CONFORMED COPY





                                CREDIT AGREEMENT


                                   dated as of


                                 August 25, 1999


                                      among


                                ETHAN ALLEN INC.,
                                  as Borrower,


                           ETHAN ALLEN INTERIORS INC.,


                            The Lenders Party Hereto,


                            THE CHASE MANHATTAN BANK,
                            as Administrative Agent,


                                FLEET BANK, N.A.,
                           as Co-Documentation Agent,


                                       and


                              WACHOVIA BANK, N.A.,
                            as Co-Documentation Agent

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

                             CHASE SECURITIES INC.,
                                   as Arranger


===============================================================================
                                              [CS&M Reference Number: 6700-868]



                                TABLE OF CONTENTS

                                                                           Page

                                    ARTICLE I

                                   DEFINITIONS

SECTION 1.01.  Defined Terms..................................................1
SECTION 1.02.  Terms Generally...............................................11


                                                ARTICLE II

                                                THE CREDITS

SECTION 2.01.  Commitments...................................................11
SECTION 2.02.  Loans.........................................................11
SECTION 2.03.  Borrowing Procedure; Interest Rate Elections..................12
SECTION 2.04.  Evidence of Debt; Repayment of Loans..........................13
SECTION 2.05.  Fees..........................................................14
SECTION 2.06.  Interest on Loans.............................................14
SECTION 2.07.  Default Interest..............................................15
SECTION 2.08.  Alternate Rate of Interest....................................15
SECTION 2.09.  Termination and Reduction of Commitments......................15
SECTION 2.10.  Prepayment....................................................15
SECTION 2.11.  Reserve Requirements; Change in Circumstances.................16
SECTION 2.12.  Change in Legality............................................17
SECTION 2.13.  Indemnity.....................................................17
SECTION 2.14.  Pro Rata Treatment............................................17
SECTION 2.15.  Sharing of Setoffs............................................18
SECTION 2.16.  Payments......................................................18
SECTION 2.17.  Taxes.........................................................18
SECTION 2.18.  Assignment of Commitments Under Certain Circumstances.........20
SECTION 2.19.  Swingline Loans...............................................22
SECTION 2.20.  Letters of Credit.............................................22


                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

SECTION 3.01.  Organization; Powers..........................................25
SECTION 3.02.  Authorization.................................................25
SECTION 3.03.  Enforceability................................................25
SECTION 3.04.  Governmental Approvals........................................25
SECTION 3.05.  Financial Statements..........................................25
SECTION 3.06.  No Material Adverse Change....................................26
SECTION 3.07.  Title to Properties; Possession Under Leases..................26
SECTION 3.08.  Subsidiaries..................................................26
SECTION 3.09.  Litigation; Compliance with Laws..............................25
SECTION 3.10.  Agreements....................................................26
SECTION 3.11.  Federal Reserve Regulations...................................26
SECTION 3.12.  Investment Company Act; Public Utility Holding Company Act....27
SECTION 3.13.  Use of Proceeds...............................................27
SECTION 3.14.  Tax Returns...................................................27
SECTION 3.15.  No Material Misstatements.....................................27
SECTION 3.16.  Employee Benefit Plans........................................27
SECTION 3.17.  Environmental Matters.........................................27
SECTION 3.18.  Insurance.....................................................28
SECTION 3.19.  Labor Matters.................................................28
SECTION 3.20.  Patents, Trademarks, etc......................................28
SECTION 3.21.  Year 2000.....................................................28




                                   ARTICLE IV

                                   CONDITIONS

SECTION 4.01.  All Credit Events.............................................28
SECTION 4.02.  Effectiveness.................................................29


                                    ARTICLE V

                              AFFIRMATIVE COVENANTS

SECTION 5.01.  Existence; Businesses and Properties..........................30
SECTION 5.02.  Insurance.....................................................30
SECTION 5.03.  Obligations and Taxes.........................................30
SECTION 5.04.  Financial Statements, Reports, etc............................30
SECTION 5.05.  Litigation and Other Notices..................................31
SECTION 5.06.  Employee Benefits.............................................32
SECTION 5.07.  Maintaining Records; Access to Properties and Inspections.....32
SECTION 5.08.  Use of Proceeds...............................................32
SECTION 5.09.  Further Assurances............................................32
SECTION 5.10.  Environmental Matters.........................................32


                                   ARTICLE VI

                               NEGATIVE COVENANTS

SECTION 6.01.  Indebtedness..................................................33
SECTION 6.02.  Liens.........................................................33
SECTION 6.03.  Certain Acquisitions..........................................34
SECTION 6.04.  Mergers, Consolidations and Sales of Assets...................34
SECTION 6.05.  Business of Holdings, Borrower and Subsidiaries...............35
SECTION 6.06.  Consolidated Net Worth........................................35
SECTION 6.07.  Consolidated Fixed Charge Coverage Ratio......................35
SECTION 6.08.  Leverage Ratio................................................35
SECTION 6.09.  Restrictive Agreements........................................35


                                   ARTICLE VII

                                EVENTS OF DEFAULT



                                  ARTICLE VIII

                            THE ADMINISTRATIVE AGENT



                                   ARTICLE IX

                                  MISCELLANEOUS

SECTION 9.01.  Notices.......................................................40
SECTION 9.02.  Survival of Agreement.........................................40
SECTION 9.03.  Binding Effect................................................40
SECTION 9.04.  Successors and Assigns........................................40
SECTION 9.05.  Expenses; Indemnity...........................................43
SECTION 9.06.  Right of Setoff...............................................43
SECTION 9.07.  APPLICABLE LAW................................................44






SECTION 9.08.  Waivers; Amendment............................................44
SECTION 9.09.  Interest Rate Limitation......................................44
SECTION 9.10.  Entire Agreement..............................................44
SECTION 9.11.  WAIVER OF JURY TRIAL..........................................44
SECTION 9.12.  Severability..................................................45
SECTION 9.13.  Counterparts..................................................45
SECTION 9.14.  Headings......................................................45
SECTION 9.15.  Jurisdiction; Consent to Service of Process...................45
SECTION 9.16.  Confidentiality...............................................45
SECTION 9.17.  Defaulting Lender.............................................46


SCHEDULES:

Schedule 2.01 --  Commitments
Schedule 3.08 --  Excluded  Subsidiaries
Schedule 3.09 --  Litigation
Schedule 3.17 --  Environmental Matters
Schedule 3.18 --  Insurance
Schedule 6.02 --  Existing Liens
Schedule 6.09 --  Existing Restrictions


EXHIBITS:

Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Opinion of Roxanne Khazarian, Esq.
Exhibit C -- Form of Guarantee Agreement
Exhibit D -- Form of Indemnity, Subrogation and Contribution Agreement





                                    CREDIT  AGREEMENT  dated  as of  August  25,
                           1999, among ETHAN ALLEN INC., a Delaware  corporation
                           (the  "Borrower"),  ETHAN  ALLEN  INTERIORS  INC.,  a
                           Delaware  corporation  ("Holdings"),   the  financial
                           institutions   from  time  to  time  parties   hereto
                           (together  with  the  Swingline  Lender  (as  defined
                           below),  the "Lenders"),  THE CHASE MANHATTAN BANK, a
                           New York banking corporation, as swingline lender (in
                           such  capacity,   the  "Swingline  Lender"),  and  as
                           administrative   agent   (in   such   capacity,   the
                           "Administrative  Agent") for the  Lenders,  and FLEET
                           BANK,  N.A.,  a  national  banking  association,  and
                           WACHOVIA BANK, N.A., a national banking  association,
                           as  co-documentation  agents (in such  capacity,  the
                           "Co-Documentation Agents") for the Lenders.


                  The parties hereto agree as follows:


ARTICLE I.  DEFINITIONS


               SECTION  1.01.  Defined  Terms.  As used in this  Agreement,  the
following terms shall have the meanings specified below:

               "ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.

               "ABR Loan" shall mean any Loan bearing  interest at the Alternate
Base Rate in accordance with the provisions of Article II.

               "Adjusted  LIBO Rate" shall mean,  with respect to any Eurodollar
Borrowing  for any Interest  Period,  an interest  rate per annum  (rounded,  if
necessary,  to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate in
effect for such Interest Period and (b) Statutory Reserves.

               "Administrative  Agent Fees"  shall have the meaning  assigned to
such term in  Section  2.05(b).

               "Administrative  Questionnaire"  shall  mean  an   Administrative
Questionnaire in the form of Exhibit A.

               "Affiliate"  shall  mean,  when used with  respect to a specified
person,  another  person  that  directly,  or  indirectly  through  one or  more
intermediaries, Controls or is Controlled by or is under common Control with the
person specified.

               "Aggregate  Revolving  Credit Exposure"  shall mean the aggregate
amount of the Lenders' Revolving Credit Exposures.

               "Alternate  Base Rate" shall mean,  for any day, a rate per annum
(rounded, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime  Rate in effect  on such  day,  (b) the Base CD Rate in effect on such day
plus 1% and (c) the Federal Funds  Effective Rate in effect on such day plus 1/2
of 1%. If for any reason the  Administrative  Agent shall have determined (which
determination  shall be conclusive  absent  manifest error) that it is unable to
ascertain the Base CD Rate or the Federal Funds  Effective  Rate or both for any
reason, including the inability or failure of the Administrative Agent to obtain
sufficient  quotations in accordance with the terms thereof,  the Alternate Base
Rate shall be  determined  without  regard to clause (b) or (c), or both, of the
preceding sentence, as appropriate,  until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a change
in the Prime  Rate,  the  Three-Month  Secondary  CD Rate or the  Federal  Funds
Effective  Rate shall be effective on the  effective  date of such change in the
Prime Rate,  the  Three-Month  Secondary CD Rate or the Federal Funds  Effective
Rate, respectively.

               "Applicable Fixed Charge Coverage Ratio" shall mean, at any time,
the Consolidated  Fixed Charge Coverage Ratio for the most recent period of four
consecutive fiscal quarters of the Borrower for which financial  statements have
been delivered to the Administrative Agent pursuant to Section 5.04.

                                      -1-




               "Applicable   Percentage"   shall  mean,   with  respect  to  any
Eurodollar  Loan or ABR Loan,  or with  respect  to the  Commitment  Fees or L/C
Participation  Fees,  as the case may be, the  applicable  percentage  set forth
below under the caption  "Eurodollar Spread" or "ABR Spread" or "Commitment Fee"
or "L/C  Participation  Fee",  as the case  may be,  based  upon the  Borrower's
senior,  unsecured,   noncredit  enhanced  debt  ratings  by  Moody's  and  S&P,
respectively, applicable on such date:




                            Eurodollar        ABR        Commitment    L/C Participation
    Index Debt Ratings:       Spread        Spread           Fee              Fee
    -------------------       ------        ------       ----------    -----------------
                                                                  

        Category 1
        ----------

      A-/A3 or better         0.500%        0.000%         0.125%            0.500%

        Category 2
        ----------
         BBB+/Baa1            0.625%        0.000%         0.150%            0.625%

        Category 3
        ----------
         BBB/Baa2             0.750%        0.000%         0.175%            0.750%

        Category 4
        ----------
         BBB-/Baa3             1.00%        0.000%         0.200%            1.00%

        Category 5
        ----------
      Below BBB-/Baa3          1.25%        0.250%         0.250%            1.25%




               For purposes of the foregoing, (i) if either Moody's or S&P shall
not have in effect a rating  for the  Borrower's  senior,  unsecured,  noncredit
enhanced debt (other than by reason of the circumstances referred to in the last
sentence of this  definition),  then such rating  agency shall be deemed to have
established a rating in Category 5; (ii) if the ratings established or deemed to
have been established by Moody's and S&P for the Borrower's  senior,  unsecured,
noncredit enhanced debt shall fall within different  Categories,  the Applicable
Percentage shall be based on the higher of the two ratings unless one of the two
ratings  is two or more  Categories  lower  than the  other,  in which  case the
Applicable  Percentage  shall be  determined  by reference to the Category  next
below  that  of  the  higher  of the  two  ratings;  and  (iii)  if the  ratings
established  or deemed  to have  been  established  by  Moody's  and S&P for the
Borrower's  senior,  unsecured,  noncredit enhanced debt shall be changed (other
than as a result  of a change in the  rating  system of  Moody's  or S&P),  such
change shall be  effective as of the date on which it is first  announced by the
applicable rating agency.  Each change in the Applicable  Percentage shall apply
during the period  commencing on the effective date of such change and ending on
the date  immediately  preceding the effective date of the next such change.  If
the rating  system of  Moody's or S&P shall  change,  or if either  such  rating
agency shall cease to be in the business of rating  corporate debt  obligations,
the  Borrower  and the  Lenders  shall  negotiate  in good  faith to amend  this
definition  to reflect  such  changed  rating  system or the  unavailability  of
ratings  from such rating  agency and,  pending  the  effectiveness  of any such
amendment,  the  Applicable  Percentage  shall be determined by reference to the
rating most recently in effect prior to such change or cessation.

               "Assessment  Rate"  shall  mean  for any  date  the  annual  rate
(rounded, if necessary,  to the next 1/100 of 1%) most recently estimated by the
Administrative Agent as the then current net annual assessment rate that will be
employed  in  determining  amounts  payable by the  Administrative  Agent to the
Federal Deposit  Insurance  Corporation (or any successor) for insurance by such
Corporation  (or  such  successor)  of  time  deposits  made in  Dollars  at the
Administrative Agent's domestic offices.

               "Assignment  and   Acceptance"   shall  mean  an  assignment  and
acceptance  entered  into by a  Lender  and an  assignee,  and  accepted  by the
Administrative Agent,  substantially in the form of Exhibit B or such other form
as shall be approved by the Administrative Agent.

               "Base CD Rate"  shall mean the sum of (a) the  product of (i) the
Three-Month Secondary CD Rate and (ii) Statutory Reserves and (b) the Assessment
Rate.

                                      -2-



                  "Board"  shall  mean the  Board of  Governors  of the  Federal
Reserve System of the United States.

                  "Borrowing"  shall mean a group of Loans of a single Type made
by the Lenders on a single date and as to which a single  Interest  Period is in
effect.

                  "Borrowing  Request"  shall mean a request by the  Borrower in
accordance  with the  terms of  Section  2.03 and  substantially  in the form of
Exhibit C.

                  "Business  Day"  shall  mean any day  other  than a  Saturday,
Sunday or day on which banks in New York City are  authorized or required by law
to close;  provided,  however,  that when used in  connection  with a Eurodollar
Loan,  the term "Business Day" shall also exclude any day on which banks are not
open for dealings in Dollar deposits in the London interbank market.

                  "Capital  Lease  Obligations"  of any  person  shall  mean the
obligations  of such person to pay rent or other  amounts under any lease of (or
other arrangement  conveying the right to use) real or personal  property,  or a
combination  thereof,  which  obligations  are  required  to be  classified  and
accounted  for as capital  leases on a balance  sheet of such person under GAAP,
and the  amount of such  obligations  shall be the  capitalized  amount  thereof
determined in accordance with GAAP.

                  "Cash  Equivalents"  shall mean (a) securities with maturities
of one year or less from the date of acquisition  issued or fully  guaranteed by
the United States or any agency or instrumentality  thereof, (b) certificates of
deposit,  banker's  acceptances and time deposits with maturities of one year or
less from the date of acquisition  and overnight bank deposits,  in each case of
any commercial bank having a long-term  unsecured debt rating of at least "A" by
S&P or "A2" by Moody's, (c) repurchase  obligations with a term of not more than
twelve days for underlying  securities of the types described in clauses (a) and
(b) above  entered  into with any of the Lenders and (d)  commercial  paper of a
domestic issuer with maturities of one year or less rated at least A-1 by S&P or
P-1 by Moody's; (e) commercial paper of any bank or other financial  institution
meeting the  qualifications  in clause (b) above;  and (f)  investments in money
market funds, substantially all assets of which comprise securities of the types
described in clauses (a) through (e) above.

                  A "Change in Control"  shall be deemed to have occurred if (a)
Holdings  shall cease to own 100% of the capital stock of the Borrower,  (b) any
person or group (within the meaning of Rule 13d-5 of the Securities Exchange Act
of 1934 as in  effect on the date  hereof)  shall own  directly  or  indirectly,
beneficially  or of record,  shares  representing  30% or more of the  aggregate
ordinary voting power represented by the issued and outstanding capital stock of
Holdings;  (c) a majority of the seats (other than vacant seats) on the board of
directors of Holdings  shall at any time have been  occupied by persons who were
neither (i) nominated by the board of directors of Holdings,  nor (ii) appointed
by directors so nominated;  or (d) any person or group shall otherwise  directly
or indirectly Control Holdings.

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

                  "Commitment"  shall mean,  with  respect to any  Lender,  such
Lender's Revolving Credit Commitment and Swingline  Commitment and, with respect
to the Issuing Bank, its L/C Commitment.

                  "Commitment  Fee" shall have the meaning assigned to such term
in Section 2.05(a).

                  "Consolidated   Capital  Expenditures"  shall  mean,  for  any
period,  the sum of (a) the aggregate of all expenditures  (whether paid in cash
or other  consideration  or  accrued as a  liability)  by the  Borrower  and its
consolidated  Subsidiaries  during such period that,  in  conformity  with GAAP,
should be included in "additions to property,  plant or equipment" or comparable
items reflected in the consolidated  statement of cash flows of the Borrower and
its consolidated Subsidiaries; provided that "Consolidated Capital Expenditures"
shall not include (i) any of the foregoing  expenditures to the extent made with
the proceeds from property or casualty insurance or compensation with respect to
eminent  domain  or  condem  nation  proceedings  or (ii)  any of the  foregoing
expenditures  to the extent  constituting  an acquisition  made in reliance upon
clause (b) of Section  6.04;  plus (b) the  aggregate of all payments of Capital
Lease  Obligations  during  such  period  (except  to the  extent  allocable  to
interest).

                  "Consolidated EBITDA" shall mean, for any period, Consolidated
Net Income for such period,  before giving effect to any extraordinary  gains or
losses or any gains or losses  resulting  from sales of assets (other than sales
of inventory in the ordinary  course of business),  plus, to the extent deducted
in

                                      -3-



computing  such  Consolidated  Net  Income,  the sum of (a) income  tax  expense
(whether paid or deferred),  (b) Consolidated Interest Expense, (c) depreciation
and amortization and (d) any non-cash charges  resulting from any  restructuring
or consolidation  of operations or any grant,  exercise or cancellation of stock
options or warrants.

                  "Consolidated Fixed Charge Coverage Ratio" shall mean, for any
period,  the ratio of (a) the sum of (i)  Consolidated  EBITDA  plus (ii) Rental
Expense  minus (iii)  Consolidated  Capital  Expenditures  to (b) the sum of (i)
Consolidated  Interest  Expense plus (ii) Rental Expense,  in each case for such
period.

                  "Consolidated  Interest  Expense"  shall mean, for any period,
the  gross  consolidated  interest  expense  of the  Borrower  for  such  period
determined on a consolidated  basis in accordance  with GAAP, and including,  to
the extent not  otherwise  included,  Capital Lease  Obligations  (to the extent
allocable to interest) and all commissions, discounts and other fees and charges
with  respect to letters of credit and  bankers'  acceptances  and the net costs
(i.e. costs minus benefits) under interest rate protection  agreements and other
interest hedging arrangements,  but excluding amortization of deferred financing
costs to the extent otherwise included.

                  "Consolidated  Net  Income"  shall mean,  for any period,  the
consolidated net income or loss of the Borrower for such period  determined on a
consolidated basis in accordance with GAAP.

                  "Consolidated  Net  Worth"  shall  mean,  as of  any  date  of
determination,  the consolidated stockholders' equity of the Borrower determined
on a  consolidated  basis  in  accordance  with  GAAP  less  the  amount  of any
Indebtedness of Holdings to the Borrower included as an asset of the Borrower in
determining such consolidated stockholders' equity.

                  "Consolidated  Total  Assets"  shall  mean,  as of any date of
determination,   the  total  assets  which  would   properly  be  classified  as
consolidated  assets  of the  Borrower  and its  Subsidiaries  at  such  date in
accordance with GAAP.

                  "Consolidated  Total  Debt"  shall  mean,  as of any  date  of
determination,  all Indebtedness  (excluding (a) Guarantees of Indebtedness,  to
the extent the Guaranteed  Indebtedness is already included, (b) Indebtedness of
the type described in clause (i) of the definition of the term  Indebtedness and
(c) to the extent such Indebtedness is contingent in nature, Indebtedness of the
type described in clause (j) of the definition of the term  Indebtedness) of the
Borrower and its consolidated Subsidiaries determined on a consolidated basis in
accordance with GAAP.

                  "Control" shall mean the  possession,  directly or indirectly,
of the power to direct or cause the direction of the management or policies of a
person,  whether  through the  ownership  of voting  securities,  by contract or
otherwise,  and "Controlling" and "Controlled"  shall have meanings  correlative
thereto.

                  "Credit Event" shall have the meaning assigned to such term in
Section 4.01.

                  "Default" shall mean any event or condition which upon notice,
lapse of time or both would constitute an Event of Default.

                  "Dollars" or "$" shall mean lawful money of the United  States
of America.

                  "Effective  Date"  means  the  date on  which  the  conditions
specified in Section 4.02 are satisfied  (or waived in  accordance  with Section
9.08).

                  "Environment"  shall  mean  ambient  air,  surface  water  and
groundwater  (including potable water,  navigable water and wetlands),  the land
surface or  subsurface  strata,  the  workplace or as  otherwise  defined in any
Environmental Law.

                  "Environmental    Claim"   means   any   written   accusation,
allegation,  notice of violation, claim, demand, order, directive, cost recovery
action or other cause of action by, or on behalf of, any Governmental  Authority
or any person for damages,  injunctive  or  equitable  relief,  personal  injury
(including  sickness,  disease or death),  Remedial  Action  costs,  tangible or
intangible property damage, natural resource damages,  nuisance,  pollution, any
adverse  effect on the  environment  caused by any  Hazardous  Material,  or for
fines,  penalties  or  restrictions,  resulting  from  or  based  upon:  (a) the
existence,

                                      -4-



or  the  continuation  of the  existence,  of a  Release  (including  sudden  or
non-sudden, accidental or nonaccidental Releases); (b) exposure to any Hazardous
Material; (c) the presence, use, handling,  transpor tation, storage,  treatment
or disposal of any Hazardous Material; or (d) the violation or alleged violation
of any Environmental Law or Environmental Permit.

                  "Environmental  Law" means any and all applicable  present and
future treaties, laws, rules, regulations,  codes, ordinances,  orders, decrees,
judgments,  injunctions,  notices or binding agreements  issued,  promulgated or
entered  into  by  any  Governmental  Authority,  relating  in  any  way  to the
environment,  preservation or reclamation of natural resources,  the management,
Release or threatened  Release of any Hazardous Material or to health and safety
matters,  including the Comprehensive  Environmental Response,  Compensation and
Liability   Act  of  1980,   as  amended  by  the   Superfund   Amendments   and
Reauthorization  Act of  1986,  42  U.S.C.  ss.ss.  9601 et  seq.  (collectively
"CERCLA"), the Solid Waste Disposal Act, as amended by the Resource Conservation
and Recovery Act of 1976 and Hazardous  and Solid  Amendments of 1984, 42 U.S.C.
ss.ss.  6901 et seq., the Federal Water Pollution Control Act, as amended by the
Clean Water Act of 1977,  33 U.S.C.  ss.ss.  1251 et seq.,  the Clean Air Act of
1970, as amended 42 U.S.C. ss.ss. 7401 et seq., the Toxic Substances Control Act
of 1976, 15 U.S.C.  ss.ss. 2601 et seq., the Occupational  Safety and Health Act
of 1970, as amended,  29 U.S.C.  ss.ss. 651 et seq., the Emergency  Planning and
Community Right- to-Know Act of 1986, 42 U.S.C.  ss.ss.  11001 et seq., the Safe
Drinking  Water Act of 1974, as amended,  42 U.S.C.  ss.ss.  300(f) et seq., the
Hazardous  Materials  Transportation Act, 49 U.S.C. ss.ss. 1801 et seq., and any
similar or  implementing  state or local law, and all  amendments or regulations
promulgated thereunder.

                  "Environmental    Permit"   means   any   permit,    approval,
authorization,  certificate, license, variance, filing or permission required by
or from any Governmental Authority pursuant to any Environ mental Law.

                  "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may be amended from time to time.

                  "ERISA Affiliate" shall mean any trade or business (whether or
not  incorporated)  that,  together  with the  Borrower,  is treated as a single
employer under Section 414 of the Code.

                  "Eurodollar  Borrowing"  shall mean a Borrowing  comprised  of
Eurodollar Loans.

                  "Eurodollar  Loan" shall mean any Loan  bearing  interest at a
rate  determined by reference to the Adjusted  LIBO Rate in accordance  with the
provisions of Article II.

                  "Event of  Default"  shall have the  meaning  assigned to such
term in Article VII.

                  "Excluded  Subsidiary" shall mean, at any time, any Subsidiary
of the Borrower identified on Schedule 3.08 as an "Excluded Subsidiary" and that
has not ceased to be an "Excluded  Subsidiary" as provided below;  provided that
such  Subsidiary (a) does not own assets or properties  that,  together with the
assets  and  properties  owned by all other  Subsidiaries  that are  treated  as
"Excluded  Subsidiaries",  have a fair market value, in the aggregate, in excess
of  $5,000,000,  (b) did not,  during  the  period  of four  consecutive  fiscal
quarters of the  Borrower  ended on the most recent date for which  quarterly or
annual  financial  statements of Holdings are  available,  have  revenues  that,
together  with the  revenues  of all  other  Subsidiaries  that are  treated  as
"Excluded Subsidiaries", accounted for more than 3% of the consolidated revenues
of the Borrower and its Subsidiaries  during such period,  and (c) does not have
any  Indebtedness  or any other material  liabilities.  At any time the Borrower
may, and shall if one or more Excluded  Subsidiaries fail to satisfy one or more
of the  conditions  described  in clauses  (a)  through  (d)  above,  notify the
Administrative  Agent  that one or more  Excluded  Subsidiaries  shall  cease to
constitute an "Excluded  Subsidiary",  whereupon such Subsidiary or Subsidiaries
shall cease to constitute an "Excluded  Subsidiary" for all purposes hereof. The
Borrower may not designate any Subsidiary that is not an Excluded  Subsidiary as
an Excluded Subsidiary.

                  "Existing  Credit  Agreement"  means the Amended and  Restated
Credit  Agreement  dated as of March 10,  1995,  as amended  and  restated as of
December 4, 1996, among the Borrower,  Holdings, the financial institutions from
time to time parties  thereto and The Chase  Manhattan  Bank, as  administrative
agent.

                  "Existing  Letters of Credit" means any Letters of Credit that
remain outstanding under the Existing Credit Agreement on the Effective Date.


                                      -5-



                  "Federal  Funds  Effective  Rate" shall mean, for any day, the
weighted  average of the rates on  overnight  Federal  funds  transactions  with
members of the Federal  Reserve  System  arranged by Federal funds  brokers,  as
published on the next succeeding Business Day by the Federal Reserve Bank of New
York,  or, if such rate is not so published for any day which is a Business Day,
the average of the quotations for the day of such  transactions  received by the
Administrative  Agent from three Federal  funds  brokers of recognized  standing
selected by it.

                  "Financial  Officer" of any  corporation  shall mean the chief
financial officer, principal accounting officer, Treasurer or Controller of such
corporation,  and the  Assistant  Treasurer  and  Assistant  Controller  for the
purpose of giving notice pursuant to Sections 2.03, 2.10, 2.19 and 2.20.

                  "Foreign  Subsidiary"  shall  mean  any  Subsidiary  organized
outside of the United States.

                  "GAAP" shall mean  generally  accepted  accounting  principles
applied on a consistent basis.

                  "Governmental  Authority" shall mean any Federal, state, local
or  foreign  court  or  governmental  agency,   authority,   instrumentality  or
regulatory body.

                  "Guarantee"  of or by any person  shall  mean any  obligation,
contingent  or  otherwise,  of such person  guaranteeing  or having the economic
effect of  guaranteeing  any  Indebtedness  of any other  person  (the  "primary
obligor") in any manner,  whether  directly or  indirectly,  and  including  any
obligation  of such  person,  direct or  indirect,  (a) to  purchase  or pay (or
advance or supply funds for the purchase or payment of) such  Indebtedness or to
purchase  (or to advance or supply  funds for the  purchase of) any security for
the payment of such Indebtedness,  (b) to purchase or lease property, securities
or services  for the purpose of assuring the owner of such  Indebtedness  of the
payment of such Indebtedness or (c) to maintain working capital,  equity capital
or any other financial  statement  condition or liquidity of the primary obligor
so as to enable the primary obligor to pay such Indebtedness; provided, however,
that the term Guarantee shall not include endorsements for collection or deposit
in the ordinary course of business.

                  "Guarantee  Agreement  " shall mean the  Guarantee  Agreement,
substantially   in  the  form  of  Exhibit  C,  among  the  Guarantors  and  the
Administrative Agent.

                  "Guarantors"   shall   mean   Holdings   and  the   Subsidiary
Guarantors.

                  "Hazardous  Materials"  means  all  explosive  or  radioactive
substances  or wastes,  hazardous  or toxic  substances  or wastes,  pollutants,
solid, liquid or gaseous wastes,  including petroleum or petroleum  distillates,
asbestos or asbestos containing materials, polychlorinated biphenyls ("PCBs") or
PCB-containing  materials or equipment,  radon gas, infectious or medical wastes
and all other  substances  or wastes of any  nature  regulated  pursuant  to any
Environmental Law.

                  "Indebtedness" of any person shall mean, without  duplication,
(a) all  obligations  of such  person  for  borrowed  money or with  respect  to
deposits or advances of any kind, (b) all  obligations of such person  evidenced
by bonds, debentures,  notes or similar instruments, (c) all obligations of such
person upon which interest charges are customarily  paid, (d) all obligations of
such person under conditional sale or other title retention  agreements relating
to property or assets  purchased by such  person,  (e) all  obligations  of such
person issued or assumed as the deferred  purchase price of property or services
(excluding  trade  accounts  payable  and  accrued  obligations  incurred in the
ordinary  or  customary  course of  business),  (f) all  Indebtedness  of others
secured by (or for which the holder of such  Indebtedness has an existing right,
contingent  or  otherwise,  to be  secured  by) any  Lien on  property  owned or
acquired by such person,  whether or not the  obligations  secured  thereby have
been assumed,  (g) all Guarantees by such person of Indebtedness of others,  (h)
all Capital Lease Obligations of such person, (i) all obligations of such person
in respect of Rate Protection  Agreements and (j) all obligations of such person
as an account  party in respect of letters of credit and  bankers'  acceptances.
The Indebtedness of any person shall include the Indebtedness of any partnership
in which such person is a general partner.

                  "Indemnity, Subrogation and Contribution Agreement" shall mean
the Indemnity, Subrogation and Contribution Agreement, substantially in the form
of  Exhibit  D,  among  the  Borrower,   the   Subsidiary   Guarantors  and  the
Administrative Agent.

                                      -6-



                  "Information   Memorandum"   shall   mean   the   confidential
information  memorandum,  dated as of July 1999,  prepared by the  Borrower  and
distributed by the Administrative Agent to the Lenders.

                  "Interest  Payment Date" shall mean, with respect to any Loan,
the last day of the Interest  Period  applicable  to the Borrowing of which such
Loan is a part  and,  in the case of a  Eurodollar  Borrowing  with an  Interest
Period of more than  three  months'  duration,  each day that would have been an
Interest Payment Date had successive  Interest Periods of three months' duration
been applicable to such Borrowing, and, in addition, any date on which such Loan
shall be changed to a different Type.

