  contrary  contained  in  this
              Agreement, if:-

              (i)    the Administrative  Agent receives notice from a Lender (an
                     "Affected  Lender")  at any time  that the  relevant  LIBOR
                     calculated as provided in this Agreement  would not or does
                     not  accurately  reflect

<PAGE>

                     the cost to it of  funding  its  participation  in the Loan
                     during the Interest Period in question or that by reason of
                     circumstances  generally  affecting  the  London  Interbank
                     Market it is impracticable  for the Affected Lender to fund
                     or  continue  to fund its  portion of the Loan  during such
                     period; or

              (ii)   in  respect  of any  Interest  Period in  respect  of which
                     interest  is to be  determined  by  reference  to the rates
                     quoted by the Reference Banks no Reference Bank or only one
                     Reference Bank furnishes a quotation to the  Administrative
                     Agent  for  the  purpose  of   determining   LIBOR  on  the
                     applicable Quotation Date; or

              (iii)  the Administrative  Agent determines that at 11:00am on the
                     applicable  Quotation  Date in respect of any such Interest
                     Period as is referred to in Clause  13.3(a)(ii) none or one
                     only of the Reference  Banks was being offered  deposits in
                     Sterling in the London  Interbank  Market for the  Interest
                     Period in question,

              the Administrative  Agent shall give notice to the Borrower and to
              the Lenders stating the circumstances which have caused the notice
              to be  given.  The Loan  shall  (subject  to the  other  terms and
              conditions of this Agreement) nonetheless be made on the requested
              Drawdown

<PAGE>

              Date if it has not already been made. The Administrative Agent (on
              behalf of and after  consultation with the Lenders or, as the case
              may be, the Affected  Lender) and the Borrower shall  negotiate in
              good faith during the period  (hereinafter called the "negotiation
              period") of 30 days next  succeeding  the giving of such notice to
              the  Borrower  with  a  view  to  agreeing  an  alternative  basis
              acceptable to the Borrower and the Lenders or, as the case may be,
              the Affected  Lender for funding or continuing to fund the Loan to
              the  Borrower  whether  with the currency of the Loan or with some
              other currency or otherwise  and/or for  determining  the interest
              rates and/or Interest  Periods from time to time applicable to the
              Loan.

       (b)    If the Administrative Agent and the Borrower are unable during the
              negotiation period to agree upon an alternative basis as aforesaid
              acceptable to the Borrower and the Lenders or, as the case may be,
              the  Affected  Lender,  the  Interest  Period or Interest  Periods
              applicable to the Loan (or affected part thereof)  following  such
              notification shall each be deemed to be or have been of a duration
              of one month (or such other period as the Administrative Agent may
              consider  appropriate) and the Administrative  Agent shall set out
              the Interest  Period or Interest  Periods and the rate or rates of
              interest applicable in respect of such Interest Period or Interest
              Periods,   which  rate  or  rates

<PAGE>

              shall  represent  the cost as determined by each Lender or, as the
              case  may  be,  the   Affected   Lender   (and   notified  to  the
              Administrative  Agent) of funding its participation(s) in the Loan
              from  whatever  source or  sources  it shall  think fit during the
              Interest  Period or Interest  Periods in  question  plus a rate of
              interest  per annum  equal to the Margin and the  Mandatory  Costs
              Rate. The foregoing procedure shall be repeated as often as may be
              necessary  and  interest  accruing  under this  Clause  13.3 shall
              accrue from day to day and shall be payable by the Borrower on the
              last day of each Interest Period so set.

       (c)    Once the  circumstances  which have  caused this Clause 13.3 to be
              implemented  have ceased to exist,  the other  provisions  of this
              Agreement  regarding  the  calculation  and payment of interest in
              respect of the Loan shall  operate with effect from the end of the
              current Interest Period set by paragraph (b) of this Clause 13.3.

       (d)    The Borrower  shall be at liberty at any time after the setting of
              an interest rate or interest rates by the Administrative  Agent as
              aforesaid (but only so long as the circumstances which have caused
              this  Clause 13.3 to be  implemented  continue to exist) on giving
              not less than five business days' irrevocable prior written notice
              to the Administrative  Agent and the Lenders or as the case may be
              an Affected  Lender to repay to the  Administrative  Agent for the
              account of the  Lenders or as

<PAGE>

              the case may be an Affected  Lender all (but not part only) of the
              Loan or the affected  part thereof to which such  interest rate or
              interest  rates  apply  in  accordance  with  and  subject  to the
              provisions of Clause 13.4.

13.4   Prepayment

       Where any Lender's  participation  in the Loan is prepaid by the Borrower
       pursuant to any of the  provisions  of this Clause 13 the Borrower  shall
       simultaneously  with such prepayment pay to the Administrative  Agent for
       the  account of such Lender  accrued  interest on any sum prepaid and all
       other sums  payable by the  Borrower to or for the account of such Lender
       pursuant to this Agreement  together with such amount as may be specified
       by such Lender to be necessary to compensate it for any loss  (including,
       without  limitation loss of profit)  incurred by it for the remainder (if
       any) of the then  current  Interest  Period(s) as a  consequence  of such
       prepayment  together  also with any  amounts  which may be payable  under
       Clause 17 but no other  premium  or  penalty  and the  amount of the Loan
       shall be reduced accordingly.

13.5   Certificate

       The certificate of the  Administrative  Agent or, as the case may be, any
       Lender as to any of the matters  referred to in this Clause  (accompanied

<PAGE>

       by  reasonable  documentation  and  details in  respect  of any  relevant
       calculations)  shall,  save for any manifest  error,  be  conclusive  and
       binding on the Borrower.

14.    Payments

14.1   Procedure

       (a)    All sums to be advanced by the  Lenders to the  Borrower  shall be
              paid by the  Lenders to the  account of the  Administrative  Agent
              specified  by the  Administrative  Agent to the  Lenders  for that
              purpose  and  shall  be paid by the  Administrative  Agent  to the
              Borrower to such account or accounts as the Borrower may notify to
              the Administrative Agent for that purpose.

       (b)    All  repayments  and  prepayments  under Clause 7  (Repayment  and
              Prepayment),  payments  of  interest  to be made  under  Clauses 6
              (Interest),  13 (Changes in  Circumstances)  or this Clause 14 and
              payments under Clauses 16 (Expenses,  Fees and Commissions) and 17
              (Indemnities)  and other  payments to the Lenders by the  Borrower
              hereunder  shall  be made by the  Borrower  to the  Administrative
              Agent for the account of the Lenders in Sterling in cleared  funds
              on the date due for payment to such account as the  Administrative
              Agent  may  notify  to  the   Borrower  for  this   purpose.   The
              Administrative  Agent shall forthwith  distribute such payments to
              the  Lenders  in  accordance  with their  respective

<PAGE>

              entitlements hereunder.

       (c)    If any sum becomes due for payment hereunder on a day which is not
              a business day, such payment shall be made on the next  succeeding
              business day and interest  shall be increased  accordingly  unless
              such next succeeding  business day falls in another calendar month
              in which  event  such  payment  shall  be made on the  immediately
              preceding business day.

       (d)    (i)    Unless the Administrative Agent shall have been notified by
                     a Lender  not  later  than one  business  day  prior to the
                     Drawdown Date that such Lender will not make  available its
                     portion of the Facility the Administrative Agent may assume
                     that such  Lender  has made its  portion  available  to the
                     Administrative  Agent. If the Administrative Agent makes an
                     amount  available to the Borrower which has not (but should
                     have) been made available to the Administrative  Agent by a
                     Lender,  the  Administrative  Agent  shall be  entitled  to
                     recover the relevant amount from such Lender on demand,  or
                     failing  this,  the  Borrower  shall on request made by the
                     Administrative  Agent to the  Borrower  refund such amount,
                     together  with interest  thereon at the rate  determined by
                     the  Administrative  Agent  (save in the  case of  manifest
                     error) to be equal to the cost to the Administrative  Agent
                     of

<PAGE>

                     funding  such  amount for the period  until  receipt by the
                     Administrative Agent thereof.

              (ii)   If the Administrative  Agent makes an amount available to a
                     Lender which has not (but should have) been made  available
                     to the  Administrative  Agent by the Borrower,  such Lender
                     shall on request  refund such amount to the  Administrative
                     Agent together with interest thereon at the rate determined
                     by the Administrative  Agent to be equal to the cost to the
                     Administrative  Agent of making  available  such amount for
                     the  period  until  receipt  by  the  Administrative  Agent
                     thereof.

14.2   Default Interest

       In any event of non-payment by the Borrower of any sum due from it on the
       date upon which the same is due and payable  pursuant  to this  Agreement
       the  Borrower  shall pay  interest on demand made on the Borrower on such
       sum from and including the date of such non-payment to the date of actual
       payment  (as  well  after as  before  judgment)  at the  rate  per  annum
       determined  by the  Administrative  Agent  from  time  to  time to be the
       aggregate  of (i) the  Margin,  (ii) 2% per annum,  (iii)  LIBOR for such
       consecutive  periods as the Administrative  Agent may determine (provided
       that for the  first  two  business  days  following  default  the rate of
       interest  applicable  shall be overnight  LIBOR),  and (iv) the Mandatory
       Costs

<PAGE>

       Rate in respect of such unpaid sum.

14.3   Withholding; Gross-up

       All payments to be made by the Borrower under this Agreement,  whether in
       respect of principal, interest, fees or otherwise, shall (save insofar as
       required  by law to the  contrary)  be paid in full  without  set-off  or
       counterclaim  and  free  and  clear  of  and  without  any  deduction  or
       withholding or payment for or on account of any Taxes that may be imposed
       in the United Kingdom or any other jurisdiction from which payment may be
       made by the  Borrower  under this  Agreement.  If the  Borrower  shall be
       required  by law to effect any  deduction  or  withholding  or payment as
       aforesaid  from  or in  connection  with  any  payment  made  under  this
       Agreement  for the  account of any Lender or, as the case may be, for the
       account  of or for  either  Agent's  own  account  (the  person for whose
       account the  payment is made being  herein  referred  to as the  "Payee")
       then:

       (a)    the Borrower shall promptly notify the  Administrative  Agent upon
              becoming  aware of the  relevant  requirements  to deduct any such
              deduction or withholding or payment;

       (b)    the Borrower  shall ensure that such  deduction or  withholding or
              payment  does not exceed the  minimum  legal  liability  therefor,
              shall  remit the  amount of such Tax to the  appropriate  Taxation
              authority and shall forthwith pay to the Administrative  Agent for
              the account of the Payee such additional

<PAGE>

              amount as will result in the immediate receipt by the Payee of the
              full amount which would otherwise have been  receivable  hereunder
              had no such deduction or withholding or payment been made; and

       (c)    the Borrower  shall not later than 50 days after each deduction or
              withholding or payment of any Taxes forward to the  Administrative
              Agent  documentary  evidence  reasonably  required by the Payee in
              respect of the payment of any Taxes which the Administrative Agent
              shall  forward  to the Payee upon  receipt  by the  Administrative
              Agent.

14.4   Credit Against Tax

       If the Borrower makes a payment pursuant to Clause 14.3 or Clause 14.5 to
       or for  account of any  Lender and such  Lender (or in the case of Clause
       14.5 the relevant Agent) determines (which  determination shall be in its
       sole discretion but exercised in good faith) that it has received or been
       granted a credit against or relief or remission for, or repayment of, any
       tax paid or payable by it in respect of or calculated  with  reference to
       the deduction or withholding  giving rise to such  payments,  such Lender
       (or in the case of Clause 14.5 the relevant  Agent) shall,  to the extent
       that it can do so without  prejudice  to the  retention  of the amount of
       such credit,  relief,  remission or  repayment,  pay to the Borrower such
       amount as such Lender (or in the case of Clause 14.5 the relevant  Agent)
       shall

<PAGE>

       have determined (which  determination shall be in its sole discretion but
       exercised  in  good  faith)  to be  attributable  to  such  deduction  or
       withholding  and which will leave such person  (after such payment) in no
       better or worse  position  than it would have been in if the Borrower had
       not been required to make such deduction or  withholding.  Nothing herein
       contained  shall  interfere with the right of a Lender or either Agent to
       arrange its tax  affairs in whatever  manner it thinks fit nor oblige any
       Lender or either  Agent to disclose any  information  relating to its tax
       affairs or any  computations in respect thereof or in respect of payments
       under this Agreement.

14.5   Agency Payments

       If either Agent is obliged by law or any regulatory action or decision to
       make any deduction or withholding  from any payment to any of the Lenders
       (an "agency  payment") which  represents an amount or amounts received by
       such Agent from the Borrower under the Security  Documents,  the Borrower
       shall  pay  directly  to  the  relative   Lender  such  sum  (an  "agency
       compensating  sum") as will,  after taking into account any  deduction or
       withholding  which  the  Borrower  is  obliged  to make  from the  agency
       compensating  sum,  enable such  Lender to  receive,  on the due date for
       payment  of the agency  payment,  an amount  equal to the agency  payment
       which such Lender would have received in the absence of any obligation to
       make any deduction or withholding.

<PAGE>

14.6   Currency of Account

       Sterling  shall be the  currency of account and payment of each and every
       sum due from the Borrower  under the Security  Documents  except that any
       payment by the Borrower in respect of any cost, loss, expense, liability,
       duties  or  taxes   referred  to  in  Clauses  16  (Expenses,   Fees  and
       Commissions)  and/or 17  (Indemnities)  shall be made in the  currency in
       which the same were incurred by the relevant Secured Party.

14.7   Appropriation of Payments

       If the Administrative  Agent receives a payment insufficient to discharge
       all  the  amounts  then  due  and  payable  by the  Borrower  under  this
       Agreement, the Administrative Agent shall have an absolute and unfettered
       right to appropriate any payments received from the Borrower,  or amounts
       recovered  under  the  Security  Documents  to such  indebtedness  of the
       Borrower hereunder (and whether to principal,  interest or any other sums
       payable  hereunder) as the  Administrative  Agent may  determine,  to the
       exclusion  of  any  right  on  the  part  of  the  Borrower  to  make  an
       appropriation in respect of such payments.

14.8   Qualifying Lenders

       Each Lender  confirms as at the date hereof,  or, in the case of a Lender
       which is a Transferee,  successor in title or assign,  on the date of the
       relevant  transfer,  assignment  or  succession,  that it is a Qualifying
       Lender.  If otherwise than as a result of the introduction of, change in,
       or

<PAGE>

       change in the  interpretation or application of, any law or regulation or
       any  published  practice or  published  concession  of a relevant  taxing
       authority  occurring  after the date of this  Agreement  or the date upon
       which any rights under this  Agreement  were assigned or  transferred  to
       that Lender as Transferee or assignee or the date upon which it succeeded
       to such rights as successor  in title,  a Lender is not or ceases to be a
       Qualifying  Lender  the  Borrower  shall not be  required  to pay to such
       Lender  under this  Clause 14 any amount in respect of Taxes in excess of
       the amount it would have been  obliged to pay if that  Lender had been or
       had not ceased to be a Qualifying Lender.

14.9   Double Taxation Treaties

       If a Lender is resident in a country with which the United Kingdom has an
       appropriate  double  taxation  treaty  under which that  Lender  would be
       entitled to receive  principal,  interest  and fees under this  Agreement
       from the Borrower  without  withholding of United Kingdom income tax then
       (unless such Lender is able to receive such  principal  interest and fees
       without such  withholding  other than by virtue of such double tax action
       treaty) that Lender shall apply to the  appropriate  authorities for such
       exemption  and shall  deliver to the Inland  Revenue such United  Kingdom
       Inland  Revenue  forms as may be  required  for that Lender to claim such
       exemption from United Kingdom  withholding tax and the Borrower shall not
       be  required  to pay to that  Lender  under this  Clause 14 any amount in
       respect of Taxes in

<PAGE>

       excess  of the  amount  it  would  have  been  obliged  to  pay  if  such
       application  had been  made and such  Inland  Revenue  forms  had been so
       delivered.

15.    Default

15.1   Events of Default

       Each of the  following  events  (whether  or not  arising  as a result of
       events  or  circumstances  beyond  the  control  of the  Borrower)  shall
       constitute an Event of Default, namely if:

       (a)    the Borrower  shall fail to pay any principal,  interest,  fees or
              any other sum  payable  pursuant  to this  Agreement  or any other
              Security  Document  on the  date  upon  which  the same is due and
              payable  and at the  place at and in the  currency  in which it is
              expressed  to be payable  pursuant  to this  Agreement  unless the
              failure  is due  solely to  technical  or  administrative  reasons
              beyond its control and the  relevant  amount is duly paid within 2
              business days after the due date; or

       (b)    the Borrower shall commit any breach (other than as referred to in
              Clause 15.1(a)) of or default in the due performance or observance
              of  any of its  obligations  or  undertakings  contained  in  this
              Agreement or the other  Security  Documents  and such  breach,  if
              capable of remedy,  is not remedied  within 20 business days after
              the Borrower becomes aware of it; or

       (c)    any  representation  or warranty or statement

<PAGE>

              made  or  deemed  to be  made  or  repeated  by  the  Borrower  in
              connection  with  the  negotiation  of  this  Agreement  or in any
              Security  Document or in any notice,  certificate  or statement of
              fact  referred  to in or  delivered  under  any  of  the  Security
              Documents  is or shall  prove to be  untrue  or  incorrect  in any
              material  respect or misleading  when made or deemed or to be made
              or repeated hereunder; or

       (d)    any of the Security Documents is not or ceases to be in full force
              and effect or the validity or  enforceability  of any of the terms
              of  any  of the  Security  Documents  shall  be  contested  by the
              Borrower or any other party thereto (other than any of the Secured
              Parties),  or at any time any act,  condition or thing required to
              be done,  fulfilled  or  performed  in  order  (i) to  enable  the
              Borrower  lawfully to enter into, or exercise its rights under and
              perform  the  obligations  expressed  to be  assumed by it in each
              Security  Document,   or  (ii)  to  ensure  that  the  obligations
              expressed to be assumed by the Borrower in each Security  Document
              are  legal,  valid  and  enforceable,  is not  done  fulfilled  or
              performed when due; or

       (e)    any   Indebtedness  of  the  Borrower   (including,   but  without
              limitation,  the Loan Note or the Subordinated  Loan) in excess of
              (pound)10,000  in aggregate  or (in the case of trade  supplies in
              the ordinary  course of business) in excess of  (pound)100,000  in
              aggregate:-

<PAGE>

              (i)    is  declared  to be or  otherwise  becomes  due and payable
                     prior to its  specified  maturity  by reason of an event of
                     default or default; or

              (ii)   is not paid when due or within any applicable grace period,

              or any creditor or creditors of the Borrower become(s) entitled to
              declare  any  such  Indebtedness  due  and  payable  prior  to its
              specified  maturity,  and in any such case such declaration is not
              challenged by the commencement of bona fide legal proceedings; or

       (f)    any  Encumbrance  securing  Indebtedness  over  any  asset  of the
              Borrower  (including,  without  limitation,  the Permitted Charge)
              becomes  enforceable  or a creditor  or  encumbrancer  attaches or
              takes  possession of, or a distress,  execution,  sequestration or
              other process is levied or enforced upon or sued out against,  any
              of the undertaking and assets of the Borrower; or

       (g)    the Borrower:

              (i)    is, or is deemed for the purposes of any law to be,  unable
                     or admits its  inability to pay its debts as they fall due;
                     or

              (ii)   suspends  making  payments on all or any class of its debts
                     or announces  an

<PAGE>

                     intention to do so, or a moratorium  is declared in respect
                     of any of its Indebtedness; or

              (iii)  commences  negotiations  with one or more of its  creditors
                     with a view to the general  readjustment or rescheduling of
                     all or part of its  Indebtedness  which it would  otherwise
                     not be able to pay as it falls due; or

              (iv)   proposes   or  enters   into  any   composition   or  other
                     arrangement  for the benefit of its creditors  generally or
                     any class of creditors; or

       (h)    the Borrower  takes any action  (including  petition,  proposal or
              convening a meeting) or any legal proceedings are started or other
              steps are taken for:-

              (i)    the Borrower to be adjudicated or found insolvent; or

              (ii)   the winding-up or  dissolution of the Borrower  (other than
                     in connection with a solvent  reconstruction,  the terms of
                     which  have been  previously  approved  in  writing  by the
                     Majority Lenders); or

              (iii)  the  appointment  of a  trustee,  receiver,  administrative
                     receiver,  administrator or similar officer of the Borrower
                     or the whole or any part of its undertaking and assets; or

<PAGE>

       (i)    any  adjudication,  order or, as the case may be,  appointment  is
              made under or in relation to any of the proceedings referred to in
              Clause 15.1(h); or

       (j)    any event  occurs  or  proceeding  is taken  with  respect  to the
              Borrower in any  jurisdiction  to which it is subject which has an
              effect  equivalent  or similar to any of the events  mentioned  in
              Clauses 15.1(g) or (h); or

       (k)    the Borrower suspends or ceases, or threatens to suspend or cease,
              to carry on the whole or a  substantial  part of its  business  or
              sells or otherwise  disposes of the whole or any substantial  part
              of its business,  undertaking or assets, or threatens to do any of
              the same without the prior written consent of the Lenders; or

       (l)    the  Borrower  fails  to  perform  any of its  obligations  (being
              obligations  which  the  Administrative  Agent  determines  in its
              discretion to be material) under any other  agreement  between the
              Borrower and an Agent, or any of the Lenders,  as the case may be;
              or

       (m)    any of the holdings of, or the beneficial ownership of any of, the
              issued share capital of the Borrower  changes without the previous
              written consent of the Majority Lenders; or

       (n)    any change shall occur in the  business or financial  condition of
              the  Borrower  from that  disclosed to the Lenders  which,  in the

<PAGE>

              reasonable opinion of the Majority Lenders, constitutes an adverse
              change  material  to the  ability of the  Borrower  to perform its
              obligations under any of the Security Documents; or

       (o)    all or any part of the Properties is compulsorily purchased or the
              applicable  local  authority  makes  an order  for the  compulsory
              purchase of the same; or

       (p)    any destruction of or damage to the Properties occurs which in the
              opinion of the Majority  Lenders is material and where such damage
              or the cost of  reinstatement  is not fully  covered by  insurance
              effected pursuant to Clause 12.1; or

       (q)    it is or becomes  unlawful  for the Borrower to perform any of its
              obligations or purported obligations under the Security Documents;
              or

       (r)    any event  occurs  or  proceeding  is taken  with  respect  to the
              Borrower in any  jurisdiction  to which it is subject which has an
              effect  equivalent  or similar to any of the events  mentioned  in
              Clauses 15.1(a) to (f), (h) or (k) to (o).

15.2   Acceleration

       At any time after the happening of an Event of Default the Administrative
       Agent may and shall if so requested by the Majority  Lenders by notice in
       writing to the Borrower:

<PAGE>

       (a)    declare that the Loan and all interest  thereon and all other sums
              payable by the Borrower  pursuant to this  Agreement and any other
              Security   Document  have  become   immediately  due  and  payable
              whereupon the same shall become immediately due and payable by the
              Borrower; and/or

       (b)    declare that the Facility shall be cancelled forthwith,  whereupon
              the same shall be so cancelled.

16.    Expenses, Fees and Commissions

16.1   Initial and Continuing Costs

       The Borrower shall pay to the Administrative  Agent on demand made on the
       Borrower  all  expenses  (including,  but not  limited to the  expense of
       Approved Valuations as provided by Clause 9.4 (though only for additional
       Approved  Valuations  in  accordance  with Clause  9.4) and the  Approved
       Valuations  and other  surveys  and  reports  referred  to in the  Fourth
       Schedule and all other  survey  report  valuation  and legal fees and all
       fees of the internal  specialists of the  Administrative  Agent) (and all
       Value  Added  Tax  and  similar  Taxes  thereon,  if  any)  properly  and
       reasonably  incurred  or  (in  the  case  of  its  internal  specialists)
       notionally and reasonably  incurred by the  Administrative  Agent and the
       Lenders in connection with the  negotiation,  preparation,  execution and
       printing  of this  Agreement  and the other  Security  Documents  and the
       arrangement of the Facility,  the Hedging  Arrangements  (but so

<PAGE>

       that for the  avoidance  of doubt the  premium  payable in respect of the
       Hedging Arrangements shall be paid to and retained by the Hedge Provider)
       and any  amendment,  extension  or consent  or any other  matter not of a
       routine  administrative  nature arising out of or in connection  with any
       Security Document.

16.2   Enforcement Costs

       The Borrower shall pay to the Administrative  Agent on demand made on the
       Borrower all expenses  certified by either of the Agents or by any Lender
       through the Administrative Agent as having been incurred by it (including
       the fees payable or notionally payable to any internal specialists of the
       Administrative  Agent at their normal  charging  rate) in  protecting  or
       preserving  any of the  rights of the  Agents or such  Lender  against or
       relating to the Borrower or in  enforcing  any of such rights or in suing
       for or recovering any sum due to the Agents or such Lender hereunder from
       the Borrower or in investigating any Potential Event of Default.

16.3   Stamp Duty

       The  Borrower  shall  pay on  demand  made  on the  Borrower  all  stamp,
       documentary  and other  like  duties  and  taxes,  if any,  to which this
       Agreement  and any other  Security  Document  may be subject or give rise
       (including,  without limitation, any such duties and taxes as are payable
       on or in connection  with the acquisition of the Properties and the Hotel
       Business or the  enforcement of this

<PAGE>

       Agreement) and shall indemnify the Administrative  Agent on behalf of the
       Lenders against any and all liabilities with respect to or resulting from
       any delay or omission on the part of the  Borrower to pay any such duties
       or  taxes.   Demand   under  this  Clause  16.3  shall  be  made  by  the
       Administrative Agent on the Borrower.

16.4   Arrangement Fee

       The  Borrower  shall  pay  to  the   Administrative   Agent  in  Sterling
       immediately on the Drawdown Date an arrangement  fee of one per cent (1%)
       of the  Facility  Amount.  Such fee  shall be paid to the  Administrative
       Agent for the account of the  Lenders  listed in the First  Schedule  and
       shall be  divided  between  them in such  proportions  as they shall have
       agreed.

16.5   Reimbursement by Borrower

       If the Borrower fails to perform any of its obligations under this Clause
       16  (Expenses,  Fees  and  Commissions),  the  Borrower  shall  forthwith
       reimburse the Administrative  Agent for any payment made by it under this
       Clause.

17.    Indemnities

17.1   General

       Subject  to Clause  17.4 the  Borrower  shall  upon  demand  and  without
       prejudice  to any other  rights which either Agent or any Lender may have
       under any Security  Document  indemnify and keep  indemnified each Agent,
       each  Lender and the Hedge

<PAGE>

       Provider  against any funding or other cost,  loss,  expense or liability
       (including,  without limitation,  any losses, costs or expenses sustained
       or incurred in  liquidating  deposits taken to fund or maintain the Loan,
       or  sustained   or  incurred  in   connection   with  the   cancellation,
       termination,  reduction  or  rearrangement  of the Hedging  Arrangements)
       which it may sustain or incur as a result of:-

       (a)    the Facility not being made available to the Borrower by reason of
              non-fulfilment  of any of the conditions in Clause 4 (Availability
              and Drawing) (other than by reason of the negligence or default of
              the Agent or Lender otherwise entitled to such indemnity),  or the
              Borrower purporting to revoke a Notice of Drawing; or

       (b)    the occurrence or continuance of any Event of Default or Potential
              Event  of  Default  and/or  the  declaration  of  the  Loan  to be
              immediately due and payable; or

       (c)    any  party or any  Agent  on its  behalf  (whether  by  reason  of
              mandatory  prepayment or otherwise) receiving or recovering all or
              any part of the Loan or overdue sum otherwise than on the last day
              of an Interest  Period  relating to the Loan or overdue sum and/or
              otherwise than on the relevant Repayment Date; or

       (d)    the Borrower making a payment other than in accordance with Clause
              14 (Payments) unless

<PAGE>

              the  Administrative  Agent has given its prior written  consent to
              such payment in a specified manner,

17.2   Currency Indemnity

       (a)    If, for any reason,  any payment due from the Borrower under or in
              connection with any Security Document is made or is satisfied in a
              currency (the "Other  Currency")  other than the currency in which
              the relevant payment under this Agreement is due (the "Contractual
              Currency"),  then to the extent that the payment  (when  converted
              into the Contractual  Currency at the rate of exchange on the date
              of payment or, in the case of the liquidation or insolvency of the
              Borrower,  at the rate of exchange on the latest date permitted by
              applicable  law  for  the  determination  of  liabilities  in such
              liquidation or insolvency) actually received by the party entitled
              thereto  falls short of the amount  expressed  to be due under the
              terms  of this  Agreement  or,  as the  case  may be,  such  other
              Security   Document,   the  Borrower  shall,  as  a  separate  and
              independent  obligation,  indemnify the party entitled thereto and
              hold such party harmless against the amount of such shortfall.

       (b)    If on any occasion the Contractual  Currency so purchased  exceeds
              the amount payable  hereunder in the  Contractual  Currency to the
              party  entitled  thereto then,  subject to the Borrower  having no
              further obligation, actual

<PAGE>

              or  contingent,  to such party  under this  Agreement,  such party
              shall refund to the Borrower the excess amount of the  Contractual
              Currency so purchased.

       (c)    For the purpose of this Clause "rate of  exchange"  means the rate
              at which the party  entitled  thereto is able on the relevant date
              to purchase the  Contractual  Currency with the Other Currency and
              shall take into account any premium and other costs of exchange.

17.3   Independent Obligations

       The  above   indemnities   shall  constitute   separate  and  independent
       obligations of the Borrower from the other respective  obligations  under
       this Agreement,  shall give rise to a separate and  independent  cause of
       action  against  the  Borrower  and  shall  apply   irrespective  of  any
       indulgence granted by the Lenders or by the Agents from time to time.

17.4   Double Counting

       None of the Agents or the Lenders  shall be entitled to make any recovery
       by way of indemnity if and to the extent that they would thereby  recover
       more than once in respect of the same loss.

18.    The Agents

18.1   Appointment

       Each   Lender   and  the  Hedge   Provider   irrevocably   appoints   the
       Administrative  Agent  to  act as its

<PAGE>

       agent for the purpose of this  Agreement and the Security Agent to act as
       its agent and  trustee  for the  purpose of the  Security  Documents  and
       irrevocably authorises each of them to take such action and exercise such
       rights,  powers and  discretions as are  specifically  delegated to it by
       this  Agreement or the other  Security  Documents  and such other action,
       rights,  powers and  discretions  as are reasonably  incidental  thereto.
       However, no Agent may begin any legal action or proceeding in the name of
       a Lender or the Hedge  Provider  without its  consent.  The  relationship
       between  the  Administrative  Agent  and  the  Lenders  is of  agent  and
       principal only. The  Administrative  Agent shall not be a trustee for any
       Lender or the Hedge Provider, nor an agent or trustee for the Borrower or
       any other party thereto,  under or in relation to any Security  Document.
       The  Security  Agent shall not be an agent or trustee for the Borrower or
       any other  party  thereto  other  than the  Secured  Parties  under or in
       relation to any Security Document.

18.2   Duties of Administrative Agent

       The Administrative Agent shall:

       (a)    promptly  send  to  each  Lender  details  of  each  communication
              received by it from the Borrower under this Agreement (except that
              details of any communication relating to a particular Lender shall
              be sent to that Lender only),  details of any Transfer Certificate
              executed by any other  Lender and provide  such other  information
              relating to

<PAGE>

              the Facility as any Lender may reasonably request;

       (b)    promptly send to each Lender a copy of any legal opinion delivered
              under this Agreement and of any document or  information  received
              by it under Clause 4 (Availability and Drawing);

       (c)    subject to the other  provisions  of this Clause 18 (The  Agents),
              act in accordance with any instructions  from the Majority Lenders
              or,  if so  instructed  by  the  Majority  Lenders,  refrain  from
              exercising a right,  power or  discretion  vested in it under this
              Agreement,  provided  however  that except with the prior  written
              consent of all the Lenders,  the Administrative Agent shall not be
              entitled  to (i)  extend  the due date or reduce the amount of any
              payment of principal,  interest or other amount payable under this
              Agreement, (ii) change the currency in which any amount is payable
              under this Agreement, (iii) increase any Lender's Commitment, (iv)
              extend  the  Availability  Period,  (v)  amend the  definition  of
              "Majority  Lenders" in Clause 1.1,  (vi) amend the  provisions  of
              Clauses  9.1,  9.2,  9.3,  9.4,  9.5,  or 15.2  (vii)  change  the
              Valuation Basis or (viii) amend this Clause 18.2; and

       (d)    have only those  duties,  obligations  and  responsibilities  of a
              solely mechanical and administrative  nature,  expressly specified
              in this Agreement.

<PAGE>

18.3   Duties of Security Agent

       The Security Agent shall:

       (a)    subject to the other  provisions  of this Clause 18 (The  Agents),
              act in accordance with any instructions  from the Majority Lenders
              or,  if so  instructed  by  the  Majority  Lenders,  refrain  from
              exercising a right,  power or  discretion  vested in it under this
              Agreement or the other Security  Documents,  provided however that
              except  with the prior  written  consent of all the  Lenders,  the
              Security Agent shall not be entitled to (i) extend the due date or
              reduce the amount of any payment of  principal,  interest or other
              amount  payable  under the  Security  Documents,  (ii)  change the
              currency in which any amount is due or payable  under the Security
              Documents, or (iii) amend the definition of "Majority Lenders" for
              the purposes of the Security Documents;

       (b)    notify the  Lenders as soon as  reasonably  practicable  if it has
              actual  knowledge or express  notice of the occurrence of an Event
              of Default or Potential Event of Default; and

       (c)    have only those duties, obligations and responsibilities expressly
              specified in the Security Documents.