                  "Interest   Period"  shall  mean  (a)  as  to  any  Eurodollar
Borrowing,  the period  commencing on the date of such  Borrowing or on the last
day of the immediately  preceding  Interest Period applicable to such Borrowing,
as the case may be,  and ending on the  numerically  corresponding  day (or,  if
there is no  numerically  corresponding  day,  on the last day) in the  calendar
month that is 1, 2, 3, 6 or (if available,  as determined by the  Administrative
Agent and the Lenders) 9 or 12 months thereafter,  as the Borrower may elect and
(b) as to any ABR Borrowing, the period commencing on the date of such Borrowing
or on the last day of the immediately  preceding  Interest Period  applicable to
such  Borrowing,  as the case may be, and ending on the earliest of (i) the next
succeeding  March 31, June 30,  September 30 or December 31, (ii) the  Revolving
Credit  Maturity Date and (iii) the date such Borrowing is prepaid in accordance
with Section 2.10(b);  provided,  however, that if any Interest Period would end
on a day other than a Business Day,  such  Interest  Period shall be extended to
the next succeeding  Business Day unless, in the case of a Eurodollar  Borrowing
only, such next  succeeding  Business Day would fall in the next calendar month,
in which case such Interest Period shall end on the next preceding Business Day.
Interest shall accrue from and including the first day of an Interest  Period to
but excluding the last day of such Interest Period.

                  "Issuing Bank" shall mean, as the context may require, (a) The
Chase  Manhattan  Bank or (b) any other  Lender that may become an Issuing  Bank
pursuant to Section 2.20(i) or 2.20(k), with respect to Letters of Credit issued
by such Lender. The Issuing Bank may, in its discretion, arrange for one or more
Letters of Credit to be issued by  Affiliates of the Issuing Bank, in which case
the term "Issuing Bank" shall include any such Affiliate with respect to Letters
of Credit issued by such Affiliate.

                  "Issuing  Bank Fees" shall have the  meaning  assigned to such
term in Section 2.05(c).

                  "L/C Commitment" shall mean the commitment of the Issuing Bank
to issue Letters of Credit pursuant to Section 2.20.

                  "L/C  Disbursement"  shall mean a payment or disbursement made
by the Issuing Bank pursuant to a Letter of Credit.

                  "L/C  Exposure"  shall  mean  at any  time  the sum of (a) the
aggregate undrawn amount of all outstanding  Letters of Credit at such time plus
(b) the aggregate  principal  amount of all L/C Disburse ments that have not yet
been reimbursed at such time. The L/C Exposure of any Revolving Credit Lender at
any time shall mean its Pro Rata  Percentage  of the  aggregate  L/C Exposure at
such time.

                  "L/C  Participation  Fee" shall have the  meaning  assigned to
such term in Section 2.05(c).

                  "Letter  of Credit"  shall  mean any  letter of credit  issued
pursuant to Section 2.20.

                  "Leverage  Ratio"  shall mean,  on any date,  the ratio of (a)
Consolidated  Total Debt to (b) the sum of (i) Consolidated  Total Debt and (ii)
Consolidated Net Worth, in each case as of such date.

                  "LIBO  Rate"  shall  mean,  with  respect  to  any  Eurodollar
Borrowing,  the rate  (rounded,  if necessary,  to the next 1/16 of 1%) at which
Dollar deposits  approximately  equal in principal amount to the  Administrative
Agent's  portion of such Eurodollar  Borrowing and for a maturity  comparable to
such  Interest  Period  are  offered  to  the  principal  London  office  of the
Administrative  Agent in  immediately  available  funds in the London  interbank
market at approximately  11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.

                  "Lien"  shall  mean,  with  respect  to  any  asset,  (a)  any
mortgage, deed of trust, lien, pledge, encumbrance,  charge or security interest
in or on such  asset,  (b) the  interest  of a  vendor  or a  lessor  under  any
conditional sale agreement,  capital lease or title retention agreement relating
to such asset and (c) in the case of securities,  any purchase  option,  call or
similar right of a third party with respect to such securities.

                                      -7-



                  "Loan  Documents"  shall mean this  Agreement,  the  Guarantee
Agreement, the Indemnity,  Subrogation and Contribution Agreement and the Notes,
if any.

                  "Loan Parties" shall mean the Borrower and the Guarantors.

                  "Loans"  shall  mean  the  Revolving Loans and  the  Swingline
Loans.

                  "Margin Stock" shall have the meaning assigned to such term in
Regulation U.

                  "Material Adverse Effect" shall mean (a) a materially  adverse
effect on the business, assets, operations, prospects or condition, financial or
otherwise,  of Holdings,  or the Borrower,  or the Borrower and the Subsidiaries
taken as a whole,  (b) material  impairment  of the ability of any Loan Party to
perform any of its obligations under any Loan Document to which it is or will be
a party or (c) material impairment of the rights of or benefits available to the
Lenders under any Loan Document.

                  "Moody's" shall mean Moody's Investors Service,  Inc., and its
successors.

                  "Multiemployer  Plan"  shall  mean  a  multiemployer  plan  as
defined  in  Section  4001(a)(3)  of ERISA to which  the  Borrower  or any ERISA
Affiliate  (other  than one  considered  an ERISA  Affiliate  only  pursuant  to
subsection  (m) or (o) of Code Section 414) is making or accruing an  obligation
to make  contributions,  or has within any of the preceding five plan years made
or accrued an obligation to make contributions.

                  "Non Wholly Owned  Subsidiary" shall mean a Subsidiary that is
not a Wholly Owned Subsidiary.

                  "Note"  shall  mean  a  promissory   note  of  the   Borrower,
substantially in the form of Exhibit D.

                  "Obligations"   shall   mean  all   obligations   defined   as
"Obligations" in the Guarantee Agreement.

                  "PBGC"  shall mean the Pension  Benefit  Guaranty  Corporation
referred to and defined in ERISA.

                  "Person"   or  "person"   shall  mean  any   natural   person,
corporation, business trust, joint venture, association, company, partnership or
government, or any agency or political subdivision thereof.

                  "Plan"  shall mean any  employee  pension  benefit plan (other
than a  Multiemployer  Plan)  subject to the  provisions of Title IV of ERISA or
Section 412 of the Code that is maintained for current or former  employees,  or
any beneficiary thereof, of the Borrower or any ERISA Affiliate.

                  "Pro Rata  Percentage"  of any Revolving  Credit Lender at any
time  shall  mean  the  percentage  of the  Total  Revolving  Credit  Commitment
represented by such Lender's Revolving Credit Commitment.

                  "Prime  Rate"  shall  mean  the  rate of  interest  per  annum
publicly  announced from time to time by the  Administrative  Agent as its prime
rate in effect at its  principal  office in New York  City;  each  change in the
Prime Rate shall be effective  on the date such change is publicly  announced as
being effective.

                  "Rate   Protection   Agreements"   shall  mean  interest  rate
protection  agreements,  foreign currency exchange  agreements,  commodity price
protection  agreements and other interest or currency exchange rate or commodity
price hedging arrangements.

                  "Register"  shall have the meaning  given such term in Section
9.04(d).

                  "Regulation  T" shall mean  Regulation  T of the Board as from
time to time in effect and all official rulings and  interpretations  thereunder
or thereof.

                                      -8-



                  "Regulation  U" shall mean  Regulation  U of the Board as from
time to time in effect and all official rulings and  interpretations  thereunder
or thereof.

                  "Regulation  X" shall mean  Regulation  X of the Board as from
time to time in effect and all official rulings and  interpretations  thereunder
or thereof.

                  "Release"  means  any  spilling,  leaking,  pumping,  pouring,
emitting,  emptying,   discharging,   injecting,  escaping,  leaching,  dumping,
disposing,  depositing,  dispersing,  emanating or  migrating  of any  Hazardous
Material in, into, onto or through the environment.

                  "Remedial  Action" means (a) "remedial action" as such term is
defined  in  CERCLA,  42 U.S.C.  Section  9601(24),  and (b) all  other  actions
required  by any  Governmental  Authority  or  voluntarily  undertaken  to:  (i)
cleanup, remove, treat, abate or in any other way address any Hazardous Material
in the environment;  (ii) prevent the Release or threat of Release,  or minimize
the further Release of any Hazardous Material so it does not migrate or endanger
or threaten to endanger  public  health,  welfare or the  environment;  or (iii)
perform studies and  investigations in connection with, or as a precondition to,
(i) or (ii) above.

                  "Rental  Expense"  shall  mean,  for any  period,  all payment
obligations of Borrower and its  consolidated  Subsidiaries  accrued during such
period under  agreements  for rent,  lease,  hire or use of any real or personal
property,  including obligations in the nature of operating leases but excluding
Capital Lease Obligations.

                  "Reportable  Event" shall mean any reportable event as defined
in Section 4043(b) of ERISA or the regulations issued thereunder with respect to
a Plan (other than a Plan maintained by an ERISA Affiliate that is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414).

                  "Required  Lenders"  shall mean, at any time,  Lenders  having
Revolving Credit Exposure and unused Revolving Credit  Commitments  representing
in excess  of 50% of the sum of the  Aggregate  Revolving  Credit  Exposure  and
unused Revolving Credit Commitments at such time.

                  "Responsible  Officer"  of  any  corporation  shall  mean  any
executive officer or Financial Officer of such corporation and any other officer
or  similar  official  thereof   responsible  for  the   administration  of  the
obligations of such corporation in respect of this Agreement.

                  "Revolving Credit Borrowing" shall mean a Borrowing  comprised
of Revolving Loans.

                  "Revolving Credit Commitment" shall mean, with respect to each
Lender,  the commitment of such Lender to make Revolving  Loans hereunder as set
forth in Schedule 2.01, or in the  Assignment  and Acceptance  pursuant to which
such Lender assumed its Revolving Credit Commitment,  as applicable, as the same
may be reduced  from time to time  pursuant  to  Section  2.09 and  pursuant  to
assignments by such Lender pursuant to Section 9.04.

                  "Revolving  Credit  Exposure"  shall mean, with respect to any
Lender  at any  time,  the  aggregate  principal  amount  at  such  time  of all
outstanding  Revolving Credit Loans of such Lender, plus the aggregate amount at
such time of such Lender's L/C Exposure,  plus the aggregate amount at such time
of such Lender's Swingline Exposure.

                  "Revolving Credit Lender" shall mean a Lender with a Revolving
Credit Commitment.

                  "Revolving Credit Maturity Date" shall mean August 25, 2004.

                  "Revolving  Loans" shall mean the revolving  loans made by the
Lenders to the Borrower pursuant to Section 2.01. Each Revolving Loan shall be a
Eurodollar Revolving Loan or an ABR Revolving Loan.

                  "S&P"  shall  mean  Standard  & Poor's  Ratings  Group and its
successors.

                  "Statutory  Reserves"  shall mean a fraction  (expressed  as a
decimal),  the numerator of which is the number one and the denominator of which
is the  number  one minus  the  aggregate  of the  maximum  reserve  percentages
(including any marginal,  special, emergency or supplemental reserves)

                                      -9-


expressed as a decimal established by the Board and any other banking authority,
domestic or foreign, to which the Administrative  Agent or any Lender (including
any branch,  Affiliate,  or other  Funding  Office  making or holding a Loan) is
subject (a) with  respect to the Base CD Rate,  for new  negotiable  nonpersonal
time deposits in Dollars of over $100,000 with maturities approximately equal to
three months,  and (b) with respect to the Adjusted LIBO Rate, for  Eurocurrency
Liabilities (as defined in Regulation D of the Board).  Such reserve percentages
shall include  those imposed  pursuant to such  Regulation D.  Eurodollar  Loans
shall be deemed to constitute Eurocurrency Liabilities and to be subject to such
reserve requirements  without benefit of or credit for proration,  exemptions or
offsets  which may be  available  from  time to time to any  Lender  under  such
Regulation D. Statutory  Reserves shall be adjusted  automatically  on and as of
the effective date of any change in any reserve percentage.

                  "subsidiary"  shall mean,  with respect to any person  (herein
referred to as the "parent"), any corporation, partnership, association or other
business  entity  (a)  of  which   securities  or  other   ownership   interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or more than 50% of the general partnership interests are, at the time any
determination is being made, owned,  controlled or held, or (b) which is, at the
time any determination is made,  otherwise  Controlled,  by the parent or one or
more subsidiaries of the parent or by the parent and one or more subsidiaries of
the parent.

                  "Subsidiary" shall mean any subsidiary of the Borrower.

                  "Subsidiary  Guarantor" shall mean each Subsidiary that is not
a Foreign Subsidiary or an Excluded Subsidiary.

                  "Swingline  Commitment"  shall  mean  the  commitment  of  the
Swingline  Lender to make loans  pursuant  to Section  2.19,  as the same may be
reduced from time to time pursuant to Section 2.09.

                  "Swingline  Exposure"  shall  mean at any time  the  aggregate
principal amount at such time of all outstanding  Swingline Loans. The Swingline
Exposure  of any  Revolving  Credit  Lender at any time shall equal its Pro Rata
Percentage of the aggregate Swingline Exposure at such time.

                  "Swingline  Loan"  shall  mean any loan made by the  Swingline
Lender pursuant to Section 2.19.

                  "Three-Month  Secondary CD Rate" shall mean,  for any day, the
secondary market rate for three-month  certificates of deposit reported as being
in effect on such day (or,  if such day shall not be a  Business  Day,  the next
preceding  Business Day) by the Board through the public  information  telephone
line of the Federal Reserve Bank of New York (which rate will, under the current
practices  of the Board,  be published in Federal  Reserve  Statistical  Release
H.15(519)  during the week following such day), or, if such rate shall not be so
reported on such day or such next  preceding  Business  Day,  the average of the
secondary  market  quotations for  three-month  certificates of deposit of major
money center banks in New York City received at  approximately  10:00 a.m.,  New
York City time, on such day (or, if such day shall not be a Business Day, on the
next  preceding  Business Day) by the  Administrative  Agent from three New York
City negotiable  certificate of deposit dealers of recognized  standing selected
by it.

                  "Total Revolving Credit  Commitment"  shall mean, at any time,
the aggregate amount of the Revolving Credit  Commitments,  as in effect at such
time.

                  "Transactions" shall have the meaning assigned to such term in
Section 3.02.

                  "Type",  when used in respect of any Loan or Borrowing,  shall
refer to the Rate by  reference  to which  interest on such Loan or on the Loans
comprising  such  Borrowing is  determined.  For purposes  hereof,  "Rate" shall
include the Adjusted LIBO Rate and the Alternate Base Rate.

                  "Withdrawal Liability" shall mean liability to a Multiemployer
Plan as a result of a complete  or partial  withdrawal  from such  Multiemployer
Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

                  "Wholly  Owned  Subsidiary"  shall mean a Subsidiary  of which
securities  (except  for  directors'   qualifying  shares)  or  other  ownership
interests representing 100% of the equity, including 100% of the ordinary voting
power,  are, at the time any determination is being made, owned by the Borrower,
either  directly or  indirectly  through  other  Subsidiaries  that  satisfy the
requirements of this definition.

                                      -10-



                  SECTION 1.02. Terms Generally. The definitions in Section 1.01
shall apply equally to both the singular and plural forms of the terms  defined.
Whenever the context may require,  any pronoun shall  include the  corresponding
masculine,  feminine  and neuter  forms.  The words  "include",  "includes"  and
"including"  shall be deemed to be followed by the phrase "without  limitation".
All references  herein to Articles,  Sections,  Exhibits and Schedules  shall be
deemed  references  to Articles and Sections of, and Exhibits and  Schedules to,
this Agreement unless the context shall otherwise  require.  Except as otherwise
expressly  provided  herein,  (a) any  reference  in this  Agreement to any Loan
Document  shall  mean  such  document  as  amended,  restated,  supplemented  or
otherwise  modified  from  time to time and (b) all  terms of an  accounting  or
financial  nature shall be construed in accordance  with GAAP, as in effect from
time to time;  provided,  however,  that for purposes of determining  compliance
with the covenants contained in Article VI, all accounting terms herein shall be
interpreted  and  all  accounting  determinations  hereunder  shall  be  made in
accordance with GAAP as in effect on the date of this Agreement and applied on a
basis consistent with the application used in the financial  statements referred
to in Section 3.05.


ARTICLE II.  THE CREDITS

                  SECTION 2.01. Commitments. Subject to the terms and conditions
and relying  upon the  representations  and  warranties  herein set forth,  each
Lender  agrees,  severally  and not  jointly,  to make  Revolving  Loans  to the
Borrower,  at any time and from  time to time on or after the date  hereof,  and
until the earlier of the Revolving  Credit  Maturity Date and the termination of
the Revolving  Credit  Commitment  of such Lender in  accordance  with the terms
hereof, in an aggregate  principal amount at any time outstan ding that will not
result  in (i) such  Lender's  Revolving  Credit  Exposure  exceeding  (ii) such
Lender's Revolving Credit Commitment.

                  Within  the limits set forth in the  preceding  sentence,  the
Borrower may borrow,  pay or prepay and reborrow Revolving Loans on or after the
Effective Date and prior to the Revolving  Credit Maturity Date,  subject to the
terms, conditions and limitations set forth herein.

                  SECTION  2.02.  Loans.  (a) Each Loan  (other than a Swingline
Loan,  as to which this Section 2.02 shall not apply) shall be made as part of a
Borrowing  consisting of Loans made by the Lenders  ratably in  accordance  with
their  applicable  Revolving Credit  Commitments;  provided,  however,  that the
failure  of any Lender to make any Loan  shall not in itself  relieve  any other
Lender of its obligation to lend hereunder (it being understood,  however,  that
no Lender shall be  responsible  for the failure of any other Lender to make any
Loan  required  to be made by such  other  Lender).  The  Loans  comprising  any
Borrowing shall be in an aggregate  principal  amount which is (i) not less than
$500,000  and  is an  integral  multiple  of  $100,000,  in the  case  of an ABR
Borrowing,  (ii) not less than $500,000 and is an integral multiple of $500,000,
in the case of a Eurodollar Borrowing, or (iii) equal to the remaining available
balance of the Revolving Credit Commitments.

                  (b) Subject to Sections 2.08 and 2.12, each Borrowing shall be
comprised  entirely of ABR Loans or Eurodollar Loans as the Borrower may request
pursuant to Section 2.03. Each Lender may at its option make any Eurodollar Loan
by causing any  domestic or foreign  branch or  Affiliate of such Lender to make
such  Loan;  provided  that any  exercise  of such  option  shall not affect the
obligation  of the Borrower to repay such Loan in  accordance  with the terms of
this Agreement.  Borrowings of more than one Type may be outstanding at the same
time; provided,  however, that the Borrower shall not be entitled to request any
Borrowing  which,  if made,  would result in more than 20 Eurodollar  Borrowings
outstanding  hereunder at any time.  For purposes of the  foregoing,  Borrowings
having different  Interest  Periods,  regardless of whether they commence on the
same date, shall be considered separate Borrowings.

                  (c)  Each  Lender  shall  make  each  Loan  to be  made  by it
hereunder on the proposed  date thereof by wire  transfer to such account as the
Administrative  Agent may  designate in federal funds not later than 11:00 a.m.,
New York City time, and the Administrative Agent shall by 12:00 (noon), New York
City time, credit the amounts so received to an account with the  Administrative
Agent  designated by the Borrower in the  applicable  Borrowing  Request,  which
account must be in the name of the  Borrower or, if a Borrowing  shall not occur
on such date because any condition  precedent  herein  specified  shall not have
been met, return the amounts so received to the respective Lenders.

                  (d) Unless the Administrative Agent shall have received notice
from a Lender prior to the date of any Borrowing  that such Lender will not make
available to the  Administrative  Agent such Lender's portion of such Borrowing,
the  Administrative  Agent may assume  that such  Lender  has made such  portion
available  to the  Administrative  Agent  on  the  date  of  such  Borrowing  in
accordance  with

                                      -11-



paragraph  (c) above and the  Administrative  Agent may, in  reliance  upon such
assumption,  make available to the Borrower on such date a corresponding amount.
If the  Administrative  Agent shall have so made funds  available  then,  to the
extent  that such  Lender  shall not have made  such  portion  available  to the
Administrative  Agent, such Lender and the Borrower  severally agree to repay to
the Administrative  Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such amount is made avail able
to the Borrower until the date such amount is repaid to the Administrative Agent
at (i) in the case of the Borrower,  the interest rate applicable at the time to
the Loans  comprising such Borrowing and (ii) in the case of such Lender, a rate
determined  by the  Administrative  Agent to represent  its cost of overnight or
short-term  funds  (which  determination  shall be  conclusive  absent  manifest
error).   If  such  Lender  shall  repay  to  the   Administrative   Agent  such
corresponding amount, such amount shall constitute such Lender's Loan as part of
such Borrowing for purposes of this  Agreement.  Nothing in this paragraph shall
be construed to relieve any Lender of its obligation to make Loans  hereunder or
to  prejudice  any rights  that the  Borrower  may have  against any Lender as a
result of any failure by such Lender to make Loans hereunder.

                  (e) Notwithstanding any other provision of this Agreement, the
Borrower  shall not be entitled to request any Borrowing if the Interest  Period
requested  with respect  thereto would end after the Revolving  Credit  Maturity
Date.

                  (f) If the  Issuing  Bank  shall  not have  received  from the
Borrower any payment  required to be made under Section 2.20(e) by the time such
payment is required to be made,  then, the Issuing Bank will promptly notify the
Administrative  Agent of the L/C Disbursement and the Administrative  Agent will
promptly notify each Revolving  Credit Lender of such L/C  Disbursement  and its
Pro Rata  Percentage  thereof.  Each  Revolving  Credit Lender shall pay by wire
transfer of immediately  available funds to the  Administrative  Agent not later
than 2:00 p.m., New York City time, on such date (or, if such  Revolving  Credit
Lender shall have received  such notice later than 12:00  (noon),  New York City
time,  on any day,  not  later  than  10:00  a.m.,  New York City  time,  on the
immediately  following  Business Day), an amount equal to such Lender's Pro Rata
Percentage of such L/C Disbursement and the  Administrative  Agent will promptly
pay to the Issuing  Bank  amounts so received  by it from the  Revolving  Credit
Lenders.  The  Administrative  Agent will  promptly  pay to the Issuing Bank any
amounts  received by it from the Borrower  pursuant to Section  2.20(e) prior to
the time that any  Revolving  Credit  Lender makes any payment  pursuant to this
paragraph (f); any such amounts received by the Administrative  Agent thereafter
will be promptly  remitted by the  Administrative  Agent to the Revolving Credit
Lenders  that shall have made such  payments and to the Issuing  Bank,  as their
interests may appear. If any Revolving Credit Lender shall not have made its Pro
Rata Percentage of such L/C Disbursement  available to the Administrative  Agent
as provided above, such Lender and the Borrower  severally agree to pay interest
on such amount, for each day from and including the date such amount is required
to be paid in  accordance  with this  paragraph to but  excluding  the date such
amount is paid, to the Administrative  Agent for the account of the Issuing Bank
at (i) in the case of the Borrower,  the applicable rate per annum under Section
2.20(h),  without duplication and (ii) in the case of such Lender, for the first
such day, the Federal Funds  Effective  Rate, and for each day  thereafter,  the
Alternate  Base Rate.  If (i) the  Revolving  Credit  Lenders  make the payments
required pursuant to this paragraph (f) in respect of any L/C Disbursement, (ii)
the  Borrower  notifies  the  Administrative  Agent in  accordance  with Section
2.20(e)  that all or any portion of such  payments  should be financed  with ABR
Loans,  specifying  the amount  thereof to be so  financed,  (iii) the amount so
specified is not less than $500,000 and is an integral multiple of $100,000, and
(iv) the  conditions to Borrowing set forth in Section 4.01 are satisfied at the
time, then the amount of such payments so specified  shall  constitute ABR Loans
made on the date  such  payments  were  made  for all  purposes  hereof  and the
Administrative Agent shall promptly advise the Lenders thereof.

                  (g) Any Borrowing  made on the Effective Date shall be made as
an ABR Borrowing.

                  SECTION 2.03.  Borrowing  Procedure;  Interest Rate Elections.
(a) In order to request a Borrowing  (other than a Swingline  Loan,  as to which
this   Section  2.03  shall  not  apply),   the  Borrower   shall  give  to  the
Administrative  Agent telephonic notice of the contents of its Borrowing Request
(promptly  confirmed by hand delivery or telecopy  notice to the  Administrative
Agent of a duly completed Borrowing Request substantially in the form of Exhibit
C) (i) in the case of a  Eurodollar  Borrowing,  not later than 11:00 a.m.,  New
York City time, three Business Days before a proposed Borrowing, and (ii) in the
case of an ABR  Borrowing,  not later than 12:00 noon,  New York City time,  one
Business Day before a proposed  Borrowing;  provided,  however,  that  Borrowing
Requests with respect to Borrowings to be made on the Effective Date may, at the
discretion  of the  Administrative  Agent,  be  delivered  later  than the times
specified above.  Each Borrowing  Request shall be irrevocable,  signed by or on
behalf of the Borrower and shall specify the following information:  (i) whether
the  Borrowing  then being  requested is to be a

                                      -12-



Eurodollar Borrowing or an ABR Borrowing; (ii) the date of such Borrowing (which
shall be a Business Day),  (iii) the number and location of the account to which
funds are to be  disbursed  (which shall be an account  that  complies  with the
requirements of Section 2.02(c)); (iv) the amount of such Borrowing;  and (v) if
such Borrowing is to be a Eurodollar Borrowing, the Interest Period with respect
thereto; provided,  however,that,  notwithstanding any contrary specification in
any  Borrowing  Request,   each  requested   Borrowing  shall  comply  with  the
requirements  set  forth  in  Section  2.02.  If no  election  as to the Type of
Borrowing is specified in any such notice, then the requested Borrowing shall be
an ABR Borrowing. If no Interest Period with respect to any Eurodollar Borrowing
is  specified  in any such  notice,  then the  Borrower  shall be deemed to have
selected an Interest Period of one month's duration.  The  Administrative  Agent
shall promptly (and in any event on the same day that the  Administrative  Agent
receives such notice, if received by 1:00 p.m., New York City time, on such day)
advise the Lenders of any notice  given  pursuant to this  Section 2.03 (and the
contents thereof) and of each Lender's portion of the requested Borrowing.

                  (b) The  Revolving  Loans  included  in any  Revolving  Credit
Borrowing shall initially be of the Type and have the Interest Period determined
as provided in paragraph  (a) above.  Thereafter,  the Borrower may from time to
time  elect to change  or  continue  the Type of all or a  portion  of the Loans
included in such Borrowing, as follows:

                  (i) if such Loans are ABR  Loans,  the  Borrower  may elect to
         change such Loans to Eurodollar Loans; or

                  (ii) if such Loans are  Eurodollar  Loans,  the  Borrower  may
         elect to change  such Loans to ABR Loans or to  continue  such Loans as
         Eurodollar Loans for an additional Interest Period.

Each such election  shall be made by  delivering a notice to the  Administrative
Agent at the time and in the manner  applicable  to a  Borrowing  Request  under
paragraph (a) above, and specifying the information  required to be specified in
such a Borrowing Request,  and the contents thereof shall be communicated by the
Administrative  Agent to the Lenders, in each case as though the Loans resulting
from such election were being  advanced as a Borrowing on the date such election
is to become effective. In any event (i) the Borrower may not elect to change or
continue any Eurodollar  Loans except  pursuant to an election that is effective
on the last day of the Interest Period applicable  thereto,  (ii) each Borrowing
resulting from any such election  (including each separate  Borrowing  resulting
from an election that applies to a portion of the Loans included in a Borrowing)
shall comply with the  requirements  set forth in Section 2.02, and (iii) if any
election applies to a portion of the Loans included in a Borrowing, such portion
shall be allocated  ratably among the Loans included in such  Borrowing.  If the
Borrower  shall not have  delivered a notice in accordance  with this  paragraph
prior to 11:00 a.m., New York City time, three Business Days before the last day
of the Interest  Period then in effect for any  Borrowing,  then,  except to the
extent that the Borrower is required to repay or elects to prepay such Borrowing
in accordance  with Section 2.04 or 2.10,  the Loans  included in such Borrowing
shall  be  converted  into or  continued  as ABR  Loans  on the last day of such
Interest Period then if effect.

                  SECTION 2.04.  Evidence of Debt;  Repayment of Loans.  (a) The
outstanding principal balance of each Revolving Loan and Swingline Loan shall be
payable on the Revolving  Credit  Maturity  Date.  Each Loan shall bear interest
from the date of the first  Borrowing  hereunder  on the  outstanding  principal
balance thereof as set forth in Section 2.06.

                  (b) Each Lender shall  maintain in  accordance  with its usual
practice  an account or  accounts  evidencing  the  indebtedness  to such Lender
resulting  from each Loan made by such Lender from time to time,  including  the
amounts of principal and interest payable and paid such Lender from time to time
under this Agreement.

                  (c) The Administrative  Agent shall maintain accounts in which
it will record (i) the amount of each Loan made hereunder, the Type of each Loan
made  and the  Interest  Period  applicable  thereto,  (ii)  the  amount  of any
principal  or interest  due and  payable or to become due and  payable  from the
Borrower to each Lender  hereunder  and (iii) the amount of any sum  received by
the  Administrative  Agent  hereunder  from the Borrower and each Lender's share
thereof.

                  (d) The entries  made in the accounts  maintained  pursuant to
paragraphs (b) and (c) of this Section 2.04 shall be prima facie evidence of the
existence  and amounts of the  obligations  therein  recorded,  absent  manifest
error;  provided,  however, that the failure of any Lender or the Administrative
Agent to maintain  such  accounts or any error  therein  shall not in any manner
affect the  obligations  of the Borrower to repay the Loans in  accordance  with
their terms.

                                      -13-



                  (e) Notwithstanding any other provision of this Agreement,  in
the event any Lender shall request and receive a Note payable to such Lender and
its  registered  assigns,  the interests  represented  by that Note shall at all
times (including after any assignment of all or part of such interests  pursuant
to Section 9.04) be  represented by one or more Notes payable to the payee named
therein or its registered assigns.

                  SECTION  2.05.  Fees.  (a) The Borrower  agrees to pay to each
Lender,  through  the  Administrative  Agent,  on the last day of  March,  June,
September  and  December  in each year,  and on the date on which the  Revolving
Credit  Commitment  of such Lender shall be  terminated  as provided  herein,  a
commitment fee (a "Commitment Fee") equal to the Applicable Percentage per annum
on the average daily unused amount of the  Revolving  Credit  Commitment of such
Lender  during  the  preceding  quarter  (or other  period  commencing  with the
Effective Date or ending with the Revolving  Credit Maturity Date or the date on
which the Revolving Credit  Commitment of such Lender shall be terminated).  All
Commitment  Fees shall be  computed  on the basis of the  actual  number of days
elapsed in a year of 360 days.  The  Commit  ment Fee due to each  Lender  shall
commence to accrue on the  Effective  Date and shall cease to accrue on the date
on which the Revolving  Credit  Commitment of such Lender shall be terminated as
provided herein. For purposes of calculating Commitment Fees only, no portion of
the Revolving Credit  Commitments shall be deemed utilized under Section 2.14 as
a result of outstanding Swingline Loans.

                  (b) The Borrower  agrees to pay to the  Administrative  Agent,
for its own account,  the  administrative  fees separately agreed to between the
Borrower and the  Administrative  Agent at the time so agreed to be payable (the
"Administrative Agent Fees").