18.4   Performance of Duties

       Each Agent:

<PAGE>

       (a)    may perform any of its duties,  obligations  and  responsibilities
              under the  Security  Documents  by or  through  its  personnel  or
              agents;

       (b)    may refrain from exercising any right,  power or discretion vested
              in  it  under  the  Security   Documents  until  it  has  received
              instructions   from  the  Majority  Lenders  or  (subject  to  the
              Inter-Creditor   Agreement)  the  Hedge  Provider  (provided  that
              instructions  have been requested) as to whether (and, if it is to
              be, the way in which) it is to be exercised and shall in all cases
              be fully protected when acting,  or (if so instructed)  refraining
              from acting,  in accordance  with  instructions  from the Majority
              Lenders or (as the case may be) the Hedge Provider;

       (c)    may treat (i) the Lender  which makes  available  any share of the
              Loan as the person  entitled to repayment of that share unless all
              or  part  of  it  has  been  assigned  or  transferred   (and  the
              Administrative  Agent has received  notice of that  assignment  or
              transfer) in accordance  with Clause 19  (Transfer);  and (ii) the
              office(s)  notified  by a Lender to the  Administrative  Agent for
              this purpose before the signing of this Agreement (or, as the case
              may  be,  in  the  relevant  Transfer  Certificate  or  notice  of
              assignment)  as its Lending  Office(s)  unless the  Administrative
              Agent has received  from that Lender a notice of change of Lending
<PAGE>

              Office in accordance with Clause 19 (Transfer). Each Agent may act
              on any such  assignment  and/or notice until it is superseded by a
              further assignment and/or notice;

       (d)    shall not be required  to do anything  which would or might in its
              reasonable  opinion  be  contrary  to  any  law  or  directive  or
              otherwise  render it liable to any person  which is not a party to
              the  Security  Documents  and  may  do  anything  which  is in its
              reasonable opinion necessary to comply with any law or directive;

       (e)    shall not be  required  to make any  enquiry  as to default by the
              Borrower  (unless  specifically  so  instructed  by  the  Majority
              Lenders) in the performance or observance of any of the provisions
              of the Security  Documents or as to the  existence of any Event of
              Default or Potential  Event of Default  unless that Agent acquires
              actual  knowledge to the contrary or has been  notified in writing
              thereof by a Lender;

       (f)    may refrain  from taking any step (or further  step) to protect or
              enforce  the rights of any  person  under the  Security  Documents
              until it has been  indemnified (or received  confirmation  that it
              will be so indemnified) and/or secured to its satisfaction against
              any  and  all  actions,   charges,   costs,  losses,  expenses  or
              liabilities (including legal,  accountants' and other professional
              fees)

<PAGE>

              which  would or might be  brought,  made or  preferred  against or
              suffered, sustained or incurred by it as a result; and

       (g)    shall notify the Lenders and (if appropriate) seek instructions of
              the  Lenders in relation to any  material  communication  from the
              Borrower and, in particular, shall seek the consent of the Lenders
              if the Borrower  requests the  Administrative  Agent to consent to
              the  grant of any  matter  referred  to in  Clause  12.1 (h) or to
              structural alterations to the Properties or to capital expenditure
              in  excess  of  (pound)100,000  (other  than  in  relation  to the
              Improvement  Programme in respect of which Clause 9.5 shall apply)
              and the  Lenders  shall  not  unreasonably  withhold  or delay the
              giving of such instructions.

18.5   Agents' Discretions

       Each Agent may:

       (a)    assume that any  representation  made by the Borrower or any other
              party thereto in connection with the Security Documents is true;

       (b)    assume that no Event of Default has occurred and that the Borrower
              is not in breach of or default under the Security Documents;

       (c)    assume that any right,  power,  authority or discretion  vested in
              this Agreement  upon the Majority  Lenders or any other person has
              not been exercised;

<PAGE>

       (d)    rely on any  communication,  certificate,  legal  opinion or other
              document reasonably believed by it to be genuine;

       (e)    rely as to any matter of fact which might  reasonably  be expected
              to be within the knowledge of any person,  on a written  statement
              by that person and on any communication or document believed by it
              to be genuine;

       (f)    obtain  and  pay  for  the  advice  or  services  of any  lawyers,
              accountants,  surveyors  or  other  experts  in  relation  to  the
              negotiation,   preparation,   execution  and  enforcement  of  the
              Security  Documents as may to it seem  necessary or desirable  and
              rely on any such advice;

       (g)    retain for its own benefit and  without  liability  to account any
              fee or other sum  receivable by it in  connection  with its agency
              and subject always to Clause 20 (Set Off/Pro-Rata Sharing) for its
              account; and

       (h)    subject  to  the  interests  of  the  Lenders  not  being  thereby
              prejudiced  accept  deposits  from,  lend  money to,  provide  any
              advisory  or other  services  or engage in any kind of  banking or
              other business with, any party to any Security Document or related
              company  of any  party  (and,  in  each  case,  may do so  without
              liability to account to any Lender).

<PAGE>

18.6   Limitation of Responsibilities

       No Agent nor any of their respective personnel or agents shall be:

       (a)    responsible   for  the   adequacy,   accuracy,   completeness   or
              reasonableness  of  any   representation,   warranty,   statement,
              projection,  assumption or information provided by the Borrower to
              any Lender, or contained in any Security Document or any notice or
              other document  delivered under or in connection with any Security
              Document  including,   but  without   limitation,   any  financial
              statement delivered by the Borrower or on its behalf under Clauses
              12.1(a) or (b) or otherwise  and any  Approved  Valuation or other
              valuation,  survey or report relating to the Properties and/or the
              Hotel Business;

       (b)    responsible  for  the  execution,  delivery,  validity,  legality,
              adequacy,  enforceability  or  admissibility  in  evidence  of any
              Security  Document or any such notice or other document or for the
              satisfaction  or failure by the Borrower to satisfy any  condition
              precedent to the utilisation of the Facility; or

       (c)    responsible  for the  collectability  of amounts payable under any
              Security Documents;

       (d)    responsible for the accuracy of any statements (whether written or
              oral) made in or in connection with any Security Documents; or

<PAGE>

       (e)    liable for anything done or not done by it or any of them under or
              in connection  with any Security  Document save in the case of its
              or their own gross  negligence or wilful  misconduct  (but so that
              this Clause 18.6(e) shall not be construed to impose any liability
              in respect of any  matter for which  liability  is under any other
              provision of this Clause excluded).

18.7   The Agents as a Lender

       Each Agent  shall have the same  rights  and powers  with  respect to its
       Commitments  and  Outstandings  (if  any)  as any  other  Lender  and may
       exercise  those  rights  and  powers as if it were not also  acting as an
       Agent.

18.8   No Reliance on Agents

       Without  affecting  the  responsibility  of the Borrower for  information
       supplied by it or on its behalf in connection with any Security Document,
       each Lender and the Hedge Provider  confirms that it has itself been, and
       will at all times continue to be, solely  responsible  for making its own
       independent  investigation  and  appraisal  of  the  business,  financial
       condition,  prospects,  creditworthiness,   status  and  affairs  of  the
       Borrower or any other person and has not relied, and will not at any time
       rely, on any Agent or other Lender:

       (a)    to  provide  it with any  information  relating  to the  business,
              financial  condition,  prospects,   creditworthiness,   status  or

<PAGE>

              affairs of the Borrower or any other person,  whether  coming into
              its  possession  before  or  after  the  drawing  of the  Facility
              (except,  in the case of the  Administrative  Agent,  as stated in
              Clause 18.2 or as provided otherwise in this Agreement); or

       (b)    to check or enquire into the adequacy,  accuracy,  completeness or
              reasonableness of any representation, warranty, Approved Valuation
              or  other  valuation  survey,   report,   statement,   projection,
              assumption or  information at any time provided by or on behalf of
              the Borrower or any other person under or in  connection  with any
              Security  Document (whether or not that information has been or is
              at any time circulated to it by any Agent  including,  but without
              limitation,  any financial  statement delivered by the Borrower or
              on its behalf under  Clauses 12.1 (a) or (b) or otherwise  and any
              such representation,  warranty,  valuation,  statement projection,
              assumption as information relating to the Hotel Business); or

       (c)    to assess or keep under review the business,  financial condition,
              prospects, creditworthiness,  status or affairs of the Borrower or
              any other person nor the value or adequacy of the Properties.

18.9   Lenders' Indemnity

       To the  extent  that  the  Borrower  does not do so on

<PAGE>

       demand or is not obliged to do so, each Lender shall on demand  indemnify
       each  Agent  in the  proportion  borne  by its  Outstandings  to all  the
       Outstandings at the relevant time (or, if there are then no Outstandings,
       in the  proportion  borne by its  Commitments  to the Total  Commitments)
       against any cost, expense or liability  mentioned in Clause 16 (Expenses,
       Fees and Commissions) or sustained or incurred by that Agent in complying
       with any instructions from the Majority Lenders or otherwise sustained or
       incurred  by it (in its  capacity  as an  Agent) in  connection  with its
       duties,  obligations and  responsibilities  under the Security  Documents
       except routine  administrative costs and expenses of that Agent or to the
       extent  that  they are  sustained  or  incurred  as a result of the gross
       negligence or wilful  misconduct of that Agent or any of its personnel or
       agents.

18.10  Change of Agents

       Notwithstanding the irrevocable appointments in Clause 18.1, an Agent may
       resign at any time if it gives at least 30 days' notice in writing to the
       Borrower  and the  Lenders and an Agent may at any time be removed by the
       Majority  Lenders  giving  not less than 30 days'  notice  to the  Agent.
       However, no resignation or removal shall be effective until the successor
       has been appointed and accepted its  appointment in accordance  with this
       Clause  18.10.  The  Majority  Lenders  may  appoint a  successor  to the
       resigning  or  removed  Agent  but,  if the  successor  has  not  been so
       appointed and accepted its  appointment

<PAGE>

       within 15 days  after the date of the  notice of  resignation  or, as the
       case may be, removal,  the resigning  Agent and the Majority  Lenders may
       appoint a successor  Agent.  Any  appointment  of a successor  must be in
       writing,  signed by the person(s) appointing that successor and delivered
       to that successor. Any acceptance of such appointment must be in writing,
       signed by the person appointed and delivered to the person(s)  appointing
       that  successor.  The other parties to this  Agreement  shall be promptly
       informed of the  acceptance  by a  successor  Agent.  Upon the  successor
       accepting  its  appointment,  the  resigning  or, as the case may be, the
       removed  Agent  shall  be  automatically   discharged  from  any  further
       obligation under the Security Documents and its successor and each of the
       other  parties to the Security  Documents  shall have the same rights and
       obligations  among themselves as they would have had if the successor had
       been the original  Agent party to this  Agreement and the other  Security
       Documents.  The resigning or, as the case may be, the removed Agent shall
       provide  its  successor  with (or with  copies  of) such  records  as its
       successor requires to carry out its duties under the Security Documents.

18.11  Signing of Transfer Certificates

       The Borrower,  the Security  Agent and each Lender (except for the Lender
       and the  Transferee  seeking the  relevant  assignment  and/or  novation)
       irrevocably  authorises  the  Administrative  Agent to sign each Transfer
       Certificate on their behalf.

<PAGE>

18.12  Security Agent as Trustee

       Notwithstanding that the Security Agent is entitled to remuneration,  the
       Security  Agent  shall  have  all  the  rights,  powers,  privileges  and
       immunities which  gratuitous  trustees have or may have in England and by
       way of  supplement  to the Trustee Act 1925 it is  expressly  declared as
       follows  (provided  nevertheless  that  nothing  in any of the  following
       provisions  of this Clause 18.12 shall exempt the Security  Agent from or
       indemnify  it against  any  liability  for breach of trust in any case in
       which the Security  Agent has failed to show the degree of diligence  and
       care required of it having regard to the provisions of this Agreement and
       the  Security  Documents  or in the case of gross  negligence  or  wilful
       misconduct of the Security Agent):-

       (a)    As between the Lenders and the  Security  Agent in relation to any
              of the  provisions  of any Security  Document,  or any  agreement,
              matter or thing relating to the Borrower or any Secured Asset, the
              Security  Agent  may  act  on  the  opinion  or  advice  of or any
              information  obtained  from  any  lawyer,  accountant,  architect,
              engineer, surveyor, broker, consultant, valuer, appraiser or other
              expert,  whether  obtained by the Security Agent or a Lender,  and
              shall  not be  responsible  for any loss  occasioned  by so acting
              provided the Security Agent acts in good faith.

       (b)    Any opinion,  advice or  information  referred

<PAGE>

              to in  paragraph  (a) may be sent or  obtained  by  letter,  telex
              message, facsimile transmission, cablegram, telephone or any other
              means.  The  Security  Agent shall not be liable for acting on any
              opinion,  advice  or  information  purporting  to be  so  conveyed
              although  the same  shall  contain  some  error  or  shall  not be
              authentic.

       (c)    The Security Agent may accept as sufficient evidence a certificate
              signed by any person  believed  by it (after due  enquiry) to be a
              director or other responsible officer of any person as to any fact
              or  matter  upon  which  the  Security  Agent  may  require  to be
              satisfied.  The Security Agent shall be in no way  responsible for
              any loss that may be occasioned by acting on any such certificate.

       (d)    The Security Agent shall not be liable for any failure,  omission,
              or defect in perfecting any of the security given or created by or
              pursuant to the Security Documents  including without prejudice to
              the generality of the foregoing (i) failure to obtain any licence,
              consent   certificate  or  other   authority  for  the  execution,
              delivery,    validity,     legality,    adequacy,     performance,
              enforceability  or  admissibility  in  evidence  of  any  Security
              Document, (ii) failure to register the same in accordance with the
              provisions of any of the documents of title of the Borrower to any
              of the Secured  Assets  and/or of any Security  Document and (iii)
<PAGE>

              failure to effect or procure  registration of or otherwise protect
              any of  the  security  given  or  created  by or  pursuant  to the
              Security  Documents by registering under the Land Registration Act
              1925 or any other  applicable  registration  laws in any  relevant
              jurisdiction by any notice, caution, filing, registration or other
              entry  prescribed  by or  pursuant to the  provisions  of the said
              laws.

       (e)    Subject to Clause 4 (Availability and Drawing) hereof the Security
              Agent  may  accept  without  enquiry,  requisition,  objection  or
              investigation  such title (if any) as the Borrower may have to any
              Secured  Asset (or any part  thereof)  and shall not be liable for
              any failure or omission to ascertain or  investigate  the title of
              the  Borrower  or other  person  to any  asset  now or at any time
              hereafter  subject or purporting to be subject to any  Encumbrance
              created by or pursuant to the Security Documents.

       (f)    The Security  Agent and every  receiver,  delegate,  sub-delegate,
              attorney,  agent or  other  person  validly  appointed  under  the
              Security  Documents  may  indemnify  itself or himself  out of the
              Secured  Assets (or any  proceeds  thereof)  against all  actions,
              charges,  claims, costs, damages,  demands,  expenses,  liability,
              loss or  proceedings  which  may be  brought,  made  or  preferred
              against or suffered,  incurred or  sustained by it or him,  acting
              reasonably  in relation to,

<PAGE>

              in  connection  with or arising out of the entry into any Security
              Document,  the taking or holding of any of the  security  given or
              created by or pursuant  to the  Security  Documents  and/or in the
              execution of any power,  trust,  authority or discretion vested in
              any of them by any  Security  Documents  and/or in  respect of any
              other  matter or thing done or omitted to be done  pursuant to any
              Security Documents and/or acting as Security Agent.

       (g)    The  Security  Agent may  place  any or all title  deeds and other
              documents  certifying,  representing or constituting  the title to
              any of the  Secured  Assets and for the time being in its hands in
              any safe  deposit,  safe or  receptacle  selected by the  Security
              Agent or with any  banker or  banking  company  or  company  whose
              business includes undertaking the safe custody of documents or any
              solicitor or firm of solicitors  and may pay all  reasonable  sums
              required  to be paid on account of or in respect of any deposit of
              such documents.  The Security Agent may in its absolute discretion
              make any such  arrangements  as are  appropriate as chargee of the
              Secured  Assets for  allowing the  Borrower or its  solicitors  or
              auditors or other  advisers  access to or  possession  of any such
              title deeds and other documents when necessary or convenient.

       (h)    The Security Agent shall not be bound to give notice to any person
              of the execution of any

<PAGE>

              Security  Document  or the  occurrence  of any  Event  of  Default
              (however  described) under any Security  Document (or any event or
              circumstance which with the giving of notice and/or the passing of
              time and/or the fulfilment of any other  requirement  would become
              such an event of default)  or whether any event has  occurred as a
              result of which the security  constituted by any Security Document
              may become  enforceable and,  (subject also to paragraph  18.4(e))
              until it shall have  actual  knowledge  or  express  notice to the
              contrary,  the Security  Agent shall be entitled to assume that no
              such event has happened  and that the  Borrower is  observing  and
              performing  all  the  obligations  on its  part  contained  in the
              relevant Security Document.

       (i)    The Security Agent may perform any of its duties,  obligations and
              responsibilities  under any Security Document by or through any of
              its officers and  personnel  and/or may employ and pay an agent to
              transact or concur in transacting any business and to do or concur
              in  doing  any  acts  required  to be done by the  Security  Agent
              (including  the receipt and payment of money).  Any agent who is a
              lawyer, accountant,  architect,  auctioneer,  engineer,  surveyor,
              broker,  consultant,  valuer, appraiser or other person engaged in
              any  profession  or  business  shall  be  entitled  to be paid all
              reasonable and usual  professional  and other charges for business

<PAGE>

              transacted  and acts done by him or any partner or employee of his
              in connection with any Security Document.

       (j)    The Security Agent may whenever it thinks fit delegate by power of
              attorney or otherwise to any person or persons or fluctuating body
              of persons  (whether  being a joint  trustee or not) all or any of
              the trusts,  powers,  authorities  and  discretions  vested in the
              Security Agent by any Security  Document.  Any such delegation may
              be made  upon  such  terms  and  conditions  (including  power  to
              sub-delegate)  and  subject to such  regulations  as the  Security
              Agent may in the  interests of the Secured  Parties  think fit but
              such terms,  conditions and regulations  shall not be inconsistent
              with  any  of  the  provisions  of  any  Security  Document.   Any
              delegation  by the  Security  Agent  pursuant  to  this  paragraph
              18.12(j)  shall not in any way relieve the Security Agent from any
              liability or obligation under any Security Document.  The Security
              Agent shall as soon as reasonably  practicable  give notice to any
              party  to a  Security  Document  of any  such  delegation  (or any
              renewal,  extension or  termination  thereof)  under that Security
              Document or this Agreement. Any Lender may require such delegation
              of  authority to be revoked or withdrawn  without  giving  reasons
              therefor to the Security Agent.