                  (c) The Borrower  agrees to pay (i) to each  Revolving  Credit
Lender,  through  the  Administrative  Agent,  on the last day of  March,  June,
September  and  December  of each  year and on the date on which  the  Revolving
Credit  Commitment of such Lender shall be terminated as provided  herein, a fee
(an "L/C  Participation  Fee") equal to the  Applicable  Percentage per annum on
such Lender's Pro Rata  Percentage  of the average daily  aggregate L/C Exposure
(excluding the portion thereof  attributable to unreimbursed L/C  Disbursements)
during the preceding  quarter (or shorter period  commencing  with the Effective
Date or  ending  with  the  later  of the date on  which  the  Revolving  Credit
Commitment of such Lender shall be terminated  and the date on which such Lender
ceases to have any L/C  Exposure)  and (ii) to the Issuing  Bank with respect to
each Letter of Credit, on the last day of March, June, September and December in
each year and on the date on which the L/C Commitment of such Issuing Bank shall
be terminated as provided herein, a fee equal to 0.125% per annum (or such other
rate as the  Borrower and such  Issuing  Bank may agree) on the  aggregate  face
amount of such Letter of Credit during the preceding  quarter (or shorter period
commencing with the date of issuance of such Letter of Credit or ending with the
expiration or  termination  such Letter of Credit) plus, in connection  with the
issuance,  amendment,  extension, renewal or transfer of any Letter of Credit or
any L/C  Disbursement,  the Issuing Bank's customary  documentary and processing
charges  (collectively,  the "Issuing Bank Fees"),  provided, in each case, that
any fees accruing after the Revolving  Credit  Maturity Date shall be payable on
demand.  All L/C  Participation  Fees and Issuing Bank Fees shall be computed on
the basis of the actual number of days elapsed in a year of 360 days.

                  (d) All fees  shall be paid on the dates due,  in  immediately
available  funds,  to  the  Administrative  Agent  for  distribution,  if and as
appropriate,  among the Lenders, except that the Issuing Bank Fees shall be paid
directly to the Issuing  Bank.  Once paid,  none of the fees shall be refundable
under any circumstances.

                  SECTION 2.06. Interest on Loans. (a) Subject to the provisions
of Section 2.07,  the Loans  comprising  each ABR Borrowing  shall bear interest
(computed  on the basis of the actual  number of days elapsed over a year of 365
or 366 days, as the case may be, when  determined by reference to the Prime Rate
and over a year of 360 days at all other times) at a rate per annum equal to the
Alternate Base Rate plus the Applicable Percentage.

                  (b)  Subject  to the  provisions  of Section  2.07,  the Loans
comprising each Eurodollar  Borrowing shall bear interest (computed on the basis
of the  actual  number  of days  elapsed  over a year of 360 days) at a rate per
annum equal to the Adjusted LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Percentage.

                  (c)  Interest  on each Loan shall be  payable on the  Interest
Payment  Dates  applicable  to such Loan  except as  otherwise  provided in this
Agreement.  The  applicable  Alternate  Base Rate or

                                      -14-



Adjusted LIBO Rate for each Interest Period or day within an Interest Period, as
the case may be,  shall be  determined  by the  Administrative  Agent,  and such
determination shall be conclusive absent manifest error.


                  SECTION 2.07. Default Interest.  If the Borrower shall default
in the payment of the  principal  of or interest on any Loan or any other amount
becoming due  hereunder,  by  acceleration  or otherwise,  the Borrower shall on
demand from time to time pay interest,  to the extent  permitted by law, on such
defaulted  amount up to (but not including) the date of actual payment (after as
well as  before  judg  ment) at a rate per annum  (computed  on the basis of the
actual  number of days  elapsed over a year of 360 days) equal to the sum of the
Alternate Base Rate plus the Applicable Percentage plus 2.00%.

                  SECTION 2.08. Alternate Rate of Interest. In the event, and on
each occasion,  that on the day two Business Days prior to the  commencement  of
any Interest Period for a Eurodollar  Borrowing the  Administrative  Agent shall
have  determined  that  Dollar  deposits  in the  principal  amount of the Loans
comprising  such Borrowing are not generally  available in the London  interbank
market,  or that the rates at which such Dollar  deposits are being offered will
not  adequately  and  fairly  reflect  the  cost  to any  Lender  of  making  or
maintaining its Eurodollar Loan during such Interest Period,  or that reasonable
means do not exist for ascertaining  the Adjusted LIBO Rate, the  Administrative
Agent shall, as soon as practicable thereafter,  give written or telecopy notice
of such determination to the Borrower and the Lenders.  In the event of any such
determination,  until the  Administrative  Agent shall have advised the Borrower
and the  Lenders  that the  circumstances  giving  rise to such notice no longer
exist,  any  request by the  Borrower  for a  Eurodollar  Borrowing  pursuant to
Section  2.03  shall  be  deemed  to be a  request  for an ABR  Borrowing.  Each
determination by the  Administrative  Agent hereunder shall be conclusive absent
manifest error.

                  SECTION 2.09.  Termination and Reduction of  Commitments.  (a)
The  Revolving  Credit  Commitments  and  the  Swingline   Commitment  shall  be
automatically terminated on the Revolving Credit Maturity Date.

                  (b) Upon at  least  three  Business  Days'  prior  irrevocable
telephonic  notice  (promptly  confirmed by hand delivery or telecopy notice) to
the  Administrative  Agent,  the Borrower  may at any time in whole  permanently
terminate, or from time to time in part permanently reduce, the Revolving Credit
Commitments  or the  Swingline  Commitment;  provided,  however,  that  (i) each
partial  reduction of the Revolving Credit  Commitments  shall be in an integral
multiple of $1,000,000 and in a minimum  principal amount of $1,000,000 and (ii)
the Total Revolving  Credit  Commitment shall not be terminated at any time that
there is any Revolving  Credit  Exposure,  nor reduced to an amount that is less
than the sum of the Aggregate Revolving Credit Exposure at the time.

                  (c)  Each  reduction  in  the  Revolving  Credit   Commitments
hereunder  shall be made  ratably  among the  Lenders in  accordance  with their
respective  Commitments.  The Borrower shall pay to the Administrative Agent for
the account of the Lenders,  on the date of each  termination or reduction,  the
Commitment  Fees on the  amount of the  Commitments  so  terminated  or  reduced
accrued to the date of such termination or reduction.

                  SECTION  2.10.  Prepayment.  (a) The  Borrower  shall have the
right at any time and from time to time to prepay any Borrowing,  in whole or in
part,  upon prior  telephonic  notice  (promptly  confirmed by hand  delivery or
telecopy  notice) to the  Administrative  Agent before 11:00 a.m., New York City
time, on the date three Business Days prior to the prepayment  date, in the case
of a Eurodollar Borrowing,  or one Business Day prior to the prepayment date, in
the case of an ABR Borrowing;  provided,  however,  that each partial prepayment
shall be in an amount  which is an integral  multiple  of $100,000  and not less
than $500,000.

                  (b) In the event of any  termination  of the Revolving  Credit
Commitments,  the Borrower shall repay or prepay all its  outstanding  Revolving
Credit Borrowings on the date of such  termination.  In the event of any partial
reduction  of the  Revolving  Credit  Commitments,  then  (i) at or prior to the
effective  date of such  reduction,  the  Administrative  Agent shall notify the
Borrower and the  Revolving  Credit  Lenders of the Aggregate  Revolving  Credit
Exposure and (ii) if the Aggregate  Revolving  Credit  Exposure would exceed the
Total Revolving Credit  Commitment  after giving effect to such reduction,  then
the Borrower  shall, on the date of such  reduction,  repay or prepay  Revolving
Credit  Borrowings or Swingline  Loans (or a  combination  thereof) in an amount
sufficient to eliminate such excess.

                  (c) Each notice of  prepayment  shall  specify the  prepayment
date and the  principal  amount of each  Borrowing  (or  portion  thereof) to be
prepaid,  shall be  irrevocable  and shall  commit the  Borrower  to prepay such
Borrowing  by  the  amount  stated  therein  on the  date  stated  therein.  All
prepayments

                                      -15-



under this Section 2.10 shall be subject to Section 2.13 but without  premium or
penalty.  All  prepayments  of Loans (other than ABR Loans  prepaid  pursuant to
paragraph (a) of this Section 2.10) under this Section 2.10 shall be accompanied
by  accrued  interest  on the  principal  amount  being  prepaid  to the date of
payment.

                  SECTION 2.11. Reserve  Requirements;  Change in Circumstances.
(a) If  after  the  date of this  Agreement  any  change  in  applicable  law or
regulation  or  in  the   interpretation  or   administration   thereof  by  any
Governmental Authority charged with the interpretation or administration thereof
(whether  or not having the force of law) shall  change the basis of taxation of
payments to any Lender or the Issuing  Bank of the  principal  of or interest on
any  Eurodollar  Loan made by such Lender or any fees or other  amounts  payable
hereunder  (other  than  changes in respect of taxes  imposed on the overall net
income of such  Lender or the  Issuing  Bank by the  jurisdiction  in which such
Lender  or the  Issuing  Bank  has  its  principal  office  or by any  political
subdivision  or  taxing  authority  therein),  or shall  impose,  modify or deem
applicable any reserve,  special deposit or similar  requirement  against assets
of, deposits with or for the account of or credit extended by such Lender or the
Issuing  Bank  (except any such  reserve  requirement  which is reflected in the
Adjusted  LIBO Rate) or shall  impose on such Lender or the Issuing  Bank or the
London  interbank  market  any  other  condition  affecting  this  Agreement  or
Eurodollar  Loans made by such  Lender or any Letter of Credit or  participation
therein, and the result of any of the foregoing shall be to increase the cost to
such Lender or the Issuing Bank of making or maintaining  any Eurodollar Loan or
of issuing or  maintaining  any Letter of Credit or purchasing or  maintaining a
participation therein, or to reduce the amount of any sum received or receivable
by such Lender or the Issuing Bank hereunder (whether of principal,  interest or
otherwise)  by an  amount  deemed  by  such  Lender  or the  Issuing  Bank to be
material,  then the Borrower will pay to such Lender or the Issuing Bank, as the
case may be, upon demand such  additional  amount or amounts as will  compensate
such Lender or the Issuing Bank, as the case may be, for such  additional  costs
incurred or reduction suffered.

                  (b) If any Lender or the  Issuing  Bank shall have  determined
that the adoption after the date hereof of any law, rule, regulation,  agreement
or guideline regarding capital adequacy,  or any change after the date hereof in
any such law, rule, regulation,  agreement or guideline (whether such law, rule,
regulation, agreement or guideline has been adopted) or in the interpretation or
administration   thereof  by  any  Governmental   Authority   charged  with  the
interpretation  or administration  thereof,  or compliance by any Lender (or any
lending  office of such  Lender)  or the  Issuing  Bank or any  Lender's  or the
Issuing Bank's holding company with any request or directive  regarding  capital
adequacy (whether or not having the force of law) of any Governmental  Authority
has or would have the effect of reducing the rate of return on such  Lender's or
the Issuing  Bank's  capital or on the  capital of such  Lender's or the Issuing
Bank's holding company,  if any, as a consequence of this Agreement or the Loans
made or  participation  in Letters of Credit  purchased by such Lender  pursuant
hereto or the Letters of Credit issued by the Issuing Bank pursuant  hereto to a
level below that which such Lender or the Issuing  Bank or such  Lender's or the
Issuing Bank's holding  company could have achieved but for such  applicability,
adoption, change or compliance by an amount deemed by such Lender or the Issuing
Bank to be  material,  then  from  time to time the  Borrower  shall pay to such
Lender  or the  Issuing  Bank,  as the case may be,  such  additional  amount or
amounts as will  compensate  such Lender or the Issuing Bank or such Lender's or
the Issuing Bank's holding company for any such reduction  suffered.  Any Lender
or Issuing Bank may utilize  reasonable  averaging  and  attribution  methods in
determining any amount or amounts under this paragraph.

                  (c) A  certificate  of a Lender or the  Issuing  Bank  setting
forth the amount or amounts  necessary to compensate  such Lender or the Issuing
Bank or its holding company, as applicable, as specified in paragraph (a) or (b)
above shall be delivered to the Borrower,  shall set forth in reasonable  detail
the circumstances  giving rise to such certificate and the basis for calculation
of the amount or amounts for which  compensation is required,  shall  constitute
rebuttable  presumptive  evidence of such amount or amounts and, if not rebutted
within five Business Days,  shall be conclusive and binding.  The Borrower shall
pay  each  Lender  or the  Issuing  Bank  the  amount  shown  as due on any such
certificate delivered by it within 10 days after its receipt of the same.

                  (d) The  protection of this Section shall be available to each
Lender  and the  Issuing  Bank  regardless  of any  possible  contention  of the
invalidity or inapplicability of the law, rule, regulation, agreement, guideline
or other change or condition which shall have occurred or been imposed.

                  (e) Each  Lender or  Issuing  Bank will  promptly  notify  the
Borrower  and the  Administrative  Agent of any event of which it has  knowledge
that will entitle such Lender or Issuing Bank to  compensation  pursuant to this
Section  (any such event,  a  "Compensation  Event").  No Lender or Issuing Bank
shall be entitled  to  compensation  pursuant to this  Section in respect of any
Compensation Event for

                                      -16-



any period of time in excess of 365 days prior to such notice; provided that, if
a Compensation  Event by its terms is retroactive,  such 365-day period shall be
increased by the duration of the retroactive effect of such Compensation Event.

                  SECTION  2.12.  Change in Legality.  (a)  Notwithstanding  any
other  provision  herein,  if, after the date  hereof,  any change in any law or
regulation  or in the  interpretation  thereof  by any Gov  ernmental  Authority
charged with the administration or interpretation thereof shall make it unlawful
for any Lender to make or maintain any Eurodollar  Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Loan, then, by
written notice to the Borrower and to the Administrative Agent:

                  (i) such Lender may  declare  that  Eurodollar  Loans will not
         thereafter (for the duration of such unlawfulness or  impracticability)
         be made by such Lender  hereunder,  whereupon such Lender will not make
         any  further   Eurodollar  Loans  and  any  request  for  a  Eurodollar
         Borrowing,  shall,  as to such Lender only,  be deemed a request for an
         ABR Loan unless such declaration  shall be subsequently  withdrawn (or,
         if a Loan to the  Borrower  cannot  be made for the  reasons  specified
         above, such request shall be deemed to have been withdrawn); and

                  (ii) such Lender may require that all  outstanding  Eurodollar
         Loans made by it be  converted  to ABR Loans,  in which  event all such
         Eurodollar Loans shall be  automatically  con verted to ABR Loans as of
         the effective date of such notice as provided in paragraph (b) below.

In the event any Lender shall  exercise its rights under (i) or (ii) above,  all
payments and prepayments of principal which would otherwise have been applied to
repay the  Eurodollar  Loans  that  would  have been made by such  Lender or the
converted  Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender in lieu of, or resulting  from the  conversion of,
such Eurodollar Loans.

                  (b) For  purposes  of  this  Section  2.12,  a  notice  to the
Borrower by any Lender shall be effective as to each Eurodollar Loan, if lawful,
on the last day of the Interest Period  currently  applicable to such Eurodollar
Loan;  in all other cases such notice  shall be effective on the date of receipt
by the Borrower.

                  SECTION 2.13.  Indemnity.  The Borrower  shall  indemnify each
Lender  against any loss or expense  which such Lender may sustain or incur as a
consequence  of (a) any  event,  other  than a  default  by such  Lender  in the
performance  of its  obligations  hereunder,  which  results in (i) such  Lender
receiving or being  deemed to receive any amount on account of the  principal of
any Loan prior to the end of the Interest  Period in effect therefor or (ii) any
Eurodollar  Loan to be made,  continued  or  converted  by such Lender not being
made,  continued or converted  after notice thereof shall have been given by the
Borrower  hereunder  (any of the  events  referred  to in this  clause (a) being
called a  "Breakage  Event") or (b) any  default in the making of any payment or
prepayment  required to be made  hereunder.  In the case of any Breakage  Event,
such loss shall include an amount equal to the excess, as reasonably  determined
by such  Lender,  of (i) its cost of  obtaining  funds for the Loan which is the
subject of such  Breakage  Event for the period  from the date of such  Breakage
Event to the last day of the Interest Period in effect (or which would have been
in effect) for such Loan over (ii) the amount of interest  likely to be realized
by such Lender in  redeploying  the funds  released or not utilized by reason of
such Breakage Event for such period.  A certifi cate of any Lender setting forth
any amount or amounts which such Lender is entitled to receive  pursuant to this
Section shall be delivered to the Borrower, shall set forth in reasonable detail
the basis for such amount or amounts,  shall constitute  rebuttable  presumptive
evidence of such amount or amounts  and, if not  rebutted  within five  Business
Days, shall be conclusive and binding.

                  SECTION 2.14.  Pro Rata  Treatment.  Except as required  under
Section 2.12, each Borrowing, each reduction of the Revolving Credit Commitments
and each  change of any  Borrowing  to a  Borrowing  of  another  Type  shall be
allocated  pro rata  among the  Lenders  in  accordance  with  their  respective
Revolving Credit Commitments (or, if such Commitments shall have expired or been
terminated,  in  accordance  with  the  respective  principal  amounts  of their
outstanding  Revolving Loans) and each payment or prepayment of principal of any
Borrowing,  each payment of interest on the Loans and each payment of Commitment
Fees shall be allocated pro rata among the Lenders entitled thereto. Each Lender
agrees that in  computing  such  Lender's  portion of any  Borrowing  to be made
hereunder, the Administrative Agent may, in its discretion,  round each Lender's
percentage of such  Borrowing,  computed in accordance with Section 2.01, to the
next higher or lower whole Dollar amount.

                                      -17-



                  SECTION 2.15.  Sharing of Setoffs.  Each Lender agrees that if
it  shall,  through  the  exercise  of a  right  of  banker's  lien,  setoff  or
counterclaim  against  any Loan  Party,  or  pursuant  to a secured  claim under
Section 506 of Title 11 of the United States Code or other  security or interest
arising from, or in lieu of, such secured  claim,  received by such Lender under
any applicable bankruptcy,  insolvency or other similar law or otherwise,  or by
any other means,  obtain payment  (voluntary or  involuntary)  in respect of any
Loan or Loans or L/C  Disbursement  as a result  of which the  unpaid  principal
portion  of  its  Loans  and  participations  in  L/C  Disbursements   shall  be
proportionately  less  than  the  unpaid  principal  portion  of the  Loans  and
participations  in L/C  Disbursements  of any other  Lender,  it shall be deemed
simultaneously to have purchased from such other Lender at face value, and shall
promptly pay to such other Lender the purchase price for, a participation in the
Loans and L/C  Exposure  of such  other  Lender,  so that the  aggregate  unpaid
principal amount of the Loans and L/C Exposure and  participations  in Loans and
L/C  Exposure  held  by each  Lender  shall  be in the  same  proportion  to the
aggregate unpaid principal amount of all Loans and L/C Exposure then outstanding
as the principal  amount of its Loans and L/C Exposure prior to such exercise of
banker's lien, setoff or counterclaim or other event was to the principal amount
of all Loans and L/C  Exposure  outstanding  prior to such  exercise of banker's
lien,  setoff or counterclaim or other event;  provided,  however,  that, if any
such purchase or purchases or adjustments shall be made pursuant to this Section
and the payment giving rise thereto shall thereafter be recovered, such purchase
or purchases or  adjustments  shall be rescinded to the extent of such  recovery
and the purchase price or prices or adjustment  restored without  interest.  The
Borrower  expressly  consents to the foregoing  arrangements and agrees that any
Lender holding a participation in a Loan or L/C Disbursement deemed to have been
so  purchased  may  exercise  any and all  rights of  banker's  lien,  setoff or
counterclaim  with  respect to any and all moneys  owing by the Borrower to such
Lender by reason  thereof as fully as if such Lender had made a Loan directly to
the Borrower in the amount of such participation.

                  SECTION  2.16.  Payments.  (a) The  Borrower  shall  make each
payment  (including  principal  of or  interest  on any  Borrowing  or  any  L/C
Disbursement  or any fees or other  amounts)  hereunder and under any other Loan
Document not later than 12:00  (noon),  New York City time, on the date when due
in immediately  available funds.  Each such payment (other than (i) Issuing Bank
Fees,  which shall be paid directly to the Issuing Bank,  and (ii)  principal of
and interest on Swingline  Loans,  which shall be paid directly to the Swingline
Lender  except as otherwise  provided in Section  2.19(e))  shall be made to the
Administrative Agent at its offices at 270 Park Avenue, New York, New York. Each
such payment shall be made in Dollars.

                  (b) Whenever any payment  (including  principal of or interest
on any Borrowing or any fees or other amounts) hereunder or under any other Loan
Document  shall  become due, or otherwise  would  occur,  on a day that is not a
Business Day, such payment may be made on the next succeeding  Business Day, and
such  extension  of time shall in such case be  included in the  computation  of
interest or fees, if applicable.

                  SECTION 2.17.  Taxes. (a) Any and all payments by the Borrower
hereunder  and under any other Loan Document  shall be made, in accordance  with
Section 2.16, free and clear of and without deduction for any and all current or
future taxes,  levies,  imposts,  deductions,  charges or withholdings,  and all
liabilities  with respect  thereto,  excluding (i) income taxes and interest and
penalties  thereon imposed on the net income of the  Administrative  Agent,  any
Lender or the Issuing Bank (or any transferee or assignee  thereof,  including a
participation  holder (any such entity a "Transferee")) and (ii) franchise taxes
imposed on the net income of the Administrative Agent, any Lender or the Issuing
Bank (or Transferee),  in each case by the jurisdiction  under the laws of which
the  Administrative  Agent,  such Lender or the Issuing Bank (or  Transferee) is
organized or any  political  subdivision  thereof (all such  nonexcluded  taxes,
levies, imposts, deductions,  charges, withholdings and liabilities and interest
and penalties thereon,  collectively or individually,  being called "Taxes"). If
the Borrower shall be required to deduct any Taxes from or in respect of any sum
payable hereunder or under any other Loan Document to the Administrative  Agent,
any Lender or the Issuing Bank (or any Transferee), (i) the sum payable shall be
increased by the amount (an "additional  amount") necessary so that after making
all required  deductions  (including  deductions  applicable to additional  sums
payable under this Section 2.17) the  Administrative  Agent,  such Lender or the
Issuing Bank (or Transferee),  as the case may be, shall receive an amount equal
to the sum it would have  received had no such  deductions  been made,  (ii) the
Borrower  shall make such  deductions  and (iii) the Borrower shall pay the full
amount  deducted to the  relevant  Governmental  Authority  in  accordance  with
applicable law.

                  (b) In addition,  the  Borrower  agrees to pay to the relevant
Governmental  Authority in accordance  with applicable law any current or future
stamp or  documentary  taxes or any other excise or property  taxes,  charges or
similar  levies  (including,  mortgage  recording  taxes and  similar  fees) and
interest

                                      -18-



and  penalties  thereon that arise from any payment made  hereunder or under any
other Loan  Document  or from the  execution,  delivery or  registration  of, or
otherwise  with respect to, this  Agreement or any other Loan  Document  ("Other
Taxes").

                  (c) The Borrower will indemnify the Administrative Agent, each
Lender and the  Issuing  Bank (or  Transferee)  for the full amount of Taxes and
Other Taxes paid by the  Administrative  Agent,  such Lender or the Issuing Bank
(or  Transferee),  as the case may be, and any liability  (including  penalties,
interest  and  expenses  (including  reasonable  attorney's  fees and  expenses)
arising  therefrom or with respect  thereto,  whether or not such Taxes or Other
Taxes were correctly or legally asserted by the relevant Governmental Authority.
A  certificate  as to the amount of such  payment or  liability  prepared by the
Administrative  Agent,  a Lender or the  Issuing  Bank (or  Transferee),  or the
Administrative  Agent on its  behalf,  absent  manifest  error,  shall be final,
conclusive  and binding for all  purposes.  Such  indemnification  shall be made
within  30 days  after  the date the  Administrative  Agent,  any  Lender or the
Issuing Bank (or Transferee), as the case may be, makes written demand therefor.

                  (d) If the Administrative  Agent, a Lender or the Issuing Bank
(or Transferee)  shall become aware that it is entitled to claim a refund from a
Governmental  Authority  in respect  of Taxes or Other  Taxes as to which it has
been indemnified by the Borrower, or with respect to which the Borrower has paid
additional amounts,  pursuant to this Section 2.17, it shall promptly notify the
Borrower  of the  availability  of such refund  claim and shall,  within 30 days
after  receipt of a request by the Borrower,  make a claim to such  Governmental
Authority  for such  refund at the  Borrower's  expense.  If the  Administrative
Agent, a Lender or the Issuing Bank (or Transferee) receives a refund (including
pursuant  to a claim for refund  made  pursuant to the  preceding  sentence)  in
respect of any Taxes or Other Taxes as to which it has been  indemnified  by the
Borrower  or with  respect to which the  Borrower  has paid  additional  amounts
pursuant to this  Section  2.17,  it shall  within 30 days from the date of such
receipt  pay over  such  refund  to the  Borrower  (but  only to the  extent  of
indemnity  payments made, or additional amounts paid, by the Borrower under this
Section  2.17 with  respect  to the  Taxes or Other  Taxes  giving  rise to such
refund),  net of all  reasonable  and  necessary  out-of-pocket  expenses of the
Administrative  Agent,  such  Lender or the  Issuing  Bank (or  Transferee)  and
without  interest  (other  than  interest  paid  by  the  relevant  Governmental
Authority with respect to such refund);  provided,  however,  that the Borrower,
upon the request of the  Administrative  Agent,  such Lender or the Issuing Bank
(or  Transferee),  agrees to repay the amount  paid over to the  Borrower  (plus
penalties,  interest or other charges) to the Administrative  Agent, such Lender
or the Issuing Bank (or Transferee) in the event the Administrative  Agent, such
Lender or the Issuing Bank (or  Transferee)  is required to repay such refund to
such Governmental Authority.

                  (e) As soon as  practicable  after the date of any  payment of
Taxes or Other Taxes by the Borrower to the relevant Governmental Authority, the
Borrower will deliver to the Administrative Agent, at its address referred to in
Section  9.01,  the  original  or a certified  copy of a receipt  issued by such
Governmental Authority evidencing payment thereof.

                  (f) Without  prejudice to the survival of any other  agreement
contained herein, the agreements and obligations  contained in this Section 2.17
shall  survive the payment in full of the principal of and interest on all Loans
made hereunder,  the expiration or cancellation of all Letters of Credit and the
reimbursement of all draws thereunder.

                  (g) Each Lender (or  Transferee)  that is organized  under the
laws of a jurisdiction  other than the United  States,  any State thereof or the
District of Columbia (a "Non-U.S. Lender") shall deliver to the Borrower and the
Administrative Agent two copies of either United States Internal Revenue Service
Form 1001 or Form 4224, or, in the case of a Non-U.S.  Lender claiming exemption
from U.S.  Federal  withholding  tax under Section  871(h) or 881(c) of the Code
with respect to payments of "portfolio interest",  a Form W-8, or any subsequent
versions thereof or successors thereto (and, if such Non-U.S.  Lender delivers a
Form W-8, a certificate representing that such Non-U.S. Lender is not a bank for
purposes of Section 881(c) of the Code, is not a 10-percent  shareholder (within
the meaning of Section  871(h)(3)(B)  of the Code) of the  Borrower and is not a
controlled  foreign  corporation  related to the Borrower (within the meaning of
Section  864(d)(4) of the Code)),  properly  completed and duly executed by such
Non-U.S.  Lender  claiming  complete  exemption  from,  or reduced rate of, U.S.
Federal withholding tax on payments by the Borrower under this Agreement and the
other Loan Documents.  Such forms shall be delivered by each Non-U.S.  Lender on
or before the date it becomes a party to this  Agreement  (or,  in the case of a
Transferee  that  is  a  participation  holder,  on  or  before  the  date  such
participation holder becomes a Transferee  hereunder) and on or before the date,
if  any,  such  Non-U.S.   Lender  changes  its  applicable  lending  office  by
designating a different  lending office (a "New Lending  Office").  In addition,
each Non-U.S.  Lender shall deliver such forms promptly upon the obsolescence or
invalidity  of  any  form

                                      -19-



previously  delivered  by  such  Non-U.S.  Lender.   Notwithstanding  any  other
provision of this Section  2.17(g),  a Non-U.S.  Lender shall not be required to
deliver any form pursuant to this Section  2.17(g) that such Non-U.S.  Lender is
not legally able to deliver.

                  (h) The  Borrower  shall  not be  required  to  indemnify  any
Non-U.S.  Lender or to pay any  additional  amounts  to any  Non-U.S.  Lender in
respect of United States  Federal  withholding  tax pursuant to paragraph (a) or
(c) above to the extent that (i) the obligation to withhold amounts with respect
to United  States  Federal  withholding  tax  existed  on the date such Non U.S.
Lender became a party to this Agreement (or, in the case of a Transferee that is
a  participation  holder,  on  the  date  such  participation  holder  became  a
Transferee  hereunder) or, with respect to payments to a New Lending Office, the
date such Non-U.S.  Lender  designated such New Lending Office with respect to a
Loan ; provided,  however,  that this  paragraph  (h) shall not apply (x) to any
Transferee or New Lending Office that becomes a Transferee or New Lending Office
as a result of an assignment, participation, transfer or designation made at the
request  of the  Borrower  and  (y) to  the  extent  the  indemnity  payment  or
additional amounts any Transferee, or any Lender (or Transferee), acting through
a New  Lending  Office,  would be entitled  to receive  (without  regard to this
paragraph  (h)) do not exceed the indemnity  payment or additional  amounts that
the person making the assignment,  participation or transfer to such Transferee,
or Lender (or  Transferee)  making the  designation of such New Lending  Office,
would  have  been  entitled  to  receive  in the  absence  of  such  assignment,
participation,  transfer  or  designation  or (ii)  the  obligation  to pay such
additional  amounts  would not have  arisen but for a failure  by such  Non-U.S.
Lender to comply with the provisions of paragraph (g) above.

                  (i) Any Lender or Issuing  Bank (or  Transferee)  claiming any
indemnity  payment or additional  amounts payable  pursuant to this Section 2.17
shall use reasonable efforts (consistent with legal and regulatory restrictions)
to file any  certificate  or  document  reasonably  requested  in writing by the
Borrower or to change the  jurisdiction of its applicable  lending office if the
making of such a filing or change  would avoid the need for or reduce the amount
of any such indemnity  payment or additional  amounts that may thereafter accrue
and would not,  in the sole  determination  of such  Lender or Issuing  Bank (or
Transferee),  be  otherwise  disadvantageous  to such Lender or Issuing Bank (or
Transferee).

                  (j) Nothing  contained in this Section 2.17 shall  require any
Lender or the Issuing Bank (or any  Transferee) or the  Administrative  Agent to
make available any of its tax returns (or any other information that it deems to
be confidential or proprietary).