       (k)    Neither  the  Security  Agent nor any  director

<PAGE>

              or officer of a  corporation  acting as  Security  Agent  shall by
              reason of its or his  fiduciary  position be in any way  precluded
              from  entering  into  or  being  interested  in  any  contract  or
              financial or other transaction or arrangement with the Borrower or
              any  person  associated  with  the  Borrower   including  (without
              prejudice  to the  generality  of this  provision)  any  contract,
              transaction  or  arrangement  of a banking,  insurance or property
              advisory  nature or any contract,  transaction  or  arrangement in
              relation  to the  making of loans or the  provision  of  financial
              facilities  to, or the  purchase,  placing or  underwriting  of or
              subscribing or procuring subscriptions for or otherwise acquiring,
              holding or  dealing  with any  property,  notes,  stocks,  shares,
              debenture  stock,  debentures,  bonds or other  securities of, the
              Borrower,  or any person associated as aforesaid or from accepting
              or holding the trusteeship of any other trust deed constituting or
              securing any other securities issued by the Borrower,  or any such
              person  so  associated  or any other  office  or profit  under the
              Borrower or any such person so associated and shall be entitled to
              retain and shall not be in any way liable to account to any person
              for any  profit  made or  share  of  brokerage  or  commission  or
              remuneration  or other benefit  received  thereby or in connection
              therewith.

       (l)    Any investment  may, at the discretion of the Security  Agent,  be
              made or retained in the

<PAGE>

              names of nominees.

18.13  Acceptance of Title, Value and Valuation Bases

       The Agents may accept  without  investigation,  requisition  or objection
       such  title as any  person  may have to the  undertakings,  property  and
       assets which are subject to the Security Documents and shall not be bound
       or  concerned  to examine  or  enquire  into any defect or failure in the
       title of any person nor  liable to any other  Secured  Party or any other
       person for any failure on the part of either  Agent to give notice to any
       third party of the  Security  Documents to which it is party or otherwise
       perfect or register the security thereby created.

18.14  Rule 146 of the Land Registration Rules

       Each of the Lenders and the Hedge  Provider  hereby  confirms  and agrees
       that it does not wish to be registered in accordance with Rule 146 of the
       Land  Registration  Rules 1925 as the joint proprietor of any mortgage or
       charge  created  pursuant  to  any  Security   Document  and  accordingly
       authorises the Security Agent to hold such mortgage or charge in its sole
       name as agent and trustee for the Secured  Parties and hereby requests HM
       Land Registry to register the Security  Agent as the agent and trustee of
       any such mortgage or charge.

18.15  The Borrower and the Agents

       The  Borrower  shall be entitled to rely on any  direction,  instruction,
       certificate,  document or

<PAGE>

       other  communication  made by either  Agent and shall not be  required to
       enquire  whether  it is made  with  the  authority  of the  Lenders,  and
       performance  of  any  obligation  arising  under  this  Agreement  or the
       Security  Documents  in reliance on any such shall be deemed to be proper
       performance of the obligation in question.

18.16  Agents of the Lenders

       Save as  expressly  provided in the  Security  Documents,  the Agents are
       appointed  hereunder and  thereunder  solely as the agents of the Lenders
       and the Hedge  Provider,  and the foregoing  provisions of this Clause 18
       (The Agents)  apply solely to the Agents in their  capacity as agents for
       the Lenders.

18.17  Agents' Knowledge

       Information  obtained by either Agent in any  capacity  other than in its
       capacity as Agent and or through any department other than the department
       having specific responsibility for the administration of the Loan and the
       Security Documents shall not be imputed to such Agent.

19.    Transfer

19.1   Agreement Binding on Successors

       This  Agreement and the other Security  Documents  shall benefit and bind
       the parties,  any  Transferee in respect of which a Transfer  Certificate
       becomes  effective  in  accordance  with  Clause  19.3,  their  permitted
       assignees  and  their

<PAGE>

       respective  successors as if they were named as parties and executed this
       Agreement.  Any reference in any Security  Document to any party shall be
       construed accordingly.

19.2   Borrower's Assignment

       The  Borrower may not assign or transfer all or any part of its rights or
       obligations under any Security Document.

19.3   Novation

       Any Lender may at any time (after  consultation  with the  Administrative
       Agent and, through the Administrative  Agent, the Borrower) novate all or
       part of its Commitments and/or assign all or part of its Outstandings and
       its rights and benefits  under the Security  Documents to any  Qualifying
       Lender  without  the  consent  of any  party.  Any such  novation  and/or
       assignment  shall  (subject to Clause  19.4 in the case of an  assignment
       only) be made by delivering to the Administrative  Agent a duly completed
       and executed Transfer Certificate  substantially in the form of the Third
       Schedule. On receipt of such a Transfer  Certificate,  the Administrative
       Agent  shall  countersign  it for and on behalf  of itself  and the other
       parties  to this  Agreement  and  subject  to the terms of that  Transfer
       Certificate:

       (a)    by virtue of such Transfer Certificate,  the relevant Lender shall
              assign to the  Transferee  its  rights  to  receive  repayment  or
              prepayment in accordance with `this Agreement of the  Outstandings
              summarised  in that

<PAGE>

              Transfer  Certificate  and all its rights and  benefits  under the
              Security  Documents in respect  thereof (such rights and benefits,
              and the  corresponding  obligations  of the  Borrower to make such
              repayment  or  prepayment  and  obligations  of any other party in
              respect  thereof  under  the  Security  Documents,   being  herein
              referred  to as  the  "Assigned  Rights"  and  the  "Corresponding
              Obligations" respectively);

       (b)    to the  extent  that in such  Transfer  Certificate  the  relevant
              Lender  seeks  to  assign  its  Outstandings   and/or  novate  its
              Commitments,  the Borrower  under the Security  Documents and that
              Lender  shall each be released  from further  obligations  to each
              other and their  respective  rights  against  each other  shall be
              cancelled,  except  that the  Assigned  Rights  shall be  assigned
              pursuant to paragraph  (a) above rather than released or cancelled
              pursuant to this paragraph (b) (such rights and obligations, other
              than the Assigned Rights and the Corresponding Obligations,  being
              referred to as "Discharged Rights and Obligations");

       (c)    the  Borrower  and  the  relevant  Transferee  shall  each  assume
              obligations  towards each other and/or acquire rights against each
              other  corresponding to the Discharged  Rights and Obligations but
              which  differ  from the  Discharged  Rights and  Obligations  only
              insofar as the Borrower and that  Transferee

<PAGE>

              have assumed and/or acquired the same in place of the Borrower and
              that Lender; and

       (d)    the Transferee and the other parties to this Agreement (other than
              the  Borrower)  shall  acquire  (by  assignment,  in the  case  of
              Assigned  Rights)  the same  rights  and  assume (by virtue of the
              assignment  of  Assigned  Rights  in  the  case  of  Corresponding
              Obligations) the same obligations between themselves as they would
              have  acquired  and assumed had that  Transferee  been an original
              party  to this  Agreement  as a  Lender  with  the  rights  and/or
              obligations  acquired or assumed by it as aforesaid  (and, to that
              extent,  the original Lender and those other parties shall each be
              released from further obligations to each other).

19.4   Assignment

       Any Lender may (after  consultation  with the  Administrative  Agent and,
       through the Administrative Agent, the Borrower) at any time assign all or
       part of its Outstandings to any Qualifying  Lender without the consent of
       any  party.   Upon  notice  of  any  assignment  being  received  by  the
       Administrative  Agent,  the  assignee  shall  acquire  the same rights in
       respect of the Outstandings assigned to it as it would have had if it had
       been  an  original   party  to  this   Agreement   in  respect  of  those
       Outstandings.  If and to the extent that all or part of a Lender's rights
       are assigned in accordance with any of the provisions of this Clause, the
       assignee  shall,

<PAGE>

       upon notice of the assignment being received by the Administrative Agent,
       become  entitled to a  corresponding  share of all rights of the assignor
       under the Security  Documents  (including the benefit of such  assignor's
       rights in each  Security  Document)  and this  Clause  (and the  relevant
       Transfer Certificate or assignment).

19.5   Lending Offices

       The initial  Lending  Office(s) of each Lender  has/have been notified by
       that  Lender to the  Administrative  Agent.  Any  Lender  may at any time
       change any of its  Lending  Office(s)  in  relation to all or a specified
       part of any of its  Commitments  and/or  Outstandings  by  notifying  the
       Administrative Agent and the Borrower of the fax number, telex number and
       address of its new Lending Office(s).

19.6   Disclosure of Information

       Each  of the  Lenders  and  the  Agents  may  disclose  such  information
       regarding the Borrower or the Shareholders and the Security  Documents as
       it may think fit to any other party hereto and to any actual or potential
       Transferee,  assignee  participant or sub-participant or any other person
       with whom such Lender or Agent may enter into or be considering  entering
       into  contractual  relations  in relation to this  Agreement or the other
       Security Documents.

19.7   Costs

       For the  avoidance  of  doubt  the  costs  of any

<PAGE>

       Lender  effecting  any  assignment  or  transfer of any of its rights and
       interests hereunder shall not be borne by the Borrower.

20.    Set-Off/Pro-Rata Sharing

20.1   Set Off

       The  Borrower  authorises  each of the  Agents  and the  Lenders to apply
       (without  prior notice) any credit  balance  (whether or not then due) to
       which the  Borrower is at any time  beneficially  entitled on any account
       at,  any sum held to its  order by and/or  any  liability  or  obligation
       (whether or not  matured)  of, any office of such Agent or such Lender in
       or  towards  satisfaction  of any sum then due and  payable by it to such
       Agent or such Lender  under the  Security  Documents  and unpaid and, for
       that purpose, to convert one currency into another (provided that nothing
       in this  Clause  20.1 shall be  effective  to create a charge).  No party
       shall be obliged to exercise  any of its rights  under this Clause  20.1,
       which shall be without prejudice and in addition to any right of set-off,
       combination  of accounts,  lien or other right  (including the benefit of
       the Security  Documents)  to which it is at any time  otherwise  entitled
       (whether by operation of law,  contract or otherwise).  Each Lender shall
       notify  the  Administrative  Agent and the  Borrower  forthwith  upon the
       exercise  or  purported  exercise  of any right of  set-off  giving  full
       details in relation thereto and the Administrative Agent shall inform the
       other Lenders forthwith.

<PAGE>

20.2   Pro-Rata Sharing

       If at any time the  proportion  received or recovered  (whether by direct
       payment, by exercise of any right of set-off,  combination of accounts or
       lien,  or  otherwise) by any Lender in respect of the total sum which has
       become due to it from the Borrower  under the Security  Documents  before
       that time exceeds the  proportion  received or recovered by the Lender(s)
       receiving or recovering the smallest proportion (if any), then:

       (a)    such Lender shall  promptly  notify the  Administrative  Agent and
              within  2  business  days  after  receiving  a  request  from  the
              Administrative  Agent, that Lender shall pay to the Administrative
              Agent an amount equal to the excess and the  Administrative  Agent
              shall notify the Borrower of the receipt of such amount;

       (b)    the Administrative Agent shall promptly distribute that payment as
              if it were made by the Borrower; and

       (c)    as between the Borrower and the Lenders,  that excess amount shall
              be treated as having been paid to the Lenders to which (and in the
              proportions  in which) it is distributed  under (b) above,  rather
              than as having been paid to that Lender.

       Within 2 business days after any Lender receives or recovers any such sum
       otherwise than by

<PAGE>

       payment through the  Administrative  Agent,  that Lender shall notify the
       Administrative Agent of the amount and currency so received or recovered,
       how it was received or  recovered  and whether it  represents  principal,
       interest  or other  sums.  If all or part of any  amount so  received  or
       recovered by that Lender (the "Relevant  Lender") required  thereafter to
       be repaid  to the  Borrower  has to be  refunded  by it (with or  without
       interest),  each  Lender  to  whom  any  part  of that  amount  has  been
       distributed  shall repay to the  Administrative  Agent for the account of
       the Relevant  Lender  (within 2 business  days after  receiving a request
       from the  Administrative  Agent on behalf  of the  Relevant  Lender)  its
       proportionate share of the amount to be repaid to the Borrower and of any
       interest  required  to be paid by the  Relevant  Lender on that amount in
       respect  of all or any part of the period  from the date of the  relevant
       distribution to the date of that payment to the Relevant Lender.

       Any  amount   received  or  recovered  by  a  Lender  under  a  novation,
       assignment,  sub-participation  or the  like  shall  be  ignored  for the
       purpose of this Clause 20.2.  Furthermore,  a Lender shall not be obliged
       to share any amount  which it has (i) alone  received  on its own account
       under Clause 13 (Changes in  Circumstances) or (ii) received or recovered
       as a result of taking legal  proceedings  with any other Lender which had
       an opportunity to participate in those legal  proceedings  but did not do
       so and did not take separate legal proceedings.

<PAGE>

21.    Notices

21.1   Address

       Unless  otherwise  notified by the  relevant  party,  any notice or other
       communication hereunder shall be given, if to the Administrative Agent or
       to the Security Agent at PO Box 138, 15 Moorgate,  London EC2R 6LP marked
       for the  attention  of the Credit  Department,  if to the  Borrower  at 6
       Leylands Park,  Nobbs Crook,  Colden Common,  Winchester,  Hampshire SO21
       1TH,  marked for the  attention  of Philip  Mason (and  copied to Richard
       Saleh & Co., Derbyshire House, 737a Wilmslow Road, Didsbury,  Manchester,
       marked  for  the  attention  of  Richard  Saleh),  and if to  any  Lender
       hereunder to the Lending Office of that Lender.

21.2   Method and Receipt

       Any notice or other  communication  to be given or made  pursuant to this
       Agreement  may be  given or made by  letter  delivered  personally  or by
       registered  first class prepaid letter  (airmail if overseas),  facsimile
       transmission,  telegram or cable and shall,  save as specified  below, be
       effective, in the case of a facsimile upon sending or, in the case of any
       other  communication,  when  actually  received,  provided  that  if  any
       communication  would become  effective under the foregoing  provisions of
       this  Clause on a day  which is not a  working  day,  or  outside  normal
       working  hours on a day which is a working  day, at the place of receipt,
       it shall become effective at the next opening of business in such place.

<PAGE>

21.3   Deemed Notice

       Any notice or other  communication  given or made to either  Agent by the
       Borrower  shall  be  deemed  to have  been  given  or made to each of the
       Lenders.

22.    Calculations and Evidence of Debt

22.1   Accounts

       The Administrative Agent shall maintain in its books a control account or
       accounts  in which  shall be  recorded  (i) the amount of any  principal,
       interest  or other  sums due or to become  due from the  Borrower  to the
       Lenders hereunder and (ii) the amount of any sum received or recovered by
       the Administrative Agent for the account of the Lenders hereunder.

22.2   Evidence

       In any legal action or proceeding  arising out of or in  connection  with
       this Agreement,  the entries made in the accounts  maintained pursuant to
       Clause 22.1  shall,  in the  absence of  manifest  error,  be prima facie
       evidence of the existence and amounts of the  obligations of the Borrower
       therein recorded.

22.3   Certificates and Determinations

       A certificate of the Administrative Agent as to (i) the amount by which a
       sum payable to it hereunder is to be increased  under Clauses 13 (Changes
       in  Circumstances) or 14 (Payments) or (ii) the amount for the time being
       required to

<PAGE>

       indemnify  any Lender  against any such cost or liability as is mentioned
       in Clauses 13 (Changes in  Circumstances)  or 14  (Payments) or as to any
       other  calculation  (whether as to interest,  currency  exchange rates or
       otherwise) to be made by the Administrative Agent hereunder shall, in the
       absence of manifest error, be prima facie evidence in any legal action or
       proceeding arising out of or in connection with this Agreement.

23.    Severability

       Any provision in this Agreement which is prohibited or  unenforceable  in
       any jurisdiction  shall, as to such  jurisdiction,  be ineffective to the
       extent of such prohibition or unenforceability  without  invalidating the
       remaining  provisions  hereof or affecting the validity or enforceability
       of such provision in any other jurisdiction.

24.    Waivers; Rights Cumulative

       No delay or omission of the Agents or any Lender in exercising any right,
       power or privilege  hereunder  or otherwise  available to it at law shall
       impair such right, power or privilege or be construed as a waiver of such
       right, power or privilege nor shall any single or partial exercise of any
       such right,  power or privilege  preclude any further exercise thereof or
       the  exercise  of any other  right,  power or  privilege.  The rights and
       remedies  herein  provided are cumulative and not exclusive of any rights
       or

<PAGE>

       remedies provided by law.

25.    Counterparts

       This Agreement may be executed in any number of  counterparts  and by the
       different  parties  hereto on separate  counterparts,  each of which when
       executed  and  delivered  to  the  Security  Agent  shall  constitute  an
       original,  but all the counterparts shall together constitute but one and
       the same instrument.

26.    Governing Law and Jurisdiction

26.1   Law

       This  Agreement  shall be governed by and  construed in  accordance  with
       English law.

26.2   Submission to Jurisdiction

       For the  exclusive  benefit of the Agents and the  Lenders,  the Borrower
       irrevocably agrees that the courts of England are to have jurisdiction to
       settle any  disputes  which may arise out of or in  connection  with this
       Agreement and the other Security Documents and irrevocably submits to the
       jurisdiction of such courts and agrees that accordingly any suit,  action
       or  proceeding  arising  out  of or in  connection  with  this  Agreement
       (together in this Clause referred to as "Proceedings")  may be brought in
       such courts.

26.3   Other Jurisdictions

       Nothing  contained  in this Clause shall limit the right of the Agents or
       any Lender to take

<PAGE>

       Proceedings  against  the  Borrower  in  any  other  court  of  competent
       jurisdiction,  nor  shall  the  taking  of  Proceedings  in one  or  more
       jurisdictions  preclude the taking of Proceedings in any other  competent
       jurisdiction, whether concurrently or not.

IN WITNESS whereof the hands of the parties or their duly  authorised  attorneys
or representatives the day and year first above written.

<PAGE>

The First Schedule

The Lenders and their Commitments

                                                                    Commitments

Arab Bank plc, London Branch                                   (pound)5,000,000

Irish Nationwide Building Society, London Branch               (pound)5,000,000

                                                                     ----------

                                                              (pound)10,000,000
                                                                     ----------

<PAGE>

The Second Schedule

Form of Notice of Drawing

From:    [*Borrower]

To:      [Administrative Agent]                                       [Date]1999

(pound)[   o   ] Loan Agreement dated [        o        ] 1999

We refer to the above agreement (the "Loan Agreement") made between ourselves as
Borrower,  yourselves  as  Administrative  Agent  and  Security  Agent and Hedge
Provider and the banks and other lending or financial  institutions  referred to
therein.  Terms defined in the Loan Agreement  shall have the same meanings when
used herein.

We hereby give you irrevocable notice that pursuant to the Loan Agreement and on
[*date of proposed  drawing],  we wish to draw [the whole of the  Facility]/[the
sum of (pound)[ ]] on the terms and subject to the conditions contained therein.

[*Selection of Interest Period]

We confirm that at the date hereof the representations and warranties set out in
Clause 11 (Representations  and Warranties) of the Loan Agreement are correct as
if made with reference to the facts and circumstances now prevailing and that no
Event of Default or Potential Event of Default has occurred.

<PAGE>

We hereby authorise you to deduct from this advance:-

(a)    the  arrangement  fee payable  pursuant to Clause 16 (Expenses,  Fees and
       Commission); and

(ii)   the fees,  costs and expenses  incurred in connection  with the valuation
       and  surveying  of the  security  and  the  preparation  of the  Security
       Documents and all stamp duty and Land Registry fees (including expedition
       fees)  and  other  fees  pursuant  to  Clause  16  (Expenses,   Fees  and
       Commission).

We  hereby  direct  that the  amount  of the Loan  shall be  remitted  [by CHAPS
payment] to the following:-

<PAGE>

         Payee:

         Payee's Bank Details:

         Bank:

         Branch:

         Sort Code:

         Account No:

or to such other banks for the credit of such  account as the Payee shall direct
and we confirm that a payment in  accordance  with these  instructions  shall be
effective as if it were paid to us direct.

 ..................................................
A duly authorised signatory for and on behalf of
Grand Hotel Group Limited

<PAGE>

The Third Schedule

Form of Transfer Certificate

To:               [Insert name of Administrative Agent]
                  [Insert address of Administrative Agent]

Attention:        [                   ]

[*Borrower]
(pound) [     o     ] Loan Agreement
dated [         o          ] 1999

1.     This Transfer  Certificate relates to the above loan agreement (the "Loan
       Agreement",  which term  shall  include  any  amendments  or  supplements
       thereto),  and the other Security  Documents  referred to therein.  Terms
       defined in the Loan  Agreement  have the same  meaning  in this  Transfer
       Certificate.

       In this Transfer Certificate :

       "Existing Lender" means [           o              ]; and

       "Transferee" means [           o              ].

2.     The Existing Lender (i) confirms that the details in the Schedule to this
       Transfer  Certificate  under the heading  "Rights to be  Assigned  and/or
       Obligations to be Novated"  accurately  summarises the

<PAGE>

       Outstandings  which are to be assigned and/or Commitments which are to be
       novated by this Transfer  Certificate and (ii) requests the Transferee to
       accept  and  procure  the  transfer  to the  Transferee  of  the  portion
       specified  in  the  Schedule   hereto  of,  as  the  case  may  be,  such
       Outstandings and/or its Commitment by counter-signing and delivering this
       Transfer  Certificate to the Administrative  Agent at its address for the
       service of notices specified in the Loan Agreement.

3.     The Transferee  hereby requests the  Administrative  Agent to accept this
       Transfer  Certificate  as being  delivered  to the  Administrative  Agent
       pursuant  to and for the  purposes  of Clause 19  (Transfer)  of the Loan
       Agreement so as to take effect in  accordance  with the terms  thereof on
       the  Transfer  Date  or on  such  later  date  as  may be  determined  in
       accordance with the terms thereof.

4.     The Transferee:

       (a)    confirms  that  it has  received  a copy  of  the  Loan  Agreement
              together  with such  other  documents  and  information  as it has
              requested in connection with this transaction;

       (b)    confirms  that it has not relied and will not rely on the Existing
              Lender  to check  or  enquire  on its  behalf  into the  legality,
              validity,  effectiveness,  adequacy  or  completeness  of any such
              documents or information;

       (c)    confirms  and  agrees  that it has not relied and

<PAGE>

              will not rely on any of the Existing  Lender,  the Agents,  or the
              Lenders to assess or keep under review on its behalf the financial
              condition, creditworthiness,  condition, affairs, status or nature
              of the Borrower or any other party to the Security Documents,  and
              has not  relied and will not rely on any of the  Existing  Lender,
              the Agent or the Lenders to ensure that the  Borrower or any other
              party to the  Security  Documents  are not in breach of or default
              under any of the same; and

       (d)    if not already a Lender,  appoints the Agents to act as its agents
              as  provided in the Loan  Agreement  and agrees to be bound by the
              Loan  Agreement   (including,   but  not  limited  to,  Clause  19
              (Transfer)).

5.     The Transferee  undertakes with the Existing Lender and each of the other
       parties to the Loan  Agreement that it will perform,  in accordance  with
       their  terms,  all  those  obligations  which,  by the  terms of the Loan
       Agreement,  will be assumed by it upon  delivery of the executed  copy of
       this Transfer Certificate to the Administrative Agent.

6.     On execution of this Transfer  Certificate by the Administrative Agent on
       their  behalf,  the  Borrower,  the  Lenders  and the  Agents  accept the
       Transferee  as a party  to the Loan  Agreement  in  substitution  for the
       Existing Lender with respect to all those rights and  obligations  which,
       by the terms of the Loan Agreement and other Security Documents,  will be
       assumed by the  Transferee  after  delivery of the

<PAGE>

       executed copy of this Transfer Certificate to the Administrative Agent.

7.     None of the Existing Lender, the Lenders or the Agents:

       (a)    makes any representation or warranty or assumes any responsibility
              with respect to the legality, validity, effectiveness, adequacy or
              enforceability  of any of the  Loan  Agreement  and  the  Security
              Documents,  or with  respect to whether the  Borrower or any other
              party to the Security  Documents has complied with its obligations
              thereunder   (including,   without  limitation,   under  Clause  4
              (Availability and Drawing) of the Loan Agreement); or

       (b)    assumes any  responsibility  for the  financial  condition  of the
              Borrower or any other party to any Security  Document or any other
              document or for the  performance and observance by the Borrower or
              any other party to the Security Documents or any other document of
              its  or  their   obligations   and  any  and  all  conditions  and
              warranties,  whether  express or implied by law or otherwise,  are
              hereby excluded.

8.     The Existing  Lender  hereby  gives notice that nothing  herein or in the
       Loan  Agreement  (or any  document  relating  thereto)  shall  oblige the
       Existing  Lender to (i) accept a re-transfer  from the  Transferee of the
       whole or any part of its rights,  benefits and/or  obligations  under the
       Loan  Agreement  transferred  pursuant  hereto or (ii) support any losses
       directly or indirectly  sustained

<PAGE>

       or  incurred  by the  Transferee  for any  reason  whatsoever  including,
       without  limitation,  the  non-performance  by the  Borrower or any other
       party to the Security Documents (or any document relating thereto) of its
       obligations under any such document.  The Transferee hereby  acknowledges
       the  absence  of any such  obligation  as is  referred  to in (i) or (ii)
       above.

9.     This Transfer  Certificate  and the rights and obligations of the parties
       hereunder  shall be governed by and construed in accordance  with English
       law.

10.    The  Transferee  warrants and  represents  to the  Borrower  that it is a
       Qualifying Lender as defined in Clause 1.1 of the Loan Agreement.

THE SCHEDULE

1.       Existing Lender :

2.       Transferee :

3.       Transfer Date :

4.       Commitment :

         Lender's Commitment                         Portion Transferred

<PAGE>

5.       Facility:

         Amount of                   Drawdown and
         Lender's Participation      Repayment Date    Portion Transferred

6.       Rights to be Assigned and/or Obligation to be Novated :

7.       Transferee's Lending Office details :

         Address :

         Telephone Number :

         Telex No. :

         Fax No. :

<PAGE>

The Fourth Schedule

Conditions Precedent Documents

1.     A copy of the  Borrower's  Certificate of  Incorporation,  Memorandum and
       Articles of Association and other constitutive  documents  certified by a
       duly authorised officer of the Borrower as a true copy and as in force on
       the date of this Agreement.

2.     A  copy,  certified  a true  copy  by a duly  authorised  officer  of the
       Borrower,  of a  resolution  of the Board of  Directors  of the  Borrower
       satisfactory  to  the  Administrative   Agent  approving  the  execution,
       delivery  and  performance  of  this  Agreement  and the  other  Security
       Documents  and of the power of attorney (if any) under which the Security
       Documents  are to be  executed  and the terms and  conditions  hereof and
       thereof  and  authorising  a named  person or  persons or  appointing  an
       attorney  to  sign on  behalf  of the  Borrower  this  Agreement  and the
       Security  Documents  referred  to  above  and any  documents  or  further
       agreements  required or to be delivered by the Borrower  pursuant  hereto
       and/or thereto.

3.     A specimen signature,  authenticated by a duly authorised officer of each
       of the  Borrower  in  respect  of  each  of the  persons  referred  to in
       paragraph 2 above.

4.     This Agreement, the Corporate Account Application, the Borrower's Charge,
       the  Key-man  Charge,  the

<PAGE>

       Hedging  Arrangements  Charge and any power or powers of  attorney  under
       which they are  executed,  duly  executed by the  Borrower  and any other
       parties thereto (as appropriate),  together with signed  acknowledgements
       of notices of  assignment  in respect  of the  Key-man  Charge*  from the
       issuer of the Key-man Policy*.

5.     The Inter-Creditor  Agreement duly executed by the Borrower and the other
       parties thereto.

6.     A legal opinion in form and substance  satisfactory to the Administrative
       Agent from English  solicitors to the Agents and the Lenders,  as to such
       matters as the  Administrative  Agent may require and a legal  opinion in
       form and substance satisfactory to the Administrative Agent from Guernsey
       Solicitors   to  the  Agents  and  the   Lenders  in   relation   to  the
       Inter-Creditor Agreement and Cygnet Ventures Limited.

7.     Two  Approved   Valuations  of  the  Properties  in  form  and  substance
       acceptable to the Administrative Agent addressed to the Lenders.

8.     A structural survey of the Properties in form and substance acceptable to
       the Administrative  Agent from surveyors acceptable to the Administrative
       Agent and addressed to the Lenders.

9.     The Certificate of Title.

--------
* Amended in manuscript on executed Agreement

* Amended in manuscript on executed Agreement

<PAGE>

10.    Evidence  satisfactory to the Administrative  Agent of the Purchase Price
       (including, without limitation, any amount attributed to goodwill).

11.    The  ISDA  Agreement  duly  executed  by  the  parties  thereto  and  the
       confirmation or  confirmations  or other evidence of the trade comprising
       the Hedging Arrangements.

12.    Satisfactory   evidence  of  the  discharge  of  Encumbrances   over  the
       Properties   (apart  from  the  security   constituted  by  the  Security
       Documents).

13.    Official  priority  searches  in  favour  of the  Security  Agent  of the
       registers of title to the Properties maintained by HM Land Registry which
       confirm a period of priority of not less than 21 days after the  Drawdown
       Date which reveal no entries adverse to the interests of the Borrower and
       the Agents and other Secured Parties (save for existing security which is
       discharged  on or before the  Drawdown  Date) and such other  searches in
       respect of the Properties and/or the Hotel Business as the Administrative
       Agent may require.

14.    Such Land  Registry  forms as the  Administrative  Agent may  require  in
       connection  with  the   registration  of  the  Borrower's  title  to  the
       Properties and the security created over the Properties by or pursuant to
       the terms of the Security  Documents,  duly  completed by or on behalf of
       the  Borrower,  together  with a  cheque  for  the  payment  of all  land
       registration  fees  (including

<PAGE>

       land  registration   expedition  fees  if  the  Administrative  Agent  so
       requires) payable in connection with such registration or an authority to
       apply an appropriate part of the Loan in discharge of those fees.

15.    Such evidence as the Administrative Agent may require that the Properties
       and the Hotel  Business are insured in accordance  with the terms of this
       Agreement and the Borrower's Charge (including, without limitation, cover
       against risks of terrorism)  and that the interest of the Security  Agent
       as agent and  trustee  for the  Agents  and the  Lenders  is noted on the
       relevant  policy or policies of insurance and that such policy  nominates
       the Security  Agent,  as agent and trustee for the Agents the Lender,  as
       loss payee (or, if the  Security  Agent so  requires,  that the  relevant
       policy or policies  have been effected in the joint names of the Borrower
       and the Security Agent).

16.    An audited opening balance sheet of the Borrower in a form agreed between
       the Borrower and the Administrative Agent.

17.    The Key-man Policy together with such confirmations as the Administrative
       Agent may require  that the Key-man  Policy is and remains in full effect
       and that the first premium has been paid.

18.    A  copy,  certified  a true  copy  by a duly  authorised  officer  of the
       Borrower  of the  executed  Acquisition  Agreement,  the Loan  Note,  the
       Permitted Charge,  all documentation  relating to the Subordinated  Loan,

<PAGE>

       any indemnity  guarantee or undertaking given by the Borrower to Mr Kevin
       Leech,  Cygnet Ventures  Limited,  Citibank,  N.A.,  Milner  Laboratories
       Limited, or any other person in any way relating to the Standby Letter of
       Credit or any  liability  thereunder  or in respect  thereof,  and of the
       Disclosure  Letter,  Butlin's Licence, RLMS Services Agreement,  Butlin's
       Services Agreement and LSA Services Agreement (as those terms are defined
       in the Acquisition Agreement).

19.    The   Administrative   Agent  being   satisfied   that  the   warranties,
       representations, undertakings and indemnities from Rank Holidays Division
       Limited in the Acquisition Agreement (and associated documents) in favour
       of the  Borrower  are in form and  substance  satisfactory  to it and its
       solicitors.

20.    Confirmation  that all steps required for  completion of the  Acquisition
       Agreement in accordance  with its terms (except in so far as the Facility
       may be required for this purpose) have been completed.

21.    An undertaking from the directors of the Borrower to the Lenders that the
       Borrower will not take any action to determine the Lease of the Metropole
       Hotel Blackpool dated 26 March 1965 pursuant to the tenant's break clause
       contained in the Lease.

22.    Evidence that the Borrower has obtained such defective title insurance to
       the Properties as the Administrative Agent may require.

23.    A copy of any other authorisation or other

<PAGE>

       document,  opinion or assurance which the Administrative  Agent considers
       to be  necessary  or  desirable  in  connection  with the entry  into and
       performance of, the transactions contemplated by this Agreement or any of
       the other Security  Documents,  or for the validity or  enforceability of
       this Agreement and any of the other Security Documents.

<PAGE>

The Fifth Schedule

Calculation of Mandatory Costs Rate

The  Mandatory  Costs Rate is an  addition to the  interest  rate on the Loan to
compensate the Lenders for the cost  attributable to the Loan resulting from the
imposition  from time to time under or  pursuant to the Bank of England Act 1998
(the  "Act")  and/or  by the  Bank of  England  and/or  the  Financial  Services
Authority  (the "FSA") (or other  United  Kingdom  governmental  authorities  or
agencies) of a requirement  to place  non-interest-bearing  or Special  Deposits
(whether  interest  bearing or not) with the Bank of England  and/or pay fees to
the FSA calculated by reference to liabilities used to fund the Loan.

The Mandatory Costs Rate will be the rate determined by the Administrative Agent
as being the following :

(a)    such amount as expresses the cost to each of the Lenders  attributable to
       its  participation in the Loan resulting from the imposition from time to
       time under or  pursuant  to the Act or by the Bank of England  and/or the
       FSA (or other United  Kingdom  governmental  authorities or agencies) (or
       pursuant  to  any  further  or  alternative  legislation,  regulation  or
       requirements  applicable  to  any  Lender  including,  but  not by way of
       limitation,  any imposed by the  European  Central  Bank after the United
       Kingdom has become a  Participating  Member  State) of a  requirement  to
       place non  interest-bearing  cash  ratio  deposits  or  special  deposits
       (whether  interest  bearing or not) with the Bank of  England  and/or pay
       fees to the FSA calculated by reference to  liabilities

<PAGE>

       used to fund the  participation  of each Lender in the Loan or further or
       alternative requirements as aforesaid; and

(b)    during such period as the United Kingdom shall be a Participating  Member
       State  such  amount  as  expresses  the  cost  to  each  of  the  Lenders
       attributable  to  its  participation  in  the  Loan  resulting  from  the
       imposition  by the  European  Central  Bank  pursuant to any  legislation
       regulation or requirement  from time to time  applicable to any Lender of
       any requirement whether or not the same or similar to that referred to in
       the  preceding  paragraph  which  shall  affect the cost to any Lender of
       maintaining its  participation in the Loan as well as (if applicable) the
       amount referred to in the preceding paragraph.

Each  Lender  shall  supply  such   information   and  in  such  detail  as  the
Administrative  Agent may require  for the  purposes  of  calculating  the above
amounts. If any Lender fails to notify any rate or figures to the Administrative
Agent,  the Mandatory Costs Rate shall be determined on the basis of the rate(s)
or figure(s) notified to the Administrative Agent by the remaining Lender(s).

The Mandatory  Costs Rate  attributable  to the Loan or other sum for any period
shall be  calculated  at or about 11.00 a.m.  (London  time) on the first day of
such period for the duration of such period.

The  determination  of the Mandatory Costs Rate in relation to any period shall,
in the  absence of  manifest  error,  be  conclusive  and binding on all parties
hereto.