                  SECTION  2.18.   Assignment  of   Commitments   Under  Certain
Circumstances.  (a) In the event (i) any Lender or the Issuing  Bank  delivers a
certificate requesting compensation pursuant to Section 2.11, (ii) any Lender or
the  Issuing  Bank  delivers a notice  described  in  Section  2.12 or (iii) the
Borrower is required to pay any  additional  amount to any Lender or the Issuing
Bank or any Governmental  Authority on account of any Lender or the Issuing Bank
pursuant to Section 2.17, the Borrower may, at its sole expense and effort, upon
notice to such Lender or the Issuing Bank and the Administrative Agent,
 require  such  Lender or the  Issuing  Bank to  transfer  and  assign,  without
recourse  (in  accordance  with and  subject to the  restrictions  contained  in
Section 9.04), all of its interests, rights and obligations under this Agreement
to an assignee which shall assume such assigned  obligations (which assignee may
be another Lender,  if a Lender accepts such  assignment);  provided that (w) no
Default or Event of Default has occurred and is continuing,  (x) such assignment
shall not conflict  with any law,  rule or  regulation  or order of any court or
other Governmental  Authority having  jurisdiction,  (y) the Borrower shall have
received  the prior  written  consent of the  Administrative  Agent  (and,  if a
Revolving Credit Commitment is being assigned, of the Issuing Bank and Swingline
Lender),  which consent shall not unreasonably be withheld, and (z) the Borrower
or such assignee  shall have paid to the affected  Lender or the Issuing Bank in
immediately  available  funds an amount equal to the sum of the principal of and
interest  accrued  to the date of such  payment  on the  outstanding  Loans  and
participations  in L/C  Disbursements  and Swingline Loans of such Lender or the
Issuing  Bank plus all fees and other  amounts  accrued  for the account of such
Lender or the Issuing Bank  hereunder  (including any amounts under Section 2.11
and Section  2.13);  provided  further  that if prior to any such  transfer  and
assignment  the  circumstances  or event that  resulted in such  Lender's or the
Issuing Bank's claim for compensation under Section 2.11 or notice under Section
2.12 or the amounts paid  pursuant to Section 2.17, as the case may be, cease to
cause such Lender or the Issuing Bank to suffer increased costs or reductions in
amounts  received or receivable  or reduction in return on capital,  or cease to
have the  consequences  specified in Section 2.12, or cease to result in amounts
being  payable  under Section 2.17, as the case may be (including as a result of
any action  taken by such Lender or the Issuing Bank  pursuant to paragraph  (b)
below),  or if such  Lender or the  Issuing  Bank shall waive its right to claim
further  compensation  under  Section 2.11 in respect of such  circumstances  or
event or shall  withdraw its notice under  Section 2.12 or shall waive its right
to further  payments  under  Section  2.17 in

                                      -20-



respect of such  circumstances or event, as the case may be, then such Lender or
the Issuing Bank shall not  thereafter be required to make any such transfer and
assignment  hereunder.  In the case of any such  assignment  by an Issuing Bank,
such assignment  shall not affect the Issuing Bank's rights under this Agreement
in respect of any Letters of Credit issued by it that remain outstanding.

                  (b) If (i)  any  Lender  or the  Issuing  Bank  shall  request
compensation  under Section 2.11, (ii) any Lender or the Issuing Bank delivers a
notice  described  in Section  2.12 or (iii) the Borrower is required to pay any
additional  amount  to  any  Lender  or the  Issuing  Bank  or any  Governmental
Authority on account of any Lender or the Issuing Bank pursuant to Section 2.17,
then such Lender or the Issuing Bank shall  exercise  reasonable  efforts (which
shall not require such Lender or the Issuing Bank to incur an unreimbursed  loss
or unreimbursed  cost or expense or otherwise take any action  inconsistent with
its internal  policies or suffer any  disadvantage  or burden deemed by it to be
significant)  to assign its rights and delegate  and  transfer  its  obligations
hereunder to another of its offices,  branches or affiliates, if such assignment
would  reduce its claims for  compensation  under  Section  2.11 or enable it to
withdraw its notice  pursuant to Section 2.12 or would  reduce  amounts  payable
pursuant to Section 2.17, as the case may be, in the future. The Borrower hereby
agrees to pay all  reasonable  costs and expenses  incurred by any Lender or the
Issuing Bank in connection with any such assignment, delegation and transfer.

                  SECTION  2.19.  Swingline  Loans.  (a)  Swingline  Commitment.
Subject to the terms and  conditions  and relying upon the  representations  and
warranties  herein set forth,  the Swingline  Lender agrees to make loans to the
Borrower at any time and from time to time on and after the  Effective  Date and
until the earlier of the Revolving  Credit  Maturity Date and the termination of
the Revolving  Credit  Commitments  in accordance  with the terms hereof,  in an
aggregate  principal  amount at any time outstanding that will not result in (i)
the aggregate  principal  amount of all Swingline Loans exceeding  $3,000,000 in
the  aggregate or (ii) the Aggregate  Revolving  Credit  Exposure,  after giving
effect to any Swingline Loan,  exceeding the Total Revolving Credit  Commitment.
Each  Swingline  Loan  shall be in a  principal  amount  that is not  less  than
$100,000 and is an integral multiple of $50,000. The Swingline Commitment may be
terminated or reduced from time to time as provided herein. Within the foregoing
limits,  the Borrower may borrow,  pay or prepay and  reborrow  Swingline  Loans
hereunder  on and after the  Effective  Date and prior to the  Revolving  Credit
Maturity  Date,  subject  to the terms,  conditions  and  limitations  set forth
herein.

                  (b)   Swingline   Loans.   The   Borrower   shall  notify  the
Administrative  Agent by telephonic notice (promptly  confirmed by hand delivery
or telecopy notice) not later than 12:00 noon, New York City time, on the day of
a proposed  Swingline  Loan.  Such notice shall be delivered on a Business  Day,
shall be  irrevocable  and shall refer to this  Agreement  and shall specify the
requested  date  (which  shall be a Business  Day) and amount of such  Swingline
Loan. The Administrative  Agent will promptly advise the Swingline Lender of any
notice received from the Borrower  pursuant to this paragraph (b). The Swingline
Lender shall make each  Swingline  Loan  available to the Borrower by means of a
credit to the general deposit account of the Borrower with the Swingline  Lender
by 3:00 p.m. on the date such Swingline Loan is so requested to be made.

                  (c) Prepayment.  The Borrower shall have the right at any time
and from time to time to prepay any Swingline  Loan,  in whole or in part,  upon
giving  telephonic  notice  (promptly  confirmed  by hand  delivery  or telecopy
notice) to the  Swingline  Lender and to the  Administrative  Agent before 12:00
(noon),  New York City time on the date of prepayment at the Swingline  Lender's
address for notices specified on Schedule 2.01; provided,  however, that partial
prepayments  shall be in a  principal  amount  that is an  integral  multiple of
$50,000.  All principal  payments of Swingline Loans pursuant to Section 2.10(b)
shall be accompanied by accrued interest on the principal amount being repaid to
the date of payment.

                  (d) Interest.  Each  Swingline  Loan shall be an ABR Loan and,
subject to the  provisions of Section  2.07,  shall bear interest as provided in
Section 2.06(a).

                  (e) Participations. The Swingline Lender may by written notice
given to the Administrative Agent not later than 10:00 a.m., New York City time,
on  any  Business  Day  require  the   Revolving   Credit   Lenders  to  acquire
participations  in all or a portion of the  Swingline  Loans  outstanding.  Such
notice  shall  specify  the  aggregate  amount of  Swingline  Loans and  accrued
interest  thereon  in which  Revolving  Credit  Lenders  will  participate.  The
Administrative  Agent will, promptly upon receipt of such notice, give notice to
each Revolving  Credit Lender,  specifying in such notice such Lender's Pro Rata
Percentage of such  Swingline  Loan or Loans and accrued  interest  thereon.  In
consideration and in furtherance of the foregoing,  each Revolving Credit Lender
hereby absolutely and unconditionally agrees, upon receipt of notice as provided
above,  to pay to the  Administrative  Agent,  for the account of the

                                      -21-



Swingline  Lender,  such Revolving  Credit  Lender's Pro Rata Percentage of such
Swingline Loan or Loans and accrued interest thereon.  Each Lender  acknowledges
and agrees that its  obligation  to acquire  participations  in Swingline  Loans
pursuant  to this  paragraph  is  absolute  and  unconditional  and shall not be
affected  by  any   circumstance   whatsoever,   including  the  occurrence  and
continuance  of a Default  or an Event of  Default,  and that each such  payment
shall  be  made  without  any  offset,   abatement,   withholding  or  reduction
whatsoever. Each Lender shall comply with its obligation under this paragraph by
wire transfer of immediately  available funds, in the same manner as provided in
Section  2.02(c) with respect to Loans made by such Lender (and Section  2.02(c)
shall apply,  mutatis mutandis,  to the payment  obligations of the Lenders) and
the  Administrative  Agent shall promptly pay to the Swingline Lender amounts so
received by it from the  Lenders.  The  Administrative  Agent  shall  notify the
Borrower of any  participations  in any Swingline Loan acquired pursuant to this
paragraph and  thereafter  payments in respect of such  Swingline  Loan shall be
made to the  Administrative  Agent and not to the Swingline Lender.  Any amounts
received by the Swingline  Lender from the Borrower (or other party on behalf of
the  Borrower)  in respect of a Swingline  Loan after  receipt by the  Swingline
Lender of the  proceeds of a sale of  participations  therein  shall be promptly
remitted  to  the  Administrative  Agent;  any  such  amounts  received  by  the
Administrative  Agent shall be promptly remitted by the Administrative  Agent to
the Lenders that shall have made their  payments  pursuant to this paragraph and
to the  Swingline  Lender,  as their  interests  may  appear.  The  purchase  of
participations  in a Swingline Loan pursuant to this paragraph shall not relieve
the  Borrower  (or other party liable for  obligations  of the  Borrower) of its
default in respect of the payment thereof.

                  SECTION 2.20. Letters of Credit. (a) General. The Borrower may
request the issuance of a Letter of Credit,  in a form reasonably  acceptable to
the Administrative Agent and the Issuing Bank,  appropriately completed, for the
account of the  Borrower,  at any time and from time to time while the Revolving
Credit  Commitments  remain in effect.  This  Section  shall not be construed to
impose an obligation upon the Issuing Bank to issue any Letter of Credit that is
inconsistent with the terms and conditions of this Agreement.

                  (b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. In order to request the issuance of a Letter of Credit (or to amend,
renew or extend an existing  Letter of Credit),  the Borrower shall hand deliver
or telecopy to the Issuing  Bank and the  Administrative  Agent  (reasonably  in
advance of the requested  date of issuance,  amendment,  renewal or extension) a
notice  requesting the issuance of a Letter of Credit, or identifying the Letter
of Credit to be amended,  renewed or extended, the date of issuance,  amendment,
renewal  or  extension,  the date on which  such  Letter  of Credit is to expire
(which  shall  comply with  paragraph  (c) below),  the amount of such Letter of
Credit,  the  name  and  address  of the  beneficiary  thereof  and  such  other
information  as shall be necessary  to prepare such Letter of Credit.  Following
receipt of such  notice and prior to the  issuance  of the  requested  Letter of
Credit or the applicable  amendment,  renewal or extension,  the  Administrative
Agent  shall  notify  the  Borrower  and the  Issuing  Bank of the amount of the
Aggregate  Revolving  Credit  Exposure  after giving effect to (i) the issuance,
amendment,  renewal or extension of such Letter of Credit,  (ii) the issuance or
expiration  of any other  Letter of Credit  that is to be issued or will  expire
prior to the  requested  date of issuance of such Letter of Credit and (iii) the
borrowing  or repayment of any  Revolving  Credit Loans or Swingline  Loans that
(based upon notices delivered to the  Administrative  Agent by the Borrower) are
to be borrowed or repaid prior to the requested  date of issuance of such Letter
of Credit. A Letter of Credit shall be issued, amended, renewed or extended only
if, and upon issuance,  amendment, renewal or extension of each Letter of Credit
the Borrower shall be deemed to represent and warrant that,  after giving effect
to such issuance, amendment, renewal or extension (A) the L/C Exposure shall not
exceed  $25,000,000,  and (B) the Aggregate  Revolving Credit Exposure shall not
exceed the Total Revolving Credit Commitment. Promptly following the end of each
month, the Administrative  Agent shall notify the Lenders of the L/C Exposure as
of the end of such month.

                  (c) Expiration  Date. Each Letter of Credit shall expire at or
prior to the close of business on the date that is five  Business  Days prior to
the Revolving  Credit Maturity Date or, if such Letter of Credit is a commercial
letter of credit,  the  earlier of such date and date 180 days after the date of
issuance of such Letter of Credit.

                  (d) Participations.  By the issuance of a Letter of Credit and
without any further  action on the part of the Issuing Bank or the Lenders,  the
Issuing Bank hereby grants to each Lender,  and each such Lender hereby acquires
from the applicable Issuing Bank, a participation in such Letter of Credit equal
to such Lender's Pro Rata  Percentage of the  aggregate  amount  available to be
drawn under such Letter of Credit, effective upon the issuance of such Letter of
Credit. In consideration and in furtherance of the foregoing, each Lender hereby
absolutely and  unconditionally  agrees to pay to the Administrative  Agent, for
the account of the Issuing Bank,  such Lender's Pro Rata  Percentage of each L/C
Disbursement

                                      -22-



made by the Issuing Bank and not  reimbursed by the Borrower (or, if applicable,
another  party  pursuant  to its  obligations  under  any other  Loan  Document)
forthwith  on  the  date  due  as  provided  in  Section  2.02(f).  Each  Lender
acknowledges and agrees that its obligation to acquire  participations  pursuant
to this paragraph in respect of Letters of Credit is absolute and  unconditional
and  shall  not  be  affected  by any  circumstance  whatsoever,  including  the
occurrence and  continuance  of a Default or an Event of Default,  and that each
such  payment  shall be made  without  any  offset,  abatement,  withholding  or
reduction  whatsoever;  provided,  however,  that  the  foregoing  shall  not be
construed  to  impose  an   obligation  of  the  Lenders  to  reimburse  an  L/C
Disbursement  that the Borrower is not  required to  reimburse  due to the gross
negligence or wilful  misconduct of the Issuing Bank  (determined as provided in
Section 2.20(f)).

                  (e)  Reimbursement.  If the  Issuing  Bank  shall make any L/C
Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such
L/C  Disbursement  by  paying an amount  equal to such L/C  Disbursement  to the
Administrative  Agent  not  later  than  12:00  (noon) on the date that such L/C
Disbursement  is made or, if the Borrower shall have received notice of such L/C
Disbursement  later than 10:00 a.m.,  New York City time,  on the date that such
L/C  Disbursement  is made, not later than 12:00 (noon),  New York City time, on
the immediately  following  Business Day; provided that the Borrower may, to the
extent that such L/C  Disbursement  is not less than $500,000 and is an integral
multiple of $100,000 and subject to the  conditions  to  Borrowing  set forth in
Section 4.01, request by notice to the  Administrative  Agent not later than the
time that payment  would be required as aforesaid  that such payment be financed
with ABR Loans as  contemplated  by Section  2.02(f)  and,  to the  extent  such
payment is so financed with ABR Loans in accordance with Section  2.02(f),  such
payment  shall not be required  to be made by the  Borrower  under this  Section
2.20(e).

                  (f)  Obligations  Absolute.   The  Borrower's  obligations  to
reimburse  L/C  Disbursements  as  provided  in  paragraph  (e)  above  shall be
absolute,  unconditional  and  irrevocable,  and shall be performed  strictly in
accordance  with the terms of this  Agreement,  under any and all  circumstances
whatsoever, and irrespective of:

                  (i) any lack of  validity or  enforceability  of any Letter of
         Credit or any Loan Document, or any term or provision therein;

                  (ii) any  amendment or waiver of or  any consent  to departure
         from all or  any of the  provisions of any Letter of Credit or any Loan
         Document;

                  (iii) the  existence  of any claim,  setoff,  defense or other
         right that the  Borrower,  any other party  guaranteeing,  or otherwise
         obligated with, the Borrower, any Subsidiary or other Affiliate thereof
         or any other person may at any time have against the beneficiary  under
         any Letter of Credit, the Issuing Bank, the Administrative Agent or any
         Lender or any other person,  whether in connection with this Agreement,
         any other Loan Document or any other related or unrelated  agreement or
         transaction;

                  (iv) any draft or other document  presented  under a Letter of
         Credit proving to be forged, fraudulent, invalid or insufficient in any
         respect or any  statement  therein  being untrue or  inaccurate  in any
         respect;

                  (v)  payment  by the  Issuing  Bank  under a Letter  of Credit
         against  presentation of a draft or other document that does not comply
         with the terms of such Letter of Credit; and

                  (vi) any other act or  omission to act or delay of any kind of
         the Issuing Bank, the Lenders,  the  Administrative  Agent or any other
         person or any other event or  circumstance  whatsoever,  whether or not
         similar to any of the foregoing,  that might, but for the provisions of
         this  Section,  constitute  a  legal  or  equitable  discharge  of  the
         Borrower's obligations hereunder;

provided that the foregoing  shall not be construed to impose an obligation upon
the  Borrower  to  reimburse  the Issuing  Bank to the extent  that  neither the
Borrower nor any Subsidiary received any benefit from such L/C Disbursement as a
direct result of the Issuing  Bank's gross  negligence  or wilful  misconduct in
determining  whether  drafts  and other  documents  presented  under a Letter of
Credit comply with the terms thereof; it is understood that the Issuing Bank may
accept  documents that are on their face in order,  without  responsibility  for
further  investigation,  regardless of any notice or information to the contrary
and,  in making any payment  under any Letter of Credit (A) the  Issuing  Bank's
exclusive reliance on the documents  presented to it under such Letter of Credit
as to any and all matters set forth therein, including reliance on the amount of
any draft presented  under such Letter of Credit,  whether or not the amount due
to the

                                      -23-



beneficiary  thereunder  equals the amount of such draft and  whether or not any
document  presented  pursuant to such Letter of Credit proves to be insufficient
in any respect, if such document on its face appears to be in order, and whether
or not any other  statement  or any other  document  presented  pursuant to such
Letter of Credit proves to be forged or invalid or any statement  therein proves
to be inaccurate or untrue in any respect  whatsoever and (B) any  noncompliance
in any immaterial respect of the documents presented under such Letter of Credit
with the terms thereof shall,  in each case, be deemed not to constitute  wilful
misconduct or gross negligence of the Issuing Bank.

                  (g) Disbursement Procedures.  The Issuing Bank shall, promptly
following its receipt thereof,  examine all documents  purporting to represent a
demand for payment under a Letter of Credit.  The Issuing Bank shall as promptly
as  possible  give  telephonic  notification,  confirmed  by  telecopy,  to  the
Administrative Agent and the Borrower of such demand for payment and whether the
Issuing Bank has made or will make an L/C Disbursement thereunder; provided that
any  failure  to give or delay in  giving  such  notice  shall not  relieve  the
Borrower of its  obligation  to reimburse  the Issuing Bank and the Lenders with
respect to any such L/C Disbursement.  The  Administrative  Agent shall promptly
give each Lender notice thereof.

                  (h) Interim  Interest.  If the Issuing Bank shall make any L/C
Disbursement in respect of a Letter of Credit,  then,  unless the Borrower shall
reimburse such L/C  Disbursement  in full not later than 12:00 (noon),  New York
City time,  on the date that such L/C  Disbursement  is made,  the unpaid amount
thereof  shall bear  interest,  for each day from and including the date of such
L/C  Disbursement  to but excluding  the date of payment at the  Alternate  Base
Rate;  provided that to the extent that such L/C  Disbursement is not reimbursed
by the Borrower prior to 12:00 (noon),  New York City time on the third Business
Day after the date such L/C  Disbursement  is made and is not financed  with ABR
Loans in  accordance  with Section  2.02(f),  then such unpaid amount shall bear
interest from and including such third Business Day to but excluding the date of
payment as provided in Section 2.07.

                  (i)  Resignation  or Removal of the Issuing Bank.  The Issuing
Bank may  resign at any time by giving  180 days'  prior  written  notice to the
Administrative  Agent,  the Lenders and the Borrower,  and may be removed at any
time by the Borrower by notice to the Issuing Bank, the Administrative Agent and
the Lenders. Subject to the last sentence of this paragraph, upon the acceptance
of any  appointment as the Issuing Bank  hereunder by a successor  Issuing Bank,
such successor shall succeed to and become vested with all the interests, rights
and obligations of the retiring Issuing Bank and the retiring Issuing Bank shall
be  discharged  from its  obligations  to issue  additional  Letters  of  Credit
hereunder.  At the time such removal or resignation shall become effective,  the
Borrower  shall pay all accrued and unpaid  Issuing Bank Fees. The acceptance of
any  appointment  as the Issuing Bank  hereunder by a successor  Lender shall be
evidenced by an agreement entered into by such successor, in a form satisfactory
to the Borrower and the Administrative  Agent, and, from and after the effective
date of such agreement,  (i) such successor Lender shall have all the rights and
obligations of the previous Issuing Bank under this Agreement and the other Loan
Documents and (ii) references herein and in the other Loan Documents to the term
"Issuing  Bank" shall be deemed to refer to such  successor  or to any  previous
Issuing  Bank,  or to such  successor  and all previous  Issuing  Banks,  as the
context  shall  require.  After the  resignation  or removal of the Issuing Bank
hereunder,  the  retiring  Issuing  Bank shall  remain a party  hereto and shall
continue to have all the rights and  obligations  of an Issuing  Bank under this
Agreement and the other Loan  Documents with respect to Letters of Credit issued
by it prior to such  resignation or removal,  but shall not be required to issue
additional Letters of Credit.

                  (j) Cash  Collateralization.  If any  Event of  Default  shall
occur and be  continuing,  the Borrower  shall,  on the Business Day it receives
notice from the  Administrative  Agent or the Required  Lenders  thereof and the
amount to be deposited, deposit in an account with the Administrative Agent, for
the benefit of the Revolving Credit Lenders,  an amount in cash equal to the L/C
Exposure as of such date. Such deposit shall be held by the Administrative Agent
as  collateral  for  the  payment  and  performance  of  the  Obligations.   The
Administrative  Agent shall have exclusive  dominion and control,  including the
exclusive right of withdrawal, over such account. Other than any interest earned
on the investment of such deposits in Cash Equivalents,  which investments shall
be made at the option and sole  discretion  of the  Administrative  Agent,  such
deposits  shall  not  bear  interest.  Interest  or  profits,  if  any,  on such
investments  shall accumulate in such account.  Moneys in such account shall (i)
automatically  be applied by the  Administrative  Agent to reimburse the Issuing
Bank for L/C  Disbursements  for which it has not been reimbursed,  (ii) be held
for the  satisfaction of the  reimbursement  obligations of the Borrower for the
L/C  Exposure  at such  time and  (iii) if the  maturity  of the  Loans has been
accelerated,  be applied to satisfy the Obligations. If the Borrower is required
to provide an amount of cash collateral  hereunder as a result of the

                                      -24-



occurrence  of an Event of  Default,  such  amount (to the extent not applied as
aforesaid)  shall be returned to the Borrower  within three  Business Days after
all Events of Default have been cured or waived.

                  (k) Additional  Issuing  Banks.  The Borrower may, at any time
and from  time to time  with the  consent  of the  Administrative  Agent  (which
consent shall not be  unreasonably  withheld) and such Lender,  designate one or
more  additional  Lenders  to act as an  issuing  bank  under  the terms of this
Agreement.  Any Lender  designated as an issuing bank pursuant to this paragraph
(k) shall be deemed to be an "Issuing  Bank" (in  addition to being a Lender) in
respect of Letters of Credit  issued or to be issued by such Lender,  and,  with
respect to any Letter of Credit, such term shall thereafter apply to the Issuing
Bank that shall have issued such Letter of Credit.

                  (l) Existing Letters of Credit. All Existing Letters of Credit
shall be deemed to be Letters of Credit  issued  under this  Agreement as of the
Effective  Date and shall  constitute  Letters of Credit for all purposes of the
Loan Documents.


ARTICLE III.  REPRESENTATIONS AND WARRANTIES

                  Each of Holdings and the Borrower  represents  and warrants to
each of the Lenders that:

                   SECTION 3.01. Organization;  Powers. Each of Holdings and the
Borrower and each of the Subsidiaries (other than the Excluded Subsidiaries) (a)
is a corporation duly organized, validly existing and in good standing under the
laws of the  jurisdiction of its  organization,  (b) has all requisite power and
authority  to own its  property  and assets and to carry on its  business as now
conducted  and as proposed to be  conducted,  (c) is qualified to do business in
every  jurisdiction  where such  qualification  is  required,  except  where the
failure so to qualify  could not  reasonably be expected to result in a Material
Adverse  Effect,  and (d) has the  corporate  power and  authority  to  execute,
deliver and perform its  obligations  under each of the Loan  Documents and each
other agreement or instrument  contemplated  thereby to which it is or will be a
party and, in the case of the Borrower, to borrow hereunder.

                  SECTION  3.02.  Authorization.  The  execution,  delivery  and
performance  by each Loan Party of each of the Loan  Documents to which it is or
will be a party  and,  in the case of the  Borrower,  the  borrowings  hereunder
(collectively,  the  "Transactions")  (a)  have  been  duly  authorized  by  all
requisite  corporate and, if required,  stockholder  action and (b) will not (i)
violate  (A) any  provision  of law,  statute,  rule  or  regulation,  or of the
certificate  or articles of  incorporation  or other  constitutive  documents or
by-laws  of  Holdings,  the  Borrower  or any  Subsidiary,  (B) any order of any
Governmental Authority or (C) any provision of any indenture, agreement or other
instrument to which  Holdings,  the Borrower or any  Subsidiary is a party or by
which  any of them  or any of  their  property  is or may be  bound,  (ii) be in
conflict  with,  result in a breach of or  constitute  (alone or with  notice or
lapse of time or both) a default  under any such  indenture,  agreement or other
instrument  or (iii)  result in the creation or  imposition  of any Lien upon or
with  respect to any  property  or assets  now owned or  hereafter  acquired  by
Holdings, the Borrower or any Subsidiary.

                  SECTION  3.03.  Enforceability.  This  Agreement has been duly
executed and  delivered by Holdings and the Borrower and  constitutes,  and each
other Loan Document when executed and delivered by each Loan Party party thereto
will  constitute,  a legal,  valid and binding  obligation  of Holdings  and the
Borrower and such Loan Party  enforceable  against Holdings and the Borrower and
such Loan Party in accordance with its terms.

                  SECTION 3.04.  Governmental  Approvals.  No action, consent or
approval of, registration or filing with or any other action by any Governmental
Authority is or will be required in connection with the Transactions, except for
such as have been made or obtained and are in full force and effect.

                  SECTION 3.05.  Financial  Statements.  Holdings has heretofore
furnished to the Lenders its  consolidated and  consolidating  balance sheet and
statement of operations and  consolidated  statement of cash flows as of and for
the fiscal year ended June 30, 1998, which consolidated  statements were audited
by and accompanied by the opinion of KPMG Peat Marwick LLP,  independent  public
accountants,  and its unaudited consolidated and consolidating balance sheet and
statement of operations and  consolidated  statement of cash flows as of and for
the nine month period ended March 31, 1999.  Such financial  state ments present
fairly the  financial  condition  and  results of  operations  and cash flows of
Holdings  and its  consolidated  subsidiaries  as of  such  dates  and for  such
periods.  Each such balance  sheet and the notes

                                      -25-



thereto disclose all material liabilities,  direct or contingent, of Holdings on
a  consolidated  basis as of the date thereof.  Such financial  statements  were
prepared in accordance with GAAP applied on a consistent basis.

                  SECTION 3.06. No Material  Adverse  Change.  There has been no
material  adverse  change in the  business,  assets,  operations,  prospects  or
condition,  financial or otherwise, of the Borrower and the Subsidiaries,  taken
as a whole, since June 30, 1998.

                  SECTION 3.07.  Title to Properties;  Possession  Under Leases.
(a) Each of Holdings, the Borrower and the Subsidiaries (other than the Excluded
Subsidiaries) has good and marketable title to, or valid leasehold interests in,
all its material  properties and assets,  except for minor defects in title that
do not interfere with its ability to conduct its business as currently conducted
or to utilize such properties and assets for their intended  purposes.  All such
material  properties  and assets  are free and clear of Liens,  other than Liens
expressly permitted by Section 6.02.

                  (b) Each of Holdings, the Borrower and the Subsidiaries (other
than the Excluded  Subsidiaries)  has complied  with all  obligations  under all
material  leases to which it is a party as a lessee  and all such  leases are in
full force and effect.  Each of  Holdings,  the  Borrower  and the  Subsidiaries
(other  than  the  Excluded   Subsidiaries)   enjoys  peaceful  and  undisturbed
possession under all such material leases.

                  SECTION 3.08. Subsidiaries. Schedule 3.08 sets forth as of the
Effective  Date a list of all  Subsidiaries  of the Borrower and the  percentage
ownership interest of the Borrower therein. Each Subsidiary that is an "Excluded
Subsidiary"  satisfies the  conditions  set forth in the  definition of the term
"Excluded Subsidiary".

                  SECTION 3.09. Litigation;  Compliance with Laws. (a) Except as
set forth in Schedule 3.09,  there are not any actions,  suits or proceedings at
law or in equity or by or before any  Governmental  Authority now pending or, to
the  knowledge  of Holdings or the  Borrower,  threatened  against or  affecting
Holdings or the Borrower or any  Subsidiary or any business,  property or rights
of any such person (i) which  involve any Loan Document or the  Transactions  or
(ii) as to which there is a reasonable  possibility of an adverse  determination
and which,  if adversely  determined,  could,  individually or in the aggregate,
result in a Material Adverse Effect.

                  (b) None of Holdings,  the Borrower or any of the Subsidiaries
or any of their respective material properties or assets is in violation of, nor
will the  continued  operation  of  their  material  properties  and  assets  as
currently conducted violate, any law, rule or regulation  (including any zoning,
building,  Environmental  and Safety  Law,  ordinance,  code or  approval or any
building  permits),  or is in  default  with  respect  to  any  judgment,  writ,
injunction or decree of any Governmental  Authority,  except any such violations
or defaults  that,  individually  or in the  aggregate,  could not reasonably be
expected to result in a Material Adverse Effect.

                   SECTION  3.10.  Agreements.    (a)  None  of   Holdings,  the
Borrower or any of the Subsidiaries is a party to any agreement or instrument or
subject to any corporate  restriction  that has resulted or could  reasonably be
anticipated to result in a Material Adverse Effect.

                  (b) None of Holdings,  the Borrower or any of the Subsidiaries
is in  default in any  manner  under any  provision  of any  indenture  or other
agreement or instrument evidencing Indebtedness, or any other material agreement
or instrument to which it is a party or by which it or any of its  properties or
assets are or may be bound,  where such default could  reasonably be anticipated
to result in a Material Adverse Effect.

                  SECTION 3.11.  Federal  Reserve  Regulations.   (a)  None  of
Holdings, the Borrower or any of the Subsidiaries is engaged principally,  or as
one of its  important  activities,  in the business of extending  credit for the
purpose of purchasing or carrying Margin Stock.

                  (b) No part of the proceeds of any Loan will be used,  whether
directly or indirectly, and whether immediately, incidentally or ultimately, (i)
to purchase or carry Margin Stock or to extend  credit to others for the purpose
of  purchasing  or carrying  Margin Stock or to refund  indebtedness  originally
incurred for such purpose, or (ii) for any purpose which entails a violation of,
or which is  inconsistent  with, the provisions of the Regulations of the Board,
including Regulation T, U or X.

                                      -26-



                  SECTION 3.12.  Investment  Company Act; Public Utility Holding
Company  Act.  None  of  Holdings,  the  Borrower  or any  Subsidiary  is (a) an
"investment  company"  as  defined  in, or  subject  to  regulation  under,  the
Investment  Company  Act of 1940 or (b) a "holding  company"  as defined  in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.

                  SECTION  3.13.  Use of  Proceeds.  The  Borrower  will use the
proceeds of the Loans and will  request  the  issuance of Letters of Credit only
for the purposes specified in Section 5.08 of this Agreement.

                  SECTION 3.14. Tax Returns. Each of Holdings,  the Borrower and
the  Subsidiaries  has filed or caused to be filed all Federal,  state and local
tax returns  required to have been filed by it and has paid or caused to be paid
all taxes due and payable by it and all assessments received by it, except taxes
that are being contested in good faith by appropriate  proceedings and for which
adequate reserves have been established in accordance with GAAP.

                  SECTION  3.15.  No  Material  Misstatements.  (a)  No  factual
information,   including  factual  information   contained  in  the  Information
Memorandum or in any report, financial statement, exhibit or schedule, furnished
by or on behalf of Holdings or the Borrower to the  Administrative  Agent or any
Lender in  connection  with the  negotiation  of any Loan  Document  or included
therein or delivered pursuant thereto (when considered as a whole with all other
factual information so furnished) contained, contains or will contain, as of the
date so furnished,  any material misstatement of fact or omitted,  omits or will
omit to state, as of the date so furnished,  any material fact necessary to make
the statements therein, in the light of the circumstances under which they were,
are or will be made, not misleading.

                  (b) All  financial  projections  furnished  by or on behalf of
Holdings or the Borrower to the Administrative Agent or any Lender in connection
with the negotiation of any Loan Document have been and will be prepared in good
faith  based upon  estimates  and  assumptions  believed  by  management  of the
Borrower  to be  reasonable  at the  time  of  preparation  thereof  (except  as
otherwise disclosed in writing therein), it being understood that projections as
to future  performance are not to be viewed as facts and that actual results may
differ from projected results and such differences may be material.

                  SECTION 3.16. Employee Benefit Plans. Each of the Borrower and
its  ERISA  Affiliates  is in  compliance  in all  material  respects  with  the
applicable  provisions of ERISA and the Code and the  regulations  and published
interpretations  thereunder.  No Reportable Event has occurred in respect of any
Plan of the Borrower or any ERISA  Affiliate.  The present  value of all benefit
liabilities  under each Plan (based on those assumptions used to fund such Plan)
did not, as of the last annual valuation date applicable thereto, exceed by more
than  $1,000,000  the value of the assets of such Plan, and the present value of
all benefit  liabilities of all  underfunded  Plans (based on those  assumptions
used to fund each such  Plan) did not,  as of the last  annual  valuation  dates
applicable  thereto,  exceed by more than  $5,000,000 the value of the assets of
all such  underfunded  Plans.  Neither the Borrower nor any ERISA  Affiliate has
incurred  any  Withdrawal   Liability  that  materially  adversely  affects  the
financial  condition of the Borrower and its ERISA  Affiliates taken as a whole.
Neither the Borrower nor any ERISA Affiliate has received any notification  that
any Multiemployer  Plan is in reorganization or has been terminated,  within the
meaning of Title IV of ERISA, and no Multiemployer  Plan is reasonably  expected
to be in  reorganization  or to be  terminated,  where  such  reorganization  or
termination  has resulted or can reasonably be expected to result in an increase
in the contributions  required to be made to such Plan that would materially and
adversely  affect  the  financial  condition  of  the  Borrower  and  its  ERISA
Affiliates taken as a whole.

                  SECTION 3.17.  Environmental  Matters.  Except as set forth in
Schedule 3.17:

                  (a) The soils and groundwater  beneath the properties owned or
operated by Holdings,  the Borrower and the Subsidiaries  (the  "Properties") do
not contain  any  Hazardous  Materials  in amounts or  concentrations  which (i)
constitute a violation of, or (ii) give rise to liability  under,  Environmental
Laws, which violations and  liabilities,  in the aggregate,  could reasonably be
anticipated to result in a Material Adverse Effect.

                  (b) The  Properties and all operations of the Borrower and the
Subsidiaries  are in  compliance,  and in the  last  three  years  have  been in
compliance,  with all Environmental Laws and all necessary Environmental Permits
have  been  obtained  and  are  in  effect,  except  to  the  extent  that  such
non-compliance  or failure to obtain any necessary  permits,  in the  aggregate,
could not reasonably be anticipated to result in a Material Adverse Effect.

                                      -27-



                  (c) There have been no Releases  or  threatened  Releases  at,
from,  under or proximate to the Properties or otherwise in connection  with the
operations  of the Borrower or the  Subsidiaries,  which  Releases or threatened
Releases,  in the  aggregate,  could  reasonably be  anticipated  to result in a
Material Adverse Effect.

                  (d) None of Holdings,  the Borrower or any of the Subsidiaries
has  received  any  notice  of an  Environmental  Claim in  connection  with the
Properties or the operations of the Borrower or the  Subsidiaries or with regard
to any person whose liabilities for environmental matters Holdings, the Borrower
or the Subsidiaries has retained or assumed, in whole or in part, contractually,
by operation of law or otherwise,  which, in the aggregate,  could reasonably be
anticipated  to  result in a  Material  Adverse  Effect,  nor do  Holdings,  the
Borrower or the Subsidiaries have reason to believe that any such notice will be
received or is being threatened.

                  SECTION  3.18.  Insurance.  Schedule  3.18 sets  forth a true,
complete and correct description of all insurance  maintained by the Borrower or
by the Borrower for its  Subsidiaries  as of the Effective Date. As of each such
date, such insurance is in full force and effect and all premiums have been duly
paid.  The  Borrower  and its  Subsidiaries  have  insurance in such amounts and
covering such risks and  liabilities as are in accordance  with normal  industry
practice.

                  SECTION 3.19. Labor Matters. There are no significant strikes,
lockouts,  slowdowns or other labor disputes against  Holdings,  the Borrower or
any of  its  Subsidiaries  pending  or,  to the  knowledge  of  Holdings  or the
Borrower,  threatened that could  reasonably be expected to,  individually or in
the aggregate,  have a Material Adverse Effect.  The hours worked by and payment
made to employees of Holdings,  the Borrower or any of its Subsidiaries have not
been in  violation  of the Fair  Labor  Standards  Act or any  other  applicable
Federal,  state,  local or foreign law  dealing  with such  matters,  where such
violations  could reasonably be expected,  individually or in the aggregate,  to
result in a Material Adverse Effect.  The consummation of the Transactions  will
not give rise to a right of termination or right of renegotiation on the part of
any union under any  collective  bargaining  agreement  to which  Holdings,  the
Borrower  or any of its  Subsidiaries  is a  party  or by  which  Holdings,  the
Borrower or any of its Subsidiaries is bound.

                  SECTION 3.20. Patents,  Trademarks,  etc. Each of the Borrower
and  each  of its  Subsidiaries  owns,  or is  licensed  to  use,  all  patents,
trademarks, trade names, copyrights, technology, know-how and processes, service
marks and rights with respect to the foregoing that are (a) used in or necessary
for the conduct of their  respective  businesses as currently  conducted and (b)
material to the business, assets, operations, properties, prospects or condition
(financial or otherwise) of the Borrower and its Subsidiaries  taken as a whole.
The  use of such  patents,  trademarks,  trade  names,  copyrights,  technology,
know-how, processes and rights with respect to the foregoing by the Borrower and
its Subsidiaries does not infringe on the rights of any Person. Holdings and the
Excluded Subsidiaries do not own or license any such patents,  trademarks, trade
names, copyrights, technology, know-how or processes, service marks or rights.

                  SECTION 3.21. Year 2000. All reprogramming  required to permit
the proper  functioning,  in and  following  the year 2000,  of (a) the computer
systems  of the  Borrower  and the  Subsidiaries  and (b)  equipment  containing
embedded microchips  (including systems and equipment supplied by others or with
which the Borrower's or any  Subsidiary's  systems  interface)  that are, in the
case of (a) and (b), material to the business, assets,  operations,  properties,
prospects  or  condition  (financial  or  otherwise)  of the  Borrower  and  its
Subsidiaries,  taken  as a  whole,  and the  testing  of all  such  systems  and
equipment,  as  so  reprogrammed,  has  been  completed,  except  as  could  not
reasonably be expected to result in a Material Adverse Effect.


ARTICLE IV.  CONDITIONS

                  SECTION  4.01.  All  Credit  Events.  The  obligations  of the
Lenders to make  Loans and of the  Issuing  Bank to issue  Letters of Credit are
subject  to the  satisfaction,  on the date of each  Borrowing,  including  each
Borrowing of a Swingline  Loan,  and on the date of each issuance of a Letter of
Credit (each such event, a "Credit Event"), of each of the following conditions:

                  (a) The  Administrative  Agent shall have received a notice of
         such  Borrowing  as  required  by  Section  2.03 or, in the case of the
         issuance of a Letter of Credit, the Issuing Bank and the Administrative
         Agent  shall have  received a notice  requesting  the  issuance of such
         Letter of Credit

                                      -28-




         as    required  by   Section   2.20(b)   or,  in  the   case   of   the
         Borrowing   of  a   Swingline  Loan,  the   Swingline  Lender  and  the
         Administrative  Agent  shall  have received  a notice  requesting  such
         Swingline Loan as required by Section 2.19(b).

                  (b) The  representations  and  warranties set forth in Article
         III hereof and in the other Loan Documents shall be true and correct in
         all material  respects on and as of the date of such Credit Event  with
         the  same  effect  as  though  made  on and as of such  date, except to
         the extent  such  representations  and  warranties expressly  relate to
         an earlier date.

                  (c) Each Loan Party shall be in compliance  with all the terms
         and  provisions set forth herein and in each other Loan Document on its
         part to be observed or  performed,  and at the time of and  immediately
         after such  Credit  Event,  no Event of  Default or Default  shall have
         occurred and be continuing.

Each Credit Event shall be deemed to constitute a representation and warranty by
the  Borrower on the date of such Credit  Event as to the matters  specified  in
paragraphs (b) and (c) of this Section 4.01.

                   SECTION 4.02.  Effectiveness.    The  effectiveness  of  this
Agreement and the  obligations of the Lenders and the Issuing Bank hereunder are
subject to the satisfaction of the following conditions:

                  (a) The Administrative Agent shall have received  counterparts
         of this  Agreement  signed on behalf of  Holdings,  the  Borrower,  the
         Issuing Bank and all the Lenders.

                  (b) The  Administrative  Agent shall have received a favorable
         written opinion (addressed to the Lenders and dated the Effective Date)
         of Roxanne Khazarian, Esq., counsel for the Loan Parties, substantially
         in the form of Exhibit B and covering  such other  matters  relating to
         the  Loan  Parties,  the  Loan  Documents  or the  Transactions  as the
         Required Lenders shall reasonably request. The Borrower hereby requests
         such counsel to deliver such opinion.

                  (c)  All  legal  matters  incident  to  this  Agreement,   the
         borrowings  and  extensions  of credit  hereunder  and the  other  Loan
         Documents  shall be  reasonably  satisfactory  to the  Lenders,  to the
         Issuing  Bank  and  to  Cravath,   Swaine  &  Moore,  counsel  for  the
         Administrative Agent.

                  (d)  The   Administrative   Agent  shall  have  received  such
         documents and certificates as the  Administrative  Agent or its counsel
         may reasonably request relating to the organization, existence and good
         standing of the Loan Parties, the authorization of the Transactions and
         any other legal matters relating to the Loan Parties, this Agreement or
         the  Transactions,  all  in  form  and  substance  satisfactory  to the
         Administrative Agent and its counsel.

                  (e)  The   Administrative   Agent   shall   have   received  a
         certificate,  dated the Effective Date and signed by the  President,  a
         Vice  President  or a  Financial  Officer of the  Borrower,  confirming
         compliance  with the  conditions set forth in paragraphs (b) and (c) of
         Section 4.01.

                  (f) The Administrative Agent shall have received all fees, and
         other  amounts  due and  payable  on or  prior to the  Effective  Date,
         including,  to the  extent  invoiced,  reimbursement  or payment of all
         out-of-pocket  expenses  required  to be  reimbursed  or  paid  by  the
         Borrower hereunder or under any other Loan Document.

                  (g) The  Administrative  Agent shall have  received  from each
         Loan Party a  counterpart  of each of the  Guarantee  Agreement and the
         Indemnity,  Subrogation  and  Contribution  Agreement duly executed and
         delivered on behalf of such Loan Party.

                  (h) All outstanding Loans, accrued and unpaid interest thereon
         and accrued and unpaid  fees  (other  than  Administrative  Agent Fees)
         under the  Existing  Credit  Agreement  shall be paid in full  (without
         prejudice  to the  Borrower's  right to  borrow  hereunder  in order to
         finance such  payment),  all Liens securing the  obligations  under the
         Existing Credit  Agreement shall have been released and all commitments
         under the Existing Credit Agreement shall have been terminated.

The  Administrative  Agent  shall  notify the  Borrower  and the  Lenders of the
Effective Date, and such notice shall be conclusive and binding. Notwithstanding
the foregoing,  the  obligations of the Lenders to make Loans and of the Issuing
Bank to issue Letters of Credit hereunder shall not become effective unless each
of the foregoing conditions is satisfied (or waived pursuant to Section 9.08) at
or prior to 5:00 p.m.,

                                      -29-



New York City time,  on August 31, 1999 (and, in the event such  conditions  are
not so satisfied or waived, the Commitments shall terminate at such time).


ARTICLE V.  AFFIRMATIVE COVENANTS

                  Each of Holdings  and the Borrower  covenants  and agrees with
each Lender that so long as this Agreement  shall remain in effect and until the
Commitments have been terminated and the principal of and interest on each Loan,
all fees and all other expenses or amounts payable under any Loan Document shall
have been paid in full and all  Letters  of Credit  have been  canceled  or have
expired and all amounts drawn  thereunder have been  reimbursed in full,  unless
the Required  Lenders shall otherwise  consent in writing,  each of Holdings and
the Borrower will, and will cause each of the Subsidiaries to:

                  SECTION 5.01. Existence;  Businesses and Properties. (a) Do or
cause to be done all things necessary to preserve,  renew and keep in full force
and effect its legal existence,  except as otherwise  expressly  permitted under
Section  6.04 and  except  that  the  foregoing  shall  not  apply  to  Excluded
Subsidiaries.

                  (b) Do or cause to be done all things necessary to (i) obtain,
preserve,  renew, extend and keep in full force and effect the rights, licenses,
permits, franchises,  authorizations,  patents, copyrights, trademarks and trade
names  material to the conduct of its  business;  (ii) maintain and operate such
business in  substantially  the manner in which it is  presently  conducted  and
operated; (iii) comply in all material respects with all applicable laws, rules,
regulations and orders of any Governmental  Authority,  whether now in effect or
hereafter  enacted;  and (iv) at all times  maintain  and  preserve all property
material to the conduct of such  business and keep such property in good repair,
working order and condition and from time to time make, or cause to be made, all
needful and proper repairs, renewals,  additions,  improvements and replacements
thereto necessary in order that the business carried on in connection  therewith
may be properly conducted at all times; provided that (A) clauses (i), (ii), and
(iv) above shall not apply to Excluded Subsidiaries, (B) the foregoing shall not
prevent  any  transaction  expressly  permitted  under  Section  6.04,  (C)  the
foregoing  shall not  prevent  Holdings,  the  Borrower or any  Subsidiary  from
withdrawing its  qualification as a foreign  corporation in any jurisdiction and
(D) the  foregoing  clause (i) shall not prevent  Holdings,  the Borrower or any
Subsidiary  from  taking or  failing to take any  action  respecting  any right,
license, permit, franchise, authorization, patent, copyright, trademark or trade
name  determined  by it to be in the  best  interest  of the  Borrower  and  the
Subsidiaries;  provided further that the foregoing clauses (C) and (D) shall not
be construed to permit the taking of, or failure to take,  any action that could
reasonably be expected to result in a Material Adverse Effect.

                  SECTION  5.02.   Insurance.   Keep  its  insurable  properties
adequately  insured at all times by  financially  sound and reputable  insurers;
maintain such other insurance,  to such extent and against such risks, including
fire and other risks insured against by extended coverage,  as is customary with
companies  in  the  same  or  similar  businesses,  including  public  liability
insurance  against  claims  for  personal  injury  or death or  property  damage
occurring upon, in, about or in connection with the use of any properties owned,
occupied  or  controlled  by it; and  maintain  such other  insurance  as may be
required by law.

                  SECTION 5.03.  Obligations and Taxes. Pay its Indebtedness and
other material  obliga tions promptly and in accordance with their terms and pay
and discharge promptly when due all taxes,  assessments and governmental charges
or levies  imposed  upon it or upon its  income or  profits or in respect of its
property,  before the same shall become delinquent or in default, as well as all
lawful claims for labor,  materials and supplies or otherwise  which, if unpaid,
might give rise to a Lien upon such  properties or any part  thereof;  provided,
however,  that such payment and discharge  shall not be required with respect to
any  such  obligation,  tax,  assessment,  charge,  levy or claim so long as the
validity  or amount  thereof  shall be  contested  in good faith by  appropriate
proceedings and the Borrower shall have set aside on its books adequate reserves
with respect  thereto and such  contest  operates to suspend  collection  of the
contested obligation, tax, assessment charge, levy or claim and enforcement of a
Lien.

                  SECTION 5.04.  Financial Statements, Reports, etc. In the case
of  Holdings  and the  Borrower,  furnish to the  Administrative  Agent and each
Lender:

                  (a)  within 95 days  after the end of each  fiscal  year,  its
         consolidated and consolidating  balance sheets and related consolidated
         and consolidating statements of operations and consoli dated statements
         of shareholders'  equity and cash flows showing the financial condition
         of Holdings and its  consolidated  subsidiaries as of the close of such
         fiscal year and the results of its

                                      -30-




          operations  and the  operations of such subsidiaries during such year,
          all  audited  (in the  case of  such  consolidated  and  consolidating
          statements)  by  any  "Big 5"  accounting  firm or  other  independent
          publi c  accountants  of   recognized  national  standing   reasonably
          acceptable to the Required  Lenders,  and accompanied by an opinion of
          such accountants (which shall not contain any "going concern" or other
          materially   adverse   qualification)   to   the  effect   that   such
          consolidated   financial   statements  fairly  present  the  financial
          condition  and  results of  operations  of  Holdings on a consolidated
          basis in accordance with GAAP consistently applied;

                  (b)  within 50 days  after the end of each of the first  three
         fiscal quarters of each fiscal year, its consolidated and consolidating
         balance sheets and related consolidated and consolidating statements of
         operations and consolidated statements of shareholders' equity and cash
         flows showing the financial  condition of Holdings and its consolidated
         subsidiaries  as of the close of such fiscal quarter and the results of
         its  operations  and the  operations of such  subsidiaries  during such
         fiscal  quarter and the then elapsed  portion of the fiscal  year,  all
         certified by one of its Finan cial  Officers as fairly  presenting  the
         financial  condition  and  results  of  operations  of  Holdings  on  a
         consolidated  basis  in  accordance  with  GAAP  consistently  applied,
         subject to the  absence of  footnotes  and  normal  year-end  reserves,
         accruals and audit adjustments;

                  (c)  concurrently  with any delivery of  financial  statements
         under (a) or (b)  above,  a  certificate  of a  Financial  Officer  (i)
         certifying that no Event of Default or Default has occurred or, if such
         an Event of Default or Default has occurred,  specifying the nature and
         extent thereof and any corrective  action taken or proposed to be taken
         with respect thereto and (ii) setting forth  computations in reasonable
         detail   satisfactory  to  the   Administrative   Agent   demonstrating
         compliance  with the  covenants  contained in Sections  6.06,  6.07 and
         6.08;

                  (d)  concurrently  with any delivery of  financial  statements
         under paragraph (a) above, a certificate of the accounting firm opining
         on such  statements  (which  certificate  may be limited to  accounting
         matters  and  disclaim   responsibility   for  legal   interpretations)
         certifying  (i) whether in connection  with its audit  examination  any
         Default  or Event of Default  has come to its  attention  and,  if such
         event has come to its attention, the nature and extent thereof and (ii)
         that based on its audit  examination and its review of the computations
         referred to in clause (ii) of paragraph (c) above,  nothing has come to
         its attention that leads it to believe that the  information  contained
         in the certificate  delivered therewith pursuant to paragraph (c) above
         is not correct; provided that the requirements of this clause (d) shall
         be subject to any limitations and qualifications adopted after the date
         hereof  by  any   professional   association  or  organization  or  any
         Governmental  Authority,  in each case that  affects the content of, or
         ability  of  accounting  firms  to  deliver,  certificates  of the type
         contemplated by this paragraph;

                  (e) promptly after the same become  publicly  available or are
         filed or distributed,  as applicable,  copies of all periodic and other
         reports,  proxy statements and other materials filed by Holdings or the
         Borrower or any Subsidiary with the Securities and Exchange Commission,
         or any Governmental Authority succeeding to any of or all the functions
         of said  Commission,  or with  any  national  securities  exchange,  or
         distributed to the holders of any Indebtedness  with a then outstanding
         principal  amount  of  $15,000,000  or more (or any  trustee,  agent or
         representative for any such holders) or to Holdings'  shareholders,  as
         the case may be;

                  (f) promptly  upon the  occurrence  of any change of rating of
         the Borrower's  senior,  unsecured,  noncredit  enhanced senior debt by
         Moody's or S&P, a certificate of a Financial  Officer setting forth the
         new rating,  the effective date thereof and, if  applicable,  notice of
         any change in the Applicable Percentage as a result thereof; and

                  (g)  promptly,  from  time to  time,  such  other  information
         regarding the operations,  business affairs and financial  condition of
         Holdings and the Borrower or any  Subsidiary,  or  compliance  with the
         terms of any Loan Document,  as the Administrative  Agent or any Lender
         may reasonably request.

                  SECTION 5.05.  Litigation and  Other Notices.  Furnish  to the
Administrative Agent and each Lender prompt written notice of the following:

                  (a) any Event of Default or Default, specifying the nature and
         extent thereof and the corrective  action (if any) proposed to be taken
         with respect thereto;

                                      -31-


                  (b) the filing or commencement  of, or any threat or notice of
         intention  of any  person  to file or  commence,  any  action,  suit or
         proceeding,   whether  at  law  or  in  equity  or  by  or  before  any
         Governmental  Authority,  against the Borrower or any Affiliate thereof
         which could  reasonably  be  expected  to result in a Material  Adverse
         Effect; and

                  (c) any  other  development  that has  resulted  in,  or could
         reasonably be expected to result in, a Material Adverse Effect.

                  SECTION 5.06.  Employee  Benefits.  (a) Comply in all material
respects with the applicable provisions of ERISA and the Code and (b) furnish to
the Administrative  Agent (i) as soon as possible after, and in any event within
30 days after any  Responsible  Officer of the  Borrower or any ERISA  Affiliate
knows or has reason to know that, any  Reportable  Event has occurred that alone
or together  with any other  Reportable  Event could  reasonably  be expected to
result in liability of the Borrower to the PBGC in an aggregate amount exceeding
$5,000,000,  a statement of a Financial Officer setting forth details as to such
Reportable Event and the action that the Borrower  proposes to take with respect
thereto,  together with a copy of the notice,  if any, of such Reportable  Event
given to the PBGC,  (ii) promptly  after receipt  thereof,  a copy of any notice
that the Borrower or any ERISA  Affiliate  may receive from the PBGC relating to
the  intention  of the PBGC to  terminate  any Plan or Plans  (other than a Plan
maintained by an ERISA  Affiliate  that is considered  an ERISA  Affiliate  only
pursuant to  subsection  (m) or (o) of Code Section 414) or to appoint a trustee
to administer any such Plan,  (iii) within 10 days after the due date for filing
with the PBGC pursuant to Section 412(n) of the Code a notice of failure to make
a required installment or other payment with respect to a Plan, a statement of a
Financial  Officer  setting forth details as to such failure and the action that
the Borrower proposes to take with respect thereto,  together with a copy of any
such notice given to the PBGC and (iv)  promptly and in any event within 30 days
after receipt thereof by the Borrower or any ERISA Affiliate from the sponsor of
a  Multiemployer  Plan,  a copy of each notice  received by the  Borrower or any
ERISA Affiliate  concerning (A) the imposition of Withdrawal  Liability or (B) a
determination  that a Multiemployer Plan is, or is expected to be, terminated or
in reorganization, both within the meaning of Title IV of ERISA.

                  SECTION 5.07.  Maintaining  Records;  Access to Properties and
Inspections.  Maintain all financial  records in accordance with GAAP and permit
any  representatives  designated by any Lender, upon reasonable prior notice, to
visit and inspect the  financial  records and the  properties  of Holdings,  the
Borrower or any Subsidiary at reasonable  times (during normal  business  hours)
and as often as requested and to make extracts from and copies of such financial
records, and permit any representatives  designated by any Lender to discuss the
affairs, finances and condition of Holdings, the Borrower or any Subsidiary with
the officers  thereof and independent  accountants  therefor;  provided that any
such visitation and inspection  rights shall be exercised in a reasonable manner
that  does  not  disrupt  the  business  activities  of  the  Borrower  and  its
Subsidiaries.

                  SECTION 5.08.  Use of Proceeds.  Use the proceeds of the Loans
and  request the  issuance  of Letters of Credit  only for (i)  working  capital
purposes of the Borrower and its Subsidiaries or (ii) general corporate purposes
(including all proper and legitimate  business purposes) of the Borrower and its
Subsidiaries.

                  SECTION 5.09.  Further  Assurances.  (a) Cause each Subsidiary
(including any Subsidiary that becomes a Subsidiary  after the date hereof,  but
excluding (i) any Foreign  Subsidiary so long as such Foreign Subsidiary has not
entered  into any  Guarantee  with  respect  to any  other  Indebtedness  of the
Borrower and (ii) any Excluded  Subsidiary  that has not ceased to qualify as an
"Excluded  Subsidiary")  to  undertake  the  obligations  of  and  to  become  a
Subsidiary  Guarantor  pursuant to the  Guarantee  Agreement  and a party to the
Indemnity,  Subrogation  and  Contribution  Agreement  pursuant  to one or  more
instruments   or   agreements   satisfactory   in  form  and  substance  to  the
Administrative Agent.

                  SECTION 5.10.  Environmental Matters. (a) Promptly give notice
to the  Administrative  Agent upon  becoming  aware of (i) any  violation of any
Environmental Law, (ii) any claim, inquiry,  proceeding,  investigation or other
action,  including  a  request  for  information  or a notice  of an  actual  or
threatened  Environmental  Claim or (iii) the  discovery  of the  Release of any
Hazardous Material at, on, under or from any of the properties owned or occupied
by the  Borrower  or  any  Subsidiary  in  excess  of  reportable  or  allowable
standards,  threshold  amounts or levels  under any  Environmental  Law, or in a
manner or amount that could  reasonably be expected to result in liability under
any Environmental Law.

                  (b) Upon  discovery of the  presence on any of the  properties
owned or occupied by the Borrower or any  Subsidiary of any  Hazardous  Material
that is in  violation  of, or that could  reasonably  be  expected  to result in
liability under, any Environmental Law, take all necessary steps to initiate and
expeditiously complete all Remedial Action to eliminate any such adverse effect,
and keep the  Administrative  Agent  informed  of such  actions  and the results
thereof.

                                      -32-



ARTICLE VI.  NEGATIVE COVENANTS

                  Until the  Commitments  have  expired  or  terminated  and the
principal  of and  interest  on each Loan,  all fees and all other  expenses  or
amounts  payable  under any Loan Document have been paid in full and all Letters
of Credit have been  cancelled or have expired and all amounts drawn  thereunder
have been  reimbursed  in full,  unless the  Required  Lenders  shall  otherwise
consent in writing, each of Holdings and the Borrower covenants and agrees that:

                  SECTION 6.01.  Indebtedness.  (a) The Borrower will not permit
any  Subsidiary to incur,  create,  assume or permit to exist any  Indebtedness,
except:

                  (i) intercompany   Indebtedness,  including   open   accounts,
         incurred by Subsidiaries from the Borrower or from other Subsidiaries;

                  (ii) unsecured Indebtedness in an aggregate principal amount
         at any  time  outstanding not  to exceed 10% of Consolidated Net Worth;
         and

                  (iii)  Indebtedness    consisting   of   Guarantees   of   the
Obligations.

                  (b) The Borrower will not incur,  create,  assume or permit to
exist any  Indebtedness in respect of letters of credit or bankers'  acceptances
other  than  (i)   Indebtedness  in  respect  of  Letters  of  Credit  and  (ii)
Indebtedness in respect thereof in an aggregate  principal  amount not to exceed
$10,000,000 at any one time outstanding.

                  SECTION 6.02.  Liens.  Neither Holdings nor the Borrower will,
nor will they permit any Subsidiary to, create, incur, assume or permit to exist
any Lien on any property or assets  (including  stock or other securities of any
person,  including any Subsidiary)  now owned or hereafter  acquired by it or on
any income or revenues or rights in respect of any thereof, except:

                  (a) Liens   on  property  or  assets  of  the Borrower and its
         Subsidiaries  existing on  the Effective Date and set forth in Schedule
         6.02;

                  (b) any Lien  existing  on any  property or asset prior to the
         acquisition  thereof by the Borrower or any  Subsidiary;  provided that
         (i) such Lien is not created in  contemplation of or in connection with
         such  acquisition,  and (ii)  such  Lien  does not  apply to any  other
         property or assets of the Borrower or any Subsidiary;

                  (c) Liens  for  taxes, assessments  or governmental charges or
         levies not  yet due or  which are  being contested  in  compliance with
         Section 5.03;

                  (d) Liens imposed by law that do not secure  Indebtedness  for
         borrowed  money and were  incurred in the ordinary  course of business,
         such   as   carriers',   warehousemen's,   mechanic's,   materialmen's,
         repairmen's  or other like  Liens  arising  in the  ordinary  course of
         business;  provided  that such Liens either (i) do not in the aggregate
         materially  detract  from the value of the  property or assets to which
         such Liens apply or materially  impair the use thereof in the operation
         of the business of Holdings,  the Borrower and the Subsidiaries or (ii)
         are being contested in compliance with Section 5.03;

                  (e)  Liens  upon   equipment,   machinery  or  real   property
         (including  improvements thereto and fixtures thereon),  assets subject
         to Capital  Lease  Obligations  and  assets  financed  with  industrial
         revenue  bonds;  provided that (i) such Liens only secure  Indebtedness
         incurred (A) to finance the acquisition of such equipment, machinery or
         real property, or the improvement of such real property, (B) in respect
         of Capital Lease  Obligations  or (C) in respect of industrial  revenue
         bonds,  (ii) such  Liens  (other  than  Liens  securing  Capital  Lease
         Obligations)  are incurred,  and the related  Indebtedness  is created,
         within 180 days after the  acquisition  or  construction  of the assets
         financed thereby and (iii) in each case, such Liens do not encumber any
         other assets or properties;

                                      -33-


                  (f)  leases  or  subleases   granted  to  other   persons  not
         materially interfering with the conduct of the business of the Borrower
         and its Subsidiaries taken as a whole;

                  (g)  easements,  licenses,  rights-of-way,   zoning  or  other
         restrictions,  encroachments and other similar charges or encumbrances,
         and minor title deficiencies, statutory and common law
         landlords' liens under leases to which Holdings, the Borrower or any of
         its Subsidiaries is a party, in each case not securing Indebtedness and
         not  materially  interfering  with  the  conduct  of  the  business  of
         Holdings, the Borrower or any of its Subsidiaries;

                  (h) Liens  (other than any Lien imposed by ERISA) for worker's
         compensation,  unemployment  compensation and other forms of government
         insurance incurred in the ordinary course of business;

                  (i) Liens to secure  (i)  performance  of  tenders,  statutory
         obligations,  bids,  leases and contracts or other similar  obligations
         (other than for borrowed  money) entered into in the ordinary course of
         business or (ii)  obligations on surety or appeal bonds,  provided that
         the  obligations  secured by such Liens  (and,  to the extent  (without
         duplication)  the value of cash or  property  (other  than  Letters  of
         Credit)  forming a part of the security  with respect to such surety or
         appeal bonds  exceeds the  obligations  so secured,  the amount of such
         excess) do not exceed in the aggregate $5,000,000;

                  (j) Liens arising from  precautionary  Uniform Commercial Code
         financing   statement  filings  regarding  operating  leases  otherwise
         permitted hereunder;

                  (k) any  interest  or title of a lessor  under  any  operating
         lease of property to, or of any consignor of goods consigned to, or any
         creditor of any consignee in goods  consigned to such consignee by, the
         Borrower  or any of its  Subsidiaries,  in each  case  in the  ordinary
         course of business;

                  (l) Liens arising out of judgments or awards,  which have been
         in existence for less than 45 days from the date of creation thereof or
         which have been  stayed or bonded  pending  appeal or fully  covered by
         insurance  (subject  to  applicable   deductibles)  and  for  which  no
         enforcement  action has been  commenced,  provided  that the  aggregate
         amount of all such  judgments  or awards (and,  to the extent  (without
         duplication)  the value of cash or  property  (other  than  Letters  of
         Credit) forming a part of the security with respect to such judgment or
         award exceeds the  obligations  so secured,  the amount of such excess)
         does not exceed $5,000,000 at any time outstanding; and

                  (m)  Liens  securing  obligations  under  any Rate  Protection
         Agreement  consisting  solely of an assignment of the Borrower's rights
         under such Rate Protection Agreement.