<PAGE>

Signatories

Borrower

GRAND HOTEL GROUP LIMITED

By:               Stephen John Last
                  Philip Mason
Address:          6 Leylands Park
                  Colden Common
                  Winchester
                  Hampshire

Telephone:
Facsimile:        01489 896931

Lenders

ARAB BANK plc

By:               Frederick Stonehouse
Address:          PO Box 138
                  15 Moorgate
                  London EC2R 6LP

Telephone:        0171 315 8500
Facsimile:        0171 600 7620

IRISH NATIONWIDE BUILDING SOCIETY

By:               Gary McCollum
Address:          252 Westminster Bridge Road
                  London SE1 7PD

Telephone:
Facsimile:

<PAGE>

Administrative Agent

ARAB BANK plc

By:               Frederick Stonehouse

Address:          PO Box 138
                  15 Moorgate
                  London
                  EC2R 6LP

Telephone:        0171 315 8500
Facsimile:        0171 600 7620

Security Agent

ARAB BANK plc

By:               Frederick Stonehouse
Address:          PO Box 138
                  15 Moorgate
                  London
                  EC2R 6LP

Telephone:        0171 315 8500
Telex:
Facsimile:        0171 600 7620

<PAGE>

Hedge Provider

ARAB BANK plc

By:               Frederick Stonehouse
Address:          PO Box 138
                  15 Moorgate
                  London
                  EC2R 6LP

Telephone:        0171 315 8500
Facsimile:        0171 600 7620Date: 30 June                  1999

Grand Hotel Group Limited
as Borrower

Cygnet Ventures Limited
as Junior Creditor

The Lenders
as Lenders

Arab Bank plc
as Administrative Agent

Arab Bank plc
as Security Agent and Trustee

Arab Bank plc
as Hedge Provider

Inter-Creditor Agreement

                  Field Fisher Waterhouse 35 Vine Street London EC3N 2AA

<PAGE>

Contents

No       Heading                                                            Page
         Clauses

1.       Interpretation                                                        2
1.1      Defined Terms                                                         2
1.2      Construction of certain terms                                         9

2.       Consents                                                             10
2.1      Creditors                                                            10
2.2      Borrower                                                             10
2.3      Hedging Arrangements Charge                                          10

3.       Subordination                                                        10

4.       Undertakings of Cygnet                                               11

5.       Documentation                                                        11

6.       Undertakings of Cygnet                                               12

7.       Non-Permitted Recoveries                                             13

8.       Payments                                                             13
8.1      Payments under the Hedging Arrangements                              13
8.2      Order of Payments                                                    14
8.3      Loan Agreement and Charges Prevail                                   14

9.       Agreed Priorities and Application                                    15

10.      Retention of Property Deeds, Custody of Assets and Insurance         16
10.1     Deeds etc                                                            16
10.2     Insurance Proceeds                                                   17

11.      Unenforceability                                                     17

12.      Appointment of Receiver                                              17
12.1     Consultation                                                         17
12.2     Crystallisation                                                      19
12.3     Co-operation by Cygnet                                               19

13.      Release of Secured Assets                                            20
<PAGE>

13.1     Prior to the Enforcement Date                                        20
13.2     After the Enforcement Date                                           20

14.      Effective Security                                                   20
14.1     Creditors' Remedies                                                  20
14.2     Purchaser                                                            21

15.      Indulgence                                                           21

16.      Disclosure                                                           21

17.      Memorandum                                                           21

18.      HM Land Registry                                                     21

19.      Discharge                                                            21

20.      Assignment/Representations                                           22

21.      Waiver of Defences                                                   23

22.      Notices                                                              24

23.      Variation                                                            25

24.      Counterparts                                                         26

25.      Law and Jurisdiction                                                 26

1.       First Schedule                                                       27

2.       Second Schedule                                                      28

3.       Third Schedule                                                       29

Signatories                                                                   30

<PAGE>

THIS INTER-CREDITOR  AGREEMENT is made the 30th * day of June 1999

BETWEEN:-

(1)    GRAND HOTEL GROUP LIMITED,  as borrower under the Loan Agreement  defined
       below;

(2)    CYGNET VENTURES LIMITED;

(3)    THE LENDERS whose names are specified in the First Schedule;

(4)    ARAB BANK plc,  in its  capacity as  Administrative  Agent under the Loan
       Agreement;

(5)    ARAB  BANK  plc,  in its  capacity  as  Security  Agent  under  the  Loan
       Agreement;

(6)    ARAB BANK plc, in its capacity as party to the Hedging Arrangements; and

WHEREAS:

(A)    By the Loan  Agreement  the Lenders have agreed to make  available to the
       Borrower a loan facility of up to  (pound)10,000,000  on the terms stated
       therein.

(B)    In accordance  with the Loan Agreement the Borrower has also entered into
       an interest rate management agreement with the Hedge Provider the benefit
       of which has been  assigned  to the  Security  Agent as  trustee  for the
       Senior Creditors.

(C)    The Borrower has created security over various assets as security for the
       performance by the Borrower of its  obligations  under the Loan Agreement
       and the other Security Documents.

(D)    By the  Facility  Letter  Cygnet  has  agreed  to make  available  to the
       Borrower a loan facility of  (pound)100,000  and to provide the Indemnity
       on the terms stated therein.

--------
* Inserted in manuscript in executed Agreement

                                                                               1
<PAGE>

(E)    The  Borrower  has  issued  a Loan  Stock  Instrument  (the  "Loan  Stock
       Instrument") to  Butlin's Limited ("Butlin's") as  part consideration for
       the price  payable to Rank  under an  asset  sale  agreement  relating to
       Butlin's Provincial Hotels and the Loan Stock Instrument has been secured
       by  the issue  to  Butlin's  of a  Standby Letter of Credit (the "Standby
       Letter of Credit") by Citibank, N.A  in the maximum  principal  amount of
       (pound)10,400,000.

(F)    Mr Leech has  entered  into a facility  letter  (the  "Citibank  Facility
       Letter") in respect of the issue of the Standby Letter of Credit.

(G)    Cygnet has  undertaken by the Indemnity to indemnify Mr Leech against any
       liability incurred by Mr Leech to Citibank, N.A. pursuant to the Citibank
       Facility Letter.

(H)    Milner  has  entered  into a mortgage  of shares in respect of  5,820,000
       ordinary shares in ML Laboratories Plc (the "Milner Charge") in favour of
       Citibank,  N.A. as security  for the Standby  Letter of Credit and Cygnet
       has also  undertaken  by the  Indemnity to indemnify  Milner  against any
       liability  incurred by Milner to Citibank,  N.A. pursuant to, or any loss
       to Milner as the result of the exercise of any rights by Citibank,  N.A.,
       under the Milner Charge.

(I)    The  Borrower  has  granted  security  to  Cygnet  as  security  for  its
       obligations under the Facility Letter.

(J)    The principal  purpose of this Deed is to regulate the ranking of claims,
       the priority of security  interests and the enforcement of rights between
       the Lenders, the Hedge Provider and Cygnet.

NOW IT IS HEREBY AGREED as follows:-

1.     Interpretation

1.1    Defined Terms

       In this Deed, in addition to terms  defined in the  Recitals,  unless the
       context otherwise requires the following words and expressions shall have
       the following meanings:-

       "Administrative Agent" means   Arab   Bank   plc  in  its   capacity   as
                              administrative agent for the Lenders and the Hedge
                              Provider;

                                                                               2
<PAGE>

       "Agents"               means the  Administrative  Agent and the  Security
                              Agent,  and "Agent"  means either of them,  as the
                              context requires;

       "Borrower"             means  Grand  Hotel  Group   Limited,   a  company
                              registered  under  the Laws of  England  and Wales
                              under number  3657769 whose  registered  office is
                              situate at Derbyshire  House,  737a Wilmslow Road,
                              Didsbury, Manchester M20 6WF;

       "Charges"              means the Senior Charges and the Junior Charge;

       "Creditors"            means  the   Senior   Creditors   and  Cygnet  and
                              "Creditor" means any of them;

       "Crystallisation"      means first crystallisation of any of the floating
                              charges  contained in the Charges  whether arising
                              by  operation  of law or effected  pursuant to the
                              express  provisions  of the  relevant  Charge  and
                              "Crystallise"  and  "Crystallised"  shall  have  a
                              corresponding meaning;

       "Cygnet"               Cygnet  Ventures  Limited,  a  company  registered
                              under  the Laws of  Guernsey  under  number  35357
                              whose registered office is at National Westminster
                              House,  Le  Truchot,  St  Peter  Port,   Guernsey,
                              Channel Islands;

       "Enforcement Date"     means the earliest of:-

                              (i)  the first date on which any  Creditor (or the
                                   Security  Agent on its or their behalf in the
                                   case  of  the  Senior  Lenders)   appoints  a
                                   Receiver  of all or any part of the  property
                                   of the  Borrower  or

                                                                               3
<PAGE>

                                   takes any  other  step to enforce the Charges
                                   or any part thereof;

                              (ii) the first date on which the Borrower is wound
                                   up  voluntarily  or  ordered  to be  wound up
                                   compulsorily;

       "Facility Letter"      means the facility  letter dated 28 June 1999 from
                              Cygnet to the Borrower;

       "Hedge Provider"       means   Arab   Bank   plc  in  its   capacity   as
                              counterparty to the Hedging Arrangements;

       "Hedge Provider's      means  the   beneficial   interest  of  the  Hedge
       Security Interest"     Provider  and the Agents (in their  capacities  as
                              agents  for  the  Hedge  Provider)  in the  Senior
                              Charges;

       "Hedge Provider's      means the aggregate  amount of all monies due from
       Indebtedness"          time  to  time  to  the  Hedge  Provider  (in  its
                              capacity  as  such)  together  with  any  interest
                              accrued   due   and   payable   thereon   and  any
                              commission,  fees,  costs and expenses  payable by
                              the Borrower under the Security Documents;

       "Hedging
       Arrangements"          means   an   agreement   in   the   form   of  the
                              International  Swaps and  Derivatives  Association
                              Master Agreement (Multicurrency Cross Border) 1992
                              Edition  (the  "ISDA   Agreement")   entered  into
                              between the Hedge  Provider and the Borrower and a
                              confirmation  between the Hedge  Provider  and the
                              Borrower  and a  confirmation  between  the  Hedge
                              Provider   and   the   Borrower    evidencing   or
                              constituting on interest rate management agreement
                              under the ISDA

                                                                               4
<PAGE>

                              Agreement,   both  the  ISDA   Agreement  and  the
                              confirmation being dated 30 June * 1999;

       "Indemnity"            means the deed of indemnity  executed by Cygnet in
                              favour of Mr Leech and  Milner,  as referred to in
                              Recitals (G) (H) and (I);

       "Junior Charge"        means the debenture details of which are specified
                              in  the  Third   Schedule  and  the   assignments,
                              mortgages,  charges and other  security  interests
                              created  thereby  or  pursuant  thereto  and  made
                              between  the  Borrower  and  Cygnet  and any other
                              security  interest now or  hereafter  securing any
                              Junior  Indebtedness  including (for the avoidance
                              of  doubt)  any  fixed   charge   arising  on  the
                              Crystallisation of any charges created thereby);

       "Junior Indebtedness"  means all present and future sums, liabilities and
                              obligations  payable or owing by the  Borrower  to
                              Cygnet (whether  actual or contingent,  jointly or
                              severally  or  otherwise   howsoever)   including,
                              without  limitation,  the principal amount and all
                              other monies (including interest,  commissions and
                              fees,  legal and other costs and  expenses and any
                              payment by way of indemnity or  counter-indemnity)
                              due from time to time to Cygnet from the  Borrower
                              under the Facility Letter, and any other liability
                              or  obligation  under  or  secured  by the  Junior
                              Charge;

       "Lenders"              means the bank or banks and financial institutions
                              set out in the First  Schedule and includes  their
                              successors  in title,

--------
* Inserted in manuscript in executed Agreement

                                                                               5
<PAGE>

                              Transferees   and   assignees   under   the   Loan
                              Agreement;

       "Lenders'
       Indebtedness"          means the aggregate principal amount and all other
                              monies (including interest,  commissions and fees,
                              legal and other costs and  expenses) due from time
                              to  time to the  Agents  and  the  Lenders  by the
                              Borrower  under the Loan  Agreement  and the other
                              Security Documents;

       "Lenders' Security
       Interest"              means the  beneficial  interest of the Lenders and
                              of the Agents (in their capacity as agents for the
                              Lenders) in the Senior Charges;

       "Loan Agreement"       means  a  loan  agreement   dated  30  June*  1999
                              herewith  and made  between the  Borrower  (1) the
                              Lenders  (2)  Arab  Bank  plc in its  capacity  as
                              administrative agent for the Lenders and the Hedge
                              Provider  (3)  Arab  Bank plc in its  capacity  as
                              security   agent  and   trustee   for  the  Senior
                              Creditors (4) and Arab Bank plc in its capacity as
                              hedge provider (5);

       "Milner"               means Milner  Laboratories  Limited (Registered in
                              Jersey)  whose  registered   office  is  at  33-39
                              Columberi, St Helier, Jersey Channel Islands;

       "Mr Leech"             means Kevin Ronald  Leech of La  Vignette,  Rue la
                              Vignette, St Saviour, Jersey, Channel Islands;

       "Permitted Demand"     (a)  at any time prior to the making of any demand
                                   for the repayment of the Senior  Indebtedness
                                   pursuant to the Loan Agreement

--------
* Inserted in manuscript in executed Agreement

                                                                               6
<PAGE>

                                   and prior to the appointment of a Receiver of
                                   the  Borrower  by or on behalf of the  Senior
                                   Lenders (or any of them) or the  commencement
                                   of any liquidation or  administration  of the
                                   Borrower,  a demand upon the  Borrower  which
                                   states  that   repayment  of  the  amount  or
                                   liability demanded is subject to the terms of
                                   this Deed; and

                              (b)  at any other  time,  any demand made upon the
                                   Borrower,

                              Provided  always  that,  in each such  case,  such
                              demand is without  prejudice to the  subordination
                              of  the   Junior   Indebtedness   to  the   Senior
                              Indebtedness  herein  contained  and to the  other
                              terms of this Deed.

       "Permitted Payments"   means payments and receipts of scheduled interest,
                              commissions  and costs  payable under the Facility
                              Letter  and   principal  of  up  to (pound)100,000
                              payable  under  the  Facility  upon  expiry of the
                              period  specified  in  paragraph 3 of the Facility
                              Letter) but only so long as no Senior Indebtedness
                              is due and  unpaid  and no  Event  of  Default  or
                              Potential  Event of Default  has  occurred  and is
                              continuing unremedied under the Loan Agreement and
                              for the  avoidance of doubt no payment which is or
                              represents  (directly or indirectly) or is any way
                              attributable  to  or  liability  which  arises  in
                              connection  with or as a result of the  payment of
                              the principal amount of (pound)10,400,000  (or any
                              part  thereof)   represented  by  the  Loan  Stock
                              Instrument  and/or  the  Standby  Letter of Credit
                              shall be a Permitted Payment  notwithstanding  the
                              terms of the

                                                                               7
<PAGE>

                              Facility  Letter,  to the  intent  that no payment
                              shall be made in  respect  of the  said  principal
                              amount  of (pound)10,400,000   until  the   Senior
                              Indebtedness has been irrevocably paid in full;

       "Receiver"             means   a   receiver,    receiver   and   manager,
                              administrative  receiver,  administrator  or other
                              person  appointed  to carry out the  duties of any
                              such person;

       "Security Agent"       means Arab Bank plc in its  capacity  as  security
                              agent and trustee for the Secured Parties;

       "Security Interests"   means the Lenders' Security Interest and the Hedge
                              Provider's Security Interest;

       "Senior Charges"       means  the  legal  charges  and  debentures,   the
                              security  agreements and the other  instruments of
                              which details are specified in the Second Schedule
                              and the assignments,  mortgages, charges and other
                              security  interests  created  thereby or  pursuant
                              thereto  and made  between  the  Borrower  and the
                              Security Agent as agent and trustee for the Senior
                              Creditors and any other  security  interest now or
                              hereafter   securing   any   Senior   Indebtedness
                              including  (for the  avoidance of doubt) any fixed
                              charge  arising  on  the  Crystallisation  of  any
                              charges created thereby;

       "Senior Creditors"     means  the  Lenders,  the  Agents  and  the  Hedge
                              Provider and "Senior Creditor" means any of them;

       "Senior Indebtedness"  means  the  Lenders'  Indebtedness  and the  Hedge
                              Provider's Indebtedness.

                                                                               8
<PAGE>

1.2    Construction of certain terms

       In this Deed unless the context otherwise requires:

       (a)    terms defined in the Loan Agreement have, unless expressly defined
              in this Deed, the same meaning in this Deed;

       (b)    clause and schedule headings are for ease of reference only;

       (c)    references  to a  Clause  or  Schedule  shall  be  construed  as a
              reference to a clause hereof or schedule hereto;

       (d)    a sub-clause  shall be construed as a reference to a sub-clause of
              the clause in which such reference appears;

       (e)    a paragraph shall be construed as a paragraph of the sub-Clause in
              which such reference appears;

       (f)    any reference to any statute or regulation shall be construed as a
              reference to such statute as regulation as the same may have been,
              or may from time to time be, amended or re-enacted;;

       (g)    the singular shall include the plural and vice versa

       (h)    a  reference   to  a  person   includes   bodies   corporate   and
              unincorporate;

       (i)    a reference to this Deed, the Loan Agreement,  the Indemnity,  the
              Charges (or any of them) or any other  document shall be construed
              as a  reference  to this  Deed or,  as the  case may be,  the Loan
              Agreement or such other  document as the same may have been or may
              from time to time by, amended, supplemented or novated;

       (j)    a reference to a person  (including the parties  hereto)  includes
              its successors  and assigns and persons  deriving title through or
              under such person.  Without limitation,  a reference to the Agents
              (or either of them)  includes any  successor  appointed  under the
              Loan Agreement; and

       (k)    a  reference  in this Deed to a  creditor's  enforcing  a security
              interest include references to:

                                                                               9
<PAGE>

              (i)    its  retaining or applying in or towards the discharge of a
                     liability  of the  Borrower any amount which it receives by
                     virtue  of an  assignment  of, or other  security  interest
                     over,  an  insurance  policy  or  receivable  owned  by the
                     Borrower; and

              (ii)   taking or retaining  possession  of any moveable  property,
                     including any negotiable  instrument,  document of title or
                     other document owned by the Borrower.