                  SECTION 6.03. Certain  Acquisitions.  Neither Holdings nor the
Borrower  will,  nor will they  permit any  Subsidiary  to,  purchase,  lease or
otherwise  acquire (in one transaction or a series of related  transactions) any
property or assets outside the ordinary course of business,  except acquisitions
by the Borrower of the capital  stock of a Person (the  "Issuer") or of property
or assets  outside  the  ordinary  course  of  business,  provided  that (i) the
aggregate  consideration  paid in connection with all such acquisitions does not
exceed  $450,000,000;  (ii) the Issuer  shall be engaged in, or the property and
assets acquired shall be used in connection with, the same or related (ancillary
or  complementary)  line  of  business  as the  Borrower;  (iii)  all  necessary
governmental  approvals and third party consents for the  acquisition  have been
obtained without imposing burdensome conditions, all appeal periods have expired
and there shall be no  governmental or judicial  action,  pending or threatened,
restraining or imposing  burdensome  conditions on such acquisition;  (iv) after
giving  effect to the  acquisition,  and on a pro  forma  basis  (including  the
financial  results of the  Borrower and the  Subsidiaries  and the Issuer or the
property  and  assets to be  acquired,  as the case may be, and giving pro forma
effect to any  Indebtedness to be incurred in connection with such  acquisition)
for the period of four consecutive  fiscal quarters ending  immediately prior to
such  acquisition,  no Event of Default or Default  shall have  occurred  and be
continuing and the Borrower shall have delivered to the  Administrative  Agent a
certificate of a Financial Officer certifying compliance with the conditions set
forth in this clause (iv) and setting forth pro forma calculations demonstrating
such  compliance;  and (v) in the case of any such acquisition of capital stock,
the Issuer shall become a Subsidiary Guarantor under the Guarantee Agreement.

                  SECTION 6.04. Mergers, Consolidations and Sales of Assets. (a)
Neither  Holdings nor the Borrower will, nor will they permit any Subsidiary to,
merge into or consolidate  with any other person,

                                      -34-



or  permit  any  other  person to merge  into or  consolidate  with it, or sell,
transfer,  lease or otherwise  dispose of (in one  transaction or in a series of
transactions)  all or any  substantial  part of its assets (whether now owned or
hereafter  acquired),  including any capital stock of any Subsidiary;  provided,
however, that if at the time thereof and immediately after giving effect thereto
no Default or Event of Default  shall have occurred and be  continuing,  (i) any
Person  may be  liquidated  into or may  merge  into or with the  Borrower  in a
transaction in which the Borrower is the surviving corporation,  (ii) any Person
may merge into or with or  consolidate  with any Wholly Owned  Subsidiary of the
Borrower  in a  transaction  in which the  surviving  entity  is a Wholly  Owned
Subsidiary of the Borrower,  provided in each case that (x) no Person other than
the  Borrower  or a  Wholly  Owned  Subsidiary  of  the  Borrower  receives  any
consideration (except in the case of a merger or consolidation that is permitted
by  Section  6.03) and (y) in the event  that any Loan  Party is a party to such
merger or consolidation  and is not the surviving  entity,  the surviving entity
shall,  simultaneously  with  such  merger  or  consolidation,  assume  all  the
obligations of such Loan Party hereunder and under the other Loan Documents, and
(iii)  any  Excluded  Subsidiary  may be  liquidated  or may sell,  transfer  or
otherwise dispose of its assets to the Borrower or to another Subsidiary.

                  (b)  Notwithstanding the provisions of paragraph (a) above:

                  (i) the  Borrower  and its  Subsidiaries  may  sell,  transfer
         or otherwise dispose of assets to each other; and

                  (ii) the Borrower and its Subsidiaries  may sell,  transfer or
         otherwise  dispose of assets;  provided that (A) such  dispositions are
         made for fair  value and (B)  after  giving  effect  to any such  sale,
         transfer or  disposition  the aggregate fair market value of all assets
         disposed  of on and  after the  Effective  Date in  reliance  upon this
         clause  (ii)  would not  exceed 15% of the  Consolidated  Total  Assets
         determined by reference to the most recent  quarterly or annual balance
         sheet of the Borrower which precedes such sale, transfer or disposition
         that is delivered to the Administrative Agent pursuant to Section 5.04.

                  SECTION 6.05. Business of Holdings, Borrower and Subsidiaries.
Neither  Holdings nor the Borrower will, nor will they permit any Subsidiary to,
engage at any time in any business or business  activity other than the business
currently conducted by the Borrower and its Subsidiaries and business activities
reasonably  related,  supportive or  incidental  thereto.  Without  limiting the
generality  of the  foregoing,  Holdings  will not  engage  in any  business  or
business activity other than the ownership of the capital stock of the Borrower.

                  SECTION 6.06. Consolidated Net Worth. Neither Holdings nor the
Borrower will, nor will they permit any Subsidiary to, permit  Consolidated  Net
Worth at any time to be less than the sum of (a)  $300,000,000,  plus (b) 50% of
Consolidated  Net  Income for each  fiscal  quarter  of the  Borrower  for which
Consolidated  Net Income is positive,  commencing  with the fiscal quarter ended
June 30, 1999, plus (c) 50% of any increase in Consolidated Net Worth after June
30, 1999,  attributable to capital  contributions  or the issuance of additional
shares of capital stock.

                  SECTION  6.07.   Consolidated  Fixed  Charge  Coverage  Ratio.
Neither  Holdings nor the Borrower will, nor will they permit any Subsidiary to,
permit  the  Consolidated  Fixed  Charge  Coverage  Ratio for any period of four
consecutive  fiscal quarters of the Borrower ended on or after June 30, 1999, to
be less than 2.50 to 1.

                  SECTION 6.08.  Leverage Ratio.    Neither   Holdings  nor  the
Borrower will, nor will they permit any Subsidiary to, permit the Leverage Ratio
at any time to be greater than 0.40 to 1.

                  SECTION 6.09. Restrictive Agreements. Neither Holdings nor the
Borrower  will,  nor will they permit any  Subsidiary  to, enter into,  incur or
permit to exist, directly or indirectly, any agreement or other arrangement that
prohibits,  restricts or imposes any condition upon (a) the ability of Holdings,
the Borrower or any Subsidiary to create, incur or permit to exist any Lien upon
any of its  property  or assets,  or (b) the  ability of any  Subsidiary  to pay
dividends or other distributions with respect to any shares of its capital stock
or to make or repay loans or advances to the Borrower or any other Subsidiary or
to Guarantee Indebtedness of the Borrower or any other Subsidiary, provided that
(i) the foregoing shall not apply to restrictions and conditions  imposed by law
or by any Loan Document,  (ii) the foregoing shall not apply to restrictions and
conditions  existing on the date hereof  identified  on Schedule 6.09 (but shall
apply to any  extension or renewal of, or any  amendment or  modification  if it
expands the scope of, any such  restriction or  condition),  (iii) the foregoing
shall not apply to customary restrictions and conditions contained in agreements
relating  to  the  sale  of  a  Subsidiary  pending  such  sale,  provided  such
restrictions

                                      -35-



and conditions  apply only to the Subsidiary that is to be sold and such sale is
permitted  hereunder,  (iv)  clause  (a) of the  foregoing  shall  not  apply to
restrictions  or  conditions  imposed  by  any  agreement  relating  to  secured
Indebtedness  permitted by this  Agreement if such  restrictions  or  conditions
apply only to the property or assets securing such  Indebtedness  and (v) clause
F(a) of the foregoing shall not apply to customary
provisions in leases or other  contracts  entered into in the ordinary course of
business restricting the assignment thereof.


ARTICLE VII.  EVENTS OF DEFAULT

                  In  case  of the  happening  of any  of the  following  events
("Events of Default"):

                  (a) any  representation  or warranty made or deemed made in or
         in connection  with any Loan Document or the borrowings or issuances of
         Letters  of  Credit  hereunder,   or  any  representa  tion,  warranty,
         statement  or  information   contained  in  any  report,   certificate,
         financial statement or other instrument furnished in connection with or
         pursuant  to any  Loan  Document,  shall  prove to have  been  false or
         misleading  in any  material  respect  when  so  made,  deemed  made or
         furnished;

                  (b) default  shall be made in the payment of any  principal of
         any Loan when and as the same shall become due and payable,  whether at
         the due date  thereof or at a date fixed for prepay ment  thereof or by
         acceleration thereof or otherwise;

                  (c) default shall be made in the reimbursement with respect to
         any L/C  Disbursement  or the payment of any Fee or any interest on any
         Loan or on L/C  Disbursement  or any other amount (other than an amount
         referred to in (b) above) due under any Loan Document,  when and as the
         same shall become due and  payable,  and such  default  shall  continue
         unremedied for a period of three Business Days;

                  (d) default shall be made in the due observance or performance
         by Holdings, the Borrower or any Subsidiary of any covenant,  condition
         or agreement contained in Section 5.01(a), or 5.08 or in Article VI;

                  (e) default shall be made in the due observance or performance
         by Holdings, the Borrower or any Subsidiary of any covenant,  condition
         or agreement contained in any Loan Document (other than those specified
         in (b), (c) or (d) above) and such default  shall  continue  unremedied
         for a period of (i) in the case of a default under Section 5.05,  three
         Business Days after any Responsible  Officer of the Borrower has actual
         knowledge of any matter required to be disclosed to the  Administrative
         Agent and the  Lenders  pursuant to such  Section  that has not been so
         disclosed or (ii) in the case of any other such default,  30 days after
         notice  thereof  from the  Administrative  Agent or any  Lender  to the
         Borrower;

                  (f) Holdings, the Borrower or any Subsidiary shall (i) fail to
         pay any principal or interest,  regardless of amount, due in respect of
         any  Indebtedness in a principal  amount in excess of $5,000,000,  when
         and as the same shall become due and  payable,  or (ii) fail to observe
         or perform any other term,  covenant,  condition or agreement contained
         in any  agreement  or  instrument  evidencing  or  governing  any  such
         Indebtedness  referred  to in clause (i) if the  effect of any  failure
         referred to in this clause (ii) is to cause, or to permit the holder or
         holders of such  Indebtedness or a trustee on its or their behalf (with
         or without  the giving of notice,  the lapse of time or both) to cause,
         such Indebtedness to become due prior to its stated maturity;

                  (g)  an  involuntary  proceeding  shall  be  commenced  or  an
         involuntary   petition   shall  be  filed  in  a  court  of   competent
         jurisdiction seeking (i) relief in respect of Holdings, the Borrower or
         any Subsidiary (other than an Excluded Subsidiary), or of a substantial
         part  of  the  property  or  assets  of  Holdings,  the  Borrower  or a
         Subsidiary (other than an Excluded  Subsidiary),  under Title 11 of the
         United States Code, as now  constituted  or hereafter  amended,  or any
         other Federal or state bankruptcy, insolvency,  receivership or similar
         law,  (ii)  the   appointment  of  a  receiver,   trustee,   custodian,
         sequestrator,   conservator  or  similar  official  for  Holdings,  the
         Borrower or any Subsidiary (other than an Excluded Subsidiary) or for a
         substantial part of the property or assets of Holdings, the Borrower or
         a  Subsidiary  (other  than  an  Excluded   Subsidiary)  or  (iii)  the
         winding-up or liquidation  of Holdings,  the Borrower or any Subsidiary
         (other than an Excluded  Subsidiary);  and such  proceeding or petition
         shall continue  undismissed for 60 days or an order or decree approving
         or ordering any of the foregoing shall be entered;

                                      -36-




                  (h) Holdings,  the Borrower or any  Subsidiary  (other than an
         Excluded  Subsidiary) shall (i) voluntarily  commence any proceeding or
         file any petition  seeking  relief under Title 11 of the United  States
         Code, as now constituted or hereafter amended,  or any other Federal or
         state bankruptcy, insolvency, receivership or similar law, (ii) consent
         to the institution  of, or fail to contest in a timely and  appropriate
         manner,  any proceeding or the filing of any petition  described in (g)
         above,  (iii)  apply for or consent to the  appointment  of a receiver,
         trustee, custodian,  sequestrator,  conservator or similar official for
         Holdings,  the  Borrower  or any  Subsidiary  (other  than an  Excluded
         Subsidiary)  or for a  substantial  part of the  property  or assets of
         Holdings,  the  Borrower  or any  Subsidiary  (other  than an  Excluded
         Subsidiary),  (iv) file an answer admitting the material allegations of
         a petition filed against it in any such proceeding,  (v) make a general
         assignment for the benefit of creditors,  (vi) become unable,  admit in
         writing its inability or fail generally to pay its debts as they become
         due or (vii) take any corporate action for the purpose of effecting any
         of the foregoing;

                  (i) one or more  judgments  for the  payment  of  money  in an
         aggregate  amount in excess of  $5,000,000  shall be  rendered  against
         Holdings,   the  Borrower,  any  Subsidiary  (other  than  an  Excluded
         Subsidiary)  or any  combination  thereof  and the  same  shall  remain
         undischarged for a period of 30 consecutive days during which execution
         shall not be effectively  stayed,  or any action shall be legally taken
         by a judgment  creditor to levy upon assets or  properties of Holdings,
         the Borrower or any Subsidiary  (other than an Excluded  Subsidiary) to
         enforce any such judgment;

                  (j) (i) a Reportable Event or Reportable  Events, or a failure
         to make a required  installment or other payment (within the meaning of
         Section 412(n)(1) of the Code), shall have occurred with respect to any
         Plan or Plans that reasonably  could be expected to result in liability
         of  the  Borrower  to the  PBGC  or to a Plan  in an  aggregate  amount
         exceeding  $5,000,000  and,  within 30 days after the  reporting of any
         such Reportable Event to the Administrative  Agent or after the receipt
         by the Administrative Agent of a statement required pursuant to Section
         5.06(b)(iii)  hereof, the Administrative  Agent shall have notified the
         Borrower  in  writing  that  (A)  the  Required  Leaders  have  made  a
         determination that, on the basis of such Reportable Event or Reportable
         Events or the failure to make a required payment,  there are reasonable
         grounds  for the  termination  of such Plan or Plans by the  PBGC,  the
         appointment  by the  appropriate  United  States  district  court  of a
         trustee to administer such Plan or Plans or the imposition of a lien in
         favor of a Plan and (B) as a result  thereof an Event of Default exists
         hereunder;  or (ii) a trustee  shall be  appointed  by a United  States
         district court to administer any such Plan or Plans;  or (iii) the PBGC
         shall institute proceedings (including giving notice of intent thereof)
         to terminate any such Plan or Plans;

                  (k) (i) the  Borrower or any ERISA  Affiliate  shall have been
         notified by the sponsor of a  Multiemployer  Plan that it has  incurred
         Withdrawal  Liability to such Multiemployer  Plan, (ii) the Borrower or
         such ERISA  Affiliate does not have  reasonable  grounds for contesting
         such  With  drawal  Liability  or is  not  contesting  such  Withdrawal
         Liability  in a timely and  appropriate  manner and (iii) the amount of
         such  Withdrawal  Liability  specified in such notice,  when aggregated
         with all other amounts  required to be paid to  Multiemployer  Plans in
         connection  with Withdrawal  Liabilities  (determined as of the date or
         dates of such notification),  either (A) exceeds $5,000,000 or requires
         payments  exceeding  $1,000,000  in  any  year  or  (B)  is  less  than
         $5,000,000 but any Withdrawal  Liability payment remains unpaid 30 days
         after such payment is due;

                  (l) the  Borrower  or any  ERISA  Affiliate  shall  have  been
         notified by the sponsor of a Multiemployer Plan that such Multiemployer
         Plan is in reorganization or is being terminated, within the meaning of
         Title IV of ERISA,  if solely  as a result  of such  reorganization  or
         termination the aggregate annual  contributions of the Borrower and its
         ERISA  Affiliates  to  all   Multiemployer   Plans  that  are  then  in
         reorganization  or have been or are being  terminated have been or will
         be  increased  over the  amounts  required  to be  contributed  to such
         Multiemployer  Plans for their most recently completed plan years by an
         amount exceeding $1,000,000;

                  (m) at any  time  after  the  Effective  Date,  the  Guarantee
         Agreement  shall cease to be, or shall be asserted by any Guarantor not
         to be, a valid, binding and enforceable agreement;

                  (n) there shall have occurred a Change in Control;  or

                  (o) it is discovered  that (i) Hazardous  Materials  have been
         transported from any of the Properties or generated, treated, stored or
         disposed of at, on or under any of the  Properties in a

                                      -37-




         manner that has resulted  in, or could  reasonably  be  anticipated  to
         result in, an Environmental  Claim,  or (ii) the Borrower or any of its
         Subsidiaries has retained or assumed any liability,  contractually,  by
         operation   of   law or  otherwise,  with  respect to   the generation,
         treatment,  storage  or disposal of  Hazardous  Materials,  and, in any
         such  case  described  in clause (i) or (ii) above, the  Administrative
         Agent  shall have  notified the  Borrower  in writing that the Required
         Lenders  have  determined  that  such  Environmental  Claims  and other
         liabilities,  in   the   aggregate,  have    resulted   in,  or   could
         reasonably be anticipated to result in, a Material  Adverse Effect and,
         as a result thereof, an Event of Default exists hereunder;

then,  and in every such event (other than an event with respect to the Borrower
described in paragraph (g) or (h) above),  and at any time thereafter during the
continuance of such event, the  Administrative  Agent may, and at the request of
the Required  Lenders shall,  by notice to the Borrower,  take either or both of
the following actions,  at the same or different times: (i) terminate  forthwith
the Commitments and (ii) declare the Loans then  outstanding to be forthwith due
and  payable  in whole or in  part,  whereupon  the  principal  of the  Loans so
declared to be due and payable,  together with accrued  interest thereon and any
unpaid accrued fees and all other  liabilities of the Borrower accrued hereunder
and under any other Loan  Document,  shall  become  forthwith  due and  payable,
without  presentment,  demand,  protest or any other notice of any kind,  all of
which are hereby expressly waived by the Borrower,  anything contained herein or
in any other Loan  Document to the  contrary  notwithstanding;  and in any event
with  respect to the  Borrower  described  in para  graph (g) or (h) above,  the
Commitments  shall  automatically  terminate and the principal of the Loans then
outstanding,  together with accrued interest thereon and any unpaid accrued fees
and all other  liabilities of the Borrower accrued hereunder and under any other
Loan Document,  including the obligation to provide cash collateral  pursuant to
Section 2.20(j),  shall  automatically  become due and payable,  without present
ment,  demand,  protest or any other notice of any kind, all of which are hereby
expressly waived by the Borrower, anything contained herein or in any other Loan
Document to the contrary notwithstanding.


ARTICLE VIII.  THE ADMINISTRATIVE AGENT

                  In order to expedite  the  transactions  contemplated  by this
Agreement, The Chase Manhattan Bank is hereby appointed to act as Administrative
Agent on behalf of the  Lenders and the  Issuing  Bank.  Each of the Lenders and
each   assignee  of  any  such  Lender   hereby   irrevocably   authorizes   the
Administrative  Agent to take such  actions on behalf of such Lender or assignee
or the Issuing Bank and to exercise such powers as are specifically delegated to
the  Administrative  Agent by the terms and  provisions  hereof and of the other
Loan  Documents,  together  with  such  actions  and  powers  as are  reasonably
incidental thereto.  The Administrative  Agent is hereby expressly authorized by
the Lenders and the Issuing Bank, without hereby limiting any implied authority,
(a) to receive on behalf of the  Lenders and the  Issuing  Bank all  payments of
principal  of  and  interest  on the  Loans,  all  payments  in  respect  of L/C
Disbursements and all other amounts due to the Lenders  hereunder,  and promptly
to  distribute  to each  Lender or the  Issuing  Bank its  proper  share of each
payment so received;  (b) to give notice on behalf of each of the Lenders to the
Borrower  of any  Event of  Default  specified  in this  Agreement  of which the
Administrative Agent has actual knowledge acquired in connection with its agency
hereunder; and (c) to distribute to each Lender copies of all notices, financial
statements  and other  materials  delivered  by the  Borrower  pursuant  to this
Agreement as received by the Administrative Agent.

                  Neither  the  Agent  nor  any  of  its  directors,   officers,
employees  or agents  shall be liable as such for any action taken or omitted by
any of them except for its or his own gross negligence or wilful misconduct,  or
be  responsible  for any  statement,  warranty or  representation  herein or the
contents of any document  delivered in  connection  herewith,  or be required to
ascertain or to make any inquiry concerning the performance or observance by the
Borrower or any other Loan Party of any of the terms,  conditions,  covenants or
agreements contained in any Loan Document. The Administrative Agent shall not be
responsible  to the  Lenders  for  the  due  execution,  genuineness,  validity,
enforceability or effectiveness of this Agreement or any other Loan Documents or
other instruments or agreements.  The Administrative Agent shall in all cases be
fully protected in acting, or refraining from acting, in accordance with written
instructions   signed  by  the  Required   Lenders  and,   except  as  otherwise
specifically  provided  herein,  such  instructions  and any action or  inaction
pursuant thereto shall be binding on all the Lenders.  The Administrative  Agent
shall,  in the absence of knowledge to the contrary,  be entitled to rely on any
instrument  or  document  believed by it in good faith to be genuine and correct
and to have been  signed or sent by the proper  person or  persons.  Neither the
Administrative  Agent nor any of its  directors,  officers,  employees or agents
shall have any responsibility to the Borrower or any other Loan Party on account
of the failure of or delay in performance or breach by any Lender or the Issuing
Bank of any of its obligations hereunder or to any Lender or the Issuing Bank on
account of the failure of or delay in performance or

                                      -38-



breach by any other Lender or the Issuing Bank or the Borrower or any other Loan
Party of any of their respective  obligations  hereunder or under any other Loan
Document or in connection  herewith or therewith.  The Administrative  Agent may
execute any and all duties hereunder by or through agents or employees and shall
be entitled to rely upon the advice of legal counsel selected by it with respect
to all matters arising hereunder and shall not be liable for any action taken or
suffered in good faith by it in accordance with the advice of such counsel.

                  The Lenders hereby acknowledge that the  Administrative  Agent
shall not be under any duty to take any  discretionary  action  permitted  to be
taken by it  pursuant  to the  provisions  of this Agree ment unless it shall be
requested in writing to do so by the Required Lenders.

                  Subject  to the  appointment  and  acceptance  of a  successor
Administrative  Agent as provided below, the Administrative  Agent may resign at
any time by notifying the Lenders and the Borrower.  Upon any such  resignation,
the  Required  Lenders  shall have the right to appoint a  successor  reasonably
acceptable to the Borrower (it being  understood that any Lender is deemed to be
acceptable to the Borrower). If no successor shall have been so appointed by the
Required Lenders and shall have accepted such  appointment  within 30 days after
the  retiring  Administrative  Agent gives notice of its  resignation,  then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent reasonably  acceptable to the Borrower (it being understood
that any  Lender is deemed to be  acceptable  to the  Borrower)  which  shall be
either a Lender  or a bank  with an  office  in New  York,  New  York,  having a
combined  capital and surplus of at least  $500,000,000  or an  Affiliate of any
such bank.  Upon the  acceptance  of any  appointment  as  Administrative  Agent
hereunder by a successor bank, such successor shall succeed to and become vested
with  all  the  rights,   powers,   privileges   and  duties  of  the   retiring
Administrative  Agent and the retiring  Administrative Agent shall be discharged
from its duties and  obligations  hereunder.  After the  Administrative  Agent's
resignation  hereunder,  the  provisions  of this Article and Section 9.05 shall
continue in effect for its benefit in respect of any actions taken or omitted to
be taken by it while it was acting as Administrative Agent.

                  With respect to the Loans made or Letters of Credit  issued by
it hereunder,  the  Administrative  Agent in its individual  capacity and not as
Administrative  Agent shall have the same rights and powers as any other  Lender
and may exercise the same as though it were not the  Administrative  Agent,  and
the Administrative Agent and its Affiliates may accept deposits from, lend money
to and  generally  engage  in any  kind of  business  with the  Borrower  or any
Subsidiary  or other  Affiliate  thereof  as if it were  not the  Administrative
Agent.

                  Each Lender agrees (i) to reimburse the Administrative  Agent,
on demand, in the amount of its Pro Rata Percentage of any expenses incurred for
the benefit of the Lenders by the Administrative  Agent,  including counsel fees
and compensation of agents and employees paid for services rendered on behalf of
the Lenders,  which shall not have been  reimbursed  by the Borrower and (ii) to
indemnify and hold harmless the  Administrative  Agent and any of its directors,
officers,  employees  or  agents,  on  demand,  in the  amount  of such Pro Rata
Percentage,  from  and  against  any and all  liabilities,  taxes,  obligations,
losses,  damages,  penalties,  actions,  judgments,  suits,  costs,  expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against it in its capacity as Administrative Agent or any of them
in any way  relating  to or  arising  out of this  Agreement  or any other  Loan
Document  or any  action  taken  or  omitted  by it or any of  them  under  this
Agreement or any other Loan Document, to the extent the same shall not have been
reimbursed  by the  Borrower;  provided  that no  Lender  shall be liable to the
Administrative Agent for any portion of such liabilities,  obligations,  losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
resulting from the gross negligence or wilful  misconduct of the  Administrative
Agent or any of its directors, officers, employees or agents.

                  Each  Lender  acknowledges  that  it  has,  independently  and
without reliance upon the Administrative  Agent or any other Lender and based on
such documents and information as it has deemed appropriate, made its own credit
analysis  and  decision  to  enter  into  this   Agreement.   Each  Lender  also
acknowledges  that  it  will,   independently  and  without  reliance  upon  the
Administrative  Agent  or any  other  Lender  and  based on such  documents  and
information as it shall from time to time deem appropriate, continue to make its
own decisions in taking or not taking action under or based upon this  Agreement
or any other Loan  Document,  any related  agreement or any  document  furnished
hereunder or thereunder.

                                      -39-




ARTICLE IX.  MISCELLANEOUS

                  SECTION  9.01.  Notices.   Notices  and  other  communications
provided  for  herein  shall be in  writing  and shall be  delivered  by hand or
overnight  courier  service,  mailed by certified or registered  mail or sent by
telecopy, as follows:

                  (a) if to the  Borrower  or  Holdings,  to it at  Ethan  Allen
         Drive,  Danbury,  CT 06811,  Attention  of Chief  Financial  Officer or
         Treasurer (Telecopy No. (203) 743-8341), with copies to (i) in the case
         of  any  notice  or  communication   other  than  routine  notices  and
         communications  under Article II, the  attention of General  Counsel at
         the  aforesaid   address  and  (ii)  in  the  case  of  any  notice  or
         communication  relating  to a Default  or an Event of  Default,  Mayer,
         Brown & Platt, 1675 Broadway, New York, NY 10019, Attention of James B.
         Carlson, Esq. (Telecopy No.
         (212) 262-1910);

                  (b) if to the  Administrative  Agent,  to The Chase  Manhattan
         Bank Loan and Agency Services Group,  One Chase  Manhattan  Plaza,  8th
         Floor,  New York, NY 10081,  Attention of Jackie  Carter  (Telecopy No.
         (212)  552-7500),  with a copy to The Chase Manhattan Bank, at 270 Park
         Avenue,  New York 10017,  Attention of Margaret T. Lane  (Telecopy  No.
         (212) 270-5646); and

                  (c) if to a Lender,  to it at its address (or telecopy number)
         set forth in Schedule 2.01 or in the Assignment and Acceptance pursuant
         to which such Lender shall have become a party hereto.

All notices and other  communications  given to any party  hereto in  accordance
with the provisions of this Agreement  shall be deemed to have been given on the
date of receipt if  delivered by hand or  overnight  courier  service or sent by
telecopy  or on the date five  Business  Days after  dispatch  by  certified  or
registered  mail if mailed,  in each case  delivered,  sent or mailed  (properly
addressed) to such party as provided in this Section 9.01 or in accordance  with
the latest  unrevoked  direction  from such party given in accordance  with this
Section 9.01.

                  SECTION   9.02.   Survival  of   Agreement.   All   covenants,
agreements,  representations  and  warranties  made by the  Borrower or Holdings
herein and in the  certificates  or other  instruments  prepared or delivered in
connection  with or pursuant to this  Agreement or any other Loan Document shall
be  considered  to have been relied upon by the Lenders and the Issuing Bank and
shall survive the making by the Lenders of the Loans and the issuance of Letters
of Credit by the  Issuing  Bank,  regardless  of any  investigation  made by the
Lenders or the Issuing Bank or on their behalf, and shall continue in full force
and effect as long as the  principal  of or any accrued  interest on any Loan or
any Fee or any other  amount  payable  under  this  Agreement  or any other Loan
Document is outstanding and unpaid or any Letter of Credit is outstanding and so
long as the Commitments have not been terminated.

                  SECTION 9.03.  Binding  Effect.  This  Agreement  shall become
effective  when it shall have been  executed by the  Borrower,  Holdings and the
Administrative  Agent and when the  Administrative  Agent  shall  have  received
counterparts  hereof which, when taken together,  bear the signatures of each of
the other  parties  hereto,  and the  conditions to  effectiveness  set forth in
Section 4.02 have been satisfied or waived, and thereafter shall be binding upon
and inure to the benefit of the parties  hereto and their  respective  permitted
successors and assigns.

                  SECTION  9.04.  Successors  and Assigns.  (a) Whenever in this
Agreement  any of the parties  hereto is referred  to, such  reference  shall be
deemed to include the permitted  successors  and assigns of such party;  and all
covenants,  promises and  agreements by or on behalf of the Borrower,  Holdings,
the Administrative  Agent, the Issuing Bank or the Lenders that are contained in
this  Agreement  shall  bind  and  inure  to the  benefit  of  their  respective
successors and assigns.

                  (b) Each Lender may assign to one or more  assignees  all or a
portion of its interests, rights and obligations under this Agreement (including
all or a  portion  of its  Commitment  and the  Loans at the time  owing to it);
provided,  however,  that (i) except in the case of an assignment to a Lender or
an Affiliate of such Lender, the Borrower and the Administrative  Agent (and, in
the case of any assignment of a Revolving  Credit  Commitment,  the Issuing Bank
and the  Swingline  Lender)  must  give  their  prior  written  consent  to such
assignment (which consent shall not be unreasonably  withheld),  (ii) the amount
of the  Commitment of the assigning  Lender  subject to each such  assignment of
less  than all its  Commitment  (determined  as of the date the  Assignment  and
Acceptance  with respect to such  assignment is delivered to the  Administrative
Agent)  shall  not be less  than  $5,000,000,  (iii)  the  parties  to each such
assignment shall

                                      -40-



execute and deliver to the  Administrative  Agent an Assignment and  Acceptance,
together with a processing and  recordation fee of $3,500 and (iv) the assignee,
if it shall  not be a  Lender,  shall  deliver  to the  Administrative  Agent an
Administrative   Questionnaire.   Upon  acceptance  and  recording  pursuant  to
paragraph (e) of this Section 9.04,  from and after the effective date specified
in each Assignment and  Acceptance,  which effective date shall be at least five
Business Days after the execution thereof,  (A) the assignee thereunder shall be
a party  hereto and, to the extent of the interest  assigned by such  Assignment
and Acceptance, have the rights and obligations of a Lender under this Agreement
and (B) the assigning  Lender  thereunder  shall,  to the extent of the interest
assigned by such  Assignment and  Acceptance,  be released from its  obligations
under this Agreement (and, in the case of an Assignment and Acceptance  covering
all or the remaining  portion of an assigning  Lender's  rights and  obligations
under this  Agreement,  such Lender  shall cease to be a party  hereto but shall
continue to be entitled to the benefits of Sections 2.11,  2.13,  2.17 and 9.05,
as well as to any fees accrued for its account and not yet paid).

                  (c) By executing and delivering an Assignment and  Acceptance,
the assigning Lender  thereunder and the assignee  thereunder shall be deemed to
confirm to and agree with each other and the other  parties  hereto as  follows:
(i) such assigning  Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and that
its Revolving Credit  Commitment,  and the outstanding  balance of its Revolving
Loans, in each case without giving effect to assignments  thereof which have not
become  effective,  are as set forth in such  Assignment  and  Acceptance,  (ii)
except as set forth in (i) above,  such assigning Lender makes no representation
or  warranty  and  assumes no  responsibility  with  respect to any  statements,
warranties or representations  made in or in connection with this Agreement,  or
the execution, legality, validity, enforceability,  genuineness,  sufficiency or
value of this  Agreement,  any other Loan  Document or any other  instrument  or
document furnished  pursuant hereto, or the financial  condition of the Borrower
or any  Subsidiary  or the  performance  or  observance  by the  Borrower or any
Subsidiary  of any of its  obligations  under  this  Agreement,  any other  Loan
Document or any other instrument or document  furnished  pursuant hereto;  (iii)
such assignee  represents  and warrants  that it is legally  authorized to enter
into such  Assignment and  Acceptance;  (iv) such assignee  confirms that it has
received  a copy of this  Agreement,  together  with  copies of the most  recent
financial statements,  if any, delivered pursuant to Section 5.04 and such other
documents and  information  as it has deemed  appropriate to make its own credit
analysis and decision to enter into such  Assignment  and  Acceptance;  (v) such
assignee will independently and without reliance upon the Administrative  Agent,
such  assigning  Lender or any other  Lender  and  based on such  documents  and
information as it shall deem  appropriate at the time,  continue to make its own
credit decisions in taking or not taking action under this Agreement;  (vi) such
assignee appoints and authorizes the Administrative Agent to take such action as
agent on its behalf and to exercise  such  powers  under this  Agreement  as are
delegated  to the  Administrative  Agent,  respectively,  by the  terms  hereof,
together with such powers as are reasonably  incidental thereto;  and (vii) such
assignee  agrees  that it will  perform in  accordance  with their terms all the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.

                  (d) The  Administrative  Agent,  acting for this purpose as an
agent of the Borrower,  shall  maintain at one of its offices in The City of New
York a copy of each Assignment and Acceptance delivered to it and a register for
the  recordation  of the names and addresses of the Lenders,  and the Commitment
of, and  principal  amount of the Loans owing to,  each  Lender  pursuant to the
terms  hereof from time to time (the  "Register").  The entries in the  Register
shall be conclusive and the Borrower, the Administrative Agent, the Issuing Bank
and the  Lenders may treat each  person  whose name is recorded in the  Register
pursuant  to the terms  hereof as a Lender  hereunder  for all  purposes of this
Agreement,  notwithstanding  notice  to the  contrary.  The  Register  shall  be
available for  inspection by the Borrower,  the Issuing Bank and any Lender,  at
any reasonable time and from time to time upon reasonable prior notice.

                  (e)  Upon  its  receipt  of a duly  completed  Assignment  and
Acceptance  executed by an assigning Lender and an assignee,  an  Administrative
Questionnaire  completed in respect of the assignee  (unless the assignee  shall
already be a Lender  hereunder),  the processing and recordation fee referred to
in paragraph  (b) above and, if required,  the written  consent of the Borrower,
the  Swingline  Lender,  the Issuing Bank and the  Administrative  Agent to such
assignment,  the  Administrative  Agent  shall (i) accept  such  Assignment  and
Acceptance,  (ii) record the information  contained  therein in the Register and
(iii) give  prompt  notice  thereof to the  Lenders,  the  Issuing  Bank and the
Swingline  Lender.  No assignment shall be effective unless it has been recorded
in the Register as provided in this paragraph (e).

                  (f) Each Lender may without the consent of the  Borrower,  the
Swingline   Lender,   the  Issuing  Bank  or  the   Administrative   Agent  sell
participations to one or more banks or other entities in all or a portion of its
rights and obligations  under this Agreement  (including all or a portion of its
Commitment

                                      -41-



and  the  Loans  owing  to  it);  provided,  however,  that  (i)  such  Lender's
obligations under this Agreement shall remain unchanged,  (ii) such Lender shall
remain solely  responsible  to the other parties  hereto for the  performance of
such  obligations,  (iii) the  participating  banks or other  entities  shall be
entitled to the benefit of the cost protection  provisions contained in Sections
2.11,  2.13 and 2.17 to the same  extent  as if they were  Lenders  and (iv) the
Borrower,  the  Administrative  Agent,  the Issuing  Bank and the Lenders  shall
continue to deal solely and directly  with such Lender in  connection  with such
Lender's  rights and  obligations  under this  Agreement,  and such Lender shall
retain the sole right to enforce the obligations of the Borrower relating to the
Loans or L/C Disbursements and to approve any amendment,  modification or waiver
of any provision of this  Agreement  (other than  amendments,  modifications  or
waivers  decreasing any fees payable  hereunder or the amount of principal of or
the rate at which  interest  is payable on the Loans,  extending  any  scheduled
principal payment date or date fixed for the payment of interest on the Loans or
changing or extending the Commitments.

                  (g) Any Lender or  participant  may,  in  connection  with any
assignment or participation or proposed assignment or participation  pursuant to
this Section 9.04,  disclose to the assignee or participant or proposed assignee
or  participant  any  information  relating to any Loan Party  furnished to such
Lender  by or on  behalf  of the  Borrower;  provided  that,  prior  to any such
disclosure of information designated by the Borrower as confidential,  each such
assignee or  participant or proposed  assignee or  participant  shall execute an
agreement whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential  information on
terms no less  restrictive  than those  applicable  to the  Lenders  pursuant to
Section 9.16.

                  (h) Any  Lender may at any time  assign all or any  portion of
its rights under this Agree ment to a Federal Reserve Bank to secure  extensions
of credit by such Federal  Reserve Bank to such  Lender;  provided  that no such
assignment  shall  release a Lender  from any of its  obligations  hereunder  or
substitute  any  such  Bank  for  such  Lender  as a party  hereto.  In order to
facilitate  such an assignment to a Federal Reserve Bank, the Borrower shall, at
the request of the assigning  Lender,  duly execute and deliver to the assigning
Lender a promissory  note or notes  evidencing the Loans made to the Borrower by
the assigning Lender hereunder.

                  (i) Neither Holdings nor the Borrower shall assign or delegate
any of its rights or duties  hereunder  without the prior written consent of the
Administrative  Agent,  the  Issuing  Bank and each  Lender,  and any  attempted
assignment without such consent shall be null and void.

                  (j) In the event that S&P, Moody's or Thompson's BankWatch (or
InsuranceWatch  Ratings  Service,  in the case of  Lenders  that  are  insurance
companies (or Best's Insurance  Reports,  if such insurance company is not rated
by  Insurance  Watch  Ratings  Service))  shall,  after the date that any Lender
becomes a Lender,  downgrade the long-term  certificate  deposit ratings of such
Lender, and the resulting ratings shall be below BBB-, Baa3 and C (or BB, in the
case of a Lender that is an insurance company (or B, in the case of an insurance
company not rated by InsuranceWatch Ratings Service)),  then the Issuing Bank or
the Swingline  Lender shall have the right,  but not the obligation,  at its own
expense, upon notice to such Lender and the Administrative Agent, to replace (or
to request the Borrower to use its  reasonable  efforts to replace)  such Lender
with an assignee (in accordance with and subject to the  restrictions  contained
in paragraph  (b) above),  and such Lender  hereby agrees to transfer and assign
without recourse (in accordance with and subject to the  restrictions  contained
in paragraph (b) above) all its interests,  rights and obligations in respect of
its Revolving Credit Commitment to such assignee; provided, however, that (i) no
such assignment shall conflict with any law, rule and regulation or order of any
Governmental Authority and (ii) the Issuing Bank or the Swingline Lender or such
assignee,  as the case may be, shall pay to such Lender in immediately available
funds on the date of such  assignment  the principal of and interest  accrued to
the date of  payment on the Loans made by such  Lender  hereunder  and all other
amounts accrued for such Lender's account or owed to it hereunder.

                  (k) Notwithstanding anything to the contrary contained herein,
any Lender (a "Granting  Lender") may grant to a special purpose funding vehicle
(an "SPC") of such Granting  Lender,  identified as such in writing from time to
time by the Granting Lender to the  Administrative  Agent and the Borrower,  the
option to provide to the Borrower all or any part of any Loan that such Granting
Lender would  otherwise  be obliged to make to the Borrower  pursuant to Section
2.01, provided that (i) nothing herein shall constitute a commitment to make any
Loan  by any SPC and  (ii) if an SPC  elects  not to  exercise  such  option  or
otherwise  fails to provide all or any part of such Loan,  the  Granting  Lender
shall be obligated to make such Loan pursuant to the terms hereof. The making of
a Loan by an SPC hereunder  shall utilize the Commitment of the Granting  Lender
to the same extent, and as if, such Loan were made by the Granting Lender.  Each
party  hereto  hereby  agrees  that no SPC shall be liable  for any  payment  or
indemnity

                                      -42-



obligation  under this  Agreement for which a Lender would  otherwise be liable,
for so long as,  and to the  extent,  the  related  Granting  Lender  makes such
payment or gives such  indemnity.  In furtherance  of the foregoing,  each party
hereto hereby agrees that,  prior to the date that is one year and one day after
the payment in full of all outstanding  senior  indebtedness of any SPC, it will
not institute against, or join any other person in instituting against, such SPC
any   bankruptcy,   reorganization,   arrangement,   insolvency  or  liquidation
proceedings  or similar  proceedings  under the laws of the United States or any
State  thereof  with  respect  to any claim  arising  under or  related  to this
Agreement.  In addition,  notwithstanding  anything to the contrary contained in
this Section 9.04 any SPC may (i) with notice to, but without the prior  written
consent of, the  Borrower  or the  Administrative  Agent and without  paying any
processing  fee therefor,  assign all or a portion of its interests in any Loans
to its Granting Lender or to any financial  institutions (if consented to by the
Borrower  and  the  Administrative  Agent)  providing  liquidity  and/or  credit
facilities  to or for the account of such SPC to fund the Loans made by such SPC
or to support the  securities (if any) issued by such SPC to fund such Loans and
(ii) disclose on a confidential basis any non-public information relating to its
Loans to any rating  agency,  commercial  paper  dealer or provider of a surety,
guarantee or credit or liquidity enhancement to such SPC.

                  SECTION 9.05. Expenses;  Indemnity. (a) The Borrower agrees to
pay all out-of-pocket  expenses reasonably incurred by the Administrative Agent,
the Issuing Bank and the Swingline Lender in connection with the preparation and
administration  of this  Agreement and the other Loan Documents or in connection
with any  amendments,  modifications  or  waivers  of the  provisions  hereof or
thereof  (whether  or  not  the  transactions   hereby   contemplated  shall  be
consummated) or incurred by the  Administrative  Agent,  the Issuing Bank or any
Lender in  connection  with the  enforcement  or  protection  of their rights in
connec tion with this  Agreement  and the other Loan  Documents or in connection
with the  Loans  made or  Letters  of Credit  issued  hereunder,  including  the
reasonable fees, charges and disbursements of Cravath,  Swaine & Moore,  counsel
for the  Administrative  Agent,  and, in connection with any such enforcement or
protection,  the reasonable fees, charges and disbursements of not more than one
other counsel for the Administrative  Agent, the Issuing Bank and the Lenders in
each jurisdiction where enforcement is sought.

                  (b) The Borrower agrees to indemnify the Administrative Agent,
each Lender and the Issuing Bank, each Affiliate of any of the foregoing persons
and each of their  respective  directors,  officers,  employees and agents (each
such person being called an "Indemnitee")  against,  and to hold each Indemnitee
harmless  from, any and all losses,  claims,  damages,  liabilities  and related
expenses, including reasonable counsel fees, charges and disbursements, incurred
by or asserted against any Indemnitee arising out of, in any way connected with,
or as a result of (i) the  execution or delivery of this  Agreement or any other
Loan  Document  or  any  agreement  or  instrument   contemplated  thereby,  the
performance by the parties thereto of their respective obligations thereunder or
the  consummation of the Transactions  and the other  transactions  contemplated
thereby,  (ii) the use of the  proceeds  of the Loans or  issuance of Letters of
Credit, (iii) any claim, litigation, investigation or proceeding relating to any
of the foregoing,  whether or not any Indemnitee is a party thereto, or (iv) any
actual or alleged  presence or Release of  Hazardous  Materials  on any property
owned  or  operated  by  the  Borrower  or  any  of  the  Subsidiaries,  or  any
Environmental  Claim  related in any way to the  Borrower  or the  Subsidiaries;
provided that such indemnity  shall not, as to any  Indemnitee,  be available to
the extent that such losses,  claims,  damages,  liabilities or related expenses
resulted from the gross negligence or wilful misconduct of such Indemnitee.

                  (c) The provisions of this Section 9.05 shall remain operative
and in full force and effect  regardless  of the  expiration of the term of this
Agreement,  the  consummation  of the  transactions  contem plated  hereby,  the
repayment of any of the Loans, the expiration of the Commitments, the expiration
of any Letter of  Credit,  the  invalidity  or  unenforceability  of any term or
provision of this  Agreement or any other Loan  Document,  or any  investigation
made by or on behalf of the  Administrative  Agent,  any  Lender or the  Issuing
Bank. All amounts due under this Section 9.05 shall be payable on written demand
therefor.

                  SECTION  9.06.  Right of Setoff.  If an Event of Default shall
have occurred and be  continuing,  each Lender is hereby  authorized at any time
and from time to time,  to the fullest  extent  permitted by law, to set off and
apply any and all deposits (general or special,  time or demand,  provisional or
final) at any time held and other  indebtedness at any time owing by such Lender
to or for the credit or the account of the  Borrower  against any of and all the
obligations  of the Borrower now or hereafter  existing under this Agreement and
other Loan  Documents held by such Lender,  irrespective  of whether or not such
Lender  shall  have made any  demand  under  this  Agreement  or such other Loan
Document and although  such  obligations  may be  unmatured.  The rights of each
Lender  under  this  Section  are in  addition  to  other  rights  and  remedies
(including other rights of setoff) which such Lender may have.

                                      -43-


                  SECTION 9.07.  APPLICABLE LAW.  THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK.

                  SECTION 9.08. Waivers;  Amendment.  (a) No failure or delay of
the Administrative Agent, any Lender or the Issuing Bank in exercising any power
or right hereunder or under any Loan Document shall operate as a waiver thereof,
nor shall any single or  partial  exercise  of any such  right or power,  or any
abandonment  or  discontinuance  of steps  to  enforce  such a right  or  power,
preclude  any other or further  exercise  thereof or the  exercise  of any other
right or power. The rights and remedies of the Administrative Agent, the Issuing
Bank and the Lenders hereunder and under the other Loan Documents are cumulative
and are not exclusive of any rights or remedies which they would otherwise have.
No waiver of any  provision  of this  Agreement  or any other Loan  Document  or
consent  to any  departure  by the  Borrower,  Holdings  or any other Loan Party
therefrom shall in any event be effective  unless the same shall be permitted by
paragraph (b) below,  and then such waiver or consent shall be effective only in
the specific  instance and for the purpose for which given.  No notice or demand
on the  Borrower or Holdings in any case shall  entitle the Borrower or Holdings
to any other or further notice or demand in similar or other circumstances.

                  (b) Neither this Agreement,  the other Loan Documents, nor any
provision  thereof  may be waived,  amended or  modified  except  pursuant to an
agreement or  agreements in writing  entered into by the Borrower,  Holdings and
the  Required  Lenders;  provided,  however,  that no such  agreement  shall (i)
decrease the  principal  amount of, or extend the  maturity of or any  scheduled
principal  payment  date or date for the payment of any  interest on any Loan or
any date for reimbursement of an L/C  Disbursement,  or waive or excuse any such
payment or any part thereof, or decrease the rate of interest on any Loan or L/C
Disbursement, without the prior written consent of each Lender affected thereby,
(ii)  increase  or extend  the  Commitment  or  decrease  or extend the date for
payment of any of the fees of any Lender  without the prior  written  consent of
such Lender,  or (iii) amend or modify the  provisions  of Section 2.14 or 2.15,
the  provisions of this  Section,  the  definition of "Required  Lenders" or any
provision of any Loan Document that by its terms expressly  requires the consent
or  approval  of all the  Lenders,  without  the prior  written  consent of each
Lender; provided further that no such agreement shall amend, modify or otherwise
affect the rights or duties of the Administrative Agent, the Issuing Bank or the
Swingline  Lender  hereunder or under any other Loan Document  without the prior
written consent of the  Administrative  Agent, the Issuing Bank or the Swingline
Lender.

                  SECTION  9.09.   Interest  Rate  Limitation.   Notwithstanding
anything herein to the contrary,  if at any time the interest rate applicable to
any Loan or  participation  in any L/C  Disbursement,  together  with all  fees,
charges  and  other  amounts  which  are  treated  as  interest  on such Loan or
participation in such L/C Disbursement  under applicable law  (collectively  the
"Charges"),  shall exceed the maximum lawful rate (the "Maximum Rate") which may
be contracted for,  charged,  taken,  received or reserved by the Lender holding
such Loan or  participation  in  accordance  with  applicable  law,  the rate of
interest  payable in respect of such Loan or participation  hereunder,  together
with all  Charges  payable in respect  thereof,  shall be limited to the Maximum
Rate and, to the extent  lawful,  the  interest and Charges that would have been
payable  in  respect  of such Loan or  participation  but were not  payable as a
result of the  operation of this Section shall be cumulated and the interest and
Charges  payable to such Lender in respect of other Loans or  participations  or
periods shall be increased (but not above the Maximum Rate therefor)  until such
cumulated amount,  together with interest thereon at the Federal Funds Effective
Rate to the date of repay ment, shall have been received by such Lender.

                  SECTION 9.10. Entire  Agreement.  This Agreement and the other
Loan Documents  constitute the entire contract  between the parties  relative to
the subject matter hereof. Any previous agreement among the parties with respect
to the subject  matter hereof is superseded by this Agreement and the other Loan
Documents.  Nothing in this Agreement or in the other Loan Documents,  expressed
or implied,  is intended to confer upon any party other than the parties  hereto
and thereto any rights, remedies,  obligations or liabilities under or by reason
of this Agreement or the other Loan Documents.

                  SECTION 9.11.  WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION  DIRECTLY OR INDIRECTLY  ARISING
OUT OF,  UNDER OR IN  CONNECTION  WITH THIS  AGREEMENT  OR ANY OF THE OTHER LOAN
DOCUMENTS.  EACH PARTY HERETO (A)  CERTIFIES  THAT NO  REPRESENTATIVE,  AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,  EXPRESSLY OR OTHERWISE,  THAT SUCH
OTHER PARTY WOULD NOT,

                                      -44-




IN THE  EVENT OF  LITIGATION,  SEEK TO  ENFORCE  THE  FOREGOING  WAIVER  AND (B)
ACKNOWLEDGES  THAT IT AND THE OTHER  PARTIES  HERETO HAVE BEEN  INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.

                  SECTION  9.12.  Severability.  In the event any one or more of
the provisions  contained in this Agreement or in any other Loan Document should
be held invalid, illegal or unenforceable in any respect, the validity, legality
and  enforceability  of the remaining  provisions  contained  herein and therein
shall not in any way be affected or impaired thereby. The parties shall endeavor
in  good-faith  negotiations  to replace the invalid,  illegal or  unenforceable
provisions with valid  provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.

                  SECTION 9.13. Counterparts.  This Agreement may be executed in
counterparts (and by different parties hereto on different  counterparts),  each
of which shall constitute an original but all of which when taken together shall
constitute a single contract,  and shall become effective as provided in Section
9.03.  Delivery of an executed  signature  page to this  Agreement  by facsimile
transmission  shall be as effective as delivery of a manually signed counterpart
of this Agreement.

                  SECTION 9.14.  Headings.  Article and Section headings and the
Table of Contents used herein are for  convenience  of reference  only,  are not
part of this Agreement and are not to affect the construction of, or to be taken
into consideration in interpreting, this Agreement.

                  SECTION 9.15. Jurisdiction; Consent to Service of Process. (a)
Each of  Holdings  and  the  Borrower  hereby  irrevocably  and  unconditionally
submits,  for itself and its property,  to the nonexclusive  jurisdiction of any
New York State court or Federal court of the United States of America sitting in
New York  City,  and any  appellate  court  from any  thereof,  in any action or
proceeding  arising  out of or  relating  to this  Agreement  or the other  Loan
Documents,  or for  recognition or enforcement of any judgment,  and each of the
parties hereto hereby irrevocably and unconditionally  agrees that all claims in
respect of any such action or proceeding may be heard and determined in such New
York State or, to the extent  permitted by law, in such Federal  court.  Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive  and may be enforced in other  jurisdictions  by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect  any right  that any  Lender  may  otherwise  have to bring any action or
proceeding  relating to this Agreement or the other Loan  Documents  against the
Borrower,  Holdings  or  their  respective  properties  in  the  courts  of  any
jurisdiction.

                  (b) Each of Holdings and the Borrower  hereby  irrevocably and
unconditionally  waives, to the fullest extent it may legally and effectively do
so, any objection  which it may now or hereafter  have to the laying of venue of
any suit,  action or proceeding  arising out of or relating to this agreement or
the other Loan  Documents  in any New York State or Federal  court.  Each of the
parties hereto hereby  irrevocably  waives,  to the fullest extent  permitted by
law, the defense of an  inconvenient  forum to the maintenance of such action or
proceeding in any such court.

                  (c)  Each  party to this  Agreement  irrevocably  consents  to
service of process in the manner  provided for notices in Section 9.01.  Nothing
in this  Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.

                  SECTION 9.16.  Confidentiality.  The Administrative Agent, the
Issuing Bank and each of the Lenders agrees to keep confidential (and to use its
best  efforts  to  cause  its  respective  agents  and  representatives  to keep
confidential)  the  Information  (as  defined  below)  and all  copies  thereof,
extracts  therefrom and analyses or other materials  based thereon,  except that
the  Administrative  Agent, the Issuing Bank or any Lender shall be permitted to
disclose  Information  (a)  to  such  of  its  respective  officers,  directors,
employees,  agents and representatives as need to know such Information,  (b) to
the extent  requested by any regulatory  authority,  (c) to the extent otherwise
required by applicable  laws and regulations or by any subpoena or similar legal
process,  (d) in connection with any suit, action or proceeding  relating to the
enforcement of its rights  hereunder or under the other Loan  Documents,  (e) to
any other  party to this  Agreement  or (f) to the extent such  Information  (i)
becomes publicly  available other than as a result of a breach of this Agreement
or (ii) becomes available to the  Administrative  Agent, the Issuing Bank or any
Lender on a  nonconfidential  basis  from a source  other than the  Borrower  or
Holdings.  For the  purposes  of this  Section,  "Information"  shall  mean  all
financial  statements,   certificates,   reports,   agreements  and  information
(including all analyses, compilations and studies prepared by the Administrative
Agent,  the Issuing Bank or any Lender based on any of the  foregoing)  that are
received from the

                                      -45-




Borrower or Holdings and related to the Borrower or Holdings, any shareholder of
the Borrower or Holdings or any  employee,  customer or supplier of the Borrower
or  Holdings,  other  than  any of the  foregoing  that  were  available  to the
Administrative  Agent, the Issuing Bank or any Lender on a nonconfidential basis
prior to its  disclosure  thereto by the Borrower or Holdings,  and which are in
the case of Information  provided after the date hereof,  clearly  identified at
the time of delivery as confidential.  The provisions of this Section 9.16 shall
remain  operative and in full force and effect  regardless of the expiration and
term of this Agreement.

                  SECTION 9.17. Defaulting Lender. If any Lender shall refuse to
make any Loan  required to be made by it hereunder or to fund its  participation
in any L/C  Disbursement  or  Swingline  Loan  hereunder,  or shall  notify  the
Borrower or the Administrative  Agent in writing that it does not intend to make
any such Loan or fund any such participation,  in either case as a result of any
takeover of such Lender by any regulatory  authority or agency (any such Lender,
a "Defaulting  Lender"),  then, unless and until such Defaulting Lender retracts
in writing any such notice and cures all  defaults on its part in respect of the
funding of its Pro Rata Percentage of all outstanding  Loans, L/C  Disbursements
and Swingline  Loans,  (a) any of the Borrower,  the  Administrative  Agent, the
Issuing  Bank and the  Swingline  Lender may require such  Defaulting  Lender to
transfer  and assign all of its  interests,  rights and  obligations  under this
Agreement  to an  assignee  in the same manner and effect as provided in Section
2.18(a),  the  provisions of which shall apply,  mutatis  mutandis,  to any such
assignment,  (b) such  Defaulting  Lender  shall not be entitled to exercise any
right of setoff under  Section 9.06 and (c) to the maximum  extent  permitted by
applicable law, such Defaulting Lender shall be deemed not to be a "Lender", the
Revolving Credit  Commitment of such Defaulting Lender shall be deemed not to be
in effect and such Defaulting Lender's Revolving Credit Exposure shall be deemed
not to exist,  in each case solely for  purposes of the  definition  of the term
"Required Lenders" and determining whether any waiver, amendment or modification
has been  approved by the requisite  Lenders in accordance  with Section 9.08 or
any other  applicable  provision  of the Loan  Documents.  In no event shall the
provisions  of this Section be construed to release any  Defaulting  Lender from
its obligations  hereunder to any other party hereto,  including its obligations
to make Loans and participate in Letters of Credit and Swingline Loans, and such
provisions shall not prejudice any claims,  or be construed to waive any rights,
including any rights to bring legal proceedings  against such Defaulting Lender,
which the  Administrative  Agent, any Lender, the Issuing Bank or any Loan Party
may

                                      -46-



have  against  such  Defaulting  Lender  as a  result  of any  failure  by  such
Defaulting Lender to honor its obligations under this Agreement.


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


                                    ETHAN ALLEN INC.,

                                       by  /s/ M. Farooq Kathwari
                                         ------------------------------
                                         Name:  M. Farooq Kathwari
                                         Title:  Chairman, CEO & President


                                    ETHAN ALLEN INTERIORS INC.,

                                       by  /s/ Gerardo Burdo
                                         ------------------------------
                                         Name:  Gerardo Burdo
                                         Title:  Vice President & Treasurer


                                    THE CHASE MANHATTAN BANK, individually
                                    and as Administrative Agent and Swingline
                                    Lender,

                                       by  /s/  Margaret T. Lane
                                         ------------------------------
                                         Name:  Margaret T. Lane
                                         Title:  Vice President


                                    FLEET BANK, N.A., individually and as
                                    Co-Documentation Agent,

                                       by  /s/ Allison R. Walk
                                         ------------------------------
                                         Name:  Allison R. Walk
                                         Title:  Senior Vice President


                                    WACHOVIA BANK, N.A., individually and as
                                    Co-Documentation Agent,

                                       by  /s/ Jane C. Deaver
                                         ------------------------------
                                         Name:  Jane C. Deaver
                                         Title:  Senior Vice President


                                    MORGAN GUARANTY TRUST COMPANY OF
                                    NEW YORK,

                                       by  /s/ Sovonna L. Day
                                         ------------------------------
                                         Name: Sovonna L. Day
                                         Title: Vice President


                                      -47-




                                    BANK OF NEW YORK,

                                       by  /s/ Lucille Cuttone
                                         ------------------------------
                                         Name:  Lucille Cuttone
                                         Title:  Assistant Vice President


                                   SUNTRUST BANK, ATLANTA

                                       by  /s/ W. David Wisdom
                                         ------------------------------
                                         Name:  W. David Wisdom
                                         Title:  Vice President



                                      -48-



                                                                  EXECUTION COPY



                                    GUARANTEE  AGREEMENT  dated as of August 25,
                           1999,  among ETHAN ALLEN  INTERIORS  INC., a Delaware
                           corporation ("Holdings"), each of the subsidiaries of
                           ETHAN  ALLEN  INC.,  a  Delaware   corporation   (the
                           "Borrower"),    listed   on    Schedule    I   hereto
                           (individually,    a   "Subsidiary    Guarantor"   and
                           collectively,   the  "Subsidiary   Guarantors";   the
                           Subsidiary  Guarantors  together  with  Holdings  are
                           referred  to   individually   as  a  "Guarantor"  and
                           collectively  as  the  "Guarantors")  and  THE  CHASE
                           MANHATTAN   BANK,   as   administrative   agent  (the
                           "Administrative  Agent")  for the Lenders (as defined
                           herein).


                  Reference is made to the Credit  Agreement  dated as of August
25, 1999 (as amended,  supplemented  or modified from time to time,  the "Credit
Agreement"),  among Holdings,  the Borrower,  the financial  institutions  party
thereto,  as  lenders  (the  "Lenders"),   the  Administrative   Agent  and  the
CoDocumentation Agents. Capitalized terms used but not defined herein shall have
the meanings assigned to such terms in the Credit Agreement.

                  The Lenders  have agreed to extend  credit to, and the Issuing
Bank has  agreed to issue  Letters of Credit for the  account  of, the  Borrower
pursuant to, and subject to the terms  specified in, the Credit  Agreement.  The
obligations  of the Lenders to extend  credit and of the  Issuing  Bank to issue
Letters of Credit under the Credit  Agreement  are  conditioned  on, among other
things, the execution and delivery by the Guarantors of a guarantee agreement in
the form hereof. As the owner of all the issued and outstanding capital stock of
the Borrower,  Holdings  acknowledges  that it will,  and as  Subsidiaries,  the
Subsidiary  Guarantors  acknowledge that they will, derive substantial  benefits
from the  extension of credit to the  Borrower  under the Credit  Agreement.  As
consideration  therefor and in order to induce the Lenders to continue to extend
credit  and the  Issuing  Bank to issue  Letters  of  Credit  under  the  Credit
Agreement,  the  Guarantors  are willing to execute and deliver this  Agreement.
Accordingly, the parties hereto agree as follows:

                  SECTION 1. Each of the Guarantors unconditionally  guarantees,
jointly with the other  Guarantors and severally,  as a primary  obligor and not
merely as a surety,  (a) the due and punctual payment by the Borrower of (i) the
principal of and interest  (including  interest  accruing during the pendency of
any bankruptcy, insolvency, receivership or other similar proceeding, regardless
of whether  allowed or allowable in such  proceeding) on the Loans,  when and as
due,  whether  at  maturity,  by  acceleration,  upon one or more  dates set for
prepayment or otherwise,  (ii) each payment  required to be made by the Borrower
under the Credit  Agreement in respect of any Letter or Letters of Credit,  when
and as due,  including  payments in respect of reimbursement  of  disbursements,
interest thereon and obligations to provide cash collateral, and (iii) all other
monetary  obligations  of the Borrower to the  Lenders,  the Issuing  Bank,  the
Administrative Agent and the Co-Documentation  Agents under the Credit Agreement
and the other Loan  Documents to which the Borrower is or is to be a party,  (b)
the due and punctual  performance of all other obligations of the Borrower under
the Credit  Agreement  and the other Loan  Documents,  (c) the due and  punctual
payment and  performance  of all  obligations  of the  Borrower  under each Rate
Protection Agreement entered into with any counterparty that was a Lender at the
time  such  Rate  Protection  Agreement  was  entered  into  and (d) the due and
punctual  payment and performance of all obligations of each of Holdings and the
other  Subsidiaries,  in  the  case  of any  Subsidiary  Guarantor,  or of  each
Subsidiary,  in the case of Holdings, under the Loan Documents to which it is or
is to be a party (all the foregoing  obligations being  collectively  called the
"Obligations").  Each of the Guarantors  further agrees that the Obligations may
be extended or renewed, in whole or in part, without notice to or further assent
from it, and that it will remain bound upon its  guarantee  notwithstanding  any
extension or renewal of any Obligation.