2.     Consents

2.1    Creditors

       The Senior  Creditors  consent to the  execution  by the  Borrower of the
       Junior Charge and, subject to the terms of this Deed, to the existence of
       the Junior Indebtedness.

2.2    Borrower

       The Borrower  hereby agrees to the terms of this Deed and undertakes with
       the Creditors,  to observe the provisions hereof and not to do or omit to
       do  anything  which may  prejudice  or  affect  the  enforcement  of such
       provisions,  but none of the  undertakings  in this Deed are given to, or
       shall be enforceable by, the Borrower.

2.3    Hedging Arrangements Charge

       The Hedge  Provider  confirms  that  notwithstanding  the  provisions  of
       Section 7 (Transfer) of the ISDA  Agreement it consents and agrees to the
       execution  of  the  Hedging  Arrangements  Assignment  in  favour  of the
       Security Agent as agent and trustee for the Senior Lenders.

3.     Subordination

       The  rights  of  Cygnet  in  respect  of  the  Junior   Indebtedness  are
       subordinated to the Senior  Indebtedness  and accordingly  payment by the
       Borrower of any amount of the Junior  Indebtedness  (other than Permitted
       Payments) is conditional  upon the Borrower  having  irrevocably  paid in
       full all of the Senior Indebtedness.

                                                                              10
<PAGE>

4.     Undertakings of the Borrower

       So long as the Senior  Indebtedness is outstanding the Borrower will not,
       without the prior written consent of the Senior Creditors:

       (a)    secure  all or any part of the Junior  Indebtedness  other than by
              way of the Debenture specified in the Third Schedule;

       (b)    make a loan or  provide  credit  to or  acquire  any bill  bond or
              security issued by Cygnet, Mr Leech or Milner;

       (c)    redeem,   purchase  or   otherwise   acquire  any  of  the  Junior
              Indebtedness;

       (d)    save by means of Permitted Payments, repay or prepay any principal
              amount of, or pay any interest,  fees or commissions  (but without
              prejudice  to  accrual  thereof)  on,  or by  reference  to, or on
              account of the Junior Indebtedness;

       (e)    take or omit to take any action whereby the  subordination  of the
              Junior Indebtedness or any part thereof to the Senior Indebtedness
              would be terminated or impaired;

       (f)    incur any Junior Indebtedness other than under and on the terms of
              the Junior Charge and the Facility Letter and will procure that at
              all times the maximum principal amount of or contingent  liability
              in respect of the Junior  Indebtedness shall not exceed the lesser
              of  (1)  the  principal  amount  due  under  the  Facility  Letter
              aggregated  with a sum  equal to the  amount  for the  time  being
              unpaid under the Loan Stock Instrument and (2)  (pound)10,500,000,
              together with, in each case, any and all interest, costs, fees and
              expenses payable in connection therewith.

       (g)    give notice of any assignment or any other security created by the
              Junior  Charge to any other  person  and if,  notwithstanding  but
              without  prejudice to the foregoing,  any such notice is given, to
              join with the  Senior  Lenders  in  notifying  such  person of the
              priority afforded to the Senior Charges by this Deed.

5.     Documentation

       This Deed, the Facility  Letter,  and the Junior Charge and the Indemnity
       form the entire agreement as to the Junior Indebtedness.

                                                                              11
<PAGE>

       If there is any  inconsistency  between  the  terms of this  Deed and the
       terms  on  which  the  Junior  Indebtedness  was  or is  incurred  by the
       Borrower,  the terms of this Deed shall  prevail.  If there are any other
       terms relating to the Junior Indebtedness existing at the date hereof and
       not  comprised in this Deed,  the Facility  Letter the  Indemnity and the
       Junior  Charge,  such terms shall be of no further force and effect.  Any
       amendment to the Junior Charge the Facility  Letter or the Indemnity made
       or purported to be made without the consent of the Senior Creditors shall
       be void.

6.     Undertakings of Cygnet

       So long as the  Senior  Indebtedness  is  outstanding,  Cygnet  will  not
       without  the prior  written  consent of the Senior  Creditors  or save as
       expressly otherwise permitted by this Deed:

       (a)    assign or purport to assign to any person the whole or any part of
              the Junior Indebtedness;

       (b)    save in respect of Permitted  Payments,  purport to set off at any
              time any  amount of the  Junior  Indebtedness  against  any amount
              payable by Cygnet to the Borrower;

       (c)    save in respect of  Permitted  Payments or by a Permitted  Demand,
              attempt to obtain  repayment  from the Borrower or  prepayment  or
              payment on account of principal or payment of any  interest,  fees
              or commissions  (but without  prejudice to accrual thereof) on, or
              by reference to, any of the Junior Indebtedness;

       (d)    petition  for,  or vote in favour of, any  resolution  or take any
              other   action   whatsoever   for,  or  which  may  lead  to,  the
              administration, winding-up or dissolution of the Borrower;

       (e)    take or omit to take any action whereby the  subordination  of the
              Junior Indebtedness or any part thereof to the Senior Indebtedness
              would be terminated or impaired;

       (f)    permit any Junior  Indebtedness  to arise  other than under and on
              the terms of the  Facility  Letter or the  Junior  Charge and will
              procure  that at all  times  the  maximum  principal  amount of or
              contingent  liability in respect of the Junior  Indebtedness shall
              not exceed the  lesser of (1) the  principal  amount due under the

                                                                              12
<PAGE>

              Facility Letter  aggregated with a sum equal to the amount for the
              time  being  unpaid  under  the  Loan  Stock  Instrument  and  (2)
              (pound)10,500,000,  together  with,  in  each  case,  any  and all
              interest,   costs,   fees  and  expenses   payable  in  connection
              therewith;

       (g)    amend or supplement the Indemnity;

       (h)    notwithstanding  Clause 3 of the Indemnity (but without  prejudice
              to Clause 3 of this Deed and any other  provision  of this Deed by
              which  the  Junior  Indebtedness  is  subordinated  to the  Senior
              Indebtedness)  not to make any payment under the Indemnity without
              due enquiry as to whether the amount  demanded  from Cygnet  under
              the  Indemnity  relates  to a payment  which is  properly  due and
              payable under any Undertaking (as defined in the Indemnity);

       (i)    give notice of any  assignment  or other  security  created by the
              Junior  Charge to any other  person  and if,  notwithstanding  and
              without  prejudice to the  foregoing,  any such notice is given to
              join with the  Senior  Lenders  in  notifying  such  person of the
              priority afforded to the Senior Charges by this Deed.

7.     Non-Permitted Recoveries

       If, notwithstanding (and without prejudice to) Clauses 3, 4 and 6, Cygnet
       shall  receive  any  payment  from the  Borrower in respect of the Junior
       Indebtedness (save for Permitted Payments) before the Senior Indebtedness
       has been discharged in full (whether before or after the  commencement of
       any liquidation or other  insolvency or rescheduling or  restructuring of
       debts of the  Borrower)  then to the  extent  of the  outstanding  Senior
       Indebtedness Cygnet will hold any sums so received and its entitlement in
       respect thereof upon trust for the Senior Creditors and will pay the same
       to the Senior Creditors forthwith upon receipt.

8.     Payments

8.1    Payments under the Hedging Arrangements

       (a)    All payments  (after the  application of Section 2(c) (Netting) of
              the ISDA Agreement,  where applicable)  falling due from the Hedge
              Provider to the Borrower under the Hedging  Arrangements  shall be
              paid by the Hedge  Provider to the

                                                                              13
<PAGE>

              Security  Agent (or  retained in the  capacity  of Security  Agent
              where  the  Hedge  Provider  and the  Security  Agent are the same
              person)  pursuant to the Hedging  Arrangements  Charge (unless and
              until the  Hedging  Arrangements  Charge has been  released by the
              Security Agent).

       (b)    All payments  (after the  application of Section 2(c) (Netting) of
              the  ISDA  Agreement,  where  applicable)  falling  due  from  the
              Borrower  to the Hedge  Provider  under the  Hedging  Arrangements
              shall be paid by the Borrower to the Security Agent.

       (c)    The Agents shall  utilise all payments  specified in Clause 8.1(a)
              by the Security Agent paying the same to the Administrative  Agent
              and by the  Administrative  Agent utilising or  appropriating  the
              same  in or  towards  payment  of  interest  payable  on the  Loan
              pursuant to the Loan Agreement or otherwise in or towards  payment
              or discharge of the  obligations of the Borrower to the Agents and
              the Lenders under the Loan Agreement.

       (d)    Unless and until an Event of Default shall have occurred  pursuant
              to the  Loan  Agreement  the  Security  Agent  shall  utilise  all
              payments  specified  in Clause  8.1(b)  by paying  the same to the
              Hedge  Provider  (or  retaining  the same in the capacity of Hedge
              Provider  where the Security  Agent and the Hedge Provider are the
              same person) to retain for its own account.

       (e)    All the parties  hereby  irrevocably  instruct and  authorise  the
              Hedge Provider,  the Security Agent, the Administrative  Agent and
              the Borrower to effect  payments in accordance  with the foregoing
              provisions.

8.2    Order of Payments

       Unless and until an Event of Default shall have occurred  pursuant to the
       Loan Agreement  payments or utilisations  pursuant to Clause 8.1(d) shall
       be made in  priority  to  payments to or by the Agents for the account of
       the Lenders in respect of interest falling due under the Loan Agreement.

8.3    Loan Agreement and Charges Prevail

                                                                              14
<PAGE>

       Nothing  contained in this Clause 8 shall as between the Senior Creditors
       and the Borrower vary any matters agreed between the Senior Creditors and
       the Borrower and contained in the Loan Agreement or the Senior Charges.

9.     Agreed Priorities and Application

9.1    The Creditors  respectively  confirm that the details of their respective
       Charges  specified in the Second Schedule and the Third Schedule (and, in
       the case of Cygnet,  the Facility  Letter and  Indemnity)  and the copies
       thereof  provided to the other  parties to this Deed (as appended to this
       Deed) are true,  complete  and  accurate in all  respects and the Charges
       have to be best of their  knowledge  and belief not  Crystallised.  It is
       hereby agreed and declared  between the Creditors that for the purpose of
       this Deed (but not so as to prejudice or affect any rights or remedies of
       any Creditor against the Borrower), the priorities of the Charges and the
       Security  Interests  shall  rank in  point of  security  as  between  the
       Creditors so that:-

       (a)    the Senior  Charges  shall rank prior to the Junior  Charge in all
              respects; and

       (b)    the Lenders'  Security  Interest  shall in respect of the Lender's
              Indebtedness  rank in  priority to the Hedge  Provider's  Security
              Interest.

9.2    Accordingly  upon  enforcement  of each or any of the  Charges all monies
       and/or assets  received in respect  thereof by the Creditors  (or, in the
       case of the Senior Lenders,  either of the Agents on their behalf) or any
       Receiver  appointed  by or at the  request of any or all of them shall be
       applied  (after  retention  of  sufficient  monies  to  make  payment  in
       satisfaction of the costs, charges,  expenses and liabilities incurred by
       the Receiver,  including the  remuneration  of the Receiver)  first in or
       towards  satisfaction  of the  Lenders'  Indebtedness  in priority to any
       payment to the Hedge  Provider  or Cygnet or any other  person,  secondly
       (subject  only to payment  of the  Lenders'  Indebtedness)  shall be next
       applied in or towards  satisfaction of the Hedge Provider's  Indebtedness
       in  priority to any  payment to Cygnet or any other  person,  and thirdly
       (subject to payment of the Lenders' Indebtedness and the Hedge Provider's
       Indebtedness)  shall  next be  applied by payment to Cygnet in or towards
       satisfaction of the Junior Indebtedness.

                                                                              15
<PAGE>

9.3    The  priorities  set forth  above  shall rank as  provided in this Clause
       notwithstanding:-

       (a)    the  nature of the  Charges  and the  Security  Interests  and the
              respective  dates  or  times  of  their  execution,   creation  or
              registration;

       (b)    the respective  date or dates or time or times at which any of the
              Creditors  received notice of any of the Charges held by the other
              Creditors  and the  respective  date or  dates or time or times at
              which  monies  may be or have been  advanced  or  become  owing or
              payable or secured under the Charges;

       (c)    the  appointment of any  liquidator,  Receiver,  administrator  or
              similar officer in relation to the Borrower; and

       (d)    any  other  provisions  contained  in the  Charges  or  the  other
              Security Documents.

10.    Retention of Property Deeds, Custody of Assets and Insurance

10.1   Deeds etc

       (a)    The  Creditors  agree that where the  requirements  of the Charges
              conflict as to the deposit of deeds and  documents,  the  relevant
              deeds and documents,  if required to be deposited under the Senior
              Charges (or any of them),  shall be held with and  deposited  with
              the Security  Agent during the  subsistence  of the Senior Charges
              (or  any of  them)  and  such  deposit  shall  be  deemed  to be a
              sufficient  performance  of  any  obligation  of the  Borrower  to
              deposit deeds and documents under the Charges.

       (b)    For the  avoidance  of doubt and for the  purposes  of the  Senior
              Charges,  the Lenders,  the Agents and the Hedge Provider  confirm
              that the  Security  Agent is approved as a custodian of any assets
              charged to the Security Agent as agent and trustee for the Agents,
              the Lenders and the Hedge  Provider and the Security  Agent hereby
              confirms  that it holds and will hold such assets and the accounts
              to which they are credited in  accordance  with and subject to the
              Senior  Charges  and the  Lenders'  Security  Interest,  the Hedge
              Provider's  Security

                                                                              16
<PAGE>

              Interest  and  this  Deed.  Forthwith  upon any  discharge  of the
              Lenders'  Security  Interest  in respect of any such  property  or
              assets  the  Security  Agent  will  unless  and  until   otherwise
              instructed  by the Hedge  Provider  hold such assets for the Hedge
              Provider in accordance with the Senior Charges.

10.2   Insurance Proceeds

       In the event of any monies being received prior to the  Enforcement  Date
       under any insurance  covering any of the property or assets charged under
       the Charges such monies  shall  (subject to the rights of any landlord or
       the holder of any prior  encumbrance  or the obligation to any tenant) be
       applied in  replacing,  restoring or  reinstating  the property or assets
       destroyed,  damaged or lost unless the Majority  Lenders shall  otherwise
       direct in writing.

11.    Unenforceability

       If any of the Charges  shall be released or be or become wholly or partly
       invalid or  unenforceable  the  Creditor in whose  favour such Charges is
       given shall itself bear the loss  resulting  and shall not be entitled to
       share in moneys  derived  from the assets over which it has no  effective
       security but the Creditors shall not themselves challenge or question the
       validity or enforceability of the Charges.

12.    Appointment of Receiver

12.1   Consultation

       If any  Senior  Creditor  wishes  pursuant  to the  powers in the  Senior
       Charges to appoint a Receiver of the Borrower or to exercise its power of
       sale under or otherwise  enforce any of the Senior  Charges or wishes the
       Security Agent to do so it shall forthwith inform the other Creditors and
       endeavour  to agree with them on the method by which the Charges  will be
       enforced.  In such event the Creditors shall consult together with a view
       to agreeing upon the method of enforcement and where  appropriate  upon a
       suitable  person  or  persons  to be  appointed  as  Receiver  (and  such
       consultation  and  agreement  shall also  precede the removal of any such
       agreed Receiver and any appointment of a successor) and shall  co-operate
       with each other in ensuring that the net proceeds after  deduction of the
       expenses of  realisation  are paid in accordance  with the  provisions of
       this Deed provided that

                                                                              17
<PAGE>

       (a)    nothing  herein  contained  shall  prevent  the  Lenders,  or  the
              Security   Agent  (but  not  the  Hedge  Provider  or  Cygnet)  so
              appointing  a Receiver  of the  Borrower  forthwith  without  such
              consultation or agreement where the appointor  reasonably believes
              that the  immediate  appointment  of a Receiver  is  necessary  to
              protect its interests (or in the case of the Security  Agent,  the
              interests  of  the  Senior  Creditors  or  any of  them)  but  the
              appointor shall as soon as practicable thereafter inform the other
              Creditors of such appointment and consult with the other Creditors
              with a view to the retention in office of such Receiver or (if not
              agreed) to the removal of such Receiver and the  appointment  of a
              successor;

       (b)    in case of dispute  between  the  Majority  Lenders  and the other
              Creditors or any of them the Majority Lenders shall be entitled to
              determine  whether or not a Receiver is  appointed  and whether or
              not any power of sale is  exercised  or the  security is otherwise
              enforced and the Hedge Provider shall not be entitled to appoint a
              Receiver or to otherwise  enforce the Charges  without the consent
              of the Majority Lenders;

       (c)    no action  taken by the  Senior  Creditors  or any of them or by a
              Receiver  appointed by any of them shall be invalid or ineffectual
              because of any failure to consult in accordance with this Clause;

       (d)    for the avoidance of all doubt, until the Senior  Indebtedness has
              been  irrevocably  paid in full Cygnet shall not without the prior
              written  specific  consent of the Senior  Creditors be entitled to
              take any step to enforce the Junior Indebtedness  (including,  but
              without  limitation,  by the  exercise  of its power of sale or by
              appointing a Receiver),  nor to serve on the Borrower a demand for
              payment of or an account of any Junior  Indebtedness (other than a
              Permitted   Demand),   nor  make  any  direction  or   requirement
              whatsoever  under  Clause 6 of the Junior  Charge and in favour of
              the  Senior  Creditors  but not the  Borrower  hereby  waives  the
              requirement  under that  clause for  payment of Charged  Debts (as
              defined in the Junior  Charge)  into a  particular  account to the
              extent  inconsistent  with the terms of the Senior  Charges or any
              agreement  or  arrangement  from time to time between the Borrower
              and the Security Agent.