                  SECTION  2.  Each of the  Guarantors  waives  presentment  to,
demand of payment from and protest to Holdings,  the Borrower or any  Subsidiary
of any of the Obligations, and also waives notice of acceptance of its guarantee
and notice of protest for  nonpayment.  The  obligations  of each Guarantor here
under shall not be affected by (a) the failure of the Administrative  Agent, the
Issuing Bank or any Lender to assert any claim or demand or to enforce any right
or remedy against Holdings,  the Borrower or any Subsidiary under the provisions
of any Loan  Document or otherwise;  (b) any  rescission,  waiver,  amendment or
modification of, or any release from any of the terms or provisions of, any Loan
Document,  any guarantee or any other  agreement,  including with respect to any
other Guarantor under this Agreement;  or (c) the failure of the  Administrative
Agent,  the Issuing Bank or any Lender to exercise  any right or remedy  against
any other Guarantor or guarantor of the Obligations.


                                       1



                  SECTION  3. Each of the  Guarantors  further  agrees  that its
guarantee  hereunder  consti  tutes a guarantee  of payment  when due and not of
collection,  and  waives  any  right to  require  that any  resort be had by the
Administrative  Agent,  the Issuing Bank or any Lender to any security  held for
payment of the Obligations or to any balance of any deposit account or credit on
the books of the  Administrative  Agent, the Issuing Bank or any Lender in favor
of the Borrower or any other person.

                  SECTION 4. The  obligations of each Guarantor  hereunder shall
not be subject to any reduction,  limitation,  impairment or termination for any
reason,  including  any  claim of  waiver,  release,  surrender,  alteration  or
compromise,  and shall not be  subject to any  defense or setoff,  counterclaim,
recoup ment or termination whatsoever by reason of the invalidity, illegality or
unenforceability   of  the  Obligations  or  otherwise.   Without  limiting  the
generality of the foregoing,  the obligations of each Guarantor  hereunder shall
not be  discharged  or  impaired  or  otherwise  affected  by the failure of the
Administrative  Agent,  the  Issuing  Bank or any  Lender to assert any claim or
demand or to enforce any remedy under any Loan  Document,  any  guarantee or any
other agreement,  by any waiver or modification of any thereof,  by any default,
failure or delay,  willful or otherwise,  in the performance of the Obligations,
or by any  other  act or  omission  which  may or might in any  manner or to any
extent vary the risk of any Guarantor or otherwise operate as a discharge of any
Guarantor as a matter of law or equity (other than the  indefeasible  payment in
full of all the Obligations).

                  SECTION 5. Each of the Guarantors  waives any defense based on
or arising out of any defense of the  Borrower  or the  unenforceability  of the
Obligations or any part thereof from any cause,  or the cessation from any cause
of the liability of the Borrower,  other than the final and indefeasible payment
in full in  cash  of the  Obligations.  The  Administrative  Agent  may,  at its
election,  compromise  or  adjust  any part of the  Obligations,  make any other
accommodation  with the  Borrower or any other  guarantor  or exercise any other
right or remedy  available  to it against the  Borrower or any other  guarantor,
without  affecting  or  impairing  in any way  the  liability  of any  Guarantor
hereunder  except to the extent the  Obligations  have been  fully,  finally and
indefeasibly  paid in cash.  Pursuant to applicable  law, each of the Guarantors
waives any defense  arising out of any such  election  even though such election
operates  pursuant to  applicable  law to impair or to  extinguish  any right of
reimbursement or subrogration or other right or remedy of such Guarantor against
the Borrower or any other Guarantor or guarantor, as the case may be.

                  SECTION  6. Each of the  Guarantors  further  agrees  that its
guarantee  shall continue to be effective or be reinstated,  as the case may be,
if at any time payment,  or any part thereof,  of any Obligation is rescinded or
must otherwise be restored by the Administrative  Agent, the Issuing Bank or any
Lender  upon  the  bankruptcy  or  reorganization  of the  Borrower,  any  other
Guarantor or otherwise.

                  SECTION  7.  In  furtherance  of  the  foregoing  and  not  in
limitation of any other right which the  Administrative  Agent, the Issuing Bank
or any Lender has at law or in equity  against any  Guarantor by virtue  hereof,
upon  the  failure  of  Holdings,  the  Borrower  or any  Subsidiary  to pay any
Obligation  when and as the same  shall  become  due,  whether at  maturity,  by
acceleration,  after notice of pre payment or otherwise,  each of the Guarantors
hereby   promises  to  and  will,   upon  receipt  of  written   demand  by  the
Administrative Agent,  forthwith pay, or cause to be paid, to the Administrative
Agent  for  distribution  to  the  Lenders  and  the  Issuing  Bank,  if  and as
appropriate, in cash the amount of such unpaid Obligation, and thereupon each of
the  Administrative  Agent,  the  Issuing  Bank and any  Lender  that shall have
received any part of such payment  shall,  in a  reasonable  manner,  assign the
amount of the Obligations owed to it and paid by such Guarantor pursuant to this
guarantee to such  Guarantor,  such  assignment to be pro tanto to the extent to
which the  Obligations in question were  discharged by such  Guarantor,  or make
such other  disposition  thereof as such  Guarantor  shall  direct (all  without
recourse  to the  Administrative  Agent,  the  Issuing  Bank or such  Lender and
without any representation or warranty by the Administrative  Agent, the Issuing
Bank or such Lender); provided,  however, that until the indefeasible payment in
full of all the Obligations,  none of the Guarantors shall have any right by way
of subrogation or otherwise as a result of the payment of any sums hereunder.

                  SECTION  8.  Each  of the  Guarantors  jointly  and  severally
represents and warrants that all representations and warranties contained in the
Credit Agreement which relate to the Guarantors are true and correct.

                  SECTION 9. The guarantees  made hereunder shall survive and be
in full force and effect so long as any  Obligation is  outstanding  and has not
been  indefeasibly  paid  and so long as any of the  Lenders  have  any  further
commitment  to extend  credit or the Issuing Bank has any further  obligation to
issue  Letters of Credit  under the Credit  Agreement or any Letter of Credit is
outstanding,  and shall be rein stated to the extent provided in Section 6. Each
Subsidiary Guarantor shall be released from its guarantee


                                       2



hereunder  in the event  that (a) it ceases  to be a  Subsidiary  or (b) all the
capital  stock  of such  Subsidiary  Guarantor  shall be  sold,  transferred  or
otherwise disposed of, in accordance with the terms of the Credit Agreement,  by
the Borrower to a person that is not an Affiliate of Holdings or the Borrower.

                  SECTION  10.  This  Agreement  and the  terms,  covenants  and
conditions  hereof shall be binding upon each  Guarantor and its  successors and
shall inure to the benefit of the  Administrative  Agent, the Collateral  Agent,
the Issuing Bank and the Lenders and their  respective  successors  and assigns.
None of the  Guarantors  shall be  permitted  to assign or  transfer  any of its
rights or obligations under this Agreement,  except as expressly contemplated by
this Agreement or the Credit Agreement.

                  SECTION 11. No failure on the part of the Administrative Agent
to exercise,  and no delay in exercising,  any right,  power or remedy hereunder
shall operate as a waiver thereof,  nor shall any single or partial  exercise of
any such right, power or remedy by the Administrative Agent, the Issuing Bank or
any Lender preclude any other or further exercise thereof or the exercise of any
other right,  power or remedy.  All remedies  hereunder and under the other Loan
Documents are cumulative and are not exclusive of any other remedies provided by
law.  Except as provided  in the Credit  Agreement,  none of the  Administrative
Agent, the Issuing Bank or the Lenders shall be deemed to have waived any rights
hereunder or under any other agreement or instrument unless such waiver shall be
in writing and signed by such parties.

                  SECTION 12. THIS  AGREEMENT  SHALL BE CONSTRUED IN  ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

                  SECTION 13. All  communications and notices hereunder shall be
in writing and given as provided in Section  9.01 of the Credit  Agreement.  All
communications and notices hereunder to each Subsidiary Guarantor shall be given
to it at its address set forth in Schedule I hereto with a copy to the Borrower.

                  SECTION  14.  In  case  any  one or  more  of  the  provisions
contained in this Agreement should be held invalid,  illegal or unenforceable in
any respect with respect to any Guarantor,  no party hereto shall be required to
comply with such  provision  with respect to such  Guarantor for so long as such
provision  is held to be invalid,  illegal or  unenforceable  and the  validity,
legality and enforceability of the remaining provisions contained herein, and of
such  provision  with  respect to any other  Guarantor,  shall not in any way be
affected or impaired.  The parties shall endeavor in good-faith  negotiations to
replace any invalid,  illegal or unenforceable provisions with valid provisions,
the economic  effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.

                  SECTION  15.  This  Agreement  may be  executed in two or more
counterparts, each of which shall constitute an original, but all of which, when
taken  together,  shall  constitute  but  one  instrument;  provided  that  this
Agreement  shall be  construed  as a  separate  agreement  with  respect to each
Guarantor and may be amended,  modified,  supplemented,  waived or released with
respect to any Guarantor without the approval of any other Guarantor and without
affecting the obligations of any other Guarantor hereunder. This Agreement shall
be effective  with respect to any Guarantor  when a counterpart  which bears the
signature of such  Guarantor  shall have been  delivered  to the  Administrative
Agent.

                  SECTION 16. Upon execution and delivery by the  Administrative
Agent and a Subsidiary of an instrument in the form of Annex 1 attached  hereto,
such  Subsidiary  shall become a Subsidiary  Guarantor  hereunder  with the same
force and effect as if originally named as a Subsidiary  Guarantor  herein.  The
execution and delivery of any such  instrument  shall not require the consent of
any

                                       3





Guarantor  hereunder.  The rights and  obligations of each  Guarantor  hereunder
shall  remain in full force and effect  notwithstanding  the addition of any new
Subsidiary Guarantor as a party to this Agreement.


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

                                       ETHAN ALLEN INTERIORS INC.,

                                       by
                                          ----------------------------
                                          Name:
                                          Title:


                                       EACH SUBSIDIARY GUARANTOR LISTED ON
                                       SCHEDULE I HERETO,

                                       by
                                         ----------------------------
                                         Name:
                                         Title:


                                       THE CHASE MANHATTAN BANK, as
                                       Administrative Agent,

                                       by
                                          ----------------------------
                                          Name:
                                          Title:


                                       4


                                                                      SCHEDULE I
                                                      to the Guarantee Agreement


                              SUBSIDIARY GUARANTORS






                                       5


                                                                         ANNEX 1
                                                      to the Guarantee Agreement


                              SUPPLEMENT  NO. dated as of _______ , 199_, to the
               Guarantee Agreement dated  as of August  25,  1999  (as   amended
               and   supplemented   through   the  date  hereof,  the "Guarantee
               Agreement"), among  ETHAN  ALLEN  INTERIORS   INC.,  a  Delaware
               corporation ("Holdings"),  certain  subsidiaries  of  Ethan Allen
               Inc. (collectively,  the  "Subsidiary  Guarantors",  and together
               with Holdings,  the  "Guarantors")  and THE CHASE MANHATTAN BANK,
               as administrative  agent  (the   "Administrative  Agent") for the
               Lenders, as defined therein.


         A. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Guarantee Agreement.

         B.  Holdings  and the  Subsidiary  Guarantors  have  entered  into  the
Guarantee  Agreement in order to induce the Lenders to extend  credit to, and to
induce the  Issuing  Bank to issue  Letters of Credit  for the  account  of, the
Borrower pursuant to the Credit Agreement. The Guarantee Agreement provides that
additional  Subsidiaries  may become  Subsidiary  Guarantors under the Guarantee
Agreement  by  execution  and  delivery  of an  instrument  in the  form of this
Supplement.  Pursuant to the Credit Agreement,  the under signed Subsidiary (the
"New Subsidiary  Guarantor") is required to become a Subsidiary  Guarantor under
the  Guarantee  Agreement.  The New  Subsidiary  Guarantor  desires  to become a
Subsidiary  Guarantor  and Guarantor  under the Guarantee  Agreement in order to
induce the Lenders to continue  to extend  credit and the Issuing  Bank to issue
Letters of Credit under the Credit Agreement and as consideration therefor.

         Accordingly,  the Administrative Agent and the New Subsidiary Guarantor
agree as follows:

         SECTION  1.  In  accordance  with  the  Guarantee  Agreement,  the  New
Subsidiary Guarantor by its signature hereto shall become a Subsidiary Guarantor
and Guarantor under the Guarantee Agreement with the same force and effect as if
originally  named  therein as a Subsidiary  Guarantor  and Guarantor and the New
Subsidiary  Guarantor  hereby  agrees  to all the terms  and  provisions  of the
Guarantee  Agreement  applicable  to it as a Subsidiary  Guarantor and Guarantor
thereunder.  Each reference to a "Guarantor" or a "Subsidiary  Guarantor" in the
Guarantee Agreement shall be deemed to include the New Subsidiary Guarantor. The
Guarantee Agreement is hereby incorporated herein by reference.

         SECTION  2.  This   Supplement   shall   become   effective   when  the
Administrative  Agent  shall have  received  a  counterpart  of this  Supplement
executed on behalf of the New Subsidiary Guarantor.

         SECTION 3. The New Subsidiary  Guarantor hereby represents and warrants
that (i) this Supplement has been duly authorized, executed and delivered by the
New Subsidiary  Guarantor and con stitutes a legal, valid and binding obligation
of the New Subsidiary  Guarantor,  enforceable against it in accordance with its
terms, and (ii) set forth under its signature hereto is its address for purposes
of notices under the Guarantee Agreement, which information supplements Schedule
I to the Guarantee Agreement and shall be deemed a part thereof for all purposes
of the Guarantee Agreement.

         SECTION 4.  Except as  expressly  supplemented  hereby,  the  Guarantee
Agreement shall remain in full force and effect in accordance with its terms.

         SECTION 5. THIS  SUPPLEMENT  SHALL BE CONSTRUED IN ACCORDANCE  WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

         SECTION 6. In case any one or more of the provisions  contained in this
Supplement should be held invalid,  illegal or unenforceable in any respect, the
validity,  legality and  enforceability  of the remain ing provisions  contained
herein  and in the  Guarantee  Agreement  shall  not in any way be  affected  or
impaired.  The parties  hereto  shall  endeavor in  good-faith  negotiations  to
replace  any  invalid,  illegal or  unenforceable  provisions  herein with valid
provisions,  the economic  effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.

         SECTION 7. This Supplement may be executed in two or more counterparts,
each of which  shall  constitute  an  original,  but all of  which,  when  taken
together, shall constitute but one instrument.






                                                                             2


         SECTION  8.  The New  Subsidiary  Guarantor  agrees  to  reimburse  the
Administrative  Agent for its  reasonable  out-of-pocket  expenses in connection
with this Supplement,  including the reasonable fees and expenses of counsel for
the Administrative Agent.


         IN WITNESS WHEREOF, the New Subsidiary Guarantor and the Administrative
Agent have duly  executed this  Supplement to the Guarantee  Agreement as of the
day and year first above written.


                                       [NAME OF NEW SUBSIDIARY GUARANTOR],

                                        by

                                        Title
                                        Address--------------------------
                                               --------------------------
                                               --------------------------



                                       THE CHASE MANHATTAN BANK, as
                                       Administrative Agent,

                                        by

                                        Title






                                                                 EXECUTION COPY



                                    INDEMNITY,   SUBROGATION  AND   CONTRIBUTION
                           AGREEMENT  dated as of August 25,  1999,  among ETHAN
                           ALLEN INC., a Delaware corporation, (the "Borrower"),
                           each   Subsidiary   of  the  Borrower   party  hereto
                           (collectively,  the "Subsidiary Guarantors"), and THE
                           CHASE MANHATTAN BANK, a New York banking  corporation
                           ("Chase"), as administrative agent (in such capacity,
                           the  "Administrative  Agent")  for  the  Lenders  (as
                           defined herein).


                  Reference is made to the Credit  Agreement  dated as of August
25, 1999 (as amended,  supplemented  or modified from time to time,  the "Credit
Agreement"),  among the Borrower,  Ethan Allen Interiors Inc. ("Holdings"),  the
financial  institutions  from  time to  time  party  thereto,  as  lenders  (the
"Lenders"),   the  Administrative   Agent  and  the   Co-Documentation   Agents.
Capitalized  terms used and not defined herein shall have the meanings  assigned
in the Credit Agreement.

                  The Lenders  have agreed to extend  credit to, and the Issuing
Bank has agreed to issue  Letters of Credit for the  account  of, the  Borrower,
pursuant to, and upon the terms and subject to the con ditions specified in, the
Credit Agreement.  The Subsidiary  Guarantors have guaranteed the obligations of
the  Borrower  pursuant  to  the  Guarantee  Agreement  and  have  secured  such
obligations  pursuant to the Security Documents.  The obligations of the Lenders
to extend  credit and of the Issuing  Bank to issue  Letters of Credit under the
Credit  Agreement are conditioned  upon,  among other things,  the execution and
delivery  by  the  Borrower  and  the  Subsidiary  Guarantors  of an  indemnity,
subrogation and contribution agreement in the form hereof.

                  Accordingly,  the Borrower,  each Subsidiary Guarantor and the
Administrative Agent agree as follows:

                  SECTION 1. Indemnity and Subrogation.  In addition to all such
rights of indemnity and subrogation as the Subsidiary  Guarantors may have under
applicable law (but subject to Section 3), the Borrower agrees that in the event
a  payment  shall  be made  by any  Subsidiary  Guarantor  under  the  Guarantee
Agreement,  the Borrower shall indemnify such Subsidiary  Guarantor for the full
amount of such payment and such Subsidiary  Guarantor shall be subrogated to the
rights of the Person to whom such payment  shall have been made to the extent of
such payment.

                  SECTION  2.  Contribution  and  Subrogation.  Each  Subsidiary
Guarantor (a  "Contributing  Guarantor")  agrees (subject to Section 3) that, in
the event a payment shall be made by any other  Subsidiary  Guarantor  under the
Guarantee   Agreement  and  such  other  Subsidiary   Guarantor  (the  "Claiming
Guarantor") shall not have been fully indemnified by the Borrower as provided in
Section 1, the Contributing  Guarantor shall indemnify the Claiming Guarantor in
an amount equal to the amount of such payment  multiplied by a fraction of which
the numerator shall be the net worth of the  Contributing  Guarantor on the date
hereof  (or, in the case of any  Subsidiary  Guarantor  becoming a party  hereto
pursuant to Section 14, the date of the Supplement hereto executed and delivered
by such  Subsidiary  Guarantor) and the  denominator  shall be the aggregate net
worth  of all the  Subsidiary  Guarantors  on the  date  hereof  (or the date of
execution and delivery of such  Supplement).  Any Contributing  Guarantor making
any  payment  to a  Claiming  Guarantor  pursuant  to this  Section  2 shall  be
subrogated  to the  rights of such  Claiming  Guarantor  under  Section 1 to the
extent of such payment.

                  SECTION 3. Subrogation.  Notwithstanding any provision of this
Agreement  to the con  trary,  all  rights of the  Subsidiary  Guarantors  under
Sections 1 and 2 and all other rights of indemnity,  contribution or subrogation
under   applicable  law  or  otherwise  shall  be  fully   subordinated  to  the
indefeasible  payment in full of the Obligations.  No failure on the part of the
Borrower or any Subsidiary Guarantor to make the payments required by Sections 1
and 2 (or any other payments  required under  applicable law or otherwise) shall
in any respect limit the obligations and liabilities of any Subsidiary Guarantor
with respect to any Guarantee, and each Subsidiary Guarantor shall remain liable
for the full  amount  of the  obligations  of such  Guarantor  under  each  such
Guarantee.

                  SECTION 4.  Termination.  This Agreement  shall terminate when
all Obligations  have been  indefeasibly  paid in full, no Letters of Credit are
outstanding  and the Lenders and the  Issuing  Bank have no further  commitments
under the Credit Agreement.


                                       1




                  SECTION  5.  Continued  Effectiveness.  This  Agreement  shall
continue to be  effective or be  reinstated,  as the case may be, if at any time
payment,  or any part thereof,  of any Obligation is rescinded or must otherwise
be restored by any Lender or Issuing Bank or any  Subsidiary  Guarantor upon the
bankruptcy  or  reorganization  of the  Borrower,  any  Subsidiary  Guarantor or
otherwise.

                  SECTION 6.  GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.

                  SECTION 7.  Waivers;  Amendment.  Except for the  operation of
Section 14 of this  Agreement,  neither this Agreement nor any provision  hereof
may be waived,  amended  or  modified  except  pursuant  to a written  agreement
entered into between the  Subsidiary  Guarantors and the  Administrative  Agent,
with the prior written consent of the Required Lenders.

                  SECTION 8. Notices.  All  communications  and notice hereunder
shall be in writing and given as provided in the Credit  Agreement,  except that
to any Subsidiary  Guarantor,  communication and notice shall be directed to the
address set forth in or pursuant to the Guarantee Agreement.

                  SECTION 9.  Binding  Agreement;  Assignments.  This  Agreement
shall become  effective as to each of the Borrower or any  Subsidiary  Guarantor
when a counterpart  hereof executed on behalf of the Borrower or such Subsidiary
Guarantor  shall  have  been  delivered  to  the  Administrative   Agent  and  a
counterpart  hereof  shall have been  executed  on behalf of the  Administrative
Agent,  and  thereafter  shall be  binding  upon  each of the  Borrower  or such
Subsidiary   Guarantor  and  the  Administrative   Agent  and  their  respective
successors  and  permitted  assigns,  and  shall  inure to the  benefit  of such
Subsidiary  Guarantor  and the  Lenders  and  their  respective  successors  and
assigns,  except that no Subsidiary Guarantor shall have the right to assign its
rights or obligations  hereunder or any interest  herein (and any such attempted
assignment shall be void), except as expressly contemplated by this Agreement or
the  other  Loan  Documents.  Notwithstanding  the  foregoing,  at the  time any
Subsidiary  Guarantor  is  released  from its  obligations  under the  Guarantee
Agreement in accordance with such Guarantee  Agreement and the Credit Agreement,
such Subsidiary  Guarantor  shall cease to have any rights or obligations  under
this Agreement.

                  SECTION 10. Successors and Assigns. Whenever in this Agreement
any of the parties  hereto is referred  to,  such  reference  shall be deemed to
include the successors and permitted  assigns of such party,  and all covenants,
promises  and  agreements  by or on  behalf  of  each  of  the  Borrower  or any
Subsidiary  Guarantor that are contained in this Agreement  shall bind and inure
to the benefit of their respective successors and permitted assigns.

                  SECTION  11.  Survival  of  Agreement;  Severability.  (a) All
covenants,  agreements and  representations  and warranties made by the Borrower
and  each  Subsidiary   Guarantor  herein  and  in  the  certificates  or  other
instruments prepared or delivered in connection with this Agreement shall be con
sidered to have been relied upon by the  Lenders and each  Subsidiary  Guarantor
and shall survive the making by the Lenders of the Loans and the issuance of the
Letters of Credit by the  Issuing  Bank,  and shall  continue  in full force and
effect as long as any  Obligation is  outstanding  and unpaid and as long as the
Commitments have not been terminated.

                  (b) In the event any one or more of the  provisions  contained
in this  Agreement  should be held  invalid,  illegal  or  unenforceable  in any
respect,  no party hereto shall be required to comply with such provision for so
long as such provision is held to be invalid, illegal or unenforceable,  but the
validity,  legality and  enforceability  of the remaining  provisions  contained
herein shall not in any way be affected or impaired thereby (it being understood
that the invalidity of a particular provision in a particular jurisdiction shall
not in and of  itself  affect  the  validity  of  such  provision  in any  other
jurisdiction).  The parties shall endeavor in good-faith negotiations to replace
the invalid,  illegal or  unenforceable  provisions  with valid  provisions  the
economic  effect of which  comes as close as  possible  to that of the  invalid,
illegal or unenforceable provisions.

                  SECTION 12.  Counterparts.  This  Agreement may be executed in
two or more counter parts,  each of which shall constitute an original,  but all
of which, when taken together, shall constitute but one instrument.

                  SECTION   13.   Rules   of   Interpretation.   The   rules  of
interpretation  specified  in  Section  1.02 of the  Credit  Agreement  shall be
applicable to this Agreement.


                                       2



                  SECTION  14.  Additional  Guarantors.  Pursuant  to the Credit
Agreement,  certain  Subsidiaries  of the Borrower that were not in existence or
not  Subsidiaries on the date of the Credit Agreement are required to enter into
the Guarantee Agreement as Guarantors upon becoming Subsidiaries. Upon execution
and  delivery,  after the date hereof,  by the  Administrative  Agent and such a
Subsidiary  of an  instrument  in the  form of Annex 1 to this  Agreement,  such
Subsidiary shall become a Subsidiary Guarantor hereunder with the same force and
effect as if originally named as a Subsidiary Guarantor hereunder. The execution
and delivery of any instrument  adding an additional  Subsidiary  Guarantor as a
party

                                       3





to this  Agreement  shall  not  require  the  consent  of the  Borrower  or any
Subsidiary Guarantor  hereunder.  The rights and obligations of the Borrower and
each Subsidiary Guarantor as a party to this Agreement.


                  IN WITNESS  WHEREOF,  the  parties  hereto  have  caused  this
Agreement  to be executed by their duly  authorized  offers as of the date first
appearing above.

                                       ETHAN ALLEN INC.,

                                       by
                                         ----------------------------
                                         Name:
                                         Title:


                                       EACH SUBSIDIARY GUARANTOR LISTED ON
                                       SCHEDULE I HERETO,

                                       by
                                         ----------------------------
                                         Name:
                                         Title:


                                       THE CHASE MANHATTAN BANK, as
                                       Administrative Agent,

                                       by
                                         ----------------------------
                                         Name:
                                         Title:


                                       4



                                                                         ANNEX I
                                               to the Indemnity, Subrogation and
                                                          Contribution Agreement



                                    SUPPLEMENT  NO.  dated as of , 199_,  to the
                           Indemnity,  Subrogation  and  Contribution  Agreement
                           dated  as  of  August  25,   1999  (as   amended  and
                           supplemented through the date hereof, the "Indemnity,
                           Subrogation and Contribution Agreement"), among ETHAN
                           ALLEN INC., a Delaware  corporation (the "Borrower"),
                           certain subsidiaries of the Borrower (the "Subsidiary
                           Guarantors")   and  THE  CHASE   MANHATTAN  BANK,  as
                           administrative agent (the "Administrative Agent").


         A. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Guarantee Agreement.

         B. The Borrower  and the  Subsidiary  Guarantors  have entered into the
Indemnity, Subrogation and Contribution Agreement in order to induce the Lenders
to extend  credit to, and to induce the Issuing Bank to issue  Letters of Credit
for  the  account  of,  the  Borrower  pursuant  to the  Credit  Agreement.  The
Indemnity,  Subrogation  and  Contribution  Agreement  provides that  additional
Subsidiaries may become Subsidiary  Guarantors under the Indemnity,  Subrogation
and  Contribution  Agreement by execution  and delivery of an  instrument in the
form of this  Supplement.  Pursuant to the Credit  Agreement,  the under  signed
Subsidiary (the "New  Subsidiary  Guarantor") is required to become a Subsidiary
Guarantor under the Indemnity,  Subrogation and Contribution Agreement.  The New
Subsidiary  Guarantor  desires to become a Subsidiary  Guarantor  and  Guarantor
under the Indemnity,  Subrogation and Contribution  Agreement in order to induce
the Lenders to continue to extend  credit and the Issuing Bank to issue  Letters
of Credit under the Credit Agreement and as consideration therefor.

         Accordingly,  the Administrative Agent and the New Subsidiary Guarantor
agree as follows:

         SECTION  1.  In  accordance   with  the  Indemnity,   Subrogation   and
Contribution  Agreement,  the New Subsidiary  Guarantor by its signature  hereto
shall  become  a  Subsidiary   Guarantor  and  Guarantor  under  the  Indemnity,
Subrogation  and  Contribution  Agreement  with the same  force and effect as if
originally  named  therein as a Subsidiary  Guarantor  and Guarantor and the New
Subsidiary  Guarantor  hereby  agrees  to all the terms  and  provisions  of the
Indemnity,  Subrogation  and  Contribution  Agreement  applicable  to  it  as  a
Subsidiary Guarantor and Guarantor  thereunder.  Each reference to a "Guarantor"
or a  "Subsidiary  Guarantor" in the  Indemnity,  Subrogation  and  Contribution
Agreement  shall  be  deemed  to  include  the  New  Subsidiary  Guarantor.  The
Indemnity,  Subrogation and Contribution Agreement is hereby incorporated herein
by reference.

         SECTION  2.  This   Supplement   shall   become   effective   when  the
Administrative  Agent  shall have  received  a  counterpart  of this  Supplement
executed on behalf of the New Subsidiary Guarantor.

         SECTION 3. The New Subsidiary  Guarantor hereby represents and warrants
that (i) this Supplement has been duly authorized, executed and delivered by the
New Subsidiary  Guarantor and con stitutes a legal, valid and binding obligation
of the New Subsidiary  Guarantor,  enforceable against it in accordance with its
terms, and (ii) set forth under its signature hereto is its address for purposes
of notices under the Indemnity,  Subrogation and Contribution  Agreement,  which
information   supplements   Schedule  I  to  the  Indemnity,   Subrogation   and
Contribution  Agreement  and shall be deemed a part  thereof for all purposes of
the Indemnity, Subrogation and Contribution Agreement.

         SECTION 4. Except as  expressly  supplemented  hereby,  the  Indemnity,
Subrogation and Contribution  Agreement shall remain in full force and effect in
accordance with its terms.

         SECTION 5. THIS  SUPPLEMENT  SHALL BE CONSTRUED IN ACCORDANCE  WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

         SECTION 6. In case any one or more of the provisions  contained in this
Supplement should be held invalid,  illegal or unenforceable in any respect, the
validity,  legality and  enforceability  of the remain ing provisions  contained
herein and in the Indemnity, Subrogation and Contribution Agreement shall not in
any way be affected or impaired. The parties hereto shall endeavor in good-faith
negotiations to replace any invalid,  illegal or unenforceable provisions herein
with valid  provisions,  the economic effect of which comes as close as possible
to that of the invalid, illegal or unenforceable provisions.







                                                                              2




         SECTION 7. This Supplement may be executed in two or more counterparts,
each of which  shall  constitute  an  original,  but all of  which,  when  taken
together, shall constitute but one instrument.

         SECTION  8.  The New  Subsidiary  Guarantor  agrees  to  reimburse  the
Administrative  Agent for its  reasonable  out-of-pocket  expenses in connection
with this Supplement,  including the reasonable fees and expenses of counsel for
the Administrative Agent.


         IN WITNESS WHEREOF, the New Subsidiary Guarantor and the Administrative
Agent have duly  executed  this  Supplement to the  Indemnity,  Subrogation  and
Contribution Agreement as of the day and year first above written.


                                       [NAME OF NEW SUBSIDIARY GUARANTOR],

                                        by


                                        Title
                                        Address-------------------------
                                               -------------------------
                                               -------------------------


                                       THE CHASE MANHATTAN BANK, as
                                       Administrative Agent,

                                       by

                                       Title