                                                                              18
<PAGE>

12.2   Crystallisation

       Each Creditor hereby covenants with each of the other Creditors to notify
       each  of  them  forthwith  in  writing  after  it  becomes  aware  of the
       Crystallisation of any charge contained in its Charges.  Cygnet covenants
       with  the  Senior  Creditors  (while  any  Senior  Indebtedness   remains
       outstanding) not without the prior written specific consent of the Senior
       Creditors to take any step  (whether  under Clause 7 of the Junior Charge
       or  otherwise)  which  would or might  Crystallise  the  floating  charge
       created  under the terms of the Junior  Charge  provided that this Clause
       12.2 shall not prevent Cygnet serving a Permitted Demand on the Borrower.

12.3   Co-operation by Cygnet

       (a)    Cygnet shall co-operate with the Senior Creditors in realising the
              assets  charged  to them under the  Senior  Charges  or  otherwise
              exercising their Security Interests and shall execute any deeds or
              documents and take any steps which the Senior  Creditors or any of
              them  may  reasonably  request  for the  purpose  of  enabling  or
              facilitating  any exercise by the Senior  Creditors or any of them
              or by any  Receiver  appointed  by or on their  behalf,  of any of
              their or his powers under the Senior Charges or the general law or
              for  any  similar  or  related  purpose  including,   but  without
              limitation,  any deed or  document  which the  Senior  Lender  may
              request  for  the  purpose  of  ensuring  that  (or  avoiding  any
              uncertainty  that) a person who is to acquire an asset  covered by
              the Senior Charges upon any exercise of the security  conferred by
              the Senior  Charges  (whether by sale by the Security  Agent,  any
              Receiver or otherwise)  will acquire good title to such asset free
              from  the  Junior  Charge.   Without  limitation,   Cygnet  hereby
              irrevocably  consents  to the sale of the  assets  charged  by the
              Senior Charges by the Security Agent or by any Receiver  appointed
              by the Security  Agent or any other Senior  Lender for the purpose
              of any  restriction  or other entry which may be made on the title
              to any of the said  assets at HM Land  Registry  and by which such
              consent is required.

       (b)    Cygnet  irrevocably  and by way of security  appoints the Security
              Agent  as its  attorney  and on its  behalf  and in its  name  (or
              otherwise)  to execute  any deeds or  documents  or take any other
              steps which it is obliged to execute or take under sub-clause (a).

                                                                              19
<PAGE>

13.    Release of Secured Assets

13.1   Prior to the Enforcement Date

       If at any time prior to the Enforcement Date the Loan or any part thereof
       is  irrevocably  and  unconditionally  repaid or  prepaid in whole and in
       accordance  with and subject to the terms of the Loan  Agreement and upon
       such  repayment and in accordance  with such terms the Lender's  Security
       Interest (or any part of it) is to be released  the Agents,  the Lenders,
       and the Hedge  Provider  will release the Senior  Charges  subject to and
       conditionally upon:

       (a)    the Borrower  paying to the Hedge Provider any amount which may be
              payable  pursuant to Clause 17 of the Loan Agreement in respect of
              such prepayment;

       (b)    the rights (if any) of the Hedge  Provider in accordance  with the
              terms of this Deed in the  proceeds of any sale or other  disposal
              of the Secured  Assets  being  preserved  to the Hedge  Provider's
              reasonable  satisfaction  following such prepayment if the Hedging
              Arrangements then remain in effect; and

       (c)    no Event of Default having then occurred.

13.2   After the Enforcement Date

       If at  any  time  after  the  Enforcement  Date  any  such  repayment  or
       prepayment  shall occur as is  contemplated in Clause 13.1 and the amount
       realised from the enforcement of the Charges is insufficient to discharge
       in full the Lender's Indebtedness and the Hedge Provider's  Indebtedness,
       the  release  by  the  Hedge   Provider  shall  not  be  subject  to  the
       satisfaction  of the  condition  specified in Clause 13.1 above,  and the
       Hedge  Provider  shall be obliged to release the Secured Assets to enable
       the same to be realised.

14.    Effective Security

14.1   Creditors' Remedies

       No provision contained in this Deed shall as between the Borrower and any
       Creditor affect or prejudice any rights or remedies of any Creditor under
       the  Charges  which  shall  remain in full force and effect as  effective
       continuing  securities for all moneys obligations and

                                                                              20
<PAGE>

       liabilities therein mentioned subject only to the ranking of the Security
       Interests and the Charges as herein provided.

14.2   Purchaser

       No purchaser  dealing with any Senior Creditor or any Receiver  appointed
       by any Senior  Creditor shall be concerned in any way with the provisions
       of this Deed but shall  assume that the  Creditors  or any such  Receiver
       acting on behalf of them as the case may be are acting in accordance with
       the provisions of this Deed.

15.    Indulgence

       Each Creditor  shall (subject in the case of Cygnet to Clauses 3,4 and 6)
       be  entitled  until the date upon which a Receiver is  appointed  without
       reference  to the  others  to grant  time or  indulgence  and to  release
       compound or otherwise  deal with or receive moneys from any person liable
       or to deal with  exchange  release  modify or abstain from  perfecting or
       enforcing  any of the rights which it may now or  hereafter  have against
       the Borrower or otherwise without prejudicing its rights under this Deed.

16.    Disclosure

       The  Creditors  shall be at liberty from time to time to disclose to each
       other  information  concerning the affairs of the Borrower in such manner
       and to such extent as they shall from time to time desire.

17.    Memorandum

       Each  Creditor  agrees  to  endorse  a  Memorandum  of this Deed upon the
       Charges  and  acknowledges  the right of each of the other  Creditors  to
       production and to delivery of a copy of the same.

18.    HM Land Registry

       The parties to this Deed  hereby  apply to the  Registrar  to note in the
       appropriate manner at HM Land Registry the priority  arrangements  agreed
       in this Deed in so far as the same affect any  registered  land comprised
       in the  Charges  where an entry  relating to the Charges has been made on
       the register in accordance with the terms of this Deed.

19.    Discharge

                                                                              21
<PAGE>

       This Deed shall  cease to have effect as regards  any  Creditor  when the
       Security  Interest under the Charge or Charges (as the case may be) which
       have been created in its respective favour is/are finally  discharged but
       shall remain in full force and effect until such time.

20.    Assignment/Representations

       (a)    Each Creditor covenants with each of the other Creditors not (save
              as  permitted in this Clause) to assign or transfer the benefit of
              its Charges  unless the  assignee or  transferee  first  agrees in
              writing with the Creditor  transferring its interest and the other
              Creditors  to be bound by the  provisions  of this Deed  including
              this  provision.  This  provision  shall  apply to each and  every
              successive  assignment  or transfer.  For the  avoidance of doubt,
              notwithstanding  the  foregoing,  there shall be no restriction on
              the  ability  of  the  Lenders  assigning  or  transferring  their
              interests  under the Loan Agreement and the Security  Documents in
              accordance with their respective terms.

       (b)    Cygnet shall not effect any such  transfer  without the consent of
              the Majority Lenders.

       (c)    Cygnet warrants and represents to the Senior Creditors that:

              (i)    this Deed is binding on it in all respects;

              (ii)   this Deed is within its power and has been duly authorised;
                     and

              (iii)  this  Deed  does not and will not  breach  any  instrument,
                     agreement or  undertaking  or violate any  applicable  law,
                     rule or regulation;

              (iv)   all  consents and  authorisations  necessary in relation to
                     this Deed have been obtained and are in force;

              (v)    during the three months before the date of this Deed Cygnet
                     has not  entered  into any  arrangement  which  would  have
                     contravened this Deed if it had been entered into after the
                     date of this Deed; and

                                                                              22
<PAGE>

              (vi)   it is at the date of this Deed, and will remain at the date
                     of  any  transfer   referred  to  in  sub-clause   (b)  the
                     registered  holder of not less than 85% of the issued share
                     capital in the Borrower.

       (d)    Cygnet  and  the  Borrower  jointly  and  severally   warrant  and
              represent to the Senior Lenders that:

              (i)    the Borrower has not given any form of security to Mr Leech
                     or  Milner  which  secures  any   obligation  or  liability
                     (present or future,  actual or  contingent,  given alone or
                     jointly)  of Mr  Leech  or  Milner  to  Citibank,  N.A.  in
                     relation  to the  Standby  Letter  of  Credit,  other  than
                     insofar as the Junior Charge secures  obligations  given by
                     Cygnet under the Indemnity; and

              (ii)   the  Borrower has no  obligation  or liability to Citibank,
                     N.A. (present or future, actual or contingent,  given alone
                     or jointly,  express or implied) in relation to the Standby
                     Letter of Credit.

       (e)    References  in this Clause to the  transfer or  assignment  of the
              benefit  of a Charge  include  any  declaration  of  trust  and an
              equitable charge.

21.    Waiver of Defences

       The  subordination  effected by this Deed and the  obligations  of Cygnet
       hereunder  shall not be  affected by any act,  omission or  circumstances
       which,  but for this  provision,  might  operate to release or  otherwise
       exonerate   Cygnet  from  its   obligations   hereunder  or  affect  such
       obligations  including,  without limitation,  and whether or not known to
       Cygnet or the Senior Creditors:

       (a)    any time or indulgence granted to or composition with the Borrower
              or any other person; or

       (b)    the taking,  variation (no matter how  fundamental  or expensive),
              compromise, renewal or release of or refusal to effect or enforce,
              any  rights,  remedies  or  securities  against  or granted by the
              Borrower or any other person; or

                                                                              23
<PAGE>

       (c)    any legal limitation,  disability or other circumstances  relating
              to the  Borrower or to any other  person or any  amendment  to, or
              variation  of the terms of the Loan  Agreement  or other  Security
              Documents or any other document or security.

22.    Notices

       Except as otherwise provided in this Deed

       (a)    each  communication  to be made hereunder shall be made in writing
              and shall be served by sending  the same by  pre-paid  first class
              post or telex or facsimile  transmission  to the  addressed to the
              party to be served or notified as follows

              (i)    to the  Administrative  Agent or the Security  Agent or the
                     Hedge  Provider or Arab Bank plc in its  capacity as Lender
                     at PO Box 138, 15 Moorgate,  London EC2R 6LP marked for the
                     attention of the Credit Department (fax no. 0171 600 7620);

              (ii)   to Irish  Nationwide  Building  Society at 252  Westminster
                     Bridge  Road,  London SE1 7PD marked for the  attention  of
                     Gary McCollum (fax no. __________________);

              (iii)  to  the  Borrower  at  6  Leylands  Park,   Colden  Common,
                     Winchester,  Hampshire  marked for the  attention of Philip
                     Mason (fax no. 01703  696088) and copied to Richard Saleh &
                     Co at  Derbyshire  House,  737a  Wilmslow  Road,  Didsbury,
                     Manchester  M20 6WF  marked for the  attention  of Mr Saleh
                     (fax no 0161 434 9212);

              (iv)   to Cygnet at National  Westminster  House,  Le Truchot,  St
                     Peter  Port,  Guernsey,  Channel  Islands  marked  for  the
                     attention of Neil Crocker (fax no. 01481 728493) and copied
                     to Richard  Saleh & Co at Derbyshire  House,  737a Wilmslow
                     Road, Didsbury, Manchester M20 6WF marked for the attention
                     of Mr Saleh (fax no. 0161 434 9212).

       (b)    any notice sent by post as provided in this clause before the last
              scheduled collection of letters from the place of posting shall be
              deemed to have been served on the next succeeding business day (or
              on the third succeeding  business day in the case of a letter sent
              to or from the Channel  Islands) and in

                                                                              24
<PAGE>

              proving  the  service of the same it will be  sufficient  to prove
              that the relevant letter was properly stamped addressed and placed
              in the  post.  Any  notice  sent by  telex or  facsimile  and duly
              despatched to a current telex number with confirmed  answerback or
              facsimile  number of the addressee  shall be deemed to be received
              at the time of despatch if such time is during business hours on a
              business  day but shall  otherwise be deemed to be received at the
              opening of business on the next following business day.

       (c)    Cygnet irrevocably  appoints Mr Richard Saleh of Derbyshire House,
              737a Wilmslow Road,  Didsbury,  Manchester M20 6WF to receive, for
              and on its behalf,  service of process in  proceedings in England.
              Such service shall be deemed  completed on delivery to the process
              agent  (whether or not it is forwarded to and received by Mr Leech
              or Cygnet).  If for any reason  either the process agent ceases to
              be able to act as such or no  longer  has an  address  in  England
              Cygnet  irrevocably  agrees to appoint a substitute  process agent
              acceptable  to the Senior  Creditors  and to deliver to the Senior
              Creditors (such acceptance not to be unreasonably withheld) a copy
              of the new agent's  acceptance of that appointment  within fifteen
              days.

23.    Variation

23.1   No variation to this Deed is effective for any purpose unless it has been
       specifically agreed to in writing by the Senior Creditors.

23.2   The Senior Creditors do not need:

       (a)    the  consent  of Cygnet to effect a  variation  of this Deed which
              alters only the obligations of the Borrower and the  corresponding
              rights of the Senior Creditors or any of them;

       (b)    the  Borrower's  consent to effect a variation  of this Deed which
              alters only the obligations of Cygnet and the corresponding rights
              of the Senior Creditors or any of them.

                                                                              25
<PAGE>

24.    Counterparts

       This  Deed may be  executed  in any  number  of  counterparts  and by the
       different  parties  on  equivalent  counterparts  and each  shall when so
       executed be deemed an original

25.    Law and Jurisdiction

       This  Deed  shall  be  governed  by  and  construed  in all  respects  in
       accordance  with  English  law,  and the  parties  hereby  submit  to the
       non-exclusive jurisdiction of the English Courts.

       Nothing herein  contained shall restrict the right of any party hereto to
       initiate proceedings in any other jurisdiction.

EXECUTED as a Deed and  delivered  on the date stated at the  beginning  of this
document

                                                                              26
<PAGE>

1.     First Schedule

The Lenders at the date of this Deed:

       Arab Bank plc
       Irish Nationwide Building Society

                                                                              27
<PAGE>

2.     Second Schedule

Senior Charges

       Document

       Debenture
       Key-Man Charge
       Hedging Arrangements Charge

each being  dated the same date as this Deed and made  between  the Grand  Hotel
Group Limited (1) and Arab Bank plc as security agent and trustee for the Senior
Creditors (2)

                                                                              28
<PAGE>

3.     Third Schedule

Junior Charge

Date                 Document              Parties

30 June 1999*        Debenture             Grand  Hotel   Group   Limited  (1)
                                           Cygnet Ventures Limited (2)

--------
* Inserted in manuscript in executed Agreement

                                                                              29
<PAGE>

Signatories

The Borrower

                                                                              30
<PAGE>

Signed as a deed by
GRAND HOTEL GROUP LIMITED
acting by a director and
its secretary (or two directors)

Director....................Philip Mason

Secretary/Director..........Stephen Last

Cygnet

Signed  as a deed by  RICHARD  SALEH  as
attorney  for and in the name of  CYGNET
VENTURES   LIMITED   under  a  Power  of               Richard  Saleh
Attorney  dated  22 June 1999 in the
presence of:-

Signature of witness:.....AJ Pendlesbury

Name:.....................AJ Pendlesbury
Address:737a  Wilmslow  Road,  Didsbury,
Manchester, M20 6WE

The Lenders

Signed as a deed by FREDERICK STONEHOUSE
as attorney  for and in the name of ARAB
BANK  plc  under  a Power  of Attorney                 Frederick Stonehouse
dated 15th  August 1998 in the presence of:-

Signature of witness:....Stuart McIntyre

Name:....................Stuart McIntyre
Address:.......15 Moorgate, London, EC2R
6LP (Banker)

                                                                              31
<PAGE>

Executed  as a deed by IRISH  NATIONWIDE
BUILDING   SOCIETY  by  its   authorised               Stan Purcell
signatories

The Administrative Agent

Signed as a deed by FREDERICK STONEHOUSE
as attorney  for and in the name of ARAB
BANK  plc  under  a Power  of  Attorney                Frederick Stonehouse
dated 15th  August 1998 in the presence
of:-

Signature of witness: ...Stuart McIntyre

Name: ...................Stuart McIntyre
Address:  15 Moorgate,  London, EC2R 6LP
(Banker)

The Security Agent

Signed as a deed by FREDERICK STONEHOUSE
as attorney  for and in the name of ARAB
BANK  plc  under  a Power  of Attorney                 Frederick Stonehouse
dated 15th  August 1998 in the presence
of:-

Signature of witness:....Stuart McIntyre

Name: ...................Stuart McIntyre
Address:  15 Moorgate,  London, EC2R 6LP
(Banker)

                                                                              32
<PAGE>

The Hedge Provider

Signed as a deed by FREDERICK STONEHOUSE
as attorney  for and in the name of ARAB
BANK  plc  under  a Power  of Attorney                 Frederick Stonehouse
dated 15th  August 1998 in the presence
of:-

Signature of witness: ...Stuart McIntyre

Name: ...................Stuart McIntyre

Address:  15 Moorgate,  London, EC2R 6LP
(Banker)

                                                                              33

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"}]